Shirdi Sai Baba Sansthan Is A Religious And Charitable Trust; Its Anonymous Donations Cannot Be Taxed: Bombay High Court

The Bombay High Court on Tuesday (October 8) held that the Shree Sai Baba Sansthan Trust, Shirdi is certainly a religious and a charitable trust and thus the 'anonymous' donations to the tune of Rs 159.12 crores, it received in the hundi (cash collection box) during the assessment years 2015 to 2019, can be exempted from income tax.

A division bench of Justices Girish Kulkarni and Somasekhar Sundaresan upheld the October 25, 2023 order of an Income Tax Appellate Tribunal (ITAT) which had held that the Trust is both a charitable and religious one and thus was eligible to exemption from income tax on its anonymous donations.

"From a cumulative reading of the objects of the assessee (Trust), read with the provisions of the Sai Baba Trust Act which is a special legislation promulgated by the State Legislature reflecting the objects and activities of the assessee, as also, considering the provisions of the Bombay Public Trusts Act, we are of the clear opinion that the assessee certainly is a religious and charitable trust, hence, the assessee rightly and legitimately claimed an entitlement under sub-section 2(b) of Section 115BBC of the Act," the judges said in their order.

Notably, the bone of contention was whether the Shri Sai Baba Sansthan Trust, Shirdi could be exempted from being taxed particularly for its 'anonymous' donations. The IT department contended that the Trust being a charitable one, and as the anonymous donations exceeded 5% of the total donations, the same were taxable under section 115BBC(1) of the Act. It was of the view that the status of the assessee as a trust, existed solely for charitable purposes, which was evident from the certificate obtained under section 80G of the IT Act. The department also argued that out of the total amounts received under donations, a minuscule amount was used for religious purposes, which is contrary to the claim of the Trust that it also has religious obligations.

Section 80G of the Act, registers only those Trusts, which are established in India solely for charitable purposes and which did not have any religious activities.

On the other hand, the Trust contended that it has both religious and charitable obligations and thus as mandated under section 115BBC(2)(b), its 'anonymous' donations cannot be taxed. It contended that its objects and activities were predominantly charitable and it also served religious purposes, which overlapped the charitable purpose and thus the Department was wrong in interpreting that it was only a charitable trust.

It was further contended that the main object of its trust had always been to carry out the activities associated with prayers, maintenance of temple and providing facilities to the devotees who visited the temple, to offer prayers including providing food and propagation of the teachings of Shri Sai Baba. It pointed out that it spent nearly 0.49 per cent of its total income on religious purposes only, which is in consonance to section 80G(5B) that permits a charitable trust to spent not more than 5 per cent on activities of 'religious nature.'

The judges agreed with the contentions of the Trust, saying that it would not be acceptable that Revenue takes a position that Section 80G would exclude religious trust and/or Section 80G applies only to charitable institutions.

"In any event, in our opinion, such reading of Section 80G that it would exclude religious and charitable entities, would not be the correct reading of the said provision. As fairly stated on behalf of the Revenue, there is no bar for a charitable trust also to be a religious trust. In fact, a trust being both religious or charitable or vice-versa is well-accepted phenomena," the bench said.

The bench also took into account, section 21 of the Sai Baba Trust Act which obligated the Trust to work for maintenance of temple, conduct and performance of rituals and ceremonies therein and providing facilities for darshan of devotee, offering of prayers and performing the religious festivals.

"The provisions of Section 80G cannot be intermixed, from what is provided by Section 115BBC(2)(b). Both the provisions stand compartmentalized and are independent of each other. It would be too far-fetch to reach to a conclusion that merely the assessee being registered under Section 80G of the Act, it cannot be a religious trust, so as to fall outside the purview of Section 115BBC (2)(b) of the Act. Such an approach would amount to an inappropriate reading of the provisions of Section 80G as also Section 115BBC(2)(b). The very foundation of the operation and effect of Section 115BBC(2)(b) is a conclusive ascertainment, and a factual determination of a trust being religious and charitable as ascertained from the contents of the trust deed. Once such requirement is satisfied, any anonymous donation received by such trust would be eligible / entitled to the benefit of an exemption from tax," the judges held.

With these observations, the bench dismissed the appeal filed by the IT department.

Appearance:

Advocate Dinesh Gulabani appeared for the Department.

Senior Advocate S Ganesh along with Advocates Ashwin Shete, Srivastav and Anvi Vasani instructed by Jayakar & Partners, represented the Shree Sai Baba Sansthan Trust, Shirdi.

Case Title: Commissioner of Income Tax (Exemptions) vs Shree Sai Baba Sansthan Trust, Shirdi (Income Tax Appeal 598 of 2024)

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