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Issues involved: Interpretation of eligibility for relief under section 80G of the Income-tax Act for donations made to a trust involving both charitable and religious purposes.
Summary: The High Court of Madras addressed a reference under section 256(1) of the Income-tax Act, 1961, regarding the entitlement of an applicant for relief under section 80G in relation to donations made to a trust. The assessee had donated Rs. 20,000 each to a trust during the assessment years 1969-70 and 1970-71. The Income-tax Officer initially denied the benefit under section 80G, stating that the trust's objects included religious purposes and had not applied for recognition under section 80G. The Appellate Assistant Commissioner allowed the donation claim, but the Income-tax Appellate Tribunal upheld the Income-tax Officer's decision based on the trust's nature. The court considered the independence of section 80G from other relevant sections and focused on the specific requirements under section 80G(2)(iv) of the Act. It noted that for eligibility, the trust must be purely charitable with no income transferable for non-charitable purposes and should not be for a specific religious community. The trust in question indicated religious purposes alongside charitable ones, making it ineligible for section 80G benefits. The court emphasized that the trust's potential use for non-charitable purposes was crucial, regardless of its current activities. Consequently, the court ruled against the assessee, stating that they were not entitled to relief under section 80G for donations to the trust. No costs were awarded, and the counsel's fee was set at Rs. 1,000. This judgment clarifies the strict criteria under section 80G for claiming tax relief on donations to trusts, emphasizing the necessity for trusts to be exclusively charitable without any potential for non-charitable use, irrespective of their current operations.
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