Ganges Sugar Mills Ltd. Vs. Commissioner of Income Tax, Calcutta  INSC 641 (4 August 1997)
BHARUCHA, V.N. KHARE
4TH DAY OF AUGUST, 1997 Present;
Mr. Justice S.P.Bharucha Hon'ble Mr. Justice V.N.Khare H.N.Salve, Sr.Adv., Shri
Narain, K V.Viswandhan, D.Singh and Suman J.Khaitan, Advs. with him for the
Chandra and B.K.Prasad, Advs. for the Respondent
following Judgment of the Court was delivered :
Appeal No. 10736/95)
Division Bench of the Calcutta High Court answered the following question in
the negative and in favour of the Revenue :
on the facts and in the circumstances of the case the Appellate Tribunal was
justified in holding that the assesses was entitled to the relief under section
80G on the donations paid to Vishwa Mangal Trust?" The assesses is in
appeal by certificate.
concerned in the first appeal with the Assessment Year 1973-74, the relevant
previous year having ended on 30th June, 1972. The assesses had made a donation
of RS. 25,000/- to the Vishwa mangal Trust (hereinafter called 'the Trust').
The assessee claimed a deduction under Section 80G in respect of that donation.
The claim was allowed by the Income Tax Officer on 27th December, 1976.
assessment was then re-opened under Section 147(b) of the Income Tax Act and on
30th December, 1977 the Income Tax Officer disallowed the claim. The Appellant
Assistant Commissioner dismissed the assessee's appeal. The Income Tax Appellate
Tribunal allowed the appeal preferred by the assessee against the order of the
Appellate Assistant Commissioner. Thereafter it referred the question set out
above to the High Court. The High Court reversed the view of the Tribunal.
the same thing happened in a subsequent year and the High Court followed its
80G sets out the deductions to be made, in accordance with and subject to its
provisions, in computing the total income of an assessee in respect of
donations to certain funds, charitable institutions, etc. It applies by reason
of sub-section (5) thereof, to any other fund or any institution to which the
section applies (sub-section (2)(a)(iv)) if it is established in India
"for a charitable purpose" and fulfils the condition, inter alia,
that it "is not expressed to be for the benefit of any particular
religious community or caste". Explanation 3 states, "In this
Section, 'charitable purpose' does not include any purpose the whole or
substantially the whole of which is of a religious nature".
objects of the Trust are set out in clause (2) of the trust deed. They are :
To establish, support and maintain schools, colleges, libraries, reading rooms,
Lecture Halls, Public Museums and to grant aids to, support and maintain
persons and institutions for the promotion of science or literature or Fine
Arts or diffusion of useful knowledge or galleries of paintings and other works
of art or collection of natural history, economic and scientific inventions and
establish and maintain or grant aid to Hospitals, Medical Schools or Colleges,
Nursing Institutions and such other institutions.
grant relief on the occasion of earthquakes and floods and other occasions of
calamities of similar nature of to give donations to other institutions or
persons doing such relief works.
establish and maintain studentships, give prizes and to grant aid to poor
establish Boarding Houses and Hostels for students.
promote physical culture and education and to assist and promote sports and
games and generally to do all acts for the improvement of general health and
establish and maintain and to grant aid to centres for diffusion of Indian Art
establish, maintain and to grant and/or aid to public places of worship and
establish, support and maintain and/or to grant aid to alms houses and/or to
give relief to the poor and needy persons.
establish, support and maintain and/or to grant aid to institutions for uplift
of backward and depressed classes irrespective of caste, creed or
nationality." (Emphasis supplied.) Clause (3) of the trust deed reads thus
Trustees shall from time to time collect funds which and/or the income thereof
will be utilised for the objects aforesaid. All investments and properties of
the Trust for the time being held by the Trustees is hereinafter referred to as
the Trust Funds." The High Court did not accept the assessee's argument
that the establishment or maintenance of prayer-halls was not a religious
object. The High Court also did not accept the assessee's argument that the
object of clause 2(h) of the trust deed should not be considered to be a
religious object because the trustees were not empowered to set up places of
worship and prayer halls of a particular community or religion; it took the
view that even if a trust was set up for the advancement of all the religions
in the world, it would be a trust of a religious nature. The High Court rejected
the assessee's argument that the Trust was not set up wholly or substantially
for a religious purpose; on of the purposes, it said, was "to establish,
maintain and grant aid to public places of worship and prayer halls",
which was an entirely religious purpose.
80G applies to donations to any institution or fund established in India
"or a charitable purpose".
purpose, for the purposes of the section, does not include any purpose the
whole or substantially the whole of which is of a religious nature".
(Emphasis supplied.) Explanation 3, which uses this phraseology, takes note of
the fact that an institution or funds established for a charitable prupose may
have a number of objects. If any one of these objects is wholly, or substantially
wholly, of a religious character, the institution or funds falls outside the
scope of section 80G a donation to it does not secure the advantage of the
deduction that it gives.
judgment of this Court in Additional Commissioner of Income-Tax, Gujarat vs. Surat
Art Silk Cloth Manufactures Association, 121 I.T.R. 1, cited by learned counsel
for the assessee, was delivered with reference to the true meaning of the words
"not involving the carrying on of any activity for profit" occurring
at the end of the definition of "charitable purposes" in Section
2(15) of the Income Tax Act. This Court said that if the primary or dominant
purpose of the Trust was charitable, another object which by itself may not be
charitable but which was merely ancillary or incidental to the primary or
dominant purpose would not prevent the trust or the institution from being a
valid charity. The judgment is of no assistance in construing Explanation 3 of