TMI Blog1998 (3) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... ) allowed recognition under section 80G of the Act for the period April 1, 1993, to March 31, 1996, entitling allowability of deduction under section 80G to the donations made to the trust. On September 4, 1996, the petitioner sought for renewal of the recognition. Vide order dated December 12, 1996, the petitioner was asked to furnish the details of the activities undertaken by the trust for the last three years. At the same time, the petitioner was asked to show cause why its recognition be not cancelled on account of religious activities carried out by it. The petitioner filed a reply setting out the details of its receipts and expenses (gross and net) and the details of the activities carried out by it. The petitioner admitted having been engaged in constructing a temple of Lakshmi Narain Mandir, completed during the assessment year 1996-97, with an investment of Rs. 30.34 lakhs. While maintaining that the activities of the trust were charitable only, one of the pleas raised by the petitioner in its reply was : "the trust is carrying on mixed activities, i.e., running hospital and temple. We are unable to get to the second question of the notice, since recognition under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any institution to which this section applies ; or... (5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :-- (i) Where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (22) or clause (22A) or clause (23) or clause (23AA) or clause (23C) of section 10 :.. (a) the institution or fund maintains separate books of account in respect of such business ; (b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business ; and (c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business; (ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the benefit thereunder is claimed. Learned counsel for the petitioner laid emphasis on the language of clauses (ii) and (iii) of sub-section (5) of section 80G and submitted that this provision is sufficiently suggestive of the legislative intent that the enquiry by the Commissioner touching the trust seeking approval by the Commissioner must be confined to the provisions and objects as set out in the instrument which constitutes the trust. If the objects as set out are charitable and the instrument does not provide for or empower the trustees to spend the amount for any purpose other than charitable then it is the end of the matter. In other words, the actual utilisation of the fund or the actual activities of the institution are not germane to the enquiry under section 80G(5)(iv). The submission of learned counsel for the petitioner noted in the preceding para cannot be accepted. The submission is founded on the phraseology of various clauses of sub-section (5) but it overlooks the very guiding and governing expression used in the sub-section which excels all other clauses therein. The first and foremost requirement which the institution or the fund has to satisfy is---"if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d capital gains tax : See Chinn v. Hochstrasser [1981] 2 WLR 14 ; IRC v. Plummer [1980] AC 896." The latest trends in this direction have been noted by his Lordship as under: "The courts are now concerning themselves not merely with the genuineness of a transaction, but with the intended effect of it on fiscal purposes. No one can now get away with a tax avoidance project with the mere statement that there is nothing illegal about it. ... the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it." His Lordship has noted a judgment in Wood Polymer Ltd., In re : Bengal Hotels Ltd., In re [1977] 109 ITR 177 ; [1977] 47 Comp Cas 597 (Guj), wherein the High Court refused to accord sanction to the amalgamation of companies as it would lead to the avoidance of tax. His Lordship has concluded by holding: "It is neither fair nor desirable to expect the Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he trust being engaged mainly in the construction of a religious temple wherein no charitable activity was being carried on. It is also not disputed that the donations received by the trust and enjoying exemption under section 80G were invested by the petitioner and the income derived therefrom was utilised for a religious purpose. For the purpose of construing the purpose of a trust, one need not remain necessarily confined to the objects of the trust as set out in the deed of declaration. The real purpose of establishment of a trust has to be found out and spelled out. "Purpose" means that which one sets before him to accomplish or attend, an intention or aim, object, plan, project; the term is synonymous with the ends sought and an object to attain, an intention, etc. (see Black's Law Dictionary, 6th edn. page 1236). Purpose must obviously be construed as real purpose and not a purpose as it outwardly appears to be. Any other interpretation would permit a fraud being played on the law permitting exemption from taxation. If the argument of learned counsel for the petitioner were to be accepted then a trust may be established with a purpose as set out in the deed of declaration ..... X X X X Extracts X X X X X X X X Extracts X X X X
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