Donation in kind may qualify for charitable deduction where the gift is the cash equivalent of goods transferred.

The expression "corrosive chemicals" in the depreciation entry was construed narrowly to cover only free chemicals, so the assessee's broader reading was rejected. A donation in kind, consisting of goods manufactured by the assessee and treated as the cash equivalent of a charitable outgo, was held capable of qualifying for deduction under section 80G because the provision was not confined to cash donations alone. The discussion therefore records a mixed outcome, with the first issue resolved against the assessee and the second in its favour.

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Issues: (i) Whether the expression "corrosive chemicals" in the relevant depreciation entry covered only free chemicals or also non-free chemicals having corrosive effect. (ii) Whether deduction under section 80G was admissible for a donation made in kind, being 50 bags of sugar worth Rs. 10,800, donated for army use.

Issue (i): Whether the expression "corrosive chemicals" in the relevant depreciation entry covered only free chemicals or also non-free chemicals having corrosive effect.

Analysis: The first question had already been answered in an earlier decision between the same parties for a prior year, where the expression was construed narrowly and the assessee's contention was rejected.

Conclusion: The question was answered against the assessee and in favour of the Revenue.

Issue (ii): Whether deduction under section 80G was admissible for a donation made in kind, being 50 bags of sugar worth Rs. 10,800, donated for army use.

Analysis: The donation consisted of goods manufactured by the assessee, but their value represented an outgo equivalent to cash. The provision granting deduction for charitable donations was held not to require a restrictive approach that excluded gifts in kind where the substance of the transaction was the same as a cash donation.

Conclusion: The deduction under section 80G was held to be admissible and the question was answered in favour of the assessee and against the Revenue.

Final Conclusion: The reference was disposed of with one question decided for the Revenue and the other for the assessee, resulting in divided success with no order as to costs.

Ratio Decidendi: A donation in kind may qualify for deduction where, in substance, it is the cash equivalent of property donated and the statutory benefit is not confined to cash payments alone.

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