Independent bodies constituted under Central/State/Provisional enactments entitled to exemption under Sec.10(23BBA) Income Tax Act: Madras High Court

Independent bodies constituted under Central/State/Provisional enactments entitled to exemption under Sec.10(23BBA) Income Tax Act: Madras High Court

The Madras High Court, disposing of the writ petitions filed by Sri Vaithiyanathaswamy and Sri Amirthakadeswaraswamy Devasthanams, held that the reference to “body” and “authority” in Section 10(23BB) of the Income Tax Act, 1961 would mean an independent authority constituted under any central/state or Provincial Act.

The petitioners had made cash deposits during the Assessment Year 2017-18. However, no IT returns were filed during the relevant Assessment Year.Consequently, the IT department issued several notices including notice under S.142 (1), calling upon the petitioners to file returns of income. In response, the petitioners urged that the deposits comprise voluntary donations made by the devotees and further that they were eligible to be exempted under Section 10(23BBA) of IT Act. The writ petitions were filed by the petitioners praying for issuance of a certified Mandamus to call of various notices issued by the Income tax Department from time to time, as being arbitrary, unjust and illegal and to treat the income of the petitioners as exempted u/s 10(23BBA) of the Income Tax Act, 1961.

The IT Departmentcontended that the “body” or “authority” referred in Section 10(23BBA) of IT Act is the HR & CE department and the exemption under the said section is available only to the department and not the petitioners, as the constituent temples of the petitioner Devasthanams function under HR&CE Act.

 Upon considering the scope of Section 10(23BBA) ofthe IT Act, the High Court held that the said provision envisages a three tier structurecomprising of; (i) a Central, State or Provincial Enactment in tier one, (ii) a body or authority set up under aforesaid Central, State or Provincial enactment in the nature of a public religious or charitable trust in tier two and (iii) temples, maths, wakfs, churches, synagogues, agiaries and other places of public religious worship, religious and charitable endowments and societies in tier three.

 In order to test whether the said requirements of Section 10(23BBA) are complied by the petitioners, the Court analysed the history of constitution of the petitioner Devasthanams in detail. Accordingly it was found that the petitioner Vaithiyanathaswamydevasthanam is managed and administered by Kattalai Thambiran appointed periodically by the Pandarasannathi in his capacity as trustee under a scheme of administration framed in a scheme suit filed under Section 92 of the Civil Procedure Code 1908 in line with the provisions of the Madras Hindu Religious & Charitable Endowment Act, 1951 (‘1951 Act’) and its precursor enactments, in the year 1919. In the light of the said facts, the Court held that the requirements under Section 10(23BBA) were satisfied, with the devasthanam being the body or authority having various temples functioning under it, and the Civil Procedure Code 1908 (Central) and the Madras Hindu Religious & Charitable Endowment Act, 1951 (State) and precursor State enactments being the required enactment.

Unlike Vaithiyanathaswamydevasthanam, the Amirthakadeswaraswamy Devasthanam is being administered under the trusteeship of srilasri Pandarasanadhi of DharmapuramAdheenakartar appointed in 1841 by the East India Company and his appointment has been accepted without challenge till date, despite the enactment of the Religious Endowment Act, 1863, Madras Hindu Religious Endowment Act, 1926, the Madras HR&CE Act, 1951 and TN HR&CE Act, 1959 in the intervening periods.  The Court held that said constitution of the Amirthakadeswaraswamy Devasthanam, does not entitle it to claim exemption under S.10(23BBA) of the IT Act.

 The Court further held that the “intention of the exemption under Section 10(23BBA) is to benefit only those entities whose role is managerial or administrative and not commercial, engaged with the purpose of income generation”.

Accordingly, W.P.No.29315 of 2019 relating to Vaithyanathaswamy Devasthanam was allowed, however, with an explicit remark that the individual constituent temples, endowments and charities are liable to tax in the light of the proviso to Section 10(23BBA) and W.P.No.29312 of 2019 relating to Sri Amirthakadeswarasamy Devasthanam was dismissed.

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