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Issues:
1. Deduction u/s 80G denied by ITO for donation of shares to a charitable trust. 2. Disagreement between CIT (Appeals) and ITO regarding the exemption of the charitable trust's income u/s 11 & 12. 3. Interpretation of s. 80G regarding donation in kind (shares) constituting stock-in-trade. 4. Application of Explanation 5 to s. 80G and its temporal scope. 5. Comparison of decisions by different High Courts on similar issues. Detailed Analysis: 1. The case involved the denial of a deduction u/s 80G for the donation of shares by the assessee to a charitable trust. The ITO disallowed the deduction citing that the income of the trust was not exempt u/s 11 & 12 of the Act, a prerequisite for the allowance of deduction u/s 80G. 2. The CIT (Appeals) disagreed with the ITO, stating that the income of the charitable trust was indeed exempt u/s 11 & 12, based on the trust's registration granted by the CIT, Kanpur. However, the CIT (Appeals) upheld the ITO's decision, relying on a decision by the Andhra Pradesh High Court over a Bombay High Court decision, due to the nature of the donation being in kind and not cash. 3. The appeal before the ITAT involved arguments by the assessee's counsel, Dr. Vaish, who contended that the donation in kind, specifically shares that were the assessee's stock-in-trade, should satisfy the conditions of s. 80G. Dr. Vaish cited various decisions to support this argument and claimed that Explanation 5 to s. 80G was not applicable to the case due to its temporal scope. 4. The ITAT considered the insertion of Explanation 5 to s. 80G, noting its substantive nature and operative date of 1st April, 1976, making it inapplicable to the assessment year in question (1974-75). Consequently, the ITAT ruled that the revenue could not benefit from this provision in the present case. 5. The ITAT compared decisions from different High Courts, emphasizing the interpretation of donation in kind as equivalent to cash value. Referring to the Bombay High Court's observations in a specific case, the ITAT concluded that the shares donated, being the assessee's stock-in-trade, should be considered as a donation in cash value. Therefore, the ITAT allowed the appeal by the assessee, granting the benefit of s. 80G.
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