2025 (2) TMI 1511 - AT - Income Tax

Anonymous donations to wholly religious trusts are not taxable where characterised as corpus donations and precedent supports non-taxability.

The matter concerns whether amounts designated as Shaswat Seva Fund and an earmarked corpus fund qualify as corpus donations exempt from tax and whether ... Exemption u/s. 11(1)(d) - treating 'Shaswat Seva Fund and Earmarked Fund' as corpus donation - HELD THAT:- Assessee is a wholly religious trust. Therefore we are also of the view that the intent of the legislation in this regard is not to tax any donation made to any religious trust on the ground of anonymity. Moreover, any income exempt u/s. 10 of the Act has to be excluded while computing income of religious institutions exempt u/s. 11 of the Act, as has been held in the case of Jasubhai Foundation [2015 (4) TMI 305 - BOMBAY HIGH COURT] Even the Ld. CIT(E) while allowing the appeal of the assessee had directed the AO to re-compute the income of the assessee and allow exemption u/s. 10(23C)(v) of the Act No new material or submissions have been filed to controvert or rebut the findings so recorded by Ld. CIT(E). Appeal filed by the revenue stands dismissed. Issues: Whether the amounts received as 'Shaswat Seva Fund' and 'earmarked corpus fund' are taxable or are corpus donations exempt under section 11(1)(d) of the Income-tax Act, 1961, and whether anonymous donations to a wholly religious trust are liable to tax under section 115BBC of the Income-tax Act, 1961 (including the question of admission of additional evidence under Rule 46A(1) of the Income Tax Rules, 1962).Analysis: The assessee is a wholly religious trust registered under section 12A and approved under section 10(23C)(v) of the Income-tax Act, 1961. The assessment proceedings under section 143(3) recorded voluntary contributions claimed as corpus donations (Shaswat Seva Fund and earmarked corpus fund). The assessing officer disallowed the corpus characterization for lack of documentary proof of donor identity and specific donor directions and treated the amounts as anonymous donations taxable under section 115BBC. The appellate authority relied on the explanatory memorandum to the Finance Act, 2006 and relevant judicial precedent holding that anonymous donations to wholly religious trusts are not to be taxed and that exempt income under section 10 must be excluded while computing income under section 11. No new material was produced before the Tribunal to controvert those findings. The question of admissibility of additional evidence under Rule 46A(1) was considered in context but no fresh rebuttal was placed before the Tribunal to disturb the appellate authority's conclusion.Conclusion: The characterization of the impugned amounts as corpus donations is upheld and anonymous donations to a wholly religious trust are not taxable under section 115BBC in the circumstances of this case; the revenue's grounds are dismissed and the appeal is dismissed in favour of the assessee.