1. This is an appeal filed by Shri Anumula Venkateswarlu of Kurnool against the order of the AAC for the assessment year 1979-80.
2. The assessee is a HUF having income from property, business and share income from a partnership firm. He paid life insurance premia to the extent of Rs. 32,569 on which relief under Section 80C of the Income-tax Act, 1961 ('the Act') was claimed. The assessee's total income was computed at Rs. 42,116. Since there is a ceiling of 30 per cent of gross total income for allowance of relief under Section 80C, Sub-section (4) thereto, the ITO restricted the relief to Rs. 8,553 which is the eligible amount at 100 per cent for first Rs. 5,000, 50 per cent for next Rs. 5,000 and 40 per cent of balance out of qualifying amount Rs. 12,635 forming 30 per cent of the income determined at Rs. 42,116. The assessee in first appeal contended that Rs. 12,635 (claimed at Rs. 12,564 at 30 per cent of returned figure) was to be reckoned as the ceiling on the final eligible amount and not on the qualifying amount under Section 80C(1) itself, The assessee argued that its interpretation is justified by the decision of the Andhra Pradesh High Court in the case of Hyderabad Race Club v. Addl.
CIT  120 ITR 185 as analogous relief under Section 80G of the Act. Since its arguments did not find acceptance before the first appellate authority, the assessee is in second appeal.
3. The learned Counsel for the assessee repeated his arguments before the authorities below while the learned departmental representative relied upon the orders of authorities below and claimed that plain language of the statute justified the departmental interpretation.
4. We have carefully considered the records as well as the arguments.
The assessee has paid life insurance premia to the extent of Rs. 32,569 and claimed relief under Section 80C in respect of the same. Its total income before such relief is Rs. 42,116. 30 per cent thereof is Rs. 12,635. There is no dispute that the ceiling should be Rs. 12,635. The dispute is regarding the amount on which the ceiling should apply. The respective workings of the assessee and the ITO on the basis of premia paid Rs. 32,569 and total income at Rs. 42,116 are juxtaposed as below : Assessees working ITO's working Rs. Rs.First Rs. 5,000--100 per cent 5,000 Ceiling amount 12,635Next Rs. 5,000--50 per cent 2,500 (Being 30 per cent of total income of Rs.Balance--22,569 (i.e., First Rs. 5,000--100 per cent 5,000Rs. 32,569 less Next Rs. 5,000--50 per cent 2,500Rs. 10,000)-- 40 per cent 9,024Eligible amount 16,524 Balance--2,635-- 40 per cent 1,054 (i.e. Rs. 12,635 lessRelief to be limited to 12,635 Relief to be limited to 8,554 (Being 30 per cent of 42,116) That is how the assessee would claim the relief of Rs. 12,635 while the ITO would allow only Rs. 8,554.
80C. (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 calculated, with reference to the aggregate of the sums specified in Sub-section (2), at the following rates, namely :--(a) where such aggregate does not exceed the whole of such aggregate; Rs. 5,000(b) where such aggregate exceeds Rs. 5,000 plus 50 per cent of Rs. 5,000 but does not exceed the amount by which such Rs. 10,000 aggregate exceeds Rs.5,000.(c) where such aggregate exceeds Rs. 7,500 plus 40 per cent of Rs. 10,000 the amount by which such aggregate exceeds Rs. 10,000.
(2) The sums referred to in Sub-section (1) shall be the following, namely:-- (b) where the asscssee is a Hindu undivided family, any sums paid in the previous year by the assessee out of its income chargeable to tax, to effect or to keep in force an insurance on the life of any member of the family ; (4) The aggregate of the sums referred to in Sub-section (2), which qualifies for the purposes of computing the deduction under Sub-section (1), shall not exceed-- (iii) in the case of a Hindu undivided family, thirty per cent of its gross total income, or forty thousand rupees, whichever is less ; A plain reading of the above relevant provisions indicate deduction of 'an amount' that is calculated, with reference to the aggregate of the sums specified in Sub-section (2) at the rates specified in Sub-section (1), i.e., in the relevant year 100 per cent on first Rs. 5,000, 50 per cent on next Rs. 5,000 and 40 per cent on exess over Rs. 10,000 in balance to such 'aggregate'. What the aggregate under Section 80C(2) is in this case cannot be a matter of dispute. It is Rs. 32,569 paid by the assessee. But Section 80C(4) stipulates that 'the aggregate of the sums' referred to in Section 80C(2) fixes a ceiling, which in this case is 30 per cent or Rs. 30,000, whichever is less for the year. When Sections 80C(2) and 80C(4) are read together, only an amount of Rs. 12,635 out of the premium paid to the extent of Rs. 32,561 qualifies for deductions to be reckoned under Section 80C(1). The 'aggregate of the sums' on which relief has to be computed under Section 80C(1) gets, therefore, reduced in the threshold itself, so to say, in view of Section 80C(4) which puts the ceiling on the amount under Section 80C(2). In other words, the ceiling under Section 800(4) is on the qualifying amount of premia paid under Section 80C(2) and not on the eligible amount of relief (deduction) under Section 80C. There is no ambiguity in the wording of the statute even to admit of a doubt in favour of the assessee's claim. We have, therefore, to uphold the order of the authorities on this issue.
