2010 (2) TMI 623 - HC - Income Tax

Donation to charitable Special deduction Approval of institution - whether the income derived by the petitioner-trust is being used for charitable purposes - matter remanded back to the learned Commissioner of Income-tax

Summary

Issues:
Challenge to refusal of renewal of exemption under section 80G(5) of the Income-tax Act.

Analysis:
The petitioner, a registered charitable and religious trust, challenged the order refusing renewal of exemption under section 80G(5) of the Income-tax Act. The petitioner contended that the income was solely used for charitable purposes in India, and the Commissioner failed to consider this crucial aspect. The Department opposed the claim, alleging that the trust lent money to individuals and constructed a building from donation funds.

The Court addressed the preliminary objection raised regarding the maintainability of the petition, emphasizing that the right to appeal is statutory and amendments are prospective unless stated otherwise. The Court rejected the objection, citing the filing date of the petition before the amendment allowing appeals against orders under section 80G.

The petitioner highlighted an assessment order indicating that all income was applied for charitable purposes, contrasting the Commissioner's order lacking a finding on this crucial aspect. The Court referenced judgments emphasizing the importance of income utilization for charitable purposes over the source of income. It noted that the refusal of exemption solely based on income source was incorrect.

In response to the Revenue's argument citing a judgment regarding profit-making education activities, the Court differentiated the primary criterion for granting exemption under section 80G as the utilization of income for charitable purposes, not profit-making intentions. Considering the assessment order and relevant judgments, the Court concluded that the matter required reconsideration by the Commissioner.

Consequently, the Court quashed the impugned order and remanded the case to the Commissioner for a fresh decision in accordance with the law, directing the petitioner to appear before the Commissioner on a specified date.

This detailed analysis of the judgment emphasizes the key legal arguments, considerations, and conclusions made by the Court regarding the challenge to the refusal of renewal of exemption under section 80G(5) of the Income-tax Act.