1986 (6) TMI 50 - AT - Income Tax

Tribunal Upholds Denial of Deduction for Fixed Deposit Donation, Grants Relief on Advance Tax Interest

Leena A. Sarabhai. Versus Income-Tax Officer.

The tribunal upheld the denial of the deduction under section 80G for a donation made in the form of a fixed deposit receipt, emphasizing that only cash ... Deductions, Donation To Charitable Institution Issues Involved:1. Deduction under section 80G of the Income-tax Act, 1961.2. Charging of interest under section 139(8) of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Deduction under Section 80G:The primary issue was whether the assessee was entitled to a deduction under section 80G for a donation made in the form of a fixed deposit receipt of Rs. 7 lakhs to Shreyas Foundation. The Income Tax Officer (ITO) disallowed the claim, stating that under Explanation 5 to section 80G, the donation must be a 'sum of money,' and a fixed deposit receipt does not qualify as such. The Commissioner (Appeals) upheld this decision, emphasizing that the donation must be in cash to qualify for the deduction, and a fixed deposit receipt is not considered cash.The assessee argued that the substance of the donation should be considered rather than its form. The fixed deposit was encashed by Shreyas Foundation after one year and redeposited in its name, and the interest earned was also handed over to the foundation. The assessee cited the Gujarat High Court decision in CIT v. Smt. Dhirajben R. Amin, which emphasized examining the substance of the donation to determine if it was essentially a donation in cash.The department countered that after the insertion of Explanation 5, only donations made in cash qualify for the deduction. They argued that fixed deposit receipts are not money and cannot be treated as legal tender or reduced to their face value in money terms.The tribunal, considering the rival submissions, found that the Gujarat High Court had not explicitly examined the implications of Explanation 5 in the cited case. The tribunal concluded that the fixed deposit receipt is not a 'sum of money' and upheld the ITO's and Commissioner (Appeals)'s orders, denying the deduction under section 80G.However, the Accountant Member dissented, arguing that the amendment was clarificatory and that the substance of the transaction should be considered. He believed that the fixed deposit receipt, in this case, represented a donation in cash and should qualify for the deduction.The Third Member, considering the difference of opinion, concluded that a fixed deposit receipt is not a 'sum of money' and agreed with the Judicial Member, denying the deduction under section 80G.2. Charging of Interest under Section 139(8):The second issue was the charging of interest under section 139(8) for late payment of advance tax. The ITO charged interest, stating that the advance tax payment was credited on 17-3-1977, two days after the stipulated date of 15-3-1977. The Commissioner (Appeals) upheld this decision, interpreting the law strictly.The assessee argued that the payment was made by cheque on 15-3-1977, and based on the Gujarat High Court decision in Chandrakant Damodardas v. ITO, the interest should not be charged.The tribunal, agreeing with the assessee, directed the ITO not to charge interest under section 139(8), modifying the demand accordingly.Conclusion:The appeal was partly allowed. The tribunal upheld the denial of the deduction under section 80G for the donation made in the form of a fixed deposit receipt. However, it directed the ITO not to charge interest under section 139(8), providing relief to the assessee on this point.