Case Summary: Commissioner of Income Tax (Exemptions), Mumbai v. Shree Sai Baba Sansthan Trust – Shirdi (2024) | Bombay High Court: Shirdi Sai Baba Sansthan's Anonymous Donations Exempt from Tax
Bombay HC ruled Shirdi Sai Baba Trust as religious and charitable, exempting its anonymous donations from tax under Section 115BBC(2)(b) of the IT Act
Bombay High Court clarified that a trust could be both charitable and religious, and being registered under Section 80G did not negate its religious character.Court: High Court of Judicature at BombayCase Title: Commissioner of Income Tax (Exemptions), Mumbai v. Shree Sai Baba Sansthan Trust (Shirdi)Citation: Income Tax Appeal No. 598 of 2024 Bench: G. S. Kulkarni & Somasekhar Sundaresan, JJ.Date of Judgment: 8th October, 2024Facts of the CaseThe case revolves around whether the...
Bombay High Court clarified that a trust could be both charitable and religious, and being registered under Section 80G did not negate its religious character.
Court: High Court of Judicature at Bombay
Case Title: Commissioner of Income Tax (Exemptions), Mumbai v. Shree Sai Baba Sansthan Trust (Shirdi)
Citation: Income Tax Appeal No. 598 of 2024
Bench: G. S. Kulkarni & Somasekhar Sundaresan, JJ.
Date of Judgment: 8th October, 2024
Facts of the Case
The case revolves around whether the "anonymous donations" received by the Shree Sai Baba Sansthan Trust, Shirdi, through "Hundi collections," are taxable under Section 115BBC(1) of the Income Tax Act, 1961. The Shree Sai Baba Sansthan Trust is registered under the Bombay Public Trusts Act, 1950, and functions as both a charitable and religious trust. The Commissioner of Income Tax (CIT) sought to tax anonymous donations exceeding 5% of the total donations received, citing that the trust, registered under Section 80G of the Income Tax Act, operates as a charitable institution and thus should not be excluded from Section 115BBC(1).
The trust, however, argued that it is both a charitable and religious trust, thus falling under the exclusion provided in Section 115BBC(2)(b), which exempts religious and charitable trusts from the taxation of anonymous donations. The CIT(A) and the Income Tax Appellate Tribunal (ITAT) ruled in favour of the trust, prompting the Revenue to file this appeal.
Issues
Whether the anonymous donations received by the Shree Sai Baba Sansthan Trust are liable to be taxed under Section 115BBC(1) of the Income Tax Act.
Whether the trust is a charitable or religious institution or both, and if it falls within the exclusions provided under Section 115BBC(2)(b).
Whether the registration under Section 80G of the Income Tax Act restricts the trust to being classified solely as a charitable institution, thereby subjecting anonymous donations to taxation.
Arguments by the Appellant (Revenue)
The Revenue contended that since the trust is registered under Section 80G, it qualifies only as a charitable trust and not as a religious trust. Therefore, anonymous donations exceeding 5% should be taxable under Section 115BBC(1).
The Assessing Officer (AO) also argued that the expenses incurred by the trust for religious purposes were less than 5% of its total income, further supporting its classification as a charitable trust.
The Revenue also claimed that the Tribunal and CIT(A) erred in their interpretation of Section 80G and 115BBC, which should not be construed to apply to mixed-purpose (religious and charitable) trusts.
Arguments by the Respondent (Shree Sai Baba Sansthan Trust)
The trust argued that it is both a charitable and religious institution, as evidenced by its activities related to worship, propagation of spiritual teachings, and religious festivals. It contended that it falls under the exclusion provided in Section 115BBC(2)(b), which exempts trusts with religious and charitable purposes from taxation on anonymous donations.
The trust highlighted that it was also registered under Section 10(23C)(v), which recognized its dual purpose (religious and charitable).
The trust further pointed out that the mere registration under Section 80G does not negate its religious character, and the minimal expenditure on religious activities (0.49%) did not change its overall religious nature.
Judgment
The court dismissed the Revenue's appeal and upheld the orders of the CIT(A) and ITAT. The court held:
The Shree Sai Baba Sansthan Trust qualifies as both a charitable and religious institution. The activities of the trust, including religious festivals, propagation of teachings, and spiritual worship, demonstrate its religious character.
Section 115BBC(2)(b) exempts institutions created for both charitable and religious purposes from taxation on anonymous donations, provided the institution does not exceed the prescribed limits for religious expenditure (5%). In this case, the trust met the requirements.
The trust's registration under Section 80G does not restrict it to being classified solely as a charitable institution. The provisions of Section 80G and Section 115BBC(2)(b) can coexist, allowing mixed-purpose trusts to claim benefits under both sections.
The court found no perversity in the findings of fact by the lower appellate forums, which recognized the trust's religious and charitable nature.
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Conclusion
The High Court ruled that the Shree Sai Baba Sansthan Trust is entitled to the benefit of the exclusion under Section 115BBC(2)(b), exempting it from taxation on anonymous donations. The Revenue’s appeal was dismissed, and the orders of the CIT(A) and ITAT were upheld.