KARPAGAMBAL MILLS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Order of the Court is as follows: An interesting question of law on the interpretation of section 8OG of the Income-tax Act, 1961 ('the Act') arises on the facts of the case. Section 8OG(1) provides that in computing total income of the assessee, there shall be deducted, in accordance with and subject to the provisions of section 8OG, an amount equal to fifty per cent of the aggregate of the sums specified in sub-section (2). Sub-section (2) of section 8OG refers to funds of institutions to which the section applies. Sub-section (3) of section 8OG refers to the minimum amount eligible for deduction. Sub-section (3) of section 8OG prescribes the minimum amount and it should not be less than Rs. 250. Sub-section (4) of section 80G reads as under:

(2.) THE assessee made donations to two institutions which are admittedly recognised under section 8OG amounting in all to Rs. 3, 00, 500 during the previous year relevant to the assessment year 1980-81 and claimed 50 per cent deduction thereof amounting to Rs. 1, 50, 250. THE contention of the assessee was that under sub-section (1) of section 8OG, 50 per cent of the donation should first be deducted and thereafter it should be restricted to 10 per cent of the total income. THE ITO as well as the Commissioner (Appeals) held that the eligible amount of deduction should first be restricted to 10 per cent of the total income and thereafter 50 per cent of the same should be allowed as deduction under section 8OG(4). THE Tribunal also upheld the view of the authorities and held that sub-section (4) limits the eligible quantum of donation provided under section 8OG(1) and sub-section (4) applies with reference to the aggregate amount of donation and not with reference to the quantum of donation admissible thereunder.

(3.) ON the other hand, the Karnataka High Court in the case of Canara Bank (supra) as the Bombay High Court in the case of New Shorrock Spg. & Mfg. Co. Ltd. (supra) held that sub-section (4) of section 8OG puts a ceiling on the part of the aggregate of the sums specified in sub-section (2) in respect of the deduction as claimed under sub-section (1) and the ceiling specified in sub-section (4) applies to the aggregate of the sums in respect of which the deduction is claimed and not to the amount of deduction allowed under sub-section (1) which has to be computed in the manner specified therein.