Dwarka Prasad, Actg. C.J. - (1.) THE Income-tax Appellate Tribunal, Delhi Bench 'A', hereinafter referred to as "the Tribunal", has referred the following question to us for our decision : "Whether on the interpretation of the provisions of Section 15B of the Indian Income-tax Act, 1922, the assessee is entitled to rebate in respect of donations made to Bangur High School, Arogya Bhawan Hospital and Bangur Hospital ? "
(2.) WE have held by our order dated December 22, 1981, that the asses-see is entitled to rebate, in respect of donations made to Bangur High School, Arogya Bhawan Hospital and Bangur Hospital, under the provisions of Section 15B of the Indian I.T. Act, 1922 (hereinafter referred to as "the Act"), and decided the reference in favour of the assessee. WE now proceed to record the reasons for our aforesaid decision. The facts which have given rise to this reference may be briefly stated: There was an educational institution known as Darbar High School at Pali, which was wholly financed and run by the Rajasthan Government. As the number of students coming from different villages of Pali District was increasing, the existing building of the school was found to be inadequate to accommodate the growing number of students and the Maharaja Shri Umed Mills Ltd., Pali (hereinafter called "the assessee"), agreed to construct a new building for the school and hand over the same to the State Government, subject to the condition that the name of the school was changed to Bangur High School. The work of construction of the new school building started in the year 1952 and was completed in the year 1954. A total sum of Rs. 1,34,935 was spent by the assessee on the construction of the new school building up to the end of the accounting year relevant to the assessment year 1954-55 and out of the amount so spent, a sum of Rs. 1,00,000 was debited by the assessee to its profit and loss account, in the accounting year corresponding to the assessment year 1954-55, as donation made to Bangur High School and a rebate was claimed in respect of the aforesaid sum of rupees one lakh under Section 15B of the Act. Similarly, donations were made by the assessee of a sum of Rs. 53,358 in the assessment year 1955-56 and a sum of Rs. 8,321 in the assessment year 1956-57 which represented the amount spent by the assessee over the construction of the new school building. The Government of Rajasthan gave a certificate dated March 28,1958, to the assessee, stating that the school building of the Bangur High School, Pali, was constructed by the assessee in accordance with the sketches and plans furnished by the Government of Rajasthan and was handed over by the assessee to the State Government and was taken over by the State through its Education Department, for the benefit of the public in general and advancement of education in particular. It was also stated in the certificate that the school was run and maintained wholly and solely by the State Government and all proprietary rights in the movable and immovable property of the said Bangur High School vested in the State Government and the donor had nothing to do with it. The ITO, who was the assessing authority, disallowed the claim of the assessee for exemption on two grounds, namely, that under Section 15B of the Act only sum, i.e., cash or cheque, could qualify for exemption and since the assessee had donated a building and not cash, exemption in respect of the alleged donation was not admissible. The second ground was that Section 15B of the Act permitted exemption in respect of donations to institutions or funds but the alleged donation was made to the State Government, which was neither an institution, nor a fund. The AAC, Jodhpur Range, Jodhpur, while deciding the appeals preferred by the assessee, accepted the contention of the assessee that the impugned donation was made to an institution and held that every Government school or college fell within the definition of an institution. The finding of the ITO on this ground was set aside and it was held that the impugned donation was specifically made to Darbar High School, whose name was later on changed to Bangur High School, Pali, although it was the State Government which accepted the donation on behalf of the said school. However, the AAC held that the impugned donation, which represented the amount spent by the assessee on the new school building, could not come within the purview of Section 15B of the Act as the sums in respect of which exemption was claimed were not actually paid to the donee and in the absence of delivery of cash, Section 15B could not be made applicable, to allow rebate for the amount spent by the assessee on the construction of the new school building. Another head in respect of which exemption was claimed by the assessee relates to the payment of Rs. 3,600 in two assessment years 1955-56 and 1956-57 to the Rajasthan Arogya Bhawan Hospital at Bikaner. The claim was disallowed by the ITO on the ground that the impugned donation was made by the assessee in consideration of the hospital authorities agreeing to maintain and reserve two beds for the employees of the assessee and that the donation was an expenditure incurred for securing certain benefits by the assessee in the hospital. The AAC also agreed with the ITO in this respect and disallowed the exemption of the amounts given by way of donation to the Arogya Bhawan Hospital.
