The common view is that gifts received in individual capacities – not as trustees of public trusts – should be liable to tax. Issues have arisen before courts regarding the taxability of gifts received by the heads of religious and spiritual bodies under the Income-Tax Act, 1961 (Act). The majority view seems to be that such gifts received in individual capacities – not as trustees of public trusts for them – should be liable to tax. However, the Madras High Court in its recent decision in the case of CIT v. Gopala Naicker Bangaru, (2010 236 CTR (Mad) 82, has held that such receipts are not taxable. The assessee in the case before the High Court (HC) is the head of a religious cult. Devotees ‘make their offerings for contribution voluntarily to him at the time of his birthday and the same has been accounted for as capital receipts'. During the previous year relevant to A.Y. 2004-05, he received Rs1.75 crore as gifts on his birthday. The A.O. ‘treated the gifts as having nexus to his profession as a religious head' and taxed the same. The CIT(A) allowed the appeal of the assessee on the ground that the ‘gifts are not consideration for profession/vocation' following the decision in CIT v. Vanamamalai Ramanuja Jeer Swamigal, (1998) 231 ITR 632 (Mad). The Tribunal upheld the CIT(A)'s decision on the ground that the gifts received have no direct nexus with any of his activities.
source:thehindubusinessline.com
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