Fiduciary ownership of church funds prevents tax on bishop's bank deposits under an overriding title

Where a bishop or metropolitan holds bank deposits under a binding oath of affirmation and church constitution, the monies are treated as belonging to the church in a fiduciary capacity rather than as the individual's personal assets. The Tribunal reasoned that the undertaking created an overriding title in favour of the religious institution, so the credits did not accrue to the assessee as taxable income. On that basis, deposits standing in the assessee's name could not be assessed as his income under section 69, and the addition was deleted.

---

---

Issues: Whether bank deposits standing in the name of the assessee, who held office as metropolitan/bishop under the church constitution, could be assessed as his income under section 69 of the Income-tax Act, 1961.

Analysis: The assessee had executed an oath of affirmation under the church constitution, under which movable and immovable properties, assets, bank deposits and investments held by him, other than patrimony, were to belong to the church. The Tribunal treated this undertaking as binding on the assessee and held that the bank account was maintained in a fiduciary capacity for the church. It further held that the monies credited in the account belonged to the church by overriding title and did not accrue to the assessee as his personal income. The finding of the disciplinary committee of the Institute of Chartered Accountants of India was also relied upon as supporting the conclusion that the assets stood in the name of the bishop only in a representative capacity.

Conclusion: The addition in the hands of the assessee was not sustainable. The deposits could not be treated as his income under section 69, and the deletion of the addition was upheld.

Ratio Decidendi: Where funds and assets are held by a person in a binding fiduciary capacity under a enforceable undertaking in favour of a religious institution, the receipts belong to that institution by overriding title and do not constitute the individual holder's taxable income.

---