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PETITIONER: UPPER GANGES SUGAR MILLS LTD. ETC.

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX,CALCUTTA

DATE OF JUDGMENT:       04/08/1997

BENCH: S.P. BHARUCHA, V.N. KHARE

ACT:

HEADNOTE:

JUDGMENT:                 THE 4TH DAY OF AUGUST, 1997 Present;                Honible 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 appellants. Ranbir Chandra and B.K.Prasad, Advs. for the Respondent                       J U D G M E N T      The following Judgment of the Court was delivered :                             WITH                 (Civil Appeal No. 10736/95)                       J U D G M E N T 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      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.      We  are   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. 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  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

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above to  the High  Court.  The High Court reversed the view of the Tribunal.      Much the  same thing  happened in a subsequent year and the High Court followed its said judgment.      Section 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".      The objects  of the  Trust are set out in clause (2) of the trust deed.  They are :      "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   works   of   art   or      collection  of   natural   history,      economic and  scientific inventions      and designs.      (b) To  establish and  maintain  or      grant  aid  to  Hospitals,  Medical      Schools   or    Colleges,   Nursing      Institutions   and    such    other      institutions.      (c) To 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.      (d)  To   establish  and   maintain      studentships, give  prizes  and  to      grant aid to poor students.      (e) To  establish  Boarding  Houses      and Hostels for students.      (f) To 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    physical      development.      (g) To  establish and  maintain and      to   grant  aid   to  centres   for      diffusion   of   Indian   Art   and      Culture.      (h) To  establish, maintain  and to      grant and/or  aid to  public places      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.

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    (j)  To   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 :      "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 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.      Section 80G  applies to donations to any institution or fund  established   in  India  "or  a  charitable  purpose". "Charitable 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.      The 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 Section 80G.      To  reiterate,  explanation  3  does  not  require  the ascertainment of  whether the  whole  or  substantially  the whole of the institution or fund’s charitable