2006 (10) TMI 83 - HC - Income Tax

Charitable trust the fact that some of the devotees were given cash assistance could not be a ground to hold that all the beneficiaries were identifiable or the trust was private trust held that impugned trust is public charitable trust.

Summary

Issues involved:
Renewal of exemption certificate under section 80G of the Income-tax Act, 1961 for a charitable Trust.
Challenging the decision of the Income-tax Officer to decline the certificate renewal.
Interpretation of section 2(15) of the Act regarding charitable purpose.
Consideration of identifiable beneficiaries vs. public at large.
Availability of an alternate remedy through the Income-tax Appellate Tribunal.

Analysis:
The judgment pertains to a petition filed by trustees of a charitable Trust known as Sree Tarama Trust seeking renewal of their exemption certificate under section 80G of the Income-tax Act, 1961. The Trust, registered under the Bombay Public Trust Act, is engaged in various charitable activities including providing medical facilities, maintenance, and feeding of the poor, along with propagating teachings and philosophy. The Trust is also registered under sections 11 and 12A of the Income-tax Act, ensuring exemption of income from property held by the Trust during income assessment. The Trust applied for renewal in 1991, providing necessary information to the Income-tax Officer, who raised queries regarding the beneficiaries and criteria for selection. The Trust explained that benefits were mainly for devotees and dedicated workers, and the beneficiaries were not always identifiable due to a changing group of persons with common qualities. Despite the Trust's representations, the Income-tax Officer declined the renewal citing reasons that the Trust catered to identifiable beneficiaries and was more of a private charity.

In response, the Trust challenged the decision, arguing that the Trust's objectives aligned with charitable purposes under section 2(15) of the Act and referred to precedents establishing that benefiting a section of the public suffices for charitable intent. The Trust highlighted that the benefits provided were not limited to a select few and emphasized the broader charitable activities undertaken by the Trust. The Trust also relied on a previous Supreme Court judgment to argue against the denial of renewal without substantial justification for a different view from earlier proceedings.

On the other hand, the respondents contended that the Trust's benefits were directed towards identifiable devotees, making it ineligible for renewal under section 80G. They emphasized specific amounts disbursed to individuals and argued against interference, suggesting that the Trust should seek remedy through the Income-tax Appellate Tribunal instead of a writ petition. However, the court noted the absence of a specific provision for appeal to the Tribunal against the denial of the certificate and exercised discretion considering the prolonged pendency of the petition.

Ultimately, the court found the Income-tax Officer's decision unfounded, stating that the Trust's activities did not solely benefit identifiable individuals and were not insignificant or incidental to the public at large. The court observed that the Trust's charitable nature was evident from the diverse beneficiaries and substantial expenditures on medical benefits, education, and assistance to a larger group. Given the lack of material supporting the Officer's decision and past assessments recognizing the Trust as a public charitable trust, the court quashed the decision and directed the Trust to reapply for the certificate, emphasizing a fair consideration of the factual and legal aspects for future orders. The petition was allowed, with no costs imposed.