1998 (1) TMI 30 - HC - Income Tax

Summary

Issues:
1. Applicability of exemption under section 5(1)(xiv) of the Gift-tax Act for donations made to political parties.
2. Interpretation of the Board circular dated January 5, 1960, and its binding effect.
3. Consideration of the withdrawal of the Board circular and its impact on the case.

Detailed Analysis:
The judgment pertains to a case involving the applicability of exemption under section 5(1)(xiv) of the Gift-tax Act for donations made to political parties. The assessee had made donations to various Congress Committees during the assessment year 1968-69. The Gift-tax Officer initially disallowed the exemption, stating a lack of nexus between the donations and the assessee's business activities. The Commissioner of Income-tax (Appeals) upheld this decision. However, the Income-tax Appellate Tribunal ruled in favor of the assessee, citing a circular from January 5, 1960, which it deemed binding on the assessing authorities. The Tribunal did not delve into the conditions under section 5(1)(v) or (iv) of the Act due to this circular's application.

The Revenue challenged the Tribunal's decision, arguing that the circular only applied to gifts made by a company to a political party under a specific clause in its memorandum and articles of association. The Revenue contended that the circular was not binding and referenced precedents to support its stance. The assessee, on the other hand, maintained that the conditions in the circular were met, and the Tribunal correctly interpreted the donation as being made under the authority of a specific clause in the company's articles of association.

The High Court acknowledged the Revenue's arguments, noting that the Board circular from 1960 was intended for cases where a specific clause in the company's articles authorized donations to political parties. Despite this, the Court decided not to delve further into the circular's applicability. Given the minimal tax impact and the subsequent withdrawal of the circular by the Board in 1972, the Court deemed it unnecessary to remit the matter back to the Tribunal for consideration under section 5(1)(xiv) or (v) of the Act. The Court, while technically ruling in favor of the assessee on the questions of law, clarified that it did not fully endorse the Tribunal's decision. The judgment concluded by answering the questions of law in the affirmative, subject to the outlined observations.