Commissioner of Income Tax vs Rajmata Shri Gulabkunvarba Sahiba of Navanagar

Dr. B.P. Saraf, J.—By this reference u/s 256(1) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal has referred the following question of law to this court for opinion :

"Whether, on the facts and in the circumstances of the case and having regard to section 80G(4), the Tribunal was justified in holding that the assessee is entitled to deduction for donation u/s 80G(1) with reference with reference to the gross total income as defined in section 80B(5) ?"

The assessee is an individual. This reference pertains to the assessment year 1968-69. The previous year relevant to this assessment year is year ended on March 31, 1968. During this year, the assessee had donated a sum of Rs. 1,21,101 and claimed relief u/s 80G of the Income Tax Act, 1961, in respect thereof. There is no dispute either about the applicability of section 80G of the Act to the donation in question or the rate at which deduction is allowable under sub-section (1) of section 80G of the Act. The only dispute arose in regard to determination of the "gross total income" with reference to which the maximum amount permissible as deduction u/s 80G(4) has to be computed. According to the assessee, for computation of ten per cent., the total income means the total gross income as defined u/s 80B(5) of the Act. The Income Tax Officer did not accept this contention of the assessee and computed the said amount after deducting the amount of annuity deposit as provided in section 280-O of the Act and allowed the relief accordingly. The order of the Income Tax Officer was up held by the Appellate Assistant Commissioner. On appeal by the assessee, the Tribunal decided the controversy in favour of the assessee and directed the Income Tax Officer to recompute the deduction to be allowed on account of donations by calculating ten per cent. of the gross total income before allowance of annuity deposit. Hence this reference at the instance of the Revenue.

Dr. V. Balasubramaniam, learned counsel for the Revenue, submits that the purpose of computing ten per cent. gross total income has to be computed in the manner laid down in sub-section (4) of section 80G of the Act which is a little different from the definition of "gross total income" as given in section 80B(5) of the Act. In other words, even amounts which are not deductible u/s 80B(5) are deductible for computation of gross total income u/s 80G(4) of the Act. We have considered the above submission. Section 80G(4), as it stood at the material time, is in the following terms :

"(4) The deduction under sub-section (1) shall not be allowed in respect of such part of the aggregate of the sums referred to in sub-clauses (iv) and (v) of clause (a) and in clause (b) of sub-section (2) as exceeds ten per cent. of the gross total income (as reduced by any portion thereof on which Income Tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), or two hundred thousand rupees, whichever is less :

Provided that where such aggregate includes any donations referred to in clause (b) of sub-section (2) and such aggregate exceeds the limit of two hundred thousand rupees specified in this sub-section, then such limit shall be raised to cover that portion of the donations aforesaid which is equal to the difference between such aggregate and the said limit, so, however, that the limit so raised shall not exceed ten per cent. of the assessee''s gross total income as reduced as aforesaid, or five hundred thousand rupees, whichever is less."

Section 80B(5) defines "gross total income" as under :

"''gross total income'' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter or u/s 280-O."

A conjoint reading of these two provisions clearly goes to show that though u/s 80B(5) of the Act "gross total income" means the total income computed in accordance with the provisions of the Act, before making any detection under Chapter VI-A or section 280-O, for the purpose of sub-section (4) of section 80G of the Act, the "gross total income" as defined in section 80B(5) has to be reduced by (i) any portion of the total income on which Income Tax is not payable under any provision of the Act, and (ii) by any amount in respect of which the assessee is entitled to a deduction under any other provision of Chapter VI-A. Thus, for the purpose of section 80G(4), "gross total income" which has been defined in section 80B(5) has to be computed subject to the above two conditions and restrictions laid down therein. Section 80G(4), evidently, does not say anything about deduction u/s 280-O. "Gross total income", for the purpose of section 80G(4) read with section 80B(5), continues to be the total income computed in accordance with law, without making any deduction u/s 280-O. The only difference in the manner of computation of "gross total income" for the purpose of section 80G(4) is that such income is to be reduced by any deduction under any provisions of Chapter VI-A meaning thereby section 80C to 80V and not section 280-O which forms part of Chapter XXII-A of the Act. Admittedly, annuity deposit is allowed as a deduction u/s 280-O and not under any of the sections in Chapter VI-A of the Act. In that view of the matter, the Tribunal was right in holding that deduction on account of donations u/s 80G(4) has to be allowed with reference to ten per cent. of the gross total income without reducing the same by the amount of annuity deposit.

We, therefore, answer the question referred to us, in the affirmative, i.e., in favour of the assessee and against the Revenue.

We make no order as to costs.