TMI Blog1982 (6) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1st January, 1970. She had 10% share in the profits and losses of the partnership, the remaining 90% share being equally divided between her husband and son. The capital was also contributed by the partners in the ratio of their shares in the profits and losses of the firm. The firm, which was originally established to start a brewery, decided sometime in 1972 to deal in shares for which additional capital was brought in by the partners in the ratio of their shares in the partnership business. The assessee brought 206 shares of M/s. Alembic Chemical Works Co. Ltd. and 366 shares of M/s. Alembic Glass Industries Ltd. by way of her share in the capital of the firm. On the basis of the market value of these shares, the ITO worked out the capital gains at Rs. 57,754 and brought the said amount to tax. The AAC agreed with the view taken by the ITO and dismissed the assessee's appeal in this behalf. The Income-tax Appellate Tribunal, however, came to the conclusion that there was no " transfer " within the meaning of s. 2(47) of the I.T. Act, 1961 (hereinafter called " the Act ") as no consideration was received by the assessee or had accrued to her within the meaning, of s. 48 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es any sum specified in sub-clause (vii) of clause (a) thereof, an amount equal to the whole of such sum plus fifty per cent. of the balance of such aggregate; and (ii) in any other case, an amount equal to fifty per cent. of the aggregate of the sums specified in sub-section (2). (2) The sums referred to in sub-section (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..." There is no dispute that the trusts to which donations are made are institutions to which s. 80G applies. Explanation 5 was added at the foot of s. 80G by the Finance Act, 1976, with effect from 1st April, 1976. The said Explanation reads as under : "Explanation 5.-For the removal of doubts, it is hereby declared that no deduction shall be allowed under this section in respect of any donation unless such donation is of a sum of money." The learned counsel for the Revenue vehemently contended before us that this Explanation was brought on the statute book to clear the doubt that had arisen because of some judicial pronouncements which had taken the view that donations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0G of the Act. The Bombay High Court in CIT v. Associated Cement Co. Ltd. [1968] 68 ITR 478, was concerned with the claim of deduction under s. 15B of the Indian I.T Act, 1922. In that case the University of Bombay through its Department of Chemical Technology wrote on December 26, 1962, to the chairman of the board of directors of the assessee-company a letter saying that their professor of chemical engineering was carrying out important laboratory experiments on certain chemicals and for that purpose he desired to institute pilot plant experiments on the problem. One of the items of the pilot plant was a " rotary experimental kiln " and in connection with that, the letter stated, that he had learnt that the assessee company fabricated all their rotary kilns for cement making in their own workshop. He requested that the directors of the assessee-company should be persuaded to arrange for the fabrication of a small rotary experimental furnace for the university department to enable them to complete an investigation of national importance which was in progress. In response to this request the board of directors of the assessee-company passed resolution on June 26, 1953, sanctionin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pilot-kiln out of the said amount of Rs. 6,600 for the University. That is why in the concluding part of the judgment it is observed (at p. 486): "In our opinion, looking to the substance of this transaction there is no doubt that the sum of Rs. 6,600 was paid, by the assessee-company as a donation to the University of Bombay. " It is obvious from this observation that according to their Lordships of the Bombay High Court, the expression " any sums paid " would mean payment in cash and since, having regard to the nature of the transaction, in substance it was a transaction whereby a sum of Rs. 6,600 was paid by the assesseecompany as donation to the University, it was held that the assessee was entitled to the concession under s. 15B of the Indian I.T. Act, 1922. This decision is not an authority for the proposition that the expression "any sums paid " would also take within its fold payment made in kind. In CIT v. Bangalore Woollen Cotton and Silk Mills Co. [1973] 91 ITR 166 (Mys), the assessee, a public limited company, carrying on business in the manufacture and sale of woollen and cotton fabrics, donated cloth manufactured by it of the value of Rs. 6,834 to different instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that the donation was in cash. The