1985 (11) TMI 30 - HC - Income Tax

Summary

Issues:
1. Entitlement to relief under section 80G of the Income-tax Act for donations made in kind.
2. Disallowance of advertisement expenses in souvenirs and entitlement to rebate under section 80G.

Entitlement to Relief under Section 80G:
The case involved the question of whether the assessee, a limited company manufacturing cement, was entitled to relief under section 80G of the Income-tax Act for donations made in kind. The assessee donated cement to the Collector of Surat for flood relief and Arya Kanya Mahavidyalaya. The Income-tax Officer initially disallowed the claim, stating that donations should be in cash. However, the Appellate Assistant Commissioner allowed the claim, citing a previous judgment. The Tribunal upheld the decision, emphasizing that donating products instead of cash did not disqualify the assessee from relief under section 80G. The High Court noted the lack of a clear finding on whether the donations were in substance cash or in kind, directing the matter back to the Tribunal for further examination.

Disallowance of Advertisement Expenses and Entitlement to Rebate:
The second issue involved the disallowance of advertisement expenses in souvenirs and the entitlement to rebate under section 80G. The Income-tax Officer disallowed a portion of the expenses, considering them as donations, but allowed rebate under section 80G on the remaining amount. The Appellate Assistant Commissioner upheld this decision. The Tribunal, however, disallowed a fixed sum of Rs. 5,000 in each year for non-business purposes, stating there was no link between the business and the souvenirs. The High Court found this reasoning erroneous, highlighting that advertisements in souvenirs do not necessarily require a direct link to the business. The lack of a clear finding on the nature of the expenses led the Court to direct the Tribunal to provide a definite finding on the issue, considering Circular No. 203, dated July 16, 1976, issued by the Central Board of Direct Taxes.

In conclusion, the High Court declined to answer both questions and directed the Tribunal to reexamine the issues and provide clear findings in light of the relevant legal principles and circulars.