1970 (8) TMI 15 - HC - Income Tax

High Court denies income tax exemption for religious offerings, rules funds not used for designated purposes

The High Court ruled against the assessee in a case concerning the exemption of income from religious offerings under the Indian Income-tax Act, 1922. The ... Swami Narsingh Giri is the assessee - offerings made by the disciples - not exempt from tax, either under clause (i) or clause (ii) of section 4(3) of Indian Income-tax Act, 1922 Issues:Interpretation of section 4(3)(i) and section 4(3)(ii) of the Indian Income-tax Act, 1922 regarding exemption of income derived from religious offerings made to an individual.Analysis:The case involved a reference under section 66 of the Indian Income-tax Act, 1922, concerning the assessment of income derived from religious offerings made to the assessee. The Income-tax Officer treated certain amounts deposited in the assessee's bank account as his income, which the assessee claimed were exempt under section 4 of the Act. The Appellate Assistant Commissioner initially accepted the claim, but the Appellate Tribunal later reversed this decision, leading to the case being referred to the High Court for interpretation.The primary issue revolved around the interpretation of section 4(3)(i) of the Act, which exempts income derived from property held under trust for religious or charitable purposes. The court analyzed the statements of a witness, Swami Atma Nand Giri, who indicated that the assessee had complete control over the offerings received and could use the money as he pleased. This control over the income contradicted the requirement that such income should be set aside for religious or charitable purposes, leading to the rejection of the claim under clause (i) of section 4(3).Furthermore, the court also considered the applicability of section 4(3)(ii), which exempts income of a religious or charitable institution derived from voluntary contributions solely for such purposes. The court noted that the offerings were made to the assessee personally and were not exclusively for religious or charitable purposes, as the assessee had discretion over the usage of the funds. Consequently, the case did not fall under either clause (i) or clause (ii) of section 4(3) of the Act.In conclusion, the court answered the question referred to it in the negative, ruling against the assessee. The judgment highlighted that the income derived from the offerings made to the assessee did not qualify for exemption under the provisions of section 4(3)(i) or section 4(3)(ii) of the Indian Income-tax Act, 1922. The assessee was directed to pay costs to the Commissioner of Income-tax, U.P., emphasizing the denial of the exemption claim based on the specific circumstances and control maintained by the assessee over the received income.This detailed analysis of the judgment showcases the court's interpretation of the relevant sections of the Income-tax Act in determining the exemption eligibility of income derived from religious offerings, based on the control and purpose of the received funds as presented in the case.