2019 (11) TMI 1560 - AT - Income Tax

Expenditure on scientific research u/s. 35(1)(ii) - subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) has been withdrawn - disallowance was made by the AO merely on this basis that CBDT had withdrawn the benefit - HELD THAT - This explanation becomes applicable and as per this explanation, disallowance cannot be made merely on this basis that subsequent to the payment of sum in question by the assessee, the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) of section 35(1) has been withdrawn. There is no other basis given by the AO for making disallowance. The Tribunal order cited by ld. AR of assessee having been rendered in the case of DCIT Vs. Maco Corporation (India) Pvt. Ltd 2018 (3) TMI 811 - ITAT KOLKATA is also applicable in the facts of present case and hence, respectfully following this Tribunal order, we delete the disallowance made by the AO u/s. 35(1)(ii) of the IT Act. Appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Confirmation of the Assessing Officer's order by the Commissioner of Income Tax (Appeals).
2. Disallowance of the weighted deduction claimed under Section 35(1)(ii) of the Income Tax Act.
3. Validity of reopening the assessment based on the investigation report from Kolkata.
4. Disallowance of donations given to an approved society.
5. Retrospective withdrawal of approval granted to the society by CBDT.

Detailed Analysis:

1. Confirmation of the Assessing Officer's Order:
The assessee contested the confirmation of the Assessing Officer's order by the Commissioner of Income Tax (Appeals), arguing that it was opposed to law and facts of the case. The Tribunal examined the merits of the case and the relevant legal provisions to determine the correctness of the confirmation.

2. Disallowance of Weighted Deduction Claimed under Section 35(1)(ii):
The appellant claimed a weighted deduction of ?26,25,000 under Section 35(1)(ii) for a donation of ?15,00,000 made to an approved society, Herbicure Healthcare Bio-Herbal Research Foundation (HHBRF). The Assessing Officer disallowed the deduction, citing the retrospective cancellation of the approval granted to HHBRF by the Central Board of Direct Taxes (CBDT). The Tribunal referred to the explanation below Section 35(1)(iii), which states that the deduction should not be denied merely because the approval was withdrawn after the donation was made. The Tribunal upheld this explanation and ruled that the disallowance was not justified.

3. Validity of Reopening the Assessment:
The assessee challenged the reopening of the assessment for the year 2014-15, arguing that it was based solely on a report from the Kolkata investigation department without any independent enquiry by the Assessing Officer. The Tribunal noted that since the issue on merit was decided in favor of the assessee, the question of the validity of reopening the assessment became academic and did not require further adjudication.

4. Disallowance of Donations Given to an Approved Society:
The Tribunal highlighted that the donation was made on 20.01.2014, while the approval of HHBRF was withdrawn by CBDT on 06.09.2016. As per the explanation below Section 35(1)(iii), the deduction should not be denied merely because the approval was subsequently withdrawn. The Tribunal found that the Assessing Officer's disallowance was based solely on the retrospective withdrawal of approval, which was not a valid ground for disallowance.

5. Retrospective Withdrawal of Approval Granted to the Society by CBDT:
The Tribunal examined the provisions of Section 35(1) and the related explanation, which clearly state that the deduction should not be denied if the approval is withdrawn after the donation is made. The Tribunal concluded that the Assessing Officer's reliance on the retrospective withdrawal of approval was misplaced and that the assessee was entitled to the deduction.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, deleted the disallowance made by the Assessing Officer under Section 35(1)(ii), and ruled that the deduction should not be denied merely because the approval was withdrawn after the donation was made. The issue of the validity of reopening the assessment was rendered academic and was not adjudicated.