Tribunal Rules in Favor of Assessee: Donation Timing & Deduction Clarified

The Tribunal ruled in favor of the assessee on both issues. It held that the donation paid by cheques dated 31-3-1992, realized on 11-4-1992, should be treated as a donation made during the accounting year ending 31-3-1992. Additionally, the Tribunal determined that for claiming a deduction under section 80G, the payment of donation does not need to be from the gross total income of the relevant accounting year. Consequently, the Assessing Officer was directed to allow the claim of the assessee for the donations of Rs. 12 lakhs in the assessment year 1992-93, and the assessee's appeal was granted.

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Issues Involved:
1. Whether the donation paid by cheques dated 31-3-1992, realized on 11-4-1992, can be treated as a donation made during the accounting year ending 31-3-1992.
2. Whether for claiming deduction under section 80G, the payment of donation should be out of the gross total income of the relevant accounting year only.

Detailed Analysis:

Issue 1: Treatment of Donation by Cheques
The assessee issued cheques totaling Rs. 12 lakhs to trusts on 31-3-1992, which were realized on 11-4-1992. The Assessing Officer disallowed the deduction under section 80G due to the lack of verification of the mode of payment and realization date. The Commissioner (Appeals) upheld this decision, noting insufficient funds in the bank account on 31-3-1992 to clear the cheques.

The Tribunal considered the relevant legal provisions and precedents:
- Section 43(2) defines 'paid' as actually paid or incurred according to the method of accounting.
- Proviso to section 43B allows deductions if payments are realized within fifteen days from the due date.
- The Finance Bill, 1976, and CBDT Circular No. 261 dated 8-8-1979, which states that payment by cheque is deemed made on the date of delivery if the cheque is honored.

The Tribunal relied on the Gujarat High Court decision in Kangold (India) Ltd. v. CIT, which followed the Supreme Court ruling in CIT v. Ogale Glass Works, stating that payment by cheque is deemed made on the date of delivery, not encashment. Therefore, the Tribunal held that the cheques issued on 31-3-1992 should be treated as donations made during the accounting year ending 31-3-1992.

Issue 2: Gross Total Income Requirement
The Tribunal examined whether the payment of donations must come from the gross total income of the relevant accounting year for deduction under section 80G. It noted that section 80G does not explicitly state that donations must come from income chargeable to tax for the relevant year, unlike sections 80C, 80D, 80E, and 80F, which specify this condition.

The Tribunal referred to a CBDT circular (F.No. 45/313/66 ITJ(61) dated 2-12-1966) clarifying that donations need not come from taxable income to qualify for deduction under section 80G. The Tribunal emphasized that the circulars issued by the CBDT are binding on executive authorities, as held by the Supreme Court in CWT v. Vasudeo V. Dempo.

The Tribunal also noted that the assessee had debited the donations in the profit and loss account for the accounting year relevant to the assessment year 1992-93, indicating that the donations were made out of the current year's income.

Conclusion:
The Tribunal decided both issues in favor of the assessee. It directed the Assessing Officer to allow the claim of the assessee for the donations of Rs. 12 lakhs in the assessment year 1992-93. The appeal filed by the assessee was allowed.

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