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TMI Blog2001 (6) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... are inclined to hold that the cheques issued on 31-3-1992 are to be treated as donation made during the accounting year ending on 31-3-1992, relevant to the assessment year 1992-93, by applying the decisions of the Gujarat High Court, the Apex Court and the CBDT Circular. Whether for claiming deduction u/s 80G payment of donation should be out of thegross total income of the relevant accounting year only? - On a comparison of the provisions of section 80G with those of the then sections 80C, 80D, 80E and 80F, it emerges out that the donations eligible for deduction under section 80G, have not been riddled with the condition that the same must come out of the income chargeable to tax and that too of the previous year concerned. Even if the donations are made out of exempted income of the relevant previous year or out of chargeable income of earlier years or out of capital, the same may be eligible for deduction under section 80G on fulfilment of all the other conditions laid down in that regard. It may be that wider considerations of public benefit might have induced the Legislature to free the donations from such shackles. In this case on hand it has been shown by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 31-3-1992 and further since the cheques had also been realised within a reasonable period of two weeks, the payments should be considered as having been made in the relevant accounting year. However, the learned first appellate authority, on verification of the relevant bank account, found that the realisation of Rs. 12 lakhs on 11-4-1992 was out of a deposit of Rs. 12 lakhs made into the account on the same date. As there was no adequate funds in the account on 31-3-1992 to clear the cheques for Rs. 12 lakhs, it could not be said that the payments had already been made during the year ending 31-3-1992, according to the learned Commissioner (Appeals). Thus he upheld the action of the Assessing officer by confirming the disallowance made by the Assessing Officer. 4. The assessee is still aggrieved and is on second appeal before us on this issue with the following grounds of appeal: "1. The Commissioner of Income-tax (Appeals) erred in confirming the disallowance of donation to the extent of Rs. 12 lakhs. He ought to have observed that the cheques having been handed over on 31st March, 1992 and the same having been encashed by the Donee on 11th April, 1992, the date of paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,224 and this balance was struck after the payment of donation of Rs. 12 lakhs. This would mean that even after the payment of Rs. 12 lakhs as donation the bank balance amounted to a huge sum of one crore and odd. The assessee was having account with Grindlays Bank at Bangalore and Syndicate Bank at Coonoor. As and when the balance at Syndicate Bank, Coonoor was not sufficient to meet the clearance of any cheque issued by the company the balance at Grindlays Bank at Bangalore was to be got transferred to Syndicate Bank by issue of cheques. Similarly in this case the balance also had been transferred from Grindlays Bank to Syndicate Bank. The extract from the Finance Bill, 1976, is also relevant. While stating that donation in kind not to qualify for tax concession, in para 61 the following observations have been made in the Finance Bill:-- "As donations in kind were not intended to qualify for this concession, it is proposed to make a provision for the removal of doubts clarifying that no deduction will be allowed under section 80G unless the donation is a sum of money, that is to say, it is made in cash (or by cheque, bank draft, etc.) and not in kind." From the above passage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income' appearing in section 80A cannot be anything other than the income of the relevant assessment year, i.e. the income should be of the relevant assessment year is a sine qua non. The learned Commissioner (Appeals) in his order at page 3 has mentioned as follows:-- "In normal circumstances I would have agreed with this contention of the Chartered Accountant since cheque is also a form of a legal tender. But in the present case, on verification of the relevant bank account, I find that the realisation of Rs. 12,00,000 on 11-4-1992 was out of a deposit of Rs. 12 lakhs made into the account on the same date. As there was no adequate funds in the account on 31-3-1992 to clear the cheque for Rs. 12 lakhs, it cannot be said that the payments had really been made during the year ending 31-3-1992." The above observations are very reasoned and well considered one. It is not sufficient that, the assessee has enough funds elsewhere, i.e. in some other bank account other than the bank on which the cheques had been issued. It is also not clear whether the donee would not have received the gift if the cheques might have been issued out of the Grindlays Bank account at Bangalore. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to twenty per cent of the aggregate of the sums referred to in sub section (2)." A comparison of section 80A and section 88 would reveal that it is a must that the investment mentioned in section 88(2) should be out of the total income with which the assessee is chargeable for that assessment year, whereas it need not be out of the chargeable income of the very same year for the purpose of section 80A. The decision of the Gujarat High Court is laying the rule not only for payment of tax but also the legal position in respect of payment by cheque. The Circular No. 261 dated 8-8-1979 of the Central Board of Direct Taxes strengthens this view. Further the assessee in its account has claimed this donation in the profit and loss account as expenditure and this would mean that the donation was made out of the current year's income. 7. We have heard the rival submissions and considered the facts and the materials on record. There is no dispute about the fact that the assessee had issued two cheques totalling t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eques issued on 31-3-1992 are to be treated as donation made during the accounting year ending on 31-3-1992, relevant to the assessment year 1992-93, by applying the decisions of the Gujarat High Court, the Apex Court and the CBDT Circular. 8.2 Now let us turn to the next point as to whether for claiming deduction under section 80G the payment of donation should be out of the gross total income of the relevant accounting year only. We have carefully considered the submissions of both the sides on this point at issue. It may be noted that the provisions of section 88 were operative upto and including the assessment year 1967-68. For and from the assessment year 1968-69 the provisions of the section have been replaced by section 80G. Section 80G is contained in Chapter VIA, titled "Deductions to be made in computing total income" and is under the sub-heading "B-deductions in respect of certain payments". Section 80C (operative upto assessment year 1990-91) to section 80G are included in the said sub-heading. From the perusal of the different sections under the said sub-heading it transpires that wherever the intention of the Legislature was to allow deduction only in respect of cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is being claimed. Thus, even if the donations were paid out of another year's income or out of income which was not includible in the assessment of the current year the rebate under section 88 would still be available to the assessee." There seems to be no other contra circular issued by the CBDT in this regard and hence in our opinion the circular of the CBDT cited supra holds good. It is needless to say that the circulars issued by the CBDT are bound to be followed and accepted by the executive authorities CWT v. Vasudeo V. Dempo [1992] 196 ITR 216 (SC). In this case on hand it has been shown by the assessee's learned counsel by adverting to the profit and loss account that the assessee has debited the donations paid by these cheques in the profit and loss account of the accounting year relevant to the assessment year 1992-93, which would mean that the donations have been made out of the current year's income only, even though it is not a pre-condition according to section 80G as observed above. 8.4 Thus the two points for our consideration are to be decided in favour of the assessee as observed above and once the two points are in favour of the assessee the entire appeal of ..... 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