1976 (12) TMI 27 - HC - Income Tax

Summary

Issues: Interpretation of section 88 of the Income-tax Act, 1961 regarding exemption for initial donations to charitable trusts.

Analysis:
The judgment by the High Court of GAUHATI involved a reference made by the Income-tax Appellate Tribunal regarding the interpretation of section 88 of the Income-tax Act, 1961. The case pertained to an assessee, a Hindu undivided family, who made an initial donation of Rs. 21,000 to the Ramchandra Karwa Charitable Trust for founding the trust during the assessment year 1967-68. The assessee claimed exemption under section 88, but the Income-tax Officer initially disallowed the claim. The Appellate Assistant Commissioner allowed the rebate but disallowed the relief based on the trust's failure to meet the conditions under section 88. The Income-tax Appellate Tribunal, however, held that relief under section 88 was admissible on the initial donation, subject to the trust fulfilling the specified conditions.

The key issue was whether the assessee could benefit from exemption under section 88 for the initial donation to a fund or institution for its founding. The department argued that exemption applied only to donations made to existing funds or institutions. The relevant provisions of section 88 allowed deductions for donations to specified funds or institutions fulfilling certain conditions. The Tribunal found that the trust in question was founded when the donation was made, and thus, the initial donation should also be eligible for exemption under section 88.

The High Court rejected the department's argument, stating that the rationale behind excluding initial donations for founding a trust from exemption was illogical and contrary to the purpose of section 88. Citing a Bombay High Court decision, the Court agreed that the relief under section 88 should apply to the initial donation used to start or found a fund or institution. Therefore, the Court answered the question of law in favor of the assessee, affirming that the relief under section 88 was admissible on the initial donation made to the charitable trust. The judgment was jointly delivered by M. C. PATHAK, C.J., and N. IBOTOMBI SINGH, J.