Relief for Sai Baba Trust as HC upholds tax exemption on anonymous donations

The Bombay High Court upheld tax exemption on anonymous donations to the Shri Saibaba Sansthan Trust, preventing reassessment by tax authorities.

MUMBAI: The Bombay high court on Friday upheld tax exemption on anonymous donations received by the Shri Saibaba Sansthan Trust, which manages and administers the Sai Baba temple at Shirdi, visisted by millions of devotees from all around the world. The court directed the income tax department to desist from acting on the reassessment ordered by its official.

Maharashtra, Dec 26 (ANI): Priests chanting during the solar eclipse timing, at Sai Baba temple in Shirdi on Thursday. (ANI Photo)

In a letter, dated January 27, 2012, the director of Income Tax (Exemptions) while referring to an amendment made to section 80G(5)(vi) (indefinite validity to tax exemption to charitable trusts) by the Finance Act 2009, allowed devotees to avail tax exemption, provided that the donations were received by cheque or cash up to ₹2,000.

However, during the year 2014-2015, a show cause notice under section 142(1) of the IT Act was issued to the trust, as to why the income of the petitioner received by way of anonymous donations in the hundi (boxes), should not be taxed under the provisions of section 115BBC (deals with anonymous donations to charitable trusts) of the IT Act. Resultantly, an assessment order, passed in 2015-16, declared the anonymous donations received by the trust as taxable by the assessing officer. Resultantly, the petitioner was served with a notice, dated for the assessment year 2013-14, for reopening of assessment for the year 2013-14.

Counsel representing the trust asserted the provisions of tax exemption on anonymous donations to trusts, as these are charitable in nature. They claimed the reopening of the assessment to be illegal, as it was based on records already examined during earlier assessments.

Advocate Akhileshwar Sharma, appearing for the Income Tax department, pointed out the failure of the petitioner to disclose fully all material facts. They submitted that their primary reason to reopen the assessment was to understand whether the donations were taxable under the Act or not. They also pointed out the trust’s failure to disclose the income received via jewellery.

On perusal of section 147 (reassessment of income which escapes original assessment) of the IT Act, a division bench, led by justices G.S. Kulkarni and Firdosh P. Pooniwalla, denied jurisdiction to the assessing officer to reopen the assessment unless fresh material is made available to disturb the reasoning gone into finalising the assessment. “If such course of action is recognised, it would lead to arbitrary consequences and result in multiple assessment orders being passed on the same materials available with the Assessing Officer, which is not the legislative intention section 147 would wield,” the court said.

The bench relied on an earlier judgment of the same court in justifying that anonymous donations received by the trust in the hundi were not liable to be taxed under section 115BBC(1) of the Act. Thereafter, the court set aside the reassessment notice and restrained the tax authorities from taking any step in pursuance of the notice.