We are a statutory committee administering a religious endowment and have always been treated as exempt under s.10(23BBA). Can the department withdraw that and require returns?
Not on the facts here. The Orissa High Court held that s.10(23BBA) exempts the income of a body or authority set up by or under a Central, State or Provincial Act and entrusted with the administration of public religious or charitable trusts or endowments, and that where the proviso does not apply the exemption is a total unconditional exemption. The withdrawal order was quashed and the committee was held not required to file returns pursuant to the s.142(1) direction.
Decided by the High Court (A.K. Ganguly CJ and I. Mahanty J) on 2007-10-11, reported as AIR 2008 Orissa 37; (2008) 299 ITR 56 (Orissa), as shown in the report header. It bears on section 10(23BBA), section 142(1) of the Income Tax Act 1961, in Capital Gains Exemptions, Charitable Trusts & Exemption and Assessment & Scrutiny matters.
Section 10(23BBA) is routinely confused with s.11, and the confusion runs both ways. The clause exempts the income of the administering body itself — a temple managing committee, a wakf board, an endowments commissioner — and it does so without registration, without approval, without an application condition and without the accumulation machinery. The proviso is the thing to check: it excludes from the clause the income of the trust or endowment being administered, as distinct from the income of the body. Here the temple and all its endowments had vested in the committee itself under the constituting Act, so there was no separate administered entity whose income the proviso could reach. Where the body merely supervises trusts that continue to hold their own property, the trusts' income is outside the clause and needs its own s.11 or s.10(23C) shelter. The second practical point is that an exemption of this kind, once the clause applies, cannot be withdrawn by an administrative letter.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner is the managing committee of the Shri Jagannath Temple, a body corporate with perpetual succession and a common seal created by s.5 of Orissa Act 11 of 1955, which received the President's assent on 15 October 1955. The temple and all its endowments had vested in the committee under ss.5 and 6 of that Act. The committee had been treated as exempt since 1962, confirmed by a letter of the Assistant Commissioner of Income-tax dated 17 August 1995, and had not filed returns. By letter dated 12 October 2006 the Revenue withdrew the exemption and required the committee to file returns and comply with deduction requirements, issuing a notice under s.142(1) on the footing that no return had been filed.
The writ petition succeeded, with no order as to costs. The letter dated 12 October 2006 was quashed, the directions issued to the Bank consequent upon it for deduction of tax at source were set aside, the exemption under s.10(23BBA) was held to be a total unconditional exemption on these facts, and the petitioner was held not required to file a return pursuant to the s.142(1) direction, the direction being unauthorised and of no legal effect (paras 23, 24 and 31; the concurrence of I. Mahanty J is at para 32).
The Court traced the purpose of the clause, which is to exempt the income of bodies or authorities set up by or under a Central, State or Provincial Act and entrusted with the administration of public religious and charitable trusts within their jurisdiction (paras 7 and 22). It then applied that to the petitioner: it is a body corporate created by s.5 of the State Act, so the proviso to s.10(23BBA) does not apply to it, and the exemption granted is a total unconditional exemption (para 23). Since the temple and all its endowments had vested in the committee under ss.5 and 6 of the Act, the income was the income of a body of the kind the clause describes, and the clause mandates that such income is unconditionally exempt from income-tax (para 24).
Therefore, the proviso to Section 10(23BBA) does not apply to the petitioner and the exemption which has been granted to the petitioner under Section 10(23BBA) is a total unconditional exemption.
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Handle my notice → Ask a CA on WhatsAppNot on the facts here. The Orissa High Court held that s.10(23BBA) exempts the income of a body or authority set up by or under a Central, State or Provincial Act and entrusted with the administration of public religious or charitable trusts or endowments, and that where the proviso does not apply the exemption is a total unconditional exemption. The withdrawal order was quashed and the committee was held not required to file returns pursuant to the s.142(1) direction. This was decided by the High Court (A.K. Ganguly CJ and I. Mahanty J) and bears on section 10(23BBA), section 142(1) of the Income Tax Act 1961. It is reported as AIR 2008 Orissa 37; (2008) 299 ITR 56 (Orissa), as shown in the report header. Section 10(23BBA) is routinely confused with s.11, and the confusion runs both ways. The clause exempts the income of the administering body itself — a temple managing committee, a wakf board, an endowments commissioner — and it does so without registration, without approval, without an application condition and without the accumulation machinery. The proviso is the thing to check: it excludes from the clause the income of the trust or endowment being administered, as distinct from the income of the body. Here the temple and all its endowments had vested in the committee itself under the constituting Act, so there was no separate administered entity whose income the proviso could reach. Where the body merely supervises trusts that continue to hold their own property, the trusts' income is outside the clause and needs its own s.11 or s.10(23C) shelter. The second practical point is that an exemption of this kind, once the clause applies, cannot be withdrawn by an administrative letter. If it applies to you, the first step is this: Start with the constituting statute and show that the body was set up by or under a Central, State or Provincial Act and is entrusted with the administration of public religious or charitable trusts or endowments within its jurisdiction.
