Vildirect: IncomeTax-caselaws-2008-VIL-581-RAJ-DT

2008-VIL-581-RAJ-DT

Equivalent Citation: [2010] 322 ITR 167 (Raj)

RAJASTHAN HIGH COURT

2150 of 2006

Date: 21.11.2008

SHRI SARDABMAL SANCHETI CHARITABLE TRUST

. UNION OF INDIA AND OTHERS

Vinay Kothari for the petitioner.
K. K. Bissa for the respondents.

BENCH

DINESH MAHESHWARI J.

JUDGMENT

1. DINESH MAHESHWARI J.âThis writ petition has been preferred against the order dated January 27, 2005 (annexure 7) as passed by the Commissioner of Income-tax-I, Jodhpur whereby an application moved by the petitioner-trust for renewal of exemption under section 80G of the Income-tax Act, 1961 ("the Act"), has been rejected essentially on the ground that the petitioner-trust made a donation of Rs.71,000 to one Oswal Chhatrawas, Jodhpur, out of its income of Rs.6,90,250 for the period ended on March 31, 2004. The learned Commissioner was of opinion that the purpose of the said donee-institution being apparently of religious nature and for a particular community, donation to such an institution could not be considered as expenditure for charitable purpose; and, while finding that the petitioner-trust spent more than 5 per cent. of its total income on religious purpose and while relying on the decision of the hon'ble Supreme Court in the case of Upper Ganges Sugar Mills Ltd. v. CIT [1997] 227 ITR 578, the learned Commissioner came to the conclusion that the petitioner has not fulfilled the requisite conditions in terms of section 80G(5B) of the Act and, hence, was not qualifying for further exemption under section 80G of the Act.

2. Assailing the order aforesaid, the learned counsel for the petitioner has contended that the learned Commissioner proceeded to reject the application in a wholly cursory manner without having regard to the facts of the case and without applying the relevant principles. Learned counsel submitted that the Commissioner proceeded on a misplaced reliance on the decision of the hon'ble Supreme Court in Upper Ganges Sugar Mills Ltd. v. CIT [1997] 227 ITR 578 that the petitioner-trust had never utilised its funds for construction of temple or any religious purpose; and, according to the learned counsel, one donation for the purpose of construction of a room in Oswal Chhatrawas cannot be said to be an act of diverting the funds for religious purpose. Learned counsel has referred to and relied upon a decision of this court in the case of Umaid Charitable Trust v. Union of India [2008] 307 ITR 226.

3. Learned counsel for the respondent-Department, though has attempted to justify the order impugned, but could not dispute the position that the view has been taken by this court in Umaid Charitable Trust's case [2008] 307 ITR 226 that it is the dominant object of the trust that remains relevant and the contributions or expenditure incurred by the trust have to be viewed in the light of such object of the trust; and that a single instance of donation of more than 5 per cent. of income for renovation of temple would not by itself disentitle a trust for renewal of exemption on the ground of violation of section 80G(5B).

4. Having regard to the facts and circumstances of this case and the nature of the impugned order passed by the Commissioner of Income-tax, this court is satisfied that such an order cannot be sustained and the matter would definitely require reconsideration by the Commissioner in the light of the view taken by this court in Umaid Charitable- Trust's case [2008] 307 ITR 226 that a single instance of donation of more than 5 per cent. of income for renovation of temple would not by itself disentitle the trust from claiming the exemption particularly when there is no clause in the trust deed indicating that the income of the trust was to be applied wholly or substantially for a particular religion.

5. Though this court would not make final comments on the merits as the matter is proposed to be remanded to the authority concerned, however, it does appear appropriate to observe that mere contribution for the purpose of construction of one room in a hostel that is named Oswal Chhatrawas may not by itself be treated to be an act violating the requirements of section 80G(5B) of the Act. The other aspects particularly those relating to utilisation of the funds of the trust concerned with reference to its aims and objects do require consideration and the application for renewal of exemption cannot be rejected with an abstract reference to the quantum of one particular donation in relation to a particular hostel, even if such a hostel is managed by a particular community. Similarly, the application as moved by the petitioner cannot be rejected with mere reference to the decision of the hon'ble Supreme Court in Upper Ganges Sugar Mills [1997] 227 ITR 578 wherein the fact situation was entirely different inasmuch as one of the purposes of the said applicant trust seeking exemption under section 80G of the Act was found to be religious particularly when the clause in the trust deed permitted the trustees to support prayer halls and places of worship. The application as moved by the present petitioner requires reconsideration with reference to its trust deed and the position of law as explained by this court in Umaid Charitable Trust's case [2008] 307 ITR 226.

6. In the aforesaid view of the matter, this writ petition succeeds and is allowed to the extent indicated above. The impugned order dated January 27, 2005 (annexure 7) is set aside; the application as moved by the petitioner-trust for renewal of exemption stands restored for reconsideration of the Commissioner of Income-tax in accordance with law. The petitioner may appear before the Commissioner of Income-tax-I, Jodhpur on December 15, 2008, who shall be expected to deal with and decide on the application at the earliest.

7. In the circumstances of the case, however, there shall be no order as to costs of this writ petition.

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