Donation in kind may qualify for tax deduction where substance, not form, shows expenditure was incurred for the gift.

Donation in kind can qualify for deduction where the statutory phrase is "sums paid" and, on the facts, the assessee has in substance incurred the expenditure and donated the article produced at that cost. Applying that approach, the court upheld deduction under section 80G for a machine given as publicity and advertisement expenditure. On interest under section 214(1), the Tribunal's factual finding that a belated payment was accepted as an advance tax instalment meant the remaining conditions were satisfied, so no referable question of law arose.

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Issues: (i) Whether the Tribunal was justified in holding that a donation made in kind, namely a machine donated as publicity and advertisement expenditure, was deductible under section 80G of the Income-tax Act, 1961. (ii) Whether the Tribunal was justified in granting interest under section 214(1) on the excess advance tax paid, where the last instalment was paid two days after the prescribed date.

Issue (i): Whether the Tribunal was justified in holding that a donation made in kind, namely a machine donated as publicity and advertisement expenditure, was deductible under section 80G of the Income-tax Act, 1961.

Analysis: The relevant expression in section 80G is "sums paid". The earlier decision construing section 15B of the Income-tax Act, 1922, had held that the rebate was not confined to actual cash where, in substance, the assessee had incurred the expenditure and handed over the article produced at that cost as a donation. The later criticism that the earlier decision was confined to cash donation was not accepted. The court held that, for purposes of the deduction, the substance of the transaction had to be regarded and the earlier Bombay decision continued to govern the field.

Conclusion: The issue was answered in favour of the assessee. Donation in kind was treated as eligible for deduction under section 80G on the facts found.

Issue (ii): Whether the Tribunal was justified in granting interest under section 214(1) on the excess advance tax paid, where the last instalment was paid two days after the prescribed date.

Analysis: The Tribunal had recorded a factual finding that the belated payment was accepted by the department as an advance tax instalment. In the presence of that finding, and since the other requirements for interest were satisfied, the question did not raise any referable question of law.

Conclusion: The issue was answered against the Revenue and in favour of the assessee; no referable question of law arose.

Final Conclusion: The reference application failed, and the Tribunal's view was left undisturbed on both questions.

Ratio Decidendi: Where the statutory expression is "sums paid" and the transaction is, in substance, the incurring of expenditure resulting in an article donated at that cost, a donation in kind can satisfy the deduction requirement; a pure factual finding that an advance-tax payment was accepted as such also does not ordinarily give rise to a referable question of law.

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