The petitioner is the managing committee of the Shri Jagannath Temple, a body corporate with perpetual succession and a common seal created by s.5 of Orissa Act 11 of 1955, which received the President's assent on 15 October 1955. The temple and all its endowments had vested in the committee under ss.5 and 6 of that Act. The committee had been treated as exempt since 1962, confirmed by a letter of the Assistant Commissioner of Income-tax dated 17 August 1995, and had not filed returns. By letter dated 12 October 2006 the Revenue withdrew the exemption and required the committee to file returns and comply with deduction requirements, issuing a notice under s.142(1) on the footing that no return had been filed. The matter was decided on 2007-10-11 by the High Court (A.K. Ganguly CJ and I. Mahanty J). On those facts the High Court held as follows. The writ petition succeeded, with no order as to costs. The letter dated 12 October 2006 was quashed, the directions issued to the Bank consequent upon it for deduction of tax at source were set aside, the exemption under s.10(23BBA) was held to be a total unconditional exemption on these facts, and the petitioner was held not required to file a return pursuant to the s.142(1) direction, the direction being unauthorised and of no legal effect (paras 23, 24 and 31; the concurrence of I. Mahanty J is at para 32).
The Court traced the purpose of the clause, which is to exempt the income of bodies or authorities set up by or under a Central, State or Provincial Act and entrusted with the administration of public religious and charitable trusts within their jurisdiction (paras 7 and 22). It then applied that to the petitioner: it is a body corporate created by s.5 of the State Act, so the proviso to s.10(23BBA) does not apply to it, and the exemption granted is a total unconditional exemption (para 23). Since the temple and all its endowments had vested in the committee under ss.5 and 6 of the Act, the income was the income of a body of the kind the clause describes, and the clause mandates that such income is unconditionally exempt from income-tax (para 24). In the words reproduced by the source cited on this page: "Therefore, the proviso to Section 10(23BBA) does not apply to the petitioner and the exemption which has been granted to the petitioner under Section 10(23BBA) is a total unconditional exemption."
It was decided by the High Court on 2007-10-11 and is reported as AIR 2008 Orissa 37; (2008) 299 ITR 56 (Orissa), as shown in the report header. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 10(23BBA), section 142(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petition succeeded, with no order as to costs. The letter dated 12 October 2006 was quashed, the directions issued to the Bank consequent upon it for deduction of tax at source were set aside, the exemption under s.10(23BBA) was held to be a total unconditional exemption on these facts, and the petitioner was held not required to file a return pursuant to the s.142(1) direction, the direction being unauthorised and of no legal effect (paras 23, 24 and 31; the concurrence of I. Mahanty J is at para 32). It arises in Capital Gains Exemptions, Charitable Trusts & Exemption and Assessment & Scrutiny matters, on section 10(23BBA), section 142(1) of the Income Tax Act 1961, and was decided by A.K. Ganguly CJ and I. Mahanty J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Then apply the proviso: identify whether the property and income of the administered trust or endowment has vested in the body itself, as it had here, or whether the trust remains a separate holder of its own income. For any administered trust that is a separate holder, secure its own s.12A/12AB registration or s.10(23C) approval; s.10(23BBA) will not carry it. If exemption is withdrawn by an administrative communication rather than an assessment order, challenge the communication itself — that is what was quashed here and ask for the consequential directions to your bankers to deduct tax at source to be set aside with it, as they were here. Do not treat this as authority that no return need ever be filed; the Court decided the direction before it under s.142(1) on these facts.
Validity check could not be completed. A 2007 High Court decision. I did not check whether it was carried to the Supreme Court or has been followed or doubted since, and a later pass should look in particular for decisions on the proviso to s.10(23BBA) where the administered trust remains a separate holder of its property. Nothing in the clause appears to have been amended in a way that touches the holding, but I did not verify the current text of s.10(23BBA) against an authoritative source. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The citations AIR 2008 Orissa 37 and (2008) 299 ITR 56 are taken from the report header on indiankanoon and were not independently checked. Paragraph 23 was confirmed by a second retrieval and came back identically. Paragraph 7 of the judgment, also confirmed on the second retrieval, describes the purpose of the clause as being 'to unconditionally exempt the income of statutory bodies which are entrusted with the administration of public, religious or charitable institution and are not engaged in commercial activities'. I did not read the constituting Act, Orissa Act 11 of 1955. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition succeeded, with no order as to costs. The letter dated 12 October 2006 was quashed, the directions issued to the Bank consequent upon it for deduction of tax at source were set aside, the exemption under s.10(23BBA) was held to be a total unconditional exemption on these facts, and the petitioner was held not required to file a return pursuant to the s.142(1) direction, the direction being unauthorised and of no legal effect (paras 23, 24 and 31; the concurrence of I. Mahanty J is at para 32).
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