Publicising Donor Names for Religious Events Not Convert Donations into Business Income: ITAT [Read Order]

The tribunal highlighted that such acknowledgments are intended to provide public appraisal and motivate others to contribute to the trust's religious and cultural objectives.

The Delhi Bench of the Income Tax AppellateTribunal (ITAT) ruled that the presence of donor names on publicity material, at event sites, or on constructions is merely an acknowledgment of contributions and does not convert voluntary donations into commercial or business receipts.

Shri Krishna Janmashtmi Mahotsav Samiti (assessee) is a registered public charitable trust under Section 12A of theIncome-tax Act, 1961. Its primary activities include organizing religious and cultural events, specifically the Janmashtami Mahotsav establishing Ashrams, and publishing spiritual literature.

For the Assessment Year 2014-15, the assessee filed a NIL return, claiming exemptions under Sections 11 and 12 of the Act. However, the Assessing Officer (AO) made an addition of ₹50,54,000, reclassifying certain donations as business income taxable at the maximum marginal rate under Section 11(4A) of the Income Tax Act.

The AO’s contention was based on the interpretation that donations received during the Janmashtami Mahotsav were actually payments for advertisement or business promotion. The AO reached this conclusion after receiving replies from 5 out of 12 donors under Section133(6), suggesting the nature of the receipts was for publicity.

Aggrieved by the AO’ order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld addition, citing "contradiction and confusion" in the assessee's submissions regarding whether the funds were for a corpus, membership fees, or regular donations. Aggrieved by the CIT(A)’s order, the assessee appealed before ITAT.

The two-member bench comprising Anubhav Sharma(Judicial Member) and Manish Agarwal (Accountant Member), examined whether these receipts were donations for trust objectives or business receipts.

The tribunal observed that the funds were used to organize the Mahotsav, arrange free meals (bhandaras), conduct religious discourses, and pay for publicity materials like banners and posters. The tribunal noted that these activities were pursuant to the trust's declared religious objects, not commercial exploitation.

The tribunal noted that placing donor names on banners or construction sites (such as a Dharmshala in Vrindavan) is a standard practice to acknowledge support.

The tribunal held that any benefit derived by the donor was not commercial in nature and also held that since no profit motive existed behind these receipts, they could not be converted into commercial considerations.

The tribunal further noted that even if the alleged "advertisement" donations were considered trade-related, they formed less than 20% of total receipts, which is well within the statutory threshold allowed under Section 2(15) of the Act.

The tribunal concluded that the lower authorities erred in their findings. It ruled that the donations were voluntary contributions for religious purposes and deleted the addition of ₹50,00,000. The appeal of the assessee was allowed.

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