Trust with amended deed held eligible for s.115BBC exemption on anonymous donations for religious and charitable purposes

ITAT Kolkata allowed the assessee-trust's appeal, holding it eligible for exemption under s.115BBC in respect of anonymous donations. The AO and CIT(A) had denied the benefit on the ground that the trust's objects were only charitable, not religious, and therefore it could not claim the exception applicable to trusts having both religious and charitable purposes. ITAT found that an amended deed dated 07.05.2014, duly filed with the Registrar, clearly reflected that the trust pursued both religious and charitable objects. As this amended deed was not considered by the lower authorities, ITAT held that the conditions for exemption were satisfied and directed allowance of the claim.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the receipts treated as anonymous donations were liable to tax under section 115BBC(1) of the Income-tax Act for the relevant assessment year.

1.2 Whether the assessee qualified as a Trust created or established for both religious and charitable purposes so as to fall within the exception under section 115BBC(2)(b).

1.3 Whether the Assessing Officer and the first appellate authority erred in not considering the amended Memorandum/Deed dated 07.05.2014 altering the objects of the Trust.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Taxability of anonymous donations under section 115BBC and character of the Trust as religious-cum-charitable

Legal framework (as discussed)

2.1 The Tribunal referred to section 115BBC(1) providing for taxation of anonymous donations and to section 115BBC(2)(b), which carves out an exception for anonymous donations received by a Trust or institution created or established wholly for religious and charitable purposes, subject to specified exclusions relating to donations for universities/educational institutions or hospitals/medical institutions run by such Trust.

2.2 The first appellate authority had relied on clause (2)(b) of section 115BBC to hold that any anonymous donation received by a Trust for charitable purposes does not come within the exception, thereby sustaining the addition.

Interpretation and reasoning

2.3 The Assessing Officer, on examining the original Memorandum of Association, found that the activities of the assessee were only for disabled persons, i.e., of charitable nature, with no mention of religious purposes. On this basis, it was held that the Trust was solely charitable and not both religious and charitable, and hence not entitled to the exception under section 115BBC(2)(b). Anonymous donations of ?17,65,436 were therefore brought to tax under section 115BBC.

2.4 The first appellate authority agreed with this view, stating that anonymous donations received for charitable purposes did not fall within the exception and that the Assessing Officer had rightly taxed the amount under section 115BBC.

2.5 Before the Tribunal, the Departmental Representative reiterated that the assessee's activities were only for disabled persons and hence charitable, and that, in the absence of religious objects in the Memorandum, the exception under section 115BBC(2)(b) was not available.

2.6 The Tribunal examined the material placed on record and found that the Secretary of the assessee-society had filed Form IV regarding alteration of the Memorandum and Regulations with the Registrar under the West Bengal Societies Registration Act, 1961, dated 07.05.2014.

2.7 The Tribunal noted that, according to the assessee, a copy of the amended deed (as per the paper book at page 68) clearly established that the Trust was created for both religious and charitable purposes and thus claimed entitlement to the exception in section 115BBC(2)(b).

2.8 The Tribunal observed that both the Assessing Officer and the first appellate authority had proceeded on the basis that the Trust carried out only charitable activities for disabled persons and had not considered the amended deed dated 07.05.2014 which, according to the assessee, introduced religious objects alongside charitable ones.

2.9 On evaluation of the record, the Tribunal accepted the assessee's contention that, in light of the amended deed, the Trust was created for both religious and charitable purposes.

Conclusions

2.10 The Tribunal held that the amended deed dated 07.05.2014, establishing that the Trust was for both religious and charitable purposes, had not been considered by the lower authorities.

2.11 In view of the amended objects, the Tribunal concluded that the assessee was eligible for the benefits of the exception under section 115BBC and that the provisions of section 115BBC(1) could not be applied to the anonymous donations received.

2.12 Accordingly, the addition of ?17,65,436 as anonymous donations under section 115BBC was not sustainable, and the grounds raised by the assessee were allowed.

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