JUDGMENT
Ruma Pal, J.
1. The short point involved in this writ application is whether a donor who has made a donation to an institution for carrying out rural development programmes and has claimed deduction on such basis can he denied deduction on the ground that the money as donated was not in fact utilised by the donee for the purposes for which they were given.
2. The petitioner has donated two sums to two organisations both of which had been approved by the prescribed authority under the provisions of Section 35CCA of the Income-tax Act, 1961.
3. The payments were made in 1982. The petitioner was assessed for the assessment year 1983-84. The petitioner’s claim for deduction under Section 35CCA was allowed by the Income-tax Officer in the assessment order. The Commissioner then sought to revise the assessment under Section 263 on the following grounds ;
“The Income-tax Officer allowed incorrectly deduction amounting to Rs. 4,00,000 under Section 35CCA on account of payment of Rs. 2 lakhs each to Messrs. Jayasree Gram Vikash Trust and Jagannath Rural Development Kendra, in spite of the fact that the conditions laid down in the Board’s Circular No. 240 (see [1979] 117 ITR (St.) 17) dated May 17, 1978, have not been fulfilled by the above two agencies in regard to rural development.”
4. The circular as referred to in the ground is nothing else but a paraphrasing of the provisions of Section 35CCA. Section 35CCA(1)(a) provides:
“35CCA. Expenditure by way of payment to associations and institutions for carrying out rural development programmes.–(1) Where an assessee incurs any expenditure by way of payment of any sum-
(a) to an association or institution, which has as its object the undertaking of any programme of rural development to be used for carrying out any programme of rural development approved by the prescribed authority ; or
(b) to an association or institution, which has as its object, the training of persons for implementing programmes of rural development;
the assessee shall, subject to the provisions of Sub-section (2), be allowed a deduction of the amount of such expenditure incurred during the previous year.
(2) The deduction under Sub-section (1) shall not be allowed with respect to expenditure by way of payment of any sum to any association or institution unless such association or institution is for the time being approved in this behalf by the prescribed authority ;
Provided that the prescribed authority shall not grant such approval for more than three years at a time.”
5. The pre-conditions subject to which the assessee is permitted deduction are :
(1) The association to which the payment is made must have as its object the undertaking of any programme of rural development and the money must be given to be used for carrying out such programme of rural development.
(2) The programme of rural development must be approved by the prescribed authority.
(3) The association or institution itself must be approved by the
prescribed authority.
6. It is not in dispute that when the payment was made by the petitioner to the rural development association, it fulfilled at least the second and third conditions. The question is, whether the phrase “to be used” in Clause (1) means actual user.
7. The phrase “to be” presumes an action in future. The most appropriate meaning of the phrase “would be”.
“1. Indicating aim, purpose, intention or design : For, for the purpose of ; with the view or end of ; in order to.”
[The Shorter Oxford English Dictionary, vol. II N-Z.]
8. Therefore, whether in fact the donated sum is used for the purposes specified, the donor is not in a position to enquire or ensure.
9. On a reading of the provision of section as it stood at the material time it appears that the relevant period of time as far as the donor is concerned is when the payment is made. This is borne out by the phrase “for the time being”, in Section 35CCA(2). The misapplication of the funds donated would necessarily be subsequent to the donation.
10. The respondents have said that the writ court should not entertain the petitioner’s application because it was found that the two concerns to which the donations had been made were of doubtful character. It is also stated that disputed facts were involved which could not be determined by this court. Finally, it has been submitted that the Commissioner had sufficient material before him to issue the notice under Section 263.
11. None of the submissions by the respondents are acceptable. There is no allegation whatsoever against the petitioner in the affidavit. No situation has been pleaded involving the petitioner which would indicate that the petitioner had not come to the court with clean hands. No disputed questions of fact are involved. The matter has been decided on the basis that the two concerns to which the donation had been made by the petitioner had indeed misapplied the money received as stated by the Commissioner in the impugned notice. Assuming this fact to be correct, this court holds that these facts would not warrant the conclusion that the petitioner was not entitled to deductions as the donor. There were as such no relevant materials before the Commissioner on the basis of which he could exercise his jurisdiction under Section 263.
12. The writ application must, therefore, be allowed. The rule nisi is
made absolute. The impugned notice dated March 6/9, 1987, issued by the
respondent No. 1 under Section 263 in respect of the assessment year
1983-84 is quashed and any proceedings taken on the basis thereof are
set aside. There will be no order as to costs.
13. Stay of this judgment is prayed for and is granted for a period of
two weeks from today.