In a significant ruling, the Bombay High Court on Tuesday upheld the exemption granted to Shree Sai Baba Sansthan Trust, Shirdi, for anonymous donations received under the Income Tax Act. The court confirmed that the Trust qualifies as a religious and charitable organization, making it eligible for tax exemptions on such contributions.
The Trust received total donations of ₹228 crores in the assessment year 2015-16, out of which ₹159 crores were anonymous. The Assessing Officer had taxed these donations, asserting that the Shirdi Trust fell under Section 80G of the Income Tax Act, which grants deductions to charitable institutions but excludes religious trusts from the scope of certain exemptions under Section 115BBC(1).
The Income Tax Commissioner (Exemptions), Mumbai, appealed against the October 2023 ruling by the Income Tax Appellate Tribunal (ITAT), which had exempted the Trust from taxation on its anonymous donations. However, the High Court, led by Justices Girish Kulkarni and Somashekhar Sundaresan, rejected the appeal and upheld ITAT's decision.
The central issue in the appeal revolved around whether anonymous donations received in the Trust's Hundi were liable to be taxed under Section 115BBC(1) of the Income Tax Act. The Trust argued that it serves dual religious and charitable purposes, making it eligible for tax exemption under Section 115BBC(2)(b), which applies to religious and charitable organizations.
The court concluded that merely being registered under Section 80G does not disqualify a trust from being considered religious. The judgment emphasized that a trust can serve both religious and charitable purposes, and determining its nature requires examining the trust deed and bylaws.
This ruling provides clarity on the taxation of religious and charitable trusts and underscores the importance of considering the broader context of a trust's activities when determining its tax obligations.
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