Temple loses tax exemption for failing statutory requirements but anonymous donations escape gross taxation

ITAT Hyderabad held that a temple managed by Endowment Commissioner under state Endowment Act was not eligible for exemption under sections 11 and 12 as no return of income was filed and other statutory conditions were not satisfied. Regarding anonymous donations received through collection boxes, the tribunal ruled that since the temple was established for religious purposes, section 115BBC(2) exempted such donations from gross taxation under section 115BBC(1). Instead, donations should be assessed under sections 56 and 57, taxing only surplus after deducting expenditure. The tribunal clarified that section 10(23BBA) applies only to income of administrative bodies appointed by government under Endowment Acts, not to temples themselves. Following Madras HC precedent in Sri Amirthakadeswaraswamy case, provisions of section 10(23BBA) were held inapplicable to temple income, being relevant only for administrative authorities under Endowment legislation.

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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.

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