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Commissioner of Income Tax (Exemption) Versus Bhagwan Shree Laxmi Naraindham Trust

2015 (9) TMI 558 - DELHI HIGH COURT

Scope of Section 115 BBC on trust - Registration under Section 12A denied - receipt of anonymous donations - whether the case of the Assessee is clearly hit by the provision of Section 115BBC? - the case of the Assessee is not of public religious trust but a case of spiritual organization as held by AO - Penalty proceedings under Section 271(1)(c) were directed to be initiated separately - ITAT allowing the Assessee’s appeal concluded that the Revenue had wrongly applied Section 115 BBC of the A .....

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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.”

It might well be 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 Asses .....

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t be included in its assessable income. - Decided against revenue. - ITA 269/2015 - Dated:- 7-9-2015 - S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Mr. Kamal Sawhney, Senior Standing counsel with Mr. Raghvendra K. Singh and Mr. Shikhar Garg, Advocates For the Respondent : Mr. Mohan Parasaran, Senior Advocate with Mr. Sanjay Katyal, Mr. Ruchir Mishra, Mr. Puneet Khurana and Ms. Vibha, Advocates ORDER 1. This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 ( Act ) i .....

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in the Trust Deed are as under: (i) To establish, promote, set-up, run, maintain assist finance, support and/or help in setting up and/or maintaining and/or running schools, and other institutions orphanages, widow home, poor houses or other establishments of relief and/or help to the poor, old and infirm people. .... .... .... .... .... (vii) To arrange, establish, manage and supervise orphanages, old age homes, night shelters, hospitals, dharmshala, nariniketan and mahila ashram etc. (viii) To .....

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affected by natural and other calamities such as food, fire, famine, cyclone, earthquake, storm, accident, pestilence drought, cyclone, epidemic and the likes to give donations, subscriptions or contributions to institutions, establishments centres of persons doing relief work on such occasions. .... .... .... .... .... (xiv) To open found, establish, manage, promote, set-up, run, maintain, assist, finance, support and/or help in the setting up and/or maintaining and/or running schools, colleges .....

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nnection therewith. 3. For the AY in question, the Assessee filed its return of income accompanied by an audit report, balance sheet, income and expenditure account etc. The case of the Assessee was picked up for scrutiny. It was found by the Assessing Officer (AO) that for the AY in question, the Assessee had received ₹ 5,28,84,204 by way of donations. While the details of the names and addresses of the donors to the extent of ₹ 5,01,588,98 was furnished, the details of donors to th .....

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011 that although the legislature had exempted wholly public religious trusts from the provision of Section 115 BBC of the Act, the case of the Assessee is not of public religious trust but a case of spiritual organization. Therefore, the case of the Assessee is clearly hit by the provision of Section 115BBC. A sum of ₹ 27,25,306 was, therefore, treated as anonymous donations and brought to tax as per the provisions of Section 115BBC of the Act. Penalty proceedings under Section 271 (1) (c .....

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on 2(24)(iia) of the IT Act, it is apparent that organization spreading the spirituality cannot claim that it is exempt as per Section 115BBC of the IT Act as statute is very clear in this regard. have gone through the relevant section and I have found that trust of institutions created or established wholly for religious purpose are exempt. The instant case has been found to be established for the purpose of spirituality as per its Trust Deed dated 30-12-2002, wherein, at object No. viii it has .....

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well as the decision of the Supreme Court in Commissioner of Income-Tax v. Dawoodi Bohra Jamat (2014) 364 ITR 31 (SC), that the 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 exemp .....

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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 115BB .....

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ubmitted by Mr. Kamal Sawhney 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 Mr. Sawhney, even giving of spiritual lectures would not strictly qualify as a religious activity. 9. The question posed arises in the context of the anonymous donations received by the Assessee Trust and the view of the AO that such .....

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provide that any income of a wholly charitable trust or institution by way of anonymous donation shall be included in its total income and taxed at the rate 0 30 per cent. Anonymous donation made to wholly charitable and religious trusts of institutions, i.e. mixed purpose trusts of institutions shall be taxed only if it is for any university or other educational institution or any hospital or other medical institution run by them. Anonymous donation to wholly religious trusts or institutions w .....

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he actual activities in which the Trust is involved in including imparting spiritual education to the persons of all castes and religions, organizing Samagams, distribution of free medicines and clothes to the needy and destitute, provision of free ambulance service for needy and destitute patients and so on. 12. In Commissioner of Income-Tax v. Dawoodi Bohra Jamat (supra), the Supreme Court, after analysing the objects of the Trust in that case held that they were not indicative of a wholly rel .....

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gious obligations only and for the benefit of the members of the community. It was emphasized that : in certain cases, the activities of the trust may contain elements of both: religious and charitable and thus, both the purposes may be overlapping. More so when the religious activity carried on by a particular section of people would be a charitable activity for or towards other members of the community and also public at large. For example, the practice of option charity in the form of Khairat .....

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ext of the Hindu religion need not be confined the activities incidental to a place of worship like a temple. 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 the .....

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the edification of others. 17...What then are matters of religion? The word "religion" has not been defined in the Constitution and it is a term which is hardly susceptible of any rigid definition. A religion undoubtedly has its basis in a system of beliefs or doctrines which are regarded by those who profess that religion as conducive to their spiritual well being, but it would not be correct to say that religion is nothing else but a doctrine of belief. A religion may not only lay do .....

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