COMMISSIONER OF INCOME TAX Vs. SOHAN LAL SINGHANIA

JUDGEMENT

(1.) AT the instance of the Commissioner of Income-tax (Central) Kanpur, the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, under Section 256(1) of the Income-tax Act, 1961 (for short "the Act"), has referred the following question of law for the opinion of this court :

(2.) WE have heard learned counsel for the parties. The dispute pertains to the assessment year 1974-75. At the relevant time, the assessee held 6,000 equity shares of the face value of rupees 10 of J. K. Synthetics Ltd., Kanpur, as stock-in-trade. Those shares were donated by the assessee to Murlidhar Sohan Lal Foundation Society, Kanpur, a charitable trust. In his assessment, the assessee claimed a deduction of Rs. 23,584 under Section 80G of the Act in respect of the said shares transferred to the charitable trust. However, the Income-tax Officer negatived the claim on the ground that the income of the said trust (society) was not exempt under Sections 11 and 12 of the Act and thus one of the pre-requisites for allowance of deduction under Section 80G of the Act was not there. In appeal, the Commissioner of Income-tax (Appeals) sustained the disallowance On a different ground. It was held that although the income of the society was exempt under Sections 11 and 12 of the Act but still the assessee was not entitled to the exemption because the donation was made in kind and not in cash. The assessee carried the matter further in second appeal before the Income-tax Appellate Tribunal. The Tribunal did not agree with the view taken by the Commissioner of Income-tax (Appeals). It held that the assessee cannot be denied the benefit of Section 80G of the Act merely because donation was in kind and not in cash. In taking that view, the Tribunal placed reliance on certain decisions of the Bombay High Court including the decision in CIT v. Associated Cement Co. Ltd. [1968] 68 ITR 478 and on the decision of the Madras High Court in Addl. CIT v. Abhai Maligai [1978] 113 ITR 737 and preferred not to follow the decision of the Andhra Pradesh High Court in CIT v. Amonbolu Rajiah [1976] 102 ITR 403 on which reliance was placed on behalf of the Revenue.

(3.) THE above decision of this court has been approved by the Supreme Court in H. H. Sri Rama Verma v. CIT [1991] 187 ITR 308, and the decisions which were relied upon by the Tribunal, have been specifically disapproved. THE Supreme Court held that the context in which the expression "sums paid by the assessee" has been used under Section 80G(2)(a) makes the legislative intent clear that it refers to the amount of money paid by the assessee as donation. THE Act provides for assessment of tax on the income derived by an assessee during the assessment year, and the income relates to the amount of money earned or received by the assessee. THErefore, for purposes of claiming deduction under Section 80G(2)(a), the donation must be a sum of money paid by the assessee. THE plain meaning of the words used in the Section does not contemplate donations in kind. THE donation of shares of a company does not amount to payment of any amount though the shares, on their sale, may be converted into money, and the donation so made does not fall within the ambit of Section 80G(2)(a). THE same view has been reiterated by the Supreme Court in its subsequent decision in Vijaipat Singhania v. CIT [1992] 193 ITR 274.