Anonymous donations tax treatement

By | July 28, 2015
(Last Updated On: July 28, 2015)

Offerings received in donation boxes of temple can’t be taxed as black money under Sec. 115BBC

tax on donation in temple

IN THE ITAT MUMBAI BENCH ‘G’

Gurudev Siddha Peeth

v.

Income-tax Officer, Ward- 1 (1), Kalyan

R.C. SHARMA, ACCOUNTANT MEMBER
AND SANJAY GARG, JUDICIAL MEMBER

IT APPEAL NOS. 3466 AND 3467 (MUM.) OF 2012
[ASSESSMENT YEARS 2007-08 & 2008-09 ]

JULY  22, 2015

The provisions of section 115BBC(1) will not apply to the donations like that has been received by the assessee in donation boxes from numerous devotees who have offered the offerings on account of respect, esteem, regard, reference and their prayer for the deity/siddha peeth. Such type of offerings are made/put into the donation box by numerous visitors and its generally not possible for any such type of institutions to make and keep record of each of the donor with his name address etc. Even sometimes the donors out of their esteem, respect and regard and selflessness they do not want that their name be registered as a donor before the deity for whom them make the prayer in the belief that the deity is the ultimate giver of all the worth and virtues of their life.

The definition of anonymous donations under section 115BBC(3), it may be found that anonymous donations means voluntary contributions where the person receiving such contributions 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. In the case of a religious or charitable trust as in the case of the assesse, it is generally not only difficult but also not possible to maintain such type of record. A perusal of the entire section 115BBC shows that the provisions of said section are not applicable to the institutions like that of assessee trust as the same are meant to check the inflow of unaccounted/black money into the system with a modus operandi to make out as a part of the accounts of the institutions like university, medical institutions where the problem relating to the receipt of capitation fees, etc. is generally highlighted. Under such circumstances, there is no justification in taxing the offerings received in the hundis/donation boxes as income of the assessee under section 115BBC.

K. Gopal, A.R. and S.N. Inamdar, A.R. for the Appellant. Vijay Kumar Bora, D.R. for the Respondent.

ORDER

Sanjay Garg, Judicial Member – The above titled two appeals have been preferred by the assessee against two orders for the A.Y.s 2007-08 & 2008-09 both dated 27.02.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)]. Since the facts and the issue involved therein are identical in nature, hence the same are taken together for disposal by this common order. For the sake of convenience the facts have been taken from the ITA No.3466/M/2012 for A.Y. 2007-08.

ITA No.3466/M/2012 for A.Y. 2007-08

2. The assessee has taken the following grounds of appeal:

“1.The Ld. Commissioner of Income-tax (Appeals)-I, Thane [hereinafter referred as “Ld. CIT(A)”] erred in confirming the action of the Assessing Officer in taxing the amount of Rs. 28,25,536/- being offerings at the Samadhi Shrine of Swami Muktanand and at the temple of Bhagwan Nityanand invoking the provisions of section 115BBC of the Act without appreciating the facts and circumstances of the case.
2.The Ld. CIT(A) failed to appreciate that the offerings at the Samadhi Shrine of Swami Muktanand and at the temple of Bhagwan Nityanand were from the devotees as expression of gratitude, respect and reverence and are not income at all and are not in the nature of “voluntary contributions” or anonymous donations as contemplated under section 115BBC. The Appellant, therefore, prays that taxing the amount of Rs. 28,25,536/- invoking the provisions of section 115BBC is not at all justified and hence, the same may be deleted.
3.Without prejudice to the above, the Ld. CIT(A) failed to appreciate that having taxed the amount of Rs. 28,25,536/-, the amount required to be spent on the objects of the trust in terms of Explanation 2 to section 11(1) in the subsequent year ought to be recomputed.
4.The Ld. CIT(A) erred in confirming the levy of interest under Section 234B, section 234C and section 234D of the Act is not justified as the Assessee denies the same.
5.The appellant craves leave to add, to alter or amend any of the ground before or at-the time of hearing.”

