Brief of the Case
Delhi High Court held In the case of CIT (Exemption) vs. Bhagwan Shree Laxmi Nariandham Trust that anonymous donations received by a wholly religious trust are exempt u/s 115BBC. Mere the trust deed have clauses related to charitable activities along with organizing spiritual seminars or trust also involved in charitable activities, will not make any difference to be qualify as a religious trust if trust is involved in religious activities while examing in overall prospective. Religious activities need to be examined in the context of overall actual activities conducted by the trust. In the given case, activities done by the assessee can be included in the broad concept of Hindu religious activity when viewed in the context of the objects of the Trust and its activities in general.
Facts of the Case
The Assessee was applied registration under Section 12A on 20th May 2005. The Assessee -Trust was set up on 30th December 2002 to carry out various charitable, spiritual and religious objects as set out in the trust deed. The Assessee filed its return of income and the case of the Assessee was picked up for scrutiny. It was found by the AO that for the AY in question, the Assessee had received Rs.5,28,84,204 by way of donations. While the details of the names and addresses of the donors to the extent of Rs.5,01,588,98 was furnished, the details of donors to the extent of Rs.27,25,306 were not explained. The Assessee explained that during the AY in question it was mainly involved in imparting of spiritual education through the lectures/samagam and in distribution of medicines and clothes to the needy and destitute. The AO, therefore, proceeded to invoke Section 115BBC which deal with anonymous donations, on the ground that the assessee is not a public religious trust but a spiritual organization and add this sum to the income of the Assessee. Also penalty proceedings under Section 271 (1) (c) were initiated separately.
Contention of the Revenue
The ld counsel of the revenue submitted that none of the activities stated in Clause 5 of the Trust Deed can be said to be a purely religious activity. In other words charitable activities enumerated therein could not be said to be ‘religious activities’. According to him, even giving of spiritual lectures would not strictly qualify as a religious activity.
Held by CIT (A)
CIT (A) confirmed the action of the AO. It was held that as per circular No. 14 issued by CBDT and definition of voluntary contribution as per Section 2(24)(iia) , it is apparent that organization spreading the spirituality cannot claim exemption u/s 115BBC. All the trusts which are created or established wholly for religious purpose are exempt. In this case the trust is found to be established for the purpose of spirituality as per its Trust Deed dated 30-12-2002. Also from the object itself it is evident that appellant society’s object is in the nature of spreading spirituality in the Society. So, it cannot be held as religious society.
Held by ITAT
ITAT allowed the appeal of the assessee. It was held that there AO and CIT had proceeded on a very narrow and incorrect understanding in holding that the Assessee Trust was engaged in spreading spirituality and since Section 115BBC only exempts religious trust, a trust allegedly imparting spiritual knowledge was consequently not contemplated as an exception by the Legislature as much as it consequently is barred to claim exemption vis-a-vis the anonymous donation. The ITAT held that the said aim has to be understood in the context of and read along with the other objects of the trust whose target groups are widows, orphans, old and infirm people, destitutes, illiterate, handicapped, mentally retarded, providing food and shelter to poor and needy, night shelter, nari-niketan, mahila ashram, weaker sections and all other groups who can be included in the phrase ‘in need of physical, mental and financial help.Further the ITAT held that the “objects of the Trust and the context in which spiritual lectures espousing the philosophy, i.e, the spirituality of the major and predominant religious of the country needs to be considered in the light of the well-accepted and well-known fact that all the major religious of the world with one voice eulogise the importance of taking care of the old, infirm, disabled. Accordingly, it was held that the Revenue had incorrectly applied Section 115BBC to the facts of the Assessee’s case.
Held by High Court
In Commissioner of Income-Tax v. Dawoodi Bohra Jamat (2014) 364 ITR 31 (SC), the Supreme Court, after analysing the objects of the Trust in that case held that they were “not indicative of a wholly religious purpose but were collective indicative of both charitable and religious purposes.” It was held in the context of that case that “the establishment of Madarsas or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education under the provisions of Section 2(15) of the Act.”
The Supreme Court in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar 1954 AIR 282 SC held that “a religious denomination or organization enjoys complete autonomy in the matter of deciding as to what rites and ceremonies are essential according to the tenets of the religion they hold and no outside authority has any jurisdiction to interfere with their decision in such matters.” This position was reiterated by the Supreme Court in Ratilal Panachand Gandhi v. The State of Bombay AIR 1954 SC 388. In the case of Sastri Yagnapurushadji v. Muldas Bhudardas Vaishya AIR 1966 SC 1119 the Supreme Court pointed out that what constitutes a religious activity under the Hindu faith is very broad in nature.
It is clear that a Hindu religious institution like the Assessee is also engaged in charitable activities which are very much part of religious activity. In carrying on charitable activities along with organising of spiritual lectures, the Assessee by no means ceases to be a religious institution. The activities described by the Assessee as having been undertaken by it during the AY in question can be included in the broad conspectus of Hindu religious activity when viewed in the context of the objects of the Trust and its activities in general.
Accordingly, the Court finds no legal infirmity in the conclusion of the ITAT that for the purpose of Section 115 BBC (2) (a) anonymous donations received by the Assessee would qualify for deduction and it cannot be included in its assessable income.
Accordingly, appeal of the revenue dismissed.