HC: Anonymous Donations to Charitable cum Religious Trusts Exempt Under Section 115BBC

Citation- Commissioner of Income-tax (Exemptions), Mumbai v. Sai Baba Sansthan Trust - Shirdi

High Court- Bombay

ITA No: 598 of 2024, 14650 and 14652 of 2024

Assessment Year: 2015-16, 2017-18 and 2018-19

Date of Order- October 8, 2024

Brief Facts:

• The assessee was a public trust registered under Section 80G and 12A of the Income-tax Act, 1961.

• The trust received significant donations, including anonymous ones, through its “Hundi” collection, primarily meant for both religious and charitable purposes.

• The Assessing Officer (AO) contended that because the trust was registered as a charitable organisation under Section 80G, it did not qualify as a religious trust and hence must pay tax on anonymous donations under Section 115BBC(1).

• However, the assessee argued that it qualified as both a religious and charitable trust, and, therefore, it was entitled to the exemption under Section 115BBC(2)(b), which excludes such a trust from taxation on anonymous donations.

Observations of the Court:

The High Court held as follows-

1. The court reviewed the trust deed and the Sai Baba Trust Act, confirming the trust’s dual purpose of serving both charitable and religious functions. Activities included temple rituals, festivals, feeding the poor, and spreading Sai Baba’s teachings.

   
   

2. The court clarified that Section 80G does not prohibit a trust involved in charitable activities from also engaging in religious activities.

   
   

3. Further, the court emphasized that the provisions of Section 80G(5B) allow religious trusts to benefit from tax exemptions as long as their religious expenditures do not exceed 5% of their total income. The assessee-trust met this condition, as its religious expenditure was less than 5% of its total income.

   
   

4. Therefore, the court ruled that the anonymous donations received by the trust fell under Section 115BBC(2)(b), allowing tax exemption because the trust is classified as both religious and charitable.

   
   

5. The court clarified that Section 80G registration, allowing tax-deductible donations, does not prevent the trust from being considered religious.

The Court upheld the ITAT’s finding that the trust’s activities fulfil both religious and charitable purposes, entitling it to receive tax-free anonymous donations.