1. At the instance of the Commissioner of Income-tax, the following question of law has been referred by the Income-tax Appellate Tribunal, Gauhati Bench, under Section 256(1) of the Income-tax Act, 1961, hereinafter referred to as 'the Act' :
'Whether, on the facts and in the circumstances of the case, and on a proper interpretation of Section 88 of the Income-tax Act, 1961, the Appellate Tribunal was justified in holding that the relief under Section 88 was also admissible on the initial donation of Rs. 21,000 made to the Ramchandra Karwa Charitable Trust for the purpose of starting or founding the trust ?'
2. The assessee is a Hindu undivided family and the reference relates to the Assessment year 1967-68. During the previous year relevant to this assessment year, the assessee made an initial gift of Rs. 21,000 for the purpose of founding the trust, Ramchandra Karwa Charitable Trust. During the course of the assessment proceedings, the assessee claimed exemption under Section 88 of the Act on this sum of Rs. 21,000 as donation given to the fund. But the Income-tax Officer did not allow the claim of exemption.
3. The assessee then preferred an appeal before the Appellate Assistant Commissioner against the order of the Income-tax Officer, who held that the assessee was entitled to rebate under Section 88 even in respect of initial gift but he upheld disallowance of the relief on the ground that the trust in question, to which the donation was made, did not fulfil the required conditions as laid down under Section 88 of the Act.
4. The assessee thereafter preferred an appeal before the Income-tax Appellate Tribunal against the order of the Appellate Assistant Commissioner. The Tribunal held that relief under Section 88 was admissible also on the initial donation made for the purpose of starting or founding a fund or institution. The Tribunal, therefore, directed that relief under Section 88 of the Act should be allowed on the amount of Rs. 21,000 given to Ram-chandra Karwa Charitable Trust provided it was found that Ramchandra Karwa Charitable Trust fulfilled the various conditions laid down in Sub-section (5) of Section 88 of the Act.
5. On the above facts, the above-mentioned question of law has been referred.
6. The question that arises for consideration is whether the assessee may have the benefit of exemption under Section 88 of the Act for the initial donation to a fund or institution for the purpose of starting or founding the same.
7. The learned counsel for the department submitted that donation to a fund or institution may be exempted from tax under Section 88, if the fund or institution already existed and the donation was made to an existing fund or institution.
8. During the relevant period the relevant provisions of Section 88 of the Act were as follows :
'88. Donations for charitable purpose, etc.--(1) Subject to the provisions of this section, the assessee shall be entitled to a deduction from the
amount of income-tax on his total income with which he is chargeable for
any assessment year.....
(b) in the case of any other assessee, of an amount equal to the income-tax calculated at the average rate of income-tax, on any sums paid by the assessee in the previous year-
(i) as donations to the National Defence Fund.....
(ii)' as donations to any other fund or any institution to which this section applies;...'
9. Sub-section (5) of Section 88 of the Act was as follows :
'(5). This section applies to donations to any institution or fund referred to in Clause (ii) of Sub-section (1), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :--
(i) if the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of Sections 11 and 12 or Clause (22) of Section 10;
(ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or the fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose ;
(iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste ;
(iv) the institution or fund maintains regular accounts of its receipts and expenditure ; and
(v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (XXI of 1860), or under any law corresponding to that Act in force in any part of India or under Section 25 of the Companies Act, 1956 (1 of 1956), or is a university established by law, or is any other educational institution recognised by the Government or by a university established by law, or affiliated to any university established by law or is an institution financed wholly or in part by the Government or a local authority.....'
10. It is not disputed before the Tribunal that when the donation in question was given, the trust in question was, in fact, founded. This appears from the submissions made on behalf of the department before the Tribunal.
11. The department's case is that the provisions of Section 88(1)(b)(ii) would have been attracted if the donation in the instant case had been made to an existing fund or institution. In other words, if a donation is made for the purpose of starting or founding a fund or institution, it is submitted on behalf of the department, such a donation would not attract the provisions of Section 88(1)(b)(ii) of the Act.
12. The rationale of this submission made on behalf of the department is neither logical nor, in our opinion, in conformity with the object of the provisions ejection 88 of the Act itself. If a donation to an existing fund or trust, of course, if it fulfils the required conditions, is exempted from tax, there is no reason why a donation made to a fund or trust or institution, which is started or founded with the same donation, will not have the benefit of exemption. There is no reason to exclude the first donation with which the fund or institution is started or founded when the benefit is given to the subsequent donation.
13. We find that this view is supported by a decision of the Bombay High Court in the case of Commissioner of Gift-tax v. Yogendra N. Mafatlal reported in  58 ITR 40. We respectfully agree with the reasons
given for the decision in the Bombay case and we find that the Tribunal correctly held that the relief under Section 88 was also admissible on the initial donation with which the fund or institution is started or founded.
14. In the result, we answer the question of law referred in the affirmative and against the department.
15. The reference is accordingly disposed of. There will be no order as to costs.
N. Ibotombi Singh, J.
16. I agree.