Donations To Religious Trusts Taxable, Says Sc

The Supreme Court has ruled that contributions to a charitable institution which aims at building prayer halls and places of worship will not be eligible for income tax exemption under Section 80G of the Income Tax Act.

Even if the trust was set up for the advancement of all the religions of the world, it would be a trust of a religious nature. It need not be that the main purpose should be of a religious nature. Even if one of the several purposes for which the trust was set up was religious, contributions to it would not be eligible for tax exemption.

 

A division bench consisting of Justice S P Bharucha and Justice V N Khare thus dismissed the appeal of the Upper Ganges Sugar Mills against a judgment of the Calcutta High Court which had reversed the ruling of the income tax tribunal.

The company made a contribution to the Vishwa Mangal Trust, and claimed it as a deduction under Section 80G of the Income Tax Act.

The claim was originally allowed by the income tax officer, but four years later, the assessment was reopened and the claim was disallowed.

The appeal of the company was allowed by the appellate tribunal. On further appeal, the question was referred to the high court.

Under Section 80G, tax exemption can be claimed by a trust or fund if it is established in India for a charitable purpose, but `charitable purpose does not include any purpose the whole or substantially the whole of it is of a religious nature.

Charitable purpose for the benefit of any particular religious community or caste also are beyond this definition.

In this case, the Supreme Court stated that one of the purposes of the trust was to build prayer halls or places of worship. This was of a religious nature, Therefore the company cannot claim exemption, the court ruled.