2011 (12) TMI 242 - HC - Income Tax

Trust registered u/s 12A & 80G Tribunal allowed approval for renewal of registration u/s 80G(5)(vi) on finding that amount incurred on religious activity is 4.93% out of the total income of trust - Revenue on basis of circular dated 19.06.1968 and the judgment in Rao Bahadur Calavala Cunnan Chetty Charities case contented that expenditure on religious activity has to be seen after allowing the expenditure and not on the total income Held that - The total income as mentioned in sub-clause (5B) of Section 80G of the Act does not mean the income as it appears in Section 11 of the Act. The expression total income and income have been used differently and has distinct application. The circular dated 19.06.1968 and the judgment in CIT vs Rao Bahadur Calavala Cunnan Chetty Charities (1979 - TMI - 35614 - Madras High Court) is in respect of income relatable to Section 11 of the Act and not total income . Hence no substantial question of law arises for consideration Decided against the Revenue

Summary

Issues:
1. Interpretation of Section 80G(5B) of the Income Tax Act regarding the expenditure of a religious nature not exceeding 5% of total income for charitable and religious trusts.
2. Clarification on the distinction between 'total income' and 'income' as per Sections 11 and 5 of the Income Tax Act.

Analysis:
1. The case involved an appeal by the Revenue against the Income Tax Tribunal's order regarding the approval under Section 80G(5)(vi) of the Income Tax Act for a trust. The Trust sought renewal of registration under Section 80G(5) of the Act, but the Commissioner of Income-Tax declined the renewal due to the Trust's expenditure on Mandir Pooja exceeding 5% of its total income. However, the Tribunal found that the expenditure on Mandir Pooja was 4.93% of the total income, making the Trust eligible for registration under Section 80G. The Revenue contended that Section 11 of the Act deals with income, not total income, and thus, the expenditure on religious activities should be considered after allowing the expenditure, not on the total income.

2. The Court rejected the Revenue's argument, stating that under Section 80G(5B), the expenditure of a religious nature should not exceed 5% of the total income of the trust. The Court emphasized that the provision clearly mentions 'total income' and not just 'income' as defined in Section 11 of the Act. The Court highlighted that 'total income' and 'income' have distinct meanings and applications under the Act. The circular and judgment cited by the Revenue were related to 'income' under Section 11, not 'total income' as specified in Section 80G(5B). Therefore, the Court concluded that the argument raised by the Revenue lacked merit, and no substantial question of law arose for consideration in the appeal.

3. Consequently, the Court dismissed the appeal, upholding the Tribunal's decision to allow approval under Section 80G(5)(vi) for the trust. The judgment clarified the difference between 'total income' and 'income' in the context of charitable and religious trusts, emphasizing the specific application of these terms under different sections of the Income Tax Act.