1999 (5) TMI 11 - HC - Income Tax

Summary

Issues Involved:
1. Rejection of application u/s 80G(5) of the Income-tax Act, 1961.
2. Conditions for approval u/s 80G(5).
3. Scope of enquiry by the Commissioner while granting approval u/s 80G(5).

Summary:

1. Rejection of application u/s 80G(5) of the Income-tax Act, 1961:
The petition challenges the order dated February 18, 1999, by the Commissioner of Income-tax, Surat, which rejected the petitioner's application for renewal of approval u/s 80G(5) of the Income-tax Act, 1961. The petitioner, a trustee of a public charitable trust registered under the Bombay Public Trusts Act, 1950, and also registered u/s 12A of the Income-tax Act, sought renewal of approval for the trust to enable donors to claim deductions on donations made to it.

2. Conditions for approval u/s 80G(5):
The Commissioner denied the renewal on the grounds that the trust did not apply 75% of its income towards its charitable purposes, thereby making its income liable to be included in the taxable income, which contravenes the conditions laid down in section 80G(5)(i). The relevant provision states that the income of the trust should not be liable to inclusion in its total income under sections 11 and 12.

3. Scope of enquiry by the Commissioner while granting approval u/s 80G(5):
The court clarified that section 80G primarily relates to giving deductions to donors and not to the assessment of the trust's income. The eligibility for deduction should be considered at the time of donation, not based on future assessments. The Commissioner's role is to verify if the trust is registered u/s 12A and if it is wholly for charitable purposes, not to act as an Assessing Officer. The court emphasized that the actual assessment of the trust's income is beyond the Commissioner's jurisdiction when considering approval u/s 80G(5). The Commissioner's refusal based on pending assessments was deemed an overreach of authority.

Conclusion:
The court quashed the Commissioner's order and directed a fresh order in accordance with the law, stating that the Commissioner's refusal was based on irrelevant considerations and exceeded his jurisdiction. The rule was made absolute with no order as to costs.