The Hindu Business Line : Babus and benevolence

The question was: Can there be different yardsticks leading to differential tax treatment when benevolence is identical? Logical answer is `no'; and that was what the Nagpur Bench of the court too ruled when deciding the Tax Practitioners Benevolent Fund case, as reported in the latest issue of Taxman.

The fund was a public charitable trust registered under the Bombay Public Trust Act, 1950. Its main object was to provide financial assistance - to the necessitous who were in practice of taxation, as also to widows and dependents of such people. The trust applied for Section 80G exemption under the Income-Tax Act. This is a common measure that is resorted to by non-profit bodies to bolster their revenues and at the same time confer tax advantage to donors. However, the Nagpur Commissioner of Income-Tax rejected the trust's application. Reason: ``The trust was meant for the benefit of a specific group of people, i.e. tax practitioners.''

When arguing its case at the court, the trust produced something interesting to buttress its stand: Details about the Chartered Accountants Benevolent Fund (CABF), New Delhi. Also known as CABF, this is something almost every CA knows about because the yearly reminder that comes from the CA Institute invariably carries an appeal for contributions to the Fund.

The trust averred that its objects were `exactly identical' to those of CABF, the only difference being that the latter was for CAs and their dependents, while the former was for the benefit of tax practitioners and their dependents.

Another difference was that CABF got 80G exemption, but the trust was denied the same.

The court studied the Memorandum of Association, rules and regulations of CABF and observed: "We hardly find justification in refusing the petitioner - Tax Practitioners Benevolent Fund having similar objects the grant of exemption under Section 80G." Yardstick has to be uniform, the court said: "Section 80G of the Income-tax Act does not contemplate different yardstick and different parameters being applied to the different trusts having similar objects and similar purpose."

Also, application of law should not vary depending on babus in the Department. Thus, ``While considering the applications under Section 80G, similar persons cannot be treated differently merely because the officers happen to be different having different territorial jurisdiction.'' The decision thus emphasises the need for the Department to present one face. Incidentally, one may also credit the CABF with an act of benevolence in having served as a benchmark in the decision that ultimately went in favour of the trust.

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