The Board circular dated January 5, 1960, was intended to apply only to cases where there is a specific clause in the memorandum and articles of association of the company to make donation to a political party.

N. V. BALASUBRAMANIAN J.

In pursuance of the directions of this court dated December 19, 1983, the Appellate Tribunal has referred the following questions of law under section 26(1) of the Gift-tax Act, 1958, for our consideration.

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the gift-tax assessment made on the assessee in respect of the donations of Rs. 1, 25, 000 made to Andhra Pradesh Congress Committee, Mysore State Congress Committee and All India Congress Committee ?

2. Whether, on the facts and in the circumstances of the case, and having regard to clause 24 of the memorandum of articles of association, the Appellate Tribunal was right in holding that the donations have been made under the authority of the said clause in the memorandum and articles of association and, therefore, the gift is exempt under section 5(1)(xiv) of the Gift-tax Act in the light of the Board's Circular No. 1-G. T., dated January 5, 1960 ?

3. Whether, the Appellate Tribunal's view that the Board's Circular No. 1 G. T., dated January 5, 1960, would be applicable to the assessee's case is sustainable in law especially when the same was withdrawn by the Board's Instruction No. 923, dated June 9, 1972 ?"

The assessment year involved is 1968-69 and the assessee during the accounting year relevant for the assessment year made various donations and charitable payments which included Rs. 1, 25, 000 to the Congress Committees. The said amount of Rs. 1, 25, 000 was made up of three items, viz., Rs. 50, 000 to the Andhra Pradesh Congress Committee, Rs. 50, 000 to the Mysore Congress Committee and Rs. 25, 000 to the Chairman, Reception Committee of the All India Congress Committee. The Gift-tax Officer while completing the assessment under the provisions of the Gift-tax Act held that there was no nexus between the donation made by the assessee and the business carried on by the assessee and, therefore, the assessee was not eligible to claim exemption provided under section 5(1)(xiv) of the Gift-tax Act. The Commissioner of Income-tax (Appeals) on appeal preferred by the assessee confirmed the assessment made by the Gift-tax Officer. The assessee went on appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal relying upon a circular dated January 5, 1960, published in pages 1057-1058 of volume 1, Taxmann's Direct Tax Circulars (1980 edition), held that the assessee had satisfied the conditions contained in the said circular and the benevolent Board circular is binding on the Income-tax Officer and the assessee was entitled to claim exemption on the basis of the Board circular. In this view of the matter, the Appellate Tribunal did not consider the question regarding the fulfilment of the conditions under section 5(1)(v) or (iv) of the ActThe Revenue challenged the order of the Appellate Tribunal and on the basis of the directions of this court the questions of law set out supra have been referred to us.

Mr. C. V. Rajan, learned counsel for the Revenue, has forcibly argued that the order of the Appellate Tribunal is erroneous in law as the Tribunal failed to take notice of the fact that the circular would apply only in the case of gift made by a company to a political party under the authority of a specific clause in the memorandum and articles of association of the company and in the instant case, it was only a general clause and the Tribunal is not correct in holding that the circular would be applicable to the facts of this case. Learned counsel for the Revenue further contended that in any event the circular is not binding on this court and in support of his submission, he relied upon the decisions in CIT v. Hero Cycles P. Ltd. 1997 SC 2849 (SC), CWT v. V. T. Ramalingam 1992 MAD 131 (Mad) and CGT v. P. Gheevarghese, Travancore Timbers and Products [ 1971 SC 428 (SC) and submitted that the conditions prescribed in section 5(1)(xiv) of the Act are not satisfied and, there