2025 (7) TMI 1163 - AT - Income Tax

Exemption u/s 11 and 12 - Applicability of provisions of section 10(23BBA) - income of the assessee temple - assessee temple is managed by the Endowment Commissioner an authority appointed by the State Govt. under the Endowment Act (Telangana Charitable and Hindu Religious Institutions Endowment Act 1987) - AO has rejected the claim of the assessee and assessed the donations received under Hundi (Box collection) as anonymous donation u/s 69A r.w.s. 115BBC - CIT (A) has deleted the addition u/s 69A however since the assessee has not filed any return of income therefore the claim of exemption u/s 11(1) of the Act was denied and consequently the entire receipts/income of the assessee was taxed in normal course HELD THAT - The assessee has not brought anything on record to show that in the absence of the return of income as well as satisfactions of other conditions provided u/s 11 of the I.T. Act the benefit of section 11 12 is available to the assessee. Accordingly we do not find any error or illegality in the findings of the learned CIT (A) to the extent that the assessee is not eligible for the benefit of section 11 12 of the I.T. Act. Applicability of section 115BBC treating the donation received under Hundi collection (donation box collection) as anonymous donation liable to be taxed on gross basis - There is no dispute that the assessee is a Trust established wholly for religious and charitable purpose and therefore as per sub-section (2) of Section 115BBC the provisions of sub-section (1) shall not apply to the anonymous donation received by the assessee. However this section provides only the rate of tax applicable on the anonymous donation received by the assessee and in case the said anonymous donation is not liable to tax as per sub-sec (1) of Section 115BBC of the Act then the same will be assessed under the normal provisions of the Act and on commercial basis. In other words instead of assessing the entire donation only the surplus after deducting the expenditure incurred by the assessee will be taxed as income of the assessee. Thus the A.O is directed to assess the income of the assessee in terms of section 56 57 of the I.T. Act instead of the entire donations. Applicability of 10(23BBA) - Provisions of sec 10(23BBA) of the Act are applicable only on the income of the body or authority established constituted or appointed by the State Govt. or the Central Govt. under the Central or State or Provincial Act for administration of public religious or charitable trust or endowments and not on the income of the Endowment i.e. Mosque/Temples/Church/Gurudwara etc. The amount paid to the administrative authority or body as constituted under the Act is certainly a statutory obligation on the part of the temple to pay such amount as per the provisions of the Act and to that extent the same will be excluded from the income of the assessee temple for the purpose of computation of total income. Even otherwise the public religious trusts or temples are eligible for registration u/s 12A or 12AA of the I.T. Act 1961 and consequently the benefit of sections 11 and 12 of the Act and therefore the provisions of section 10(23BBA) are not applicable to these Trusts/Temples. Respectfully following the judgment of Sri Amirthakadeswaraswamy Devasthanam Dharumapouram Adheenam 2021 (2) TMI 860 - MADRAS HIGH COURT we hold that the provisions of section 10(23BBA) are not applicable on the income of the assessee temple but this provision is applicable only on the income of the administrative body or authority constituted/appointed under the Endowment Act.

Summary

ISSUES:

Whether delay in filing appeal can be condoned when time consumed before the High Court is excluded as per its directions.Whether the income of an endowment temple managed under a State Endowment Act is exempt from income tax under section 10(23BBA) of the Income Tax Act, 1961.Whether the assessee temple was required to file return of income and audit report in Form 10B to claim exemption under sections 11 and 12 of the Income Tax Act.Whether donations received in the form of hundi (donation box collection) constitute anonymous donations taxable under section 115BBC of the Income Tax Act.Whether additions made under section 69A of the Income Tax Act as unexplained money are justified when the deposits are explained as sourced from temple donations and offerings.

RULINGS / HOLDINGS:

The delay of 160 days in filing the appeals is condoned as the Hon'ble High Court directed that "the time consumed before this Court shall not be counted for the purpose of limitation before the Tribunal," making the appeals within limitation.The exemption under section 10(23BBA) applies only to "any body or authority ... established, constituted or appointed by or under any Central, State or Provincial Act" for administration of public religious or charitable trusts or endowments, and not to the income of the temple/endowment itself; thus, the income of the temple is not exempt under section 10(23BBA).The assessee temple was required to file the return of income and audit report in Form 10B within the prescribed time to claim exemption under sections 11 and 12; failure to do so disentitles the assessee from exemption under these sections.Donations received under hundi (donation box collection) are not anonymous donations under section 115BBC(1) and thus are not taxable at the gross rate prescribed therein; instead, such donations are assessable under normal provisions after deducting expenditure as per sections 56 and 57.Addition of Rs. 6,96,63,345/- under section 69A as unexplained money is deleted as the deposits are satisfactorily explained as arising from hundi collections, pooja rusumulu, corpus donations, and recovery of advance payments, supported by bank statements and records.

RATIONALE:

The Court applied statutory limitation principles and accepted the High Court's ruling excluding the writ petition period from limitation calculation, consistent with statutory remedies under the Income Tax Act.The Court relied on the plain language of section 10(23BBA) and the proviso clarifying that exemption applies only to the administrative bodies or authorities constituted under Central or State Acts, not to the temples or trusts themselves; this interpretation is supported by authoritative judicial precedent from the Madras High Court which emphasized the three-tier structure and limited scope of exemption.The Court emphasized mandatory compliance with filing requirements under sections 11 and 12, including timely filing of return and audit report (Form 10B), referencing CBDT circulars and statutory provisions; non-compliance results in disallowance of exemption.The Court followed judicial interpretation that donations received in hundi boxes are not anonymous donations under section 115BBC(1), and thus are taxable under normal provisions after allowing expenditure deductions, consistent with the Bombay High Court judgment cited.The Court accepted the assessee's explanation supported by documentary evidence for the source of deposits, rejecting the addition under section 69A, as unexplained money cannot be sustained without contrary evidence.