Tribunal, on appeal, took a contrary view. It held that in fact and in substance, the donation was made in cash and, therefore, it squarely fell within the purview of s. 88 of the Act. On a reference to the High Court, their Lordships, after reproducing s. 88 of the Act, observed that even a casual reading of this provision would indicate that in order to attract the provisions of s. 88, what must have been paid should be " sums " which can only mean payment in cash. After pointing out the dictionary meaning of the word " sum ", their Lordships made the following observations (p. 405): "Thus, a plain reading of the section would only mean that it is only in a case where any sum is paid by way of donation to a local authority that the assessee would be entitled to rebate. On the other hand, if he donates a building or a thing which may have money value, merely because that donation is in kind it cannot be brought within the fold of section 88. The conclusion of the Tribunal, therefore, that donation in kind is not precluded for the purpose of allowance of rebate in terms of section 88 of the Act cannot be said to be correct. It is contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bombay High Court in Associated Cement Company's case [1968] 68 ITR 478 (Bom), but the learned judges of the Andhra Pradesh High Court. In Associated Cement Company's case the Division Bench of the Bombay High Court had expressly observed at a number of places in the judgment and found that the assessee had spent Rs. 6,600 out of its own coffers, prepared the kiln and then handed over the kiln to the university pursuant to the earlier request made by the university for the donation of the kiln. It is impossible to read Associated Cement C Company's case and to hold that it was found as a fact that Rs. 6,600 were handed over to the university." In a subsequent decision the same Division Bench of the Bombay High Court in CIT v. Khandelwal Laboratories P. Ltd. [1979] 118 ITR 531, reiterated its view that the decision of the Andhra Pradesh High Court in Amonbolu Rajiah's case [1976] 102 ITR 403 (AP) proceeded on a fallacious reading of the decision of the Bombay High Court in Associated Cement Company's case [1968] 68 ITR 478 (Bom). With respect to the learned judges constituting the Division Bench of the Bombay High Court we are unable to agree that in Associated Cement Company's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended before the High Court that the order of the AAC as well as the Tribunal could not be sustained because the donation of cement bags to the charitable institution being a donation in kind could not fall within the purview of s. 80G of the Act. Relying on the decision in Associated Cement Company's case [1968] 68 ITR 478 (Bom), this court held that the transaction in substance was a money transaction and the donation was virtually a donation in cash and thereupon upheld the view taken by the Tribunal as in its opinion the said view was not unreasonable or perverse. From the resume of the case law discussed above it becomes crystal clear that the provisions of 80G of the Act would be attracted only if the donation is in cash and not in kind. However, in order to decide whether a donation is in cash or in kind, the court must look to the substance of the donation and not merely to the form in which it is made. If on the facts, having regard to the substance of the transaction, the court is satisfied that it is essentially a donation in cash, the rebate under s. 80G would be admissible to the assessee. If it is a donation in kind, pure and simple, it would clearly fall outside th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76, has retrospective application. Even without the insertion of Expln. 5, as pointed out earlier, courts have taken the view that s. 80G is attracted only if the donation is in cash and not in kind. The only rider the courts placed was that before concluding whether the donation in question was in cash or in kind, the substance of the donation should be looked into and if it is found that in substance it is a donation in cash, the benefit of s. 80G should be extended to the assessee. In the instant case the AAC as well as the Tribunal have taken the view, with respect, on an erroneous reading of the decision in Associated Cement, Company's case [1968]68-ITR 478 (Bom) as well as the subsequent two decisions, that a donation in kind would entitle an assessee to rebate under s. 80G of the Act. In our view, that conclusion recorded by the AAC as well as the Tribunal is erroneous in law. The statement of the case does not disclose a finding of fact that the transaction or donation was in substance in cash. The facts merely disclosed that shares worth Rs. 1,70,000 were donated by the assessee to the two trusts in question. In the absence of a finding of fact that the donation in subst ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
