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Commissioner Of Income Tax vs Prakash Company.

High Court Of Judicature at Allahabad|27 January, 1998

JUDGMENT / ORDER

JUDGMENT BY THE COURT :
The Tribunal, Allahabad Bench, Allahabad, has referred the following question of law for the opinion of this Court under sub-s. (1) of s. 256 of the IT Act, 1961 (for short the Act) :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in accepting the assessees claim for deduction under s. 80G of the IT Act, 1961, in respect of the donation of Rs. 15,000 made to Sri Dwarka Das V. D. Balika Vidyalaya, Malsisar ?"
2. We have heard learned standing counsel for the Revenue. No one has appeared for the respondent-assessee although the case was taken up after the list was revised.
3. In the assessment proceedings relevant to the asst. yr. 1974-75 which is in dispute, the assessee claimed deduction of Rs. 34,012 from its taxable income under the head charity and donations which included an amount of Rs. 15,000 paid as a donation to an educational institution, called Shri Dwarika Das Vishnu Dayal Balika Vidyalaya, Malsisar, Rajasthan. The ITO, however, added back the entire amount of Rs. 34,012 to the income of the assessee observing in a cursory manner that the assessee had not fulfilled the conditions laid down under s. 80G of the Act. It was not known whether the parties to whom the donations are alleged to have been made, were approved by the Central Government and in any case in absence of verifiable and complete particulars, reliefs under s. 80G could not be granted. The assessee appealed against the aforesaid disallowance amongst other items to the AAC. However, the assessee restricted its claim under the head donations to the amount of Rs. 15,000 which was paid to the said institution, claiming that it was entitled to deduction as contemplated under s. 80G of the Act in respect of the said donation. The appellate authority however, did not decide the contention on merits and sustained the disallowance on the ground that in the memorandum of appeal no specific ground was taken.
The assessee pursued the matter further in second appeal before the Tribunal and it was urged that the AAC erred in sustaining the disallowance inasmuch as the donee-institution was an educational institution recognised by the Government and in that connection reliance was placed on a certificate dt. 16th August, 1962 issued by the Dy. Director of Education, Government of Rajasthan, Department of Education. The contention of the assessee was that it was entitled to claim deduction under s. 80G by virtue of cl. (i) of sub-s. (5) of s. 80G of the Act. On behalf of the Revenue, the claim was resisted before the Tribunal on the ground, inter alia, that since no certificate was issued by the concerned CIT in favour of the donee-institution, treating it as a charitable institution, the assessee was not entitled to claim deduction as contemplated under the provisions of s. 80G of the Act. The Tribunal however, allowed the claim of the assessee in the following words :
"... To query raised by us, neither the assessee nor the Revenue could show us any provision under the IT Act, 1961 whereby an approval of the Central Government is required in respect of the deduction claimed under s. 80G of the Act. In our opinion the provisions of cl. (i) of sub-s. (5) of s. 80G of the Act are very clear and unambiguous. The certificate issued by the Dy. Director of Education, Government of Rajasthan, Department of Education, clearly shows that the school to which the assessee had donated Rs. 15,000 is an educational institution. Therefore, in our view, the assessee would be entitled to deduction under s. 80G of the Act in respect of the donation made to the said school. The ITO is, therefore, directed to allow deduction under s. 80G of the Act to the assessee in respect of the donation made by it to the said school and modify the assessment accordingly".
4. Under s. 80G, the assessee is entitled, subject to certain conditions, to a deduction in the computation of its total income of a specified percentage of the donations made by him to certain funds, charitable institutions, etc. The deduction is provided in respect of aggregate of the sum paid by the assessee in the previous year as donation. The sums that qualify for exemption are set out in sub-s. (2) of s. 80G. For the purposes of this case, sub-s. (2)(a)(iv) is relevant which at the relevant time read as under :
"(2) The sums referred to in sub-s. (1) shall be the following, namely :-
(a) any sums paid by the assessee in the previous year as donations to -
............
(iv) any other fund or any institution to which this section applies; or ............"
