The Bombay High Court, involves the appeals by the Commissioner of Income Tax (CIT) challenging the Income Tax Appellate Tribunal's (ITAT) decision in favor of the Shree Sai Baba Sansthan Trust (Shirdi). The case revolves around the applicability of Section 115BBC(1) of the Income Tax Act, 1961, to anonymous donations received by the Trust. The CIT argued that the donations were taxable, while the Trust claimed exemptions under Section 115BBC(2)(b), asserting that it is a religious and charitable organization.

The Court upheld the ITAT’s decision, agreeing that the Trust is both a religious and charitable institution and thus eligible for exemptions. The Revenue’s argument, based on the Trust’s registration under Section 80G, was rejected, as the Court clarified that Section 80G does not exclude religious trusts from also being charitable.

1. Case Introduction

• Appeals filed by the CIT challenging ITAT’s decision under Section 260A.
• Issue: Whether anonymous donations received by Shree Sai Baba Sansthan Trust are taxable under Section 115BBC(1).
• Relevant assessment years: 2015-16, 2017-18, and 2018-19.

2. Background of the Trust

• Shree Sai Baba Sansthan Trust registered under the Bombay Public Trusts Act, 1950.
• Reconstituted in 2004 under the Sai Baba Sansthan Trust (Shirdi) Act.
• Registered under Sections 12A and 80G of the Income Tax Act, 1961.

3. Anonymous Donations and the Applicability of Section 115BBC

• CIT argued that anonymous donations received via "Hundi" exceeded the allowable threshold and were taxable.
• The Assessing Officer taxed these donations, arguing that since the Trust was registered under Section 80G, it is a charitable trust, thus disqualifying it from exemption under Section 115BBC(2)(b).

4. Trust's Argument

• The Trust argued it had both religious and charitable purposes, qualifying it for exemption under Section 115BBC(2)(b).
• Cited its activities, including maintaining temples, performing rituals, and supporting devotees.
• Claimed that its religious expenditure was less than the 5% limit under Section 80G(5B), allowing it to benefit from both Sections 80G and 115BBC(2)(b).

5. CIT(A) and ITAT’s Findings

• CIT(A) and ITAT sided with the Trust, confirming it was a religious and charitable organization, and exempt from Section 115BBC(1).
• ITAT examined the Trust's constitution and concluded its purpose was mixed, involving both religious and charitable activities.

6. Revenue’s Appeal and Court’s Analysis

• Revenue contended that the Trust, by being registered under Section 80G, was solely charitable and therefore taxable.
• The Court rejected this argument, noting that Section 80G doesn’t exclude religious institutions from being charitable.
• The Court upheld the ITAT’s conclusion that the Trust was both religious and charitable, entitling it to exemption under Section 115BBC(2)(b).

Acts and Sections Discussed

1. Income Tax Act, 1961

   • Section 115BBC(1): Taxation of anonymous donations.
   • Section 115BBC(2)(b): Exemption for religious and charitable institutions from taxation of anonymous donations.
   • Section 80G: Deductions for donations made to charitable institutions.

2. Shree Sai Baba Sansthan Trust (Shirdi) Act, 2004

   • Establishment and reconstitution of the Trust, confirming its dual religious and charitable objectives.

Ratio Decidendi

The Court held that anonymous donations made to a trust established for both religious and charitable purposes are exempt from taxation under Section 115BBC(2)(b). The Trust's registration under Section 80G does not disqualify it from religious purposes. Additionally, religious expenditure below the 5% threshold allows for eligibility under both sections.

Subjects:

• Taxation of anonymous donations for religious and charitable trusts
• Interpretation of Section 115BBC and Section 80G

• Income Tax Act
• Anonymous donations
• Religious and charitable trusts
• Tax exemptions
• Section 115BBC
• Shree Sai Baba Sansthan Trust