BHAGABATI PRASAD BANERJEE, J. - (1.) THE following question of law has been referred to this Court by the Tribunal under s. 256(1) of the IT Act, 1961 : "Whether, on the facts and in the circumstances of the case, in the Income-tax Appellate Tribunal was justified in allowing deduction under s. 80G on Rs. 1,90,687 in place of Rs. 1,16,382 ?"
(2.) THE assessment year involved in this reference is the asst. yr. 1978-79 for which the relevant period of account is the year ending on 31st Dec., 1977. In this case the assessee's gross total income before deduction under s. 80G for the said assessment year amounted Rs. 23,27,649 and the assessee company made donations during the said period aggregating to Rs. 3,82,258. THE assessee claimed that 50 per cent of the donation, amounting to Rs. 1,66,129 should be deducted from the aforesaid gross total income. THE ITO did not agree with the contention of the assessee. According to him the relief admissible under s. 80G was limited to 50 per cent of 10 per cent of the gross total income of the assessee. On appeal, the CIT(A) reversed the order of the ITO. THEn the Department brought the matter before the Tribunal. THE Tribunal after examining the scheme of s. 80G came to the following conclusion : "the ceiling upto which deduction under s. 80G is admissible is 10 per cent of the gross total income or two hundred thousand rupees, whichever is less. Ten per cent of the gross total income would, therefore, come into reckoning while finding out the maximum amount of deduction permissible under sub-s. (1) It cannot be the starting point for computing the deduction under sub- s. (1) Deduction under sub-s. (1) is to be computed independent of the gross total income. As we have noticed above, it is 50 per cent of the various sums referred to in sub-s. (2) of s. 80G. THE measure of 10 per cent of gross total income does not apply to ascertain the various sums paid and referred to in sub-cls. (i), (ii) and (iii) of cl. (a) of sub-s. (2) THE sums paid under the said clauses, whatever be their amount are allowable as deduction under s. 80G(1) to the extent of 50 per cent thereof. THE sums paid in terms of cls. (iv) and (v) above are subjected to the ceiling, which is equal to 10 per cent of the gross total income or two hundred thousand rupees, whichever is less. THE ITO had, therefore, patently erred in computing the deduction under s. 80G(1) with reference to 10 per cent of the total income. THE reference to 10 per cent is to be made only after ascertaining the sums referred to in cls. iv) and (v) under sub-s.(2) of Sec.80G as a measure to determine whether the deduction so computed is more or less than the said ten per cent of the gross total income. THE above view has been brought out succinctly in the judgment of their Lordships of the Andhra Pradesh High Court in Hyderabad Race Club vs. Addl. CIT cited above. THE CIT(A) was therefore, right in taking the view he did. THE grievance of the Department is in our opinion misplaced and, hence, rejected." Andhra Pradesh High Court in the case of Hyderabad Race Club vs. Addl. CIT (1979) 8 CTR (AP) 280 : (1979) 120 ITR 185 (AP), held that under s. 80G(1) of the Act, an assessee other than a company was entitled to deduction of 55 per cent of the donations specified in sub-s.(2) Further limitation was imposed by S. 80G(4) in the case of donations given to the cases specified in cls. (iv) and (v) of s. 80G(2)(a) and s. 80G(2)(b) limiting such deduction to a sum equivalent to 10 per cent of the gross total income or two hundred thousand rupees, whichever was less. The limitation imposed in s. 80G(4) was only the ceiling for the deductions allowable under s. 80G(1) . It was held in that case that the assessee was entitled to be deduction of 55 per cent of the donations as restricted by the ceiling limit of 10 per cent of the total income, viz., Rs. 40.308. Our attention was also drawn to a decision of the Karnataka High Court in the case of CIT vs. Canara Bank (1986) 57 CTR (Kar) 38 : (1986) 162 ITR 478 (Kar), where a contrary view was taken. In that case it was observed that under sub-s. (1) of s. 80G of the IT Act, 1961, an assessee was entitled to have deduction up to 50 per cent of the total donations made while computing his total income. However, sub-s. (4) of s. 80G which placed an embargo on the maximum deduction permissible provide that an assessee would not be entitled to deduction on that part of the amount of donations which exceeded two hundred thousand rupees.
(3.) WE respectfully differ with the view expressed by the Karnataka High Court inasmuch as, in our view, this is contrary to the plain meaning of the section itself we agree with the view expressed by the Andhra Pradesh High Court. On plain reading of sub-s. (1) of s. 80G it appears that in computing the total income of an assessee that there shall be deducted in accordance with the subject to the provisions of this section, an amount equal to 50 per cent of the aggregate of the sums specified in sub-s. (2) thereof, it is categorical grant of relief, that is, 50 per cent of the aggregate sums. Sub-s. (2) specifies the list of charitable institutions to which donations can be made. Sub-s. (4) of s. 80 G limits the extent of donations only. Sub-cls. (iv) and (v) provide for deduction of any sum donated to any other fund or any institution to which this section applies or the Government or any local authority to be utilised for any charitable purpose. These are the two embargoes imposed by sub- cls. (iv) and (v) of sub-s. (2) of s. 80G.;