2008 (8) TMI 348 - HC - Income Tax

Court allows deduction for early donation to hospital & provision for debenture premium.

The court held that a donation made by the assessee to a hospital before it was eligible under section 35AC of the Income Tax Act was entitled to a ... Expenditure on Eligible Projects - donation made by the assessee to hospital prior to its being declared as eligible under a notification as per section 35AC – held that - the authorities have concurrently held that the donation paid by the assessee to Vidya Sagar Hospital has to be allowed as deduction in view of the exemption granted to Vidya Sagar Hospital for three consecutive assessment years. Considering the exemption order granted to Vidya Sagar Hospital, the authorities have come to the conclusion that the exemption was not operating from a particular date and the same was effective for all the full assessment year - there is no specific date showing the validity of exemption granted to hospital – relief granted to assessee justified. Issues:1. Whether donation made by the assessee to hospital prior to its eligibility under section 35AC is entitled to deduction.2. Whether provision for premium on redemption of debentures is an allowable deduction.Analysis:Issue 1:The court considered whether a donation made by the assessee to a hospital before it was declared eligible under section 35AC of the Income Tax Act would entitle the assessee to claim a deduction. The appellate authorities had held that the donation should be allowed as a deduction due to the exemption granted to the hospital for three consecutive assessment years. The court noted that the exemption order for the hospital did not specify a particular date from which it would be effective, leading to the conclusion that the exemption was effective for all full assessment years. Therefore, the court agreed with the authorities' decision to grant relief to the assessee, and the point was answered against the Revenue and in favor of the assessee.Issue 2:Regarding the second question of law on whether a provision for premium on redemption of debentures should be allowed as a deduction, the court referred to a judgment of the Supreme Court in a previous case. The court stated that the question was already settled by the Supreme Court's decision in Madras Industrial Investment Corporation Ltd. v. CIT [1997] 225 ITR 802, where it was held that such provisions are allowable deductions. As a result, the court answered this question against the Revenue and in favor of the assessee.In conclusion, the court dismissed the appeal, upholding the decisions of the appellate authorities on both issues.