Case Law Details
Amirthakadeswaraswamy Devasthanam Vs ACIT (Madras High Court)
Conclusion: The constituent temples function under the aegis of the HR&CE Act and the ‘body’ or ‘authority’ as referred to in Section 10(23BBA) would be the HR&CE department only. Moreover, the proviso to Section 10(23BBA) specifically excludes temples and other religious institutions functioning under the management of the ‘body’ or ‘authority’ from the scope of exemption, stating that they fell within the ambit of taxability. Thus, exemption under Section 10(23BBA) could be claimed only by the HR&CE department. Accordingly, exemption to Vaithyanathaswamy Devasthanam only was allowed, however, with an explicit remark that the individual constituent temples, endowments and charities were liable to tax in the light of the proviso to Section 10(23BBA).
Held: Assessees had made cash deposits during the Assessment Year 2017-18. However, no IT returns were filed during the relevant assessment year. Consequently, the IT department issued several notices including notice under S.142 (1), calling upon assessee to file returns of income. In response, assessee urged that the deposits comprised voluntary donations made by the devotees and further that they were eligible to be exempted under Section 10(23BBA). It was held that since the overseeing authorities were constituted only to administer or manage the affairs of the religious and charitable endowments vested in them, and did not engage in any commercial activity, it was felt that any income that might arise or accrue to them would not bear the nature of taxable income for the purposes of the Income Tax Thus, the body/authority constituted under the Central, State or Provincial Act, and vested with the administration of a public religious or charitable trust encompassing places of worship, stood exempted from the application of the IT Act. It was made clear in the proviso to Section 10(23BBA) that the exemption did not extend to the constituents of that body/authority whose income was liable to tax, in accordance with law. A three tier structure was envisaged, a Central, State or Provincial enactment (tier (i)), a body or authority set up under aforesaid Central, State or Provincial enactment in the nature of a public religious or charitable trust (tier (ii)) and temples, maths, wakfs, churches, synagogues, agiaries and other places of public religious worship, religious and charitable endowments and societies (tier (iii)). The grant of exemption was conditional upon the existence of the structure and was directed towards the entity in the second tier, explicitly excluding all places of public religious worship and charities constituted under them, from the benefit of exemption. This understanding of Section 10(23BBA) was accepted by all parties. The question that remained was where assessee Devasthanams fell within the aforesaid structure and such determination would be critical to answer the question of their taxability. It was found that assessee-Vaithiyanathaswamydevasthanam was managed and administered by Kattalai Thambiran appointed periodically by the Pandarasannathi in his capacity as trustee under a scheme of administration framed in a scheme suit filed under Section 92 of the Civil Procedure Code 1908 in line with the provisions of the Madras Hindu Religious & Charitable Endowment Act, 1951 (‘1951 Act’) and its precursor enactments, in the year 1919. The Court held that the requirements under Section 10(23BBA) were satisfied, with the devasthanam being the body or authority having various temples functioning under it, and the Civil Procedure Code 1908 (Central) and the Madras Hindu Religious & Charitable Endowment Act, 1951 (State) and precursor State enactments being the required enactment. Unlike Vaithiyanathaswamydevasthanam, the Amirthakadeswaraswamy Devasthanam was being administered under the trusteeship of srilasri Pandarasanadhi of DharmapuramAdheenakartar appointed in 1841 by the East India Company and his appointment had been accepted without challenge till date, despite the enactment of the Religious Endowment Act, 1863, Madras Hindu Religious Endowment Act, 1926, the Madras HR&CE Act, 1951 and TN HR&CE Act, 1959 in the intervening periods. The Court held that said constitution of the Amirthakadeswaraswamy Devasthanam, did not entitle it to claim exemption under S.10(23BBA) of the IT Act. Accordingly, W.P.No.29315 of 2019 relating to Vaithyanathaswamy Devasthanam was allowed, however, with an explicit remark that the individual constituent temples, endowments and charities were liable to tax in the light of the proviso to Section 10(23BBA) and W.P.No.29312 of 2019 relating to Sri Amirthakadeswarasamy Devasthanam was dismissed.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
These writ petitions have been filed by the Sri Vaithiyanathaswamy and Sri Amirthakadeswaraswamy Devasthanams and raise important issues on the interpretation of Section 10(23BBA) of the Income Tax Act, 1961 (IT Act).
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