(3.) THE third head under which exemption was claimed by the assessee was in respect of donations of Rs. 50,000 in each of the assessment years 1956-57 and 1957-58 by the assessee towards the construction of a hospital building at Pali, which, upon completion, was named as Bangur Hospital. THE donations in this respect were also disallowed by the ITO as well as by the AAC on two grounds, namely, that the donations were made in consideration of reservation of three beds in the said hospital for the employees of the assessee. It was held that the donation was not unconditional but was in the nature of a contribution for getting three beds reserved for the employees of the assessee in the hospital. THE other ground on which rebate under Section 15B of the Act was disallowed in respect of the donations to the Bangur Hospital was that there was no institution or hospital in existence at the time when the donation was made, as the amount was spent by the assessee on the construction of the hospital building and the institution, namely, the hospital came into existence later on. The Tribunal heard all the appeals filed by the assessee, in respect of assessment years 1954-55, 1955-56, 1956-57 and 1957-58 together and by its consolidated order dated March 31, 1969, allowed the claim of the assessee in respect of exemption under Section 15B of the Act relating to the three items of donations made to Bangur High School, Pali, Arogya Bhawan Hospital, Bikaner, and Bangur Hospital, Pali. The Tribunal held that although the donations to the Bangur High School were made through the Government, yet the Government was merely an agent and the donation was made to the institution. It was held that as the object of the institution was educational, the assessee's claim for exemption was justified. As regards the donation made to the Arogya Bhawan Hospital, it was held by the Tribunal that the hospital was of charitable nature and as such the claim was allowable in respect of the donation made to it by the assessee. It was held that the substance for which the donation was made was to be seen and not the form and even if the assessee spent the amount in making the construction of the hospital building, it was, in substance, a donation in cash. As the expenditure was made for the purpose of construction of the building for Bangur Hospital, the assessee was held to be entitled to rebate under Section 15B in respect of the two amounts of Rs. 50,000, in the assessment years 1956-57 and 1957-58. The reference, which has been made to us by the Tribunal, arises out of its aforesaid consolidated order dated March 31, 1969. Section 15B of the Act, which we are required to interpret, for the purpose of deciding this reference, runs as under : " 15B. Exemption on account of donations for charitable purposes.--(1) The tax shall not be payable by an assessee in respect of any sums paid by him on or after the 1st day of April, 1953, as donations to any institution or fund to which this section applies or in respect of any sums paid by him on or after the 1st day of April, 1960, as donations to the Government or to any local authority to be utilised for any charitable purpose as defined in Sub-section (3) of Section 4 ; Provided that in the case of a company this exemption shall apply only in respect of income-tax and not in respect of super-tax payable by it : Provided further that this exemption shall not apply- (a) if the aggregate of the sums so paid by the assessee is less than two hundred and fifty rupees, (b) to any sums paid in excess of seven and a half per cent, of the assessee's total income as reduced by any portion thereof exempt from tax under any other provisions of this Act, or one hundred and fifty thousand rupees, whichever is less. (2) This section applies to any institution or fund established in the taxable territories for a charitable purpose- (i) the income whereof is exempt under Clause (i) of Sub-section (3) of Section 4; (ii) which is not expressed to be for the benefit of any particular religious community ; (iii) which maintains regular accounts of its receipts and expenditure; and (iv) which is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (XXI of 1860), or under Section 26 of the Indian Companies Act, 1913 (VII of 1913), or is a university established by law or is any other educational institution recognised by Government or by a University or affiliated to any university; or (v) which is an institution financed wholly or in part by the Government or a local authority. Explanation.--An institution or fund established for the benefit of scheduled castes, backward classes, scheduled tribes or of women and children shall not be deemed to be an institution or fund expressed to be for the benefit of a religious community within the meaning of Clause (ii); (2A) For the removal of doubts, it is hereby declared that in respect of sums paid as donations on or after the 1st day of April, 1948, and before the 1st day of April, 1953, the provisions of Sub-sections (1) and (2) shall apply as if the amendments made by Clause (c) of Section 3 of the Finance Act, 1953, had not been made ; (3) The amount by which the tax payable by an assessee is reduced on account of an exemption under this section shall not in any case exceed half the amount in respect of which the exemption is allowed under this section. " ;