JUDGMENT
Jagannatha Setty, Actg. C.J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question :
” Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the Commissioner of Income-tax (Appeals’) order who accepted the claim of the assessee and allowed further deduction of Rs. 32,675 under Section 80G ? ”
2. For the assessment year 1977-78, the assessee in all made donations of Rs. 2,65,350 out of which it claimed deduction under Section 80G to the extent of Rs. 1,32,675, being 50 per cent. of the total donations. The Income-tax Officer did not allow the assessee’s claim. He restricted the deduction to Rs. 1,00,000 only. The assessee appealed to the Commissioner (Appeals). The Commissioner following the decision of the Andhra Pradesh High Court in Hyderabad Race Club v. Addl. CIT , held that the deduction claimed by the assessee must be allowed Accordingly, he held that the assessee was entitled for a farther deduction of Rs. 32,675 under Section 80G.
3. The Revenue preferred an appeal to the Appellate Tribunal. The Appellate Tribunal also by following the said decision of the Andhra Pradesh High Court in Hyderabad Race Club’s case upheld the order of the Commissioner.
4. The question raised is simple and it could be conveniently disposed of with reference to Section 80G(1) and (4) of the Income-tax Act, 1961, The said provisions, as it then stood, provided.
“80G. Deduction in respect of donations to certain funds, charitable institutions, etc.–(1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section, an amount equal to fifty per cent. of the aggregate of the sums specified in Sub-section (2)….
(4) The deduction under Sub-section (1)shall not be allowed in respect of such part of the aggregate of the sums referred to in Sub-clauses (iv) and (v) of Clause (a) and in Clause (b) of Sub-section (2) as exceeds ten per cent. of the gross total income (as reduced by any portion thereof on which income-tax is not payable under any provision of this Act and by any
amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), or two hundred thousand rupees, whichever is less.”
5. The assessee under Sub-section (1) of Section 80G is no doubt entitled to have the deduction up to 50 per cent. of the total donations made while computing the total income. But Sub-section (4) places a further embargo on the maximum deduction permissible. The total amount donated by the assessee exceeds rupees two hundred thousand. The subsection provides that on that part which exceeds two hundred thousand rupees, the assessee is not entitled to deduction. In the instant case, the assessee, therefore, is not entitled to deduction on donations in excess of two hundred thousand rupees. That means Rs. 65,351 should be excluded from consideration. Out of the remaining two lakhs, the assessee would be entitled to 50 per cent. as deduction. This appears to be the plain meaning of the above provisions.
6. The deduction allowed by the Income-tax Officer is, therefore, correct. The Appellate Tribunal and the Commissioner (Appeals) have erred in their understanding. No doubt, they have faithfully followed the decision of the Andhra Pradesh High Court in Hyderabad Race Club’s case , but with respect, we are unable to agree with the view taken therein.
7. In the result, we answer the question in the negative and in favour of the Revenue.
8. In the circumstances, we make no order as to costs.