2013 (11) TMI 1438 - HC - Income Tax

Relief u/s 80G donation made to Sherwani Charitable Trust - notional trustee s remuneration from M/s Shervani Charitable Trust - Held that - The trust deed was amended by rectification of original trust deed and suit was brought in the year 1980 in which declaration was obtained, the matter travelled upto the Supreme Court - The Apex Court held that a fraud was played by the rectification of the Trust-deed by altering the very object of the trust and directed that the Trust-deed must be read as it originally stood and that is the manner in which the appellant trust should be assessed except in the case - In the present case all the income tax appeals, which are in continuation of the proceedings of the assessment were pending - Thus the assessment proceedings had not become final The issue was restored for fresh decision. - Decided in favor of revenue.

Summary

Issues:
1. Interpretation of Section 80G of the Income-tax Act, 1961 regarding relief on donation to a charitable trust.
2. Deletion of notional trustee's remuneration from a charitable trust's income.
3. Validity of upholding the order of the CIT (A) regarding notional trustee's remuneration.
4. Impact of Supreme Court judgments on assessment proceedings.
5. Discretion of trustees in granting money for charitable purposes.

Analysis:

1. The first issue revolves around the interpretation of Section 80G of the Income-tax Act, 1961 concerning the allowance of relief on a donation made to a charitable trust. The Commissioner of Income Tax raised questions regarding the justification of allowing relief under this section on a donation paid to a specific charitable trust.

2. The second issue involves the deletion of notional trustee's remuneration from the income of a charitable trust. The Income Tax Appellate Tribunal (ITAT) was questioned on the justification of deleting such additions made as notional trustee's remuneration from the trust's income.

3. The third issue questions the validity of upholding the order of the Commissioner of Income Tax (Appeals) regarding the deletion of notional trustee's remuneration from the trust's total income. The ITAT was asked to justify following the order of the Settlement Commission despite the matter being sub-judice.

4. The fourth issue pertains to the impact of Supreme Court judgments on assessment proceedings. The Supreme Court's judgments highlighted the rectification of the trust deed and emphasized that the trust deed must be read as originally stood. The judgment impacted the assessment proceedings, saving only those that had become final.

5. The fifth issue addresses the discretion of trustees in granting money for charitable purposes. The court analyzed the trust deed amendments and rectifications, emphasizing that the discretion given to trustees for granting money to chosen individuals cannot be considered expenditure for charitable objects.

In conclusion, the High Court ruled in favor of the revenue, answering the questions of law in their favor. The Court directed the Assessment Officers to make fresh assessments in accordance with the law, disregarding the rectifications made in the trust deed. The judgment emphasized the importance of adhering to the original terms of the trust deed and the impact of Supreme Court decisions on assessment proceedings that had not been finalized.