Shirdi’s Saibaba Sansthan eligible for income tax exemption on anonymous donations: HC
Mumbai, Oct 10, 2024
The court ruled that the Trust is eligible for tax exemption on anonymous donations, affirming its status as both a religious and charitable entity.
The Bombay high court (HC) on Tuesday held that the Shri Saibaba Sansthan Trust, which administers the famous temple at Shirdi in Maharashtra, was eligible for tax exemption on anonymous donations as it was both a religious and charitable trust.
The division bench of justice Girish Kulkarni and justice Somasekhar Sundaresan was hearing appeals filed by the Income Tax (I-T) department, challenging the I-T Appellate Tribunal orders, rejecting their pleas for taxing “Hundi collections” or anonymous donations received by the Trust.
Established in 1953 and recognised under the Bombay Public Trusts Act, the Shri Sai Baba Sansthan Trust, Shirdi has been a significant religious institution for decades. Following legislative changes in 2004, the Trust was reconstituted under the Shri Sai Baba Sansthan Trust (Shirdi) Act, and it holds registrations under both section 12A (non-profit organisations entitled to tax exemptions) and section 80G of the Income-tax Act, affirming its standing as a charitable institution.
In 2015-16, the Trust had received aggregate donations of ₹228.25 crore, including ₹159.12 crore by way of anonymous donations, and the assessing officer had levied tax on the latter amount. However, the I-T Commissioner, reversed the decision on appeal and the Appellate Tribunal upheld the decision, prompting the department to approach the high court.
Before high court, the revenue argued that the anonymous donations were liable to tax since the trust was registered solely for charitable purposes under section 80G of the I-T Act, which governs the eligibility of institutions to receive tax-deductible donations.
Advocate Dinesh Gulabani, representing the Revenue, contended that the assessments should have considered the interplay between Sections 115BBC(1) and 80G and argued that the trust’s registration under Section 80G inherently indicated that it was solely a charitable entity, thus making the anonymous donations taxable.
Conversely, advocate S Ganesh, representing the trust, emphasised that the classification of the trust was fundamentally a factual matter and that both the CIT(A) and the Tribunal had reached their conclusions based on thorough examinations of the trust’s operational context and legal framework.
The court accepted the arguments advanced on behalf of the Trust. It recognized that section 80G does allow for institutions that engage in limited religious activities, provided such expenditures do not exceed 5% of total income. This provision underscores the legislature’s acknowledgement of the coexistence of religious and charitable functions within a single institution.
Furthermore, the court pointed out that the assessing officer’s restrictive interpretation of the trust’s status overlooked the broader legal and factual context. The ruling stated that simply being registered under section 80G does not preclude the trust from being classified as a religious institution. The court clarified that a comprehensive factual determination regarding the nature of the trust was essential for applying the exemptions under section 115BBC.
The court ruled that the Shri Sai Baba Sansthan Trust is indeed a religious and charitable trust, affirming the decisions made by the CIT(A) and the Tribunal. The court dismissed the Revenue’s appeals, concluding that no substantial question of law arose from the case. This ruling not only reinforces the trust’s entitlement to exemptions from tax on anonymous donations but also sets a precedent for the interpretation of tax laws relating to the dual nature of charitable institutions in India.
[The Hindustan Times]