3. The assessee is aggrieved by the action of the Ld. CIT(A) in taxing the amount of Rs. 28,25,536/- being offerings/hundis in donation boxes at the Samadhi Shrine of Swami Muktanand and at Bhagwan Nityanand temple and paduka. A record had been maintained by the assessee in respect of paduka offerings at Siddha Yoga Dhyan Kentras in different countries all over the world amounting to Rs. 27,04,323/-. It has been explained by the assessee that out of the said amount of Rs. 27,04,323/- an amount of Rs. 18,99,571/- was received by cheque, demand draft etc. Record has also been maintained regarding cash receipts of Rs. 8,04,752/- and complete details of name and address of the donors was submitted to the Ld. CIT(A) upon which the Ld. CIT(A) had called remand report. After considering the remand report, the Ld. CIT(A) held that the assessee had maintained and submitted the record relating to offering of Rs. 27,04,323/- including cash receipts of Rs. 8,04,752/-. He therefore held that the said amount of Rs. 27,04,323/- did not fall in the category of anonymous donations liable to be taxed under section 115BBC of the Act. He, however, held that the assessee had not maintained the record relating to the other donations detail of which is as under:

(i)Offerings in the Samadhi Shrine of Swami Muktanand of Rs. 9,62,089/-.
(ii)Offering in the Nityanand Dhyan Mandir of Rs. 17,23,952/-
(iii)Offering in Kind (Gold and Silver Articles) of Rs. 1,39,495/-

The Ld. CIT(A), therefore, held that as per the provisions of section 115BBC anonymous donations as detailed above were liable to be taxed at the rate of 30%. Aggrieved by the order of the Ld. CIT(A), the assessee has come in appeal before us.

4. We have heard the rival contentions and have also gone through the records. The lower authorities have taxed the assessee in relation to the offerings received in the donations boxes at Samadhi Shrine of Swami Muktanand and Bhagwan Nityanand Mandir. To get proper conclusion of the matter, we have to deliberate upon the provisions of section 115BBC which for the sake of reference is reproduced as under:

“Anonymous donations to be taxed in certain cases.

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.”

5. The section 115BBC has been inserted by Finance Act, 2006 w.e.f. 01.04.07. A perusal of the above section reveals that this section is basically meant to check the movement of black money into the system in the name of anonymous donations. However, certain donations which cannot be said to be made to avoid the identity of the donor for any illegal purposes e.g. black money etc. The same have been excluded from the purview of sub section (1) of section 115BBC. Sub section (2) in this respect provides that the provisions of sub section (1) shall not apply to any anonymous donations received by (a) an institution established for religious purposes (b) to any trust or institution created or established for religions and charitable purposes other than any anonymous donations made with a specific direction that such donation is for any universities, educational institutions, hospital or medical institution etc. A careful reading of the entire section of 115BBC reveals that the provisions have been meant to check the inflow of black money/unaccounted money into the system/institutions such as universities, educational institutions, medical institutions etc. and it has been provided that the record of the donor along with name and address etc. should be maintained. Sub section (2) specifically excludes anonymous donations received by an institution which are other than any anonymous donations made with a direction that such donation is for university, medical institution etc. When we read clause (a) and clause (b) of sub section (2) in harmony and in conscience with each other then it becomes clear that the provisions of sub section (1) will not apply to the donations like that has been received by the assessee in donation boxes from numerous devotees who have offered the offerings on account of respect, esteem, regard, reference and their prayer for the deity/siddha peeth. Such type of offerings are made/put into the donation box by numerous visitors and its generally not possible for any such type of institutions to make and keep record of each of the donor with his name address etc. Even sometimes the donors out of their esteem, respect and regard and selflessness they do not want that their name be registered as a donor before the deity for whom them make the prayer in the belief that the deity is the ultimate giver of all the worth and virtues of their life. Now reverting to the definition of anonymous donations under sub section (3) of section 115BBC, we find that it has been mentioned that anonymous donations means voluntary contributions where the person receiving such contributions 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. In the case of a religious or charitable trust as in the case of the assessee as we have observed above, it is generally not only difficult but also not possible to maintain such type of record. A perusal of the entire section 115BBC shows that the provisions of said section are not applicable to the institutions like that of assessee trust as the same are meant to check the inflow of unaccounted/black money into the system with a modus operandi to make out as a part of the accounts of the institutions like university, medical institutions where the problem relating to the receipt of capitation fees, etc. is generally highlighted. Under such circumstances, we do not find any justification on the part of the Ld. CIT(A) in taxing the offerings received in the hundis/donation boxes as income of the assessee under section 115BBC.

6. In view of our above observations and subject to taxability of the income under any other provision of the Act as the case may be, the appeal of the assessee is allowed.

ITA No.3467/M/2012 for A.Y. 2008-09

7. Since this appeal is identical in nature to the appeal of the assessee i.e. ITA No.3466/M/2012 for A.Y.2007-08, hence this appeal is also decided in favour of the assessee, in view of the discussion made above.

8. In the result, both the appeals of the assessee are hereby allowed.

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