UPPER GANGES SUGAR MILLS LTD. ETC. v. COMMISSIONER OF INCOME TAX, CALCUTTA

The Judgment of the Court was delivered by F S.P. BHARUCHA, J. A Division Bench of the Calcutta High Court answered the following question in the negative and in favour of the Revenue:

"Whether on the facts and in the circumstances of the case the G Appellate Tribunal was justified in holding that the assessee was entitled to the relief under section 80G on the donations paid to Vishwa Mangal Trust?"

The assessee is in appeal by certificate.

H We are concerned in the first appeal with the Assessment Year

UPPER GANGES SUGAR MILLS LTD. v. C.l.T. [ S.P. BHARUCHA, J.] 241

1973-74, the relevant previous year having ended on 30th June, 1972. The A assessee had made a donation of Rs. 25,000 to the Vishwa Mangal Trust (hereinafter called 'the Trust'). Th~ assessee claimed a deduction under Section SOG in respect of that donation. The .claim was allowed by the Income Tax Officer on 27th December, 1976. The 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 Appel- B !ant Assistant Commissioner dismissed the assessee's appeal. The Income Tax Appellate Tribunal allowed the appeal preferred by the assessee against the order of tlie Appellate Assistant Commissioner. Thereafter it referred the question set out above to the High Court. The High Court reversed the view of the Tribunal. c Much the same thing happened in a subsequent year and the High Court followed its said judgment.

Section BOG sets out the deductions to be made, in accordance with and subject to its provisions, in computing the total income of an assessee D 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, E 'charitable purpose' does not include any purpose the whole or substan- tially the _whole of which is of a religous nature".

The objects of the Trust are set out in clause (2) of the trust deed. They are: F "2(a) 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 knowledge or gal- G leries of paintings and other works ofart or collection of natural history, economic and scientif'ic inventions and designs.

(b) To establish and maintain or grant aid to Hospitals, Medical Schools or Colleges, Nursing Institutions and such other institu- tions. H

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A (c) .To grant relief on the occasion of earthquakes and floods and •:otJ:ier ·oc~asions of calamities of similar nature or to give donations to other institutions or persons doing such relief works .

.(d) To establish and maintain studentships, give prizes and to grant B aid topoor students.

. (~) to establish Boarding Houses and Hostels for student. '(Q To proriiote 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 physical development.

'(g) To establis.h and maintain and to grant aid to centres for diffusion of Indian Art and Culture.

· (g). To establish, maintain and to grant and/or aid to public places D of worship and prayer halls.

(i) To establish, support and maintain and/or to grant aid to alms houses and/or to give relief to the poor and needy persons.

E G) To establish, support and maintain and/or to grant aid to institutions for uplift of backward and depressed classes irrespec- tive of caste, creed or nationality." • (Emphasis supplied)

F Clause (3) of the Trust deed reads thus :

"The <'. 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 Fund." G The High Court did nor 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

. UPPER GANGES SUGAR MILLS LID. v. C.l.T. [ S.P. BHARUCHA, J.) 243

worship and prayer halls of a particular community or religion; it took the up view th~t even if a trust was set 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; one of the purposes, it said, was "to establish, maintain and grant aid• to public places of worship and pray~r B .halls"; which was an entirely religious purpose.

Section SOG applies to donations to any institution or fund established in India "for a charitable purpose". "Charitable purpose, for the pll~poses of the section, does not include . any purpose the whole or · substantially the .whole of which is of a religious nature". (Emphasis C sllpplied.)Explanation 3, which uses this phraseology, takes not of the fact · that an institution or fund established for a charitable purpose may have ·a number of objects. If any one of these objects is wholly, or substantially .. wholly, of. a religious character, the institution or fund falls outside the scope of Section SOG and a donation to it does not secure the advantage of the deduction that it gives.

The judgment of this Court in Additional Commissioner of Income- Tax, Gujarat v. Surat Art Silk Cloth Manufacturers Association, 121 I.T.R. 1, cited by learned counsel for the ass.essee, 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 assistance in construing Explanation 3 of Section SOG.

To reiterate, Explanation 3 does not require the ascertainment of whether the whole or substantially the whole of the institution or fund's . G charitable purpose is of a religious nature. If it did it would read differently. It requires the ascertainment of whether there is one purpose within the institution or fund's over-all charitable purpose .which is wholly, or· substantially wholly, of a religious nature. There is little doubt that clause 2(h) of the Trust Deed which permits the trustees to support prayer halls H

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A and places of worship sets out a purpose the whole or substantially the whole of which is of a religious nature, and this has not been seriously disputed. Therefore, in our view, the Trust and the don;i.tion by the assessee to it fall outside the scope of Section SOG.

The appeals are dismissed. There shall be no order as to costs. B S.V.K.I. Appeals dismissed.