Court denies deduction for donations exceeding limit set by Income-tax Act

Commissioner Of Income-Tax Versus Canara Bank

Commissioner Of Income-Tax Versus Canara Bank - [1986] 162 ITR 478, 57 CTR 38, 29 TAXMANN 200 Issues: Interpretation of section 80G of the Income-tax Act, 1961 regarding deduction for donations exceeding two hundred thousand rupees.

The judgment pertains to a reference under section 256(1) of the Income-tax Act, 1961, regarding the deduction of donations under section 80G. The assessee made donations totaling Rs. 2,65,350, claiming a deduction of Rs. 1,32,675 under section 80G. The Income-tax Officer allowed a deduction of only Rs. 1,00,000, leading to an appeal by the assessee to the Commissioner (Appeals). The Commissioner, relying on a decision of the Andhra Pradesh High Court, allowed a further deduction of Rs. 32,675 under section 80G. The Revenue appealed to the Appellate Tribunal, which upheld the Commissioner's order based on the same decision. The key question was whether the Appellate Tribunal was right in law in allowing the further deduction under section 80G.

The court analyzed section 80G(1) and (4) of the Income-tax Act, 1961, which allows a deduction of fifty percent of the aggregate donations subject to certain conditions. Section 80G(4) imposes a limit on the deduction for donations exceeding two hundred thousand rupees. The court highlighted that the assessee is not entitled to a deduction on donations exceeding this limit. Therefore, in this case, the assessee should not be allowed a deduction on the excess amount over two hundred thousand rupees. The court emphasized that the plain meaning of the provisions supports this interpretation.

The court concluded that the deduction allowed by the Income-tax Officer was correct, and both the Appellate Tribunal and the Commissioner (Appeals) erred in their understanding. Despite the reliance on a previous decision of the Andhra Pradesh High Court, the court disagreed with that interpretation. Consequently, the court answered the question in the negative and in favor of the Revenue, indicating that the assessee was not entitled to the further deduction claimed. No costs were awarded in this matter.