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High Court of Judicature at Madras
THE HONOURABLE MRS. JUSTICE A. SUBBULAKSHMY & THE HONOURABLE MR. JUSTICE R. JAYASIMHA BABU
Commissioner of Gift Tax - Appellant
Versus
Meco-Tronics Private Limited - Respondents
Tax Case Nos. 1879 to 1885 of 1986
Decided On : 22 October 1998
GIFT TAX ACT - SECTION 5(1A) - CHARITABLE PURPOSE - RELIGIOUS PURPOSE - EXEMPTION - INTERPRETATION:
Fact of the Case:
The assessee, a limited company, made charitable donations during the month of Ramzan. The GTO treated these amounts as gifts made for religious purposes and denied exemption under the Gift Tax Act, 1958. The assessee challenged this decision before the CGT(A) and the Tribunal, both of whom held that the gifts were not for religious purposes and were exempt from tax.
Finding of the Court:
The court held that the gifts made by the assessee were not for religious purposes and were therefore exempt from tax under section 5(1)(v) and (vi) of the Gift Tax Act, 1958.
Issues: Whether the donations made by the assessee in the month of Ramzan were pure and simple charity, devoid of any religious intent and consequently free from the GT liability?
Ratio Decidendi: The court held that the purpose of the gift is religious in nature only if it is given for celebrating a religious festival, performing a religious ritual in a place of worship, or for the upkeep of a place of worship. In the present case, there was no material to show that the gifts were intended to be applied for religious purposes. Therefore, the gifts were exempt from tax.
Final Decision: The court answered the question referred to in favor of the assessee and against the Revenue.
R. JAYASIMHA BABU, J.
The question referred to us at the instance of the Revenue is as to 'whether, on the facts and in the circumstances of the case and having regard to the provisions of s. 5(1A) of the GT Act, 1958, the Tribunal was right in holding that the donations made by the assessee in the month of Ramzan were pure and simple charity, devoid of any religious intent and consequently free from the GT liability ?
"The assessment years are 1972-73 to 1978-79.
2. The assessee is a limited company, the managing director of which happens to be a Muslim by religion. In the course of income-tax assessment proceedings, it is found that the assessee-company had paid contribution by way of charitable donations year after year during the month of Ramzan. The amount paid by way of charity varies from Rs. 25, 706 to a high of Rs. 53, 552 during the years 1972-73 to 1978-79. The amount of the gift to any single individual was less than Rs. 100 at any time. The GTO treated these amounts as gifts made for religious purposes. The CGT(A) to whom the matter was taken in appeal by the assessee, held that the gifts were not for religious purposes and the assessee was entitled to the benefit of exemption provided under s. 5(1)(v) and (vi) of the GT Act (hereinafter referred to as 'the Act'). The Tribunal upheld the order of the CGT(A).
3. Learned counsel for the Revenue contended that the Tribunal was in error in treating the donations as for a purpose other than religious. Counsel referred to s. 5(1A) of the Act, which read thus"
Any reference in cl. (v) or cl. (vi) of sub-s. (1) to charitable purpose in relation to a gift made on or after the 1st day of April, 1964, shall be construed as not including a purpose the whole or substantially the whole of which is of a religious nature."Clauses (v), (va) and (vi) of s. 5(1) of the Act read thus,
"(v) to any institution or fund established or deemed to be established for a charitable purpose to which the provisions of s. 80G of the IT Act apply;
(va)(i) to such temple, mosque, gurdwara, church or other place as has been notified by the Central Government for the purposes of cl. (b) of sub-s. (2) of s. 80G of the IT Act; or
(ii) By way of settlement on trust, of property the income from which, according to the deed of settlement, is to be used exclusively in connection with the temple, mosque, gurdwara, church or other place specified therein and notified as aforesaid;"
Clause (vi) of that section reads thus
"(vi) for any charitable purpose not falling within cl. (v) -
(a) made at any time before the 1st day of April, 1958, or
(b) made at any time after that date subject, in respect of each such gift, to a maximum of rupees one hundred in value and, in respect of such gifts in any one previous year to the same donee, to a maximum of rupees five hundred in value in the aggregate.".
Sec. 5 of the Act provides for exemption in respect of the gifts which are covered by any one or the other of the sub-clauses of s. 5(1) of the Act. Sub-cl. (v) to s. 5(1) of the Act exempts gifts made to any institution or fund established or deemed to be established for a charitable purpose to which the provisions of s. 80G of the IT Act apply. Sub-cl. (vi) of that section exempts gifts made on or after the first April, 1958 and where the amount does not exceed Rs. 100 in value when made to a single donee subject to a maximum of Rs. 500 in value in the aggregate.
4. It is not the case of the Revenue that the aggregate amount that could be given away for a charitable purpose not falling under cl. (v) of s. 5 of the Act, should not exceed Rs. 500 in the aggregate, for all recipients put together. The only grievance of the Revenue is that though the purpose of the gift is charitable the charity is of religious nature, and therefore, not exempted from the levy of the tax.
5. Sec. 5(1A) of the Act refers to charitable purpose, when it is wholly or substantially of religious nature. If the gift is made for a religious purpos
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