2016 (4) TMI 160 - AT - Income Tax

Tribunal upholds CIT(A) decision on tax exemption for religious society's anonymous donations

Dt. Commr. Income Tax, Circle-IV, Amritsar Versus All India Pingalwara Charitable Society

The Tribunal upheld the CIT(A)'s decision to delete the additions made by the AO for both assessment years. It held that the anonymous donations received ... Donations in golaks - AO proposed to tax the anonymous donations in accordance with the provisions of Section 115BBC(1), as against the assessee’s version that the same being cash received through golak, did not partake the character of the anonymous donations covered u/s 115BBC(2) of the Act - CIT(A) has erred in law in deleting the addition made by the AO by invoking the provisions of section 115BBC(1)(i) - Held that:- The objects of the Trust exhibited the dual tenor of religious and charitable purpose and activities. Section 115BC of the Act was inserted in the Income Tax Act by Finance Act, 2006 and sub clauses (i) & (ii) of sub-section (1) were substituted w.e.f. 01.04.2010. The object of bringing this law in the Statute Book w.e.f. 01.04.2006 is well explained in the Memorandum explaining the provisions of the Finance Bill, 2006. From the above, it is clear that the object was to catch the ‘unaccounted money’ which was brought in as Tax Free Income in the hands of the Charitable Trusts and this law was never meant for taxing the Petty Charities. The Legislature intended to tax the unaccounted money or black money which was brought in the books of charitable trusts in bulk and this law was not meant for taxing the small and general charities collected by the Genuine Charitable Trusts. As contended, the concept and importance of charity, against the backdrop of the Indian Society, has been in existence from time memorial in all religions, without exception. The assessee, in this regard, has cited Zakaat from Islam, Dasvand from Sikhisim and the recognition of this concept from Manu-Samriti, the original magnum opus on the Indian social system. That this concept has continued to be accepted and practiced in India all along down the ages, and thus it is firmly entrenched in our society, cannot be questioned. . Accordingly, we hold that the ld. CIT(A) has correctly deleted the addition for both the assessment years under consideration. - Decided in favour of assessee Issues Involved:1. Whether the anonymous donations received by the charitable society are taxable under Section 115BBC of the Income Tax Act, 1961.2. Whether the activities of the charitable society qualify as religious and charitable purposes under the Income Tax Act.Detailed Analysis:1. Taxability of Anonymous Donations under Section 115BBC:The primary issue in this case was whether the anonymous donations received by the charitable society through golaks (donation boxes) should be taxed under Section 115BBC of the Income Tax Act, 1961. The Assessing Officer (AO) had classified the donations as anonymous and proposed to tax them according to Section 115BBC(1), which imposes a tax on anonymous donations exceeding 5% of total donations or Rs. 1 lakh, whichever is higher.The charitable society argued that the donations received through golaks did not qualify as anonymous donations under Section 115BBC(2) because they were for religious and charitable purposes. The society maintained detailed records of the donations, including the location of the golaks and the total amount collected, even though the individual donors' identities were not recorded.The CIT(A) and the Tribunal both held that the donations received through golaks were not anonymous donations as per the provisions of Section 115BBC(2). The Tribunal noted that the society's activities were wholly for religious and charitable purposes, which exempted them from the provisions of Section 115BBC(1).2. Qualification of Activities as Religious and Charitable Purposes:The second issue was whether the activities of the charitable society qualified as religious and charitable purposes under the Income Tax Act. The society provided various services, including looking after disabled and destitute individuals, providing free education, medical aid, and running schools for special education.The CIT(A) and the Tribunal examined the objects and activities of the society in detail. They referred to several judicial precedents, including the Supreme Court's decision in 'Ramchandra Shukla v. Shree Mahadeoji,' which held that there is no line of demarcation between religion and charity in the Hindu system, and charity is regarded as part of religion.The Tribunal also cited the Gujarat High Court's decision in 'CIT v. Barkate Saifiyah Society,' which discussed the overlap between religious and charitable purposes. The Tribunal concluded that the society's activities, such as providing relief to the poor, education, and medical relief, were inherently religious and charitable.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the additions made by the AO for both assessment years. It held that the anonymous donations received by the society through golaks were exempt from taxation under Section 115BBC(2) as the society was established wholly for religious and charitable purposes. The Tribunal's decision was based on the detailed examination of the society's activities and judicial precedents that supported the overlap between religious and charitable purposes.Order:The appeals filed by the Department were dismissed, and the orders of the CIT(A) deleting the additions for both assessment years were upheld.