1972 (6) TMI 19

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..... y the assessee-company was eligible for exemption under section 88 of the Income-tax Act, 1961 ? " The assessment year is 1965-66, and the relevant accounting year is the calendar year 1964. The assessee is a public limited company carrying on the business of manufacture and sale of woollen and cotton fabrics. During the relevant accounting year, the assessee-company donated cloth manufactured by it to various charitable institutions of the value of Rs. 6,834. The assessee claimed exemption in respect of the said amount under section 88 of the Act. The Income-tax Officer disallowed the claim as the donation was not made in cash, but in kind. The Appellate Assistant Commissioner of Income-tax, Bangalore, on the appeal preferred by the asses .....

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..... ted March 14, 1960, having been cancelled by the circular dated January 17, 1964, the learned counsel for the assessee is not entitled to rely on the earlier circular since the relevant year of accounting is the calendar year 1964. Sub-section (1) of section 88 of the Act as it stood at the relevant period read thus : " 88. Donations for charitable purposes, etc.--(1) Subject to the provisions of this section, the assessee shall be entitled to a deduction from the amount of income-tax on his total income with which he is chargeable for any assessment year-- (a) where the assessee is a company, of an amount equal to the income-tax calculated at the average rate of income-tax or at the rate of twenty-seven and a half per cent., whichever is .....

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..... in Associated Cement Company's case, rendered on 5th October, 1967, has held the field all these years. The department did not take up the matter in appeal to the Supreme Court. The said decision was rendered subsequent to the Board's circular dated January 17, 1964, referred to above. So far as the State of Maharashtra is concerned, the Board's circular dated January 17, 1964, can have no validity and it is the decision of the High Court that prevails. As observed by the Bombay High Court, one has to look to the substance of the transaction and the purpose underlying section 88(1) of the Act and if that is done, we have no doubt that the assessee is entitled to the deduction of the sum of Rs. 6,834 which represents the value of the cloth .....

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