Sub-s. (5) of s. 80G amplifies the provisions of s. 80G(2)(a)(iv) and sets out the conditions under which donations covered under s. 80G(2)(a)(iv) shall enjoy benefit of s. 80G. It provides that s. 80G applies to any institution or fund referred to under sub-cl. (iv) of cl. (a) of sub-s. (2) only if it is established in India for a charitable purpose and it fulfils the conditions specified in that sub-section, namely :
"(i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of ss. 11 and 12 or cl. (22) or cl. (22A) or cl. (23) or cl. (23C) of s. 10;
(ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at anytime of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose;
(iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste;
(iv) the institution or fund maintains regular accounts of its receipts and expenditure; and
(v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (XXI of 1860), or under any law corresponding to that Act in force in any part of India or under s. 25 of the Companies Act, 1956 (1 of 1956) or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, or is an institution approved by the Central Government for the purposes of cl. (23) of s. 10, or is an institution financed wholly or in part by the Government or a local authority.
Explanation ........................"
Now in order to avail the benefit of s. 80G in terms of the provisions referred above, it must be shown that those conditions are not breached in a given case. By virtue of the condition laid down in cl. (i) of sub-s. (5) of s. 80G the income derived by the donee-institution should be exempt from tax under s. 11 and 12 where such institution derives any income, or such income was not liable to be included in its total income, amongst others, under cl. (22) of s. 10 of the Act. The expression "charitable purpose" is defined in s. 2(15) of the Act as including relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. Sec. 10(22) of the Act is to the following effect :
"10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included -
(1) ...............
(22) any income of a University or other educational institution, existing solely for educational purposes and not for purposes of profit;
................"
5. The learned standing counsel except for placing the order of the Tribunal had nothing to add against the order of the Tribunal. Despite our repeated query no infirmity in the order of the Tribunal could be pointed out to us nor the standing counsel was able to spell out as to which of the conditions of s. 80G were missing in the present case which dissentitled the assessee to the benefit of s. 80G. The copy of the certificate the Dy. Director of Education dt. 16th August, 1962 on which the Tribunal had placed reliance, is contained in the paper book which goes to show that the sanction was accorded to the donee institution by the Government of Rajasthan, Department of Education, upto Middle Standard with permission to start Class VI from July, 1962, Class VII from July, 1963 and Class VIII from July, 1964, as recommended by the Inspector of Schools, Jhunjhunu. It was not the case of the Revenue either before the Tribunal or before this Court that the said institution enjoyed any income, profit or gains from any business or its income was not exempt under ss. 11 and 12 of the Act or the said institution was not existing solely for educational purposes as contemplated in cl. (22) of s. 10 of the Act. The only objection taken by the Revenue was that no certificate was obtained/issued by the concerned CIT, to donee-institution recognising it as charitable institution. Therefore, the provisions of s. 80G were not available to the assessee. Learned standing counsel fairly conceded that at the relevant time there was no provision under the Act or the Rules framed thereunder which required the approval of the Central Government or for that matter, of any other authority, or production of an exemption certificate of the donee institution, etc., before a claim under s. 80G could be allowed. In our opinion, an assessee can legitimately claim deduction under s. 80G on showing that the donee fulfils all the conditions stated in sub-s. (5) r/w sub-s. (2)(a)(iv) of s. 80G of the Act. On the facts of the case, we find no infirmity in the decision of the Tribunal when it held that the assessee was entitled to deduction under s. 80G of the Act in respect of the donation made to the institution in question.
The question referred to this Court is, therefore, answered in the affirmative, in favour of the assessee and against the Revenue.
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Title

Commissioner Of Income Tax vs Prakash Company.

Court

High Court Of Judicature at Allahabad

JudgmentDate
27 January, 1998