1982 (1) TMI 3 - HC - Income Tax

Summary

Issues Involved:
1. Eligibility for rebate under section 15B of the Indian Income-tax Act, 1922, for donations made to Bangur High School, Arogya Bhawan Hospital, and Bangur Hospital.

Issue-wise Detailed Analysis:

1. Eligibility for Rebate for Donations to Bangur High School:
The assessee constructed a new building for Darbar High School, later renamed Bangur High School, at Pali, and handed it over to the State Government. The total expenditure was Rs. 1,34,935, with Rs. 1,00,000 claimed as a donation for the assessment year 1954-55. The Income Tax Officer (ITO) disallowed the rebate claim, arguing that section 15B only applies to cash donations and that the donation was made to the State Government, not an institution. The Appellate Assistant Commissioner (AAC) accepted that the donation was to an institution but upheld the ITO's view that the donation must be in cash. The Tribunal allowed the rebate, stating that the substance of the transaction was a donation to an educational institution. The High Court agreed, emphasizing the substance over form, citing precedents where donations in kind were considered equivalent to cash donations for rebate purposes.

2. Eligibility for Rebate for Donations to Arogya Bhawan Hospital:
The assessee donated Rs. 3,600 over two assessment years to Arogya Bhawan Hospital, Bikaner. The ITO and AAC disallowed the exemption, arguing the donation was in consideration of reserving two beds for the assessee's employees, thus not purely charitable. The Tribunal allowed the rebate, considering the hospital's charitable nature. The High Court upheld this view, stating the primary objective was charitable, and the reservation of beds did not negate the donation's charitable nature.

3. Eligibility for Rebate for Donations to Bangur Hospital:
The assessee donated Rs. 50,000 each in the assessment years 1956-57 and 1957-58 for constructing Bangur Hospital at Pali. The ITO and AAC disallowed the rebate, citing two reasons: the donations were conditional on reserving three beds for the assessee's employees, and the hospital did not exist at the time of donation. The Tribunal allowed the rebate, noting the charitable nature of the hospital and considering the substance of the transaction as a donation for constructing a charitable institution. The High Court affirmed this, emphasizing the charitable purpose and the public benefit, including the employees, did not negate the donation's charitable nature.

Conclusion:
The High Court answered the reference in favor of the assessee, affirming the Tribunal's decision to allow rebates under section 15B for donations made to Bangur High School, Arogya Bhawan Hospital, and Bangur Hospital, emphasizing the substance of the transactions over their form and considering the charitable objectives of the donations.