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 deduction. The court also ruled that a provision for premium on redemption of debentures was an allowable deduction based on a previous Supreme Court judgment. Consequently, the court dismissed the appeal, affirming the decisions of the appellate authorities in favor of the assessee on both issues.

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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.

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