Commissioner of Gift Tax vs Meco-Tronics (P) Ltd.

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 section 5(1A) of the Gift Tax 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 Gift Tax

liability?"" The assessment years are 1972-73 to 1978-79.

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 Gift Tax Officer treated these amounts as gifts made for religious purposes.

The Commissioner of Gift Tax (Appeals) 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 u/s 5(1)(v) and (vi) of the Gift Tax Act (hereinafter referred to as ''the

Act''). The Tribunal upheld the order of the Commissioner of Gift Tax (Appeals).

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 section 5(1A) of the Act, which read thus:

Any reference in clause (v) or clause (vi) of sub-section (1) to charitable purpose in relation to a gift made on or after the 1-4-1964, 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 section 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 section 8OG of the

Income Tax 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 clause (b) of

sub-section (2) of section 8OG of the Income Tax 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 clause (v)-

(a) made at any time before the 1-4-1958, 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.

Section 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 section 5(1) of

the Act. Sub-clause (v) to section 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 section 80G of the Income Tax Act apply. Sub-clause (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 Ps. 500

in value in the aggregate.

It is not the case of the revenue that the aggregate amount that could be given away for a charitable purpose not falling under clause(v) of section

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.

Section 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

purpose, such a gift would be covered by section 5(1A) of the Act. As to whether, the gift is of religious nature or not, has to be decided, not with

reference to the intention with which the gift is given by the person giving it, but, with reference to the purpose for which the recipient is expected or

required to apply the amount. The fact that a person who is pious or compassionate gives away gifts by way of charity, does not render gifts given

by such pious persons into religious gifts. It is only when a gift is given, for example, for celebrating a religious festival or performing a religious

ritual in a place of worship or for the upkeep or a place of worship and for similar purposes, it can be said that the object of the gift is religious in

nature.

The assessee herein is a company and when it makes a gift as charity, it cannot be attributed with any intent. The fact that the company has

chosen to give gifts to individuals by way of charity, during a period considered holy does, not, on that score alone, render such gifts as gifts for a

religious purpose. There is no material whatsoever, on record to show that the recipients of the amounts were persons who were part of a religious

order or that they were required to apply the amount for performing religious rituals. The object of the gift was not to promote any religion, but, to

reduce the hardship of the recipient, to a limited extent. The fact that the assessee had made gifts in the month of ''Ramzan'', and was made

charitably inclined during that month, does not render all gifts given during that month as gifts of religious nature, in the absence of any material

before us, to show that the gifts given were intended to be applied for religious purposes. Therefore, it such gifts cannot be denied exemption from

tax. The assessee is entitled to the exemption, claimed and the Tribunal has rightly held that the assessee should be given the exemption. The

question referred to, is therefore answered in favour of the assessee and against the Revenue. No costs.