Anonymous donation for religious purposes not taxable if not received with Specific direction

By | January 13, 2016

Summary of Decision:-

The assessee is established for religious and charitable purposes and the anonymous donation was not received with specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by the assessee trust. Therefore, the AO was not justified in making the addition by invoking the provisions of Section 115BBC(1) of the Act and the ld. CIT(A) rightly deleted the said addition in view of the provisions of Section 115BBC(2)(b) of the Act. I do not see any infirmity in the impugned order passed by the ld. CIT(A).

IN THE ITAT DELHI BENCH ‘SMC-2’

Income-tax Officer (Exemption), Trust Ward-1, New Delhi

v.

Satyug Darshan Trust

N.K. SAINI, ACCOUNTANT MEMBER

IT APPEAL NO. 751 (DELHI) OF 2014
[ASSESSMENT YEAR 2009-10]

NOVEMBER  4, 2015

Somil Agarwal, CA for the Appellant. P.D. Taneja, Sr. DR for the Respondent.

ORDER

1. This is an appeal by the department against the order dated 13.11.2013 of ld. CIT(A)-XXI, New Delhi.

2. Following grounds have been raised in this appeal:

“(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that as per provisions of section 115BC(2)(b) trust is to be created or established wholly for religious and charitable purpose.
(ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that the assessee is only a charitable trust running Charitable Dispensaries, Educational Institutions and Sangeet Kala Kendras and the provisions of section 115BBC(1) is fully applicable in this case.
(iii) The appellant craves leave to add to alter or amend any ground of appeal raised above at the time of hearing.”

3. Facts of the case in brief are that the assessee filed the return of income in Form No. 7 on 29.09.2009 declaring Nil income which was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) on 23.10.2010. Later on, the case was selected for scrutiny. The AO framed the assessment vide order dated 31.03.2011 at Nil income. Later on, the AO rectified the said order u/s 154 of the Act vide order dated 05.08.2012 and added Rs. 8,21,512/- which had been credited by the assessee under the head ‘Donation Golak’. The explanation of the assessee that the said amount was less than 5% of the total receipt was not accepted and the AO invoked the provisions of Section 115BBC(1) of the Act.

4. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the assessee is a religious and charitable trust and provisions of Section 115BBC(1) is not applicable as the assessee is covered u/s 115BBC(2)(b) of the Act.

5. The ld. CIT(A) after considering the submissions of the assessee observed that the provisions of Section 115BBC(1) of the Act for the anonymous donations are not applicable in the case of the assessee in view of the provisions of Section 115BBC(2)(b) of the Act. Accordingly, the addition made by the AO was deleted.

6. Now the department is in appeal. The ld. DR strongly supported the order of the AO and further submitted that the assessee received anonymous donations, so it was rightly added by the AO in the income of the assessee by invoking the provisions of section 115BBC(1) of the Act.

7. In his rival submissions the ld. DR strongly supported the impugned order passed by the ld. CIT(A) and reiterated the submissions made before the authorities below.

8. I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee is registered u/s 12AA of the Act and its income is exempt u/s 11 of the Act. The assessee is running Satyug Darshan Sangeet Kala Kendra and also running a school under the name and style of Satyug Darshan Vidhyalaya, there was no change in the aims & objects of the assessee in comparison to the earlier year. The AO while framing the original assessment vide order dated 31.03.2011 categorically stated that the activities of the assessee are charitable within the meaning of Section 2(15) of the Act and there was no change in the aims and objects of the assessee as compared to the earlier years. It is not in dispute that the provisions of Section 115BBC(1) of the Act are applicable for the anonymous donations received by any university or other educational institution or any hospital or any trust or institution referred to in Sub-clauses (iiiad) or (vi) or (iiiae) or (via) or (iv) or (v) of clause (23C) of Section 10 of the Act. However, Sub-Section (2) of Section 115BBC of the Act provides that the said provisions are not applicable to any anonymous donation received by any trust or institution created or established wholly for religious purposes. The provisions contained in Section 115BBC of the Act reads as under:

“115BBC. (1) Where the total income of an assessee, being a person in receipt of income on behalf of any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via) or any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) of clause (23C) of section 10 or any trust or institution referred to in section 11, includes any income by way of any anonymous donation, the income-tax payable shall be the aggregate of—

[(i) the amount of income-tax calculated at the rate of thirty per cent on the aggregate of anonymous donations received in excess of the higher of the following, namely:—

(A) five per cent of the total donations received by the assessee; or
(B) one lakh rupees, and

(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the aggregate of anonymous donations received.]

The following clause (ii) shall be substituted for the existing clause (ii) of sub-section (1) of section 115BBC by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015:

(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the aggregate of anonymous donations received in excess of the amount referred to in sub-clause (A) or sub-clause (B) of clause (i), as the case may be.

(2) The provisions of sub-section (1) shall not apply to any anonymous donation received by—

(a) any trust or institution created or established wholly for religious purposes;
(b) any trust or institution created or established wholly for religious and charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution.

(3) For the purposes of this section, “anonymous donation” means any voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed.”

9. In the present case, the assessee is established for religious and charitable purposes and the anonymous donation was not received with specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by the assessee trust. Therefore, the AO was not justified in making the addition by invoking the provisions of Section 115BBC(1) of the Act and the ld. CIT(A) rightly deleted the said addition in view of the provisions of Section 115BBC(2)(b) of the Act. I do not see any infirmity in the impugned order passed by the ld. CIT(A).

10. In the result, the appeal filed by the department is dismissed

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