1993 (6) TMI 22 - HC - Income Tax

Summary

Issues:
1. Whether a donor can be denied deduction if the donated money is not utilized for the specified purpose.
2. Interpretation of Section 35CCA of the Income-tax Act, 1961 regarding deductions for rural development programs.
3. Jurisdiction of the Commissioner under section 263 to revise assessments.

Analysis:

1. The main issue in this case is whether a donor can be denied deduction if the donated money is not utilized for the specified purpose. The petitioner had made donations to two organizations approved for rural development programs under section 35CCA of the Income-tax Act, 1961. The Commissioner sought to revise the assessment, claiming that the organizations had not fulfilled the conditions for rural development as per a circular. However, the court held that the phrase "to be used" in the provision does not require actual usage verification by the donor. The relevant time for the donor is when the payment is made, and any misapplication of funds would occur after the donation.

2. The interpretation of Section 35CCA of the Income-tax Act, 1961 was crucial in this judgment. The section allows deductions for expenditure on rural development programs to approved associations or institutions. The conditions include the organization having rural development as its object, approval by the prescribed authority, and the money being used for approved programs. The court clarified that the donor's responsibility ends once the donation is made, and future usage is not the donor's concern. The court emphasized that the Commissioner lacked sufficient grounds to deny the deduction under section 263.

3. The jurisdiction of the Commissioner under section 263 to revise assessments was also discussed. The respondents argued that the court should not entertain the petitioner's application due to disputed facts and the nature of the organizations receiving donations. However, the court found no allegations against the petitioner and no disputed questions of fact. The court ruled in favor of the petitioner, quashing the notice issued by the Commissioner under section 263 for the assessment year 1983-84. The court held that the petitioner was entitled to deductions as the donor, and there were no relevant materials for the Commissioner to exercise jurisdiction under section 263.

In conclusion, the court allowed the writ application, made the rule absolute, quashed the impugned notice, and set aside any proceedings based on it. The court granted a stay of judgment for two weeks and made no order as to costs.