1991 Supreme(Raj) 719
RAJASTHAN HIGH COURT
A.K.Mathur, J.
Sukhdeo Charity Estate - Appellant
Versus
Income - Respondent
S.B. Civil Writ Petition No. 504 of 1981.
Decided On : 20-05-1991
A donation received by a public religious trust from another trust for a public water supply scheme is not taxable income.
Headnote:
INCOME TAX - Reassessment - Notice - Validity - Donation received by public religious trust from another trust for public water supply scheme - Whether taxable - Held, No.
Fact of the Case:
The petitioner, a public religious trust, received a donation of Rs. 70,000 from another trust for a public water supply scheme. The Income-tax Officer issued a notice under section 148 of the Income-tax Act, 1961, for the assessment year 1964-65, alleging that the donation was taxable income that had escaped assessment.
Finding of the Court:
The court held that the donation was not taxable income, as it was intended to be used as capital for the water supply scheme. The court relied on its earlier decision in Sukhdeo Charity Estate v. CIT, where it had held that a similar donation was not taxable.
Issues: Whether the donation received by the petitioner trust from another trust for a public water supply scheme was taxable income.
Ratio Decidendi: The court held that the donation was not taxable income, as it was intended to be used as capital for the water supply scheme. The court relied on its earlier decision in Sukhdeo Charity Estate v. CIT, where it had held that a similar donation was not taxable.
Final Decision: The court allowed the writ petition and quashed the notice issued under section 148 of the Income-tax Act, 1961.
JUDGMENT
1. - The petitioner by this writ petition has prayed that the notice under section 148 of the income-tax Act, 1961, issued on February 17, 1981, may be quashed and the respondent may further be restrained from taking any proceedings in pursuance of the said notice.
2. The petitioner is a public religious trust constituted under a registered trust deed dated May 21, 1953. This trust is also registered under section 12A of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), with the Commissioner of Income-tax. The petitioner-trust applies its funds for public and religious purposes in India and it maintains and runs hospitals, temples, etc. The petitioner-trust has its head office at Ladnu, district Nagaur, and a branch at Calcutta. The trust maintains regular books of account both for its head office and the branch office. Ladnu is a small town in the district of Nagaur in Rajasthan and it had no public water supply scheme. In 1961, a public water supply scheme was mooted for the town of Ladnu by the Government of Rajasthan. It was estimated to cost about Rs. 10 lakh's. The State Government agreed to provide water to the town if the public contributed about Rs. 3 lakh's and the balance amount was to be borne by the State Government. The petitioner-trust was interested in the scheme as it would provide water facilities to the town situated in a desert area which was one of the several charitable objects for which the trust was established. The petitioner-trust opened a water supply scheme account in its books at Ladnu. It transferred a sum of Rs. 33,138 to this account out of its funds. Similarly, in the year 1963-64, it transferred a sum of Rs. 86,449.79 to the above account out of its own income making a total of Rs. 1,19,587 at the close of the accounting year and as opening balance in Samvat year 2020. Simultaneously, the petitioner-trust invited generous contributions from the public amongst others. It addressed a letter to Benjamine and Rehman Elias Memorial Trust at Calcutta (referred to hereinafter as "the Calcutta trust") to make a substantial contribution to the water supply scheme. The Calcutta trust contributed a sum of Rs. 70,000 towards the water supply scheme. It issued a cheque for a sum of Rs. 70,000 dated March 31, 1964, in favour of the petitioner-trust drawn on the Hongkong and Shanghai Banking Corporation. This cheque was handed over to the Branch Office at Calcutta and the petitioner-trust credited it in the water supply scheme account in the Calcutta branch. The Calcutta branch issued a cheque for Rs. 1,85,000 in favour of the Executive Engineer, Government of Rajasthan. Corresponding entries were passed in the books at the head office at Ladnu. The petitioner-trust used to regularly file its return of income each year with the Income-tax Officer, Nagaur. For the accounting period April 3, 1963, to April 19, 1964, the relevant assessment year being 1964-65, the petitioner filed its return of income with the Income-tax Officer, Nagaur. Along with the return, the petitioner-trust filed copies of the income and expenditure accounts and balance-sheets of both the head office and the branch office at Calcutta. The Income-tax Officer was not satisfied and, in order to verify the correctness and completeness of the return, he issued a notice under section 143(2) of the Act. The accountant of the trust and its counsel attended and produced the books of account of the Ladnu and Calcutta offices and all relevant vouchers and correspondence before him. It is also submitted before him that the donation of a sum of Rs. 70,000 made by the Calcutta trust is not the income of the petitioner-trust. The Income-tax Officer, after scrutiny of the record, adjourned the matter and, when the case was taken up again, the Income- tax Officer, after detailed examination of the donation of Rs. 70,000 from Calcutta trust, came to the conclusion that it could not be treated as income of the petitioner-trust. The I
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