6. We have, however, yet to deal with the assessee's argument based upon the decision of the Andhra Pradesh High Court in Hyderabad Race Club's case (supra). This decision relates to the mode of reckoning relief under Section 80G where Section 80G(1) allows relief at a certain percentage of the 'aggregate sums specified in Sub-section (2)' (which is the aggregate of various donations). So far the provisions of Section 80C are comparable with those of Section 80G, Section 80G(4), however, places a further ceiling of 10 per cent of gross total income with reference only to 'such part of aggregate of sums' (donations) specified under Section 80G(2)(a)(iv) and 80G(2)(a)(iv)/(v) and 80G(2)(6). Though, prima facie, the sections would appear to be similarly worded, it is noted that the ceiling in respect of Section 80G applied only to the 'part of the aggregate' inasmuch as some donations like the donations to the Prime Minister's Fund were not to be considered for the purpose of ceiling. It was in this context that the Andhra Pradesh High Court came to the conclusion that the limitation under Section 80G(4) is only a qualification to Section 80G(1) and that Section 80G(4) cannot be read independently. But, in respect of Section 80C the limitation is clearly on the 'aggregate of sums referred to in Sub-section (2)'. This shows that the qualification is on the amount payable as premia, etc Besides, there is no reference to Section 80C(1) at all in Section 80C(4) while the opening words in Section 80G(4) are 'The deduction under Sub-section (1) shall not be allowed ...'. In view of this difference, we will not be justified in conceding the assessee's claim with reference to the Andhra Pradesh High Court decision. We may also point out that Section 80G(4) has since undergone an amendment vide the Finance (No. 2) Act, 1980, making it clear that the ceiling in that Sub-section also applies to donations (qualifying amount) and not to the deductions (eligible relief). The relevant part of the Notes on Clauses on the Bill reads as under: Sub-clause (a) seeks to substitute Sub-section (4) of Section 80G. Under the proposed amendment, it is being clarified that the deduction in respect of the aggregate sums of donations to specified funds and charitable institutions in Sub-section (2) of that Section shall be limited to the smaller of the ceiling limits specified in the new Sub-section (4).
It is clear from the above that this amendment is intended only to be clarificatory, though it was not made retrospective apparently because it was not intended to disturb those cases where the relief had already been allowed on the basis of ceiling with reference to deductible amount and not specified donations themselves for earlier years. Hence, even if the provisions of Sections 80C and 80G are taken to be comparable, we cannot possibly follow the more 'liberal' interpretation now after the Parliament has approved the amendment on the basis of Notes on Clauses that such amendment is only clarificatory. In paragraph 18.2 of the Board's Circular No. 281 [F. No. 131(17)/80-TPL], dated 22-9-1980 relating to instruction of the Finance (No. 2) Act, it is stated as under : In Hyderabad Race Club v. Addl. CIT  120 ITR 185, the Andhra Pradesh High Court held that the ceiling limits prescribed in Sub-section (4) of Section 80G apply with reference to the quantum of deduction admissible under that Section and not with reference to the aggregate amount of qualifying donations referred to in that sub-section. With a view to bringing out clearly the intention underlying this provision, the Finance Act has substituted a new sub-section for the existing Sub-section (4) in order to clarify that the limits specified therein will apply with reference to the aggregate amount of the donations and not with reference to the quantum of deduction admissible thereunder ...
However, we hasten to add that even otherwise there was scope for the more 'liberal' interpretation in the language of Section 80G while Section 80C as mentioned in the preceding paragraph is unambiguous and clear. It is under these circumstances that we are unable to accept this argument based on the analogy of interpretation of Section 80G.