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2020 (2) TMI 1413 - AT - Income TaxDeduction u/s 35(1) - denial of deduction on the ground that the approval of the recipient organization was withdrawn by the CBDT vide Notification dt. 6.9.2016 - HELD THAT - As decided in assessee s own case 2019 (11) TMI 1560 - ITAT BANGALORE disallowance cannot be made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university college or other institution referred to in clause (ii) or clause (iii) of section 35(1) has been withdrawn.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.
Issues Involved:
1. Confirmation of the Assessing Officer’s order by the Commissioner of Income Tax (Appeals). 2. Disallowance of weighted deduction under Section 35(1)(ii) of the Income Tax Act. 3. Retrospective withdrawal of approval by CBDT. 4. Non-consideration of specific provisions under Section 35(1)(ii) explanation. 5. Non-following of ITAT Kolkata decisions on similar facts. 6. Reopening of the case under Section 148 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Confirmation of the Assessing Officer’s order by the Commissioner of Income Tax (Appeals): The assessee filed an appeal against the order of the Commissioner of Income Tax (Appeals)-6, Bangalore, which confirmed the Assessing Officer's order. The grounds of appeal included that the order was opposed to law and facts of the case. 2. Disallowance of weighted deduction under Section 35(1)(ii) of the Income Tax Act: The appellant company donated Rs. 25,00,000 and claimed a weighted deduction of Rs. 43,75,000 under Section 35(1)(ii) to the Herbicure Society, approved by CBDT. The Assessing Officer disallowed the deduction, and the Commissioner of Income Tax (Appeals) upheld this disallowance. The disallowance was based on the CBDT's retrospective cancellation of the approval granted to the recipient society. 3. Retrospective withdrawal of approval by CBDT: The CBDT canceled the approval of the Herbicure Society via notification dated 06.09.2016, with retrospective effect. The Assessing Officer disallowed the deduction on the grounds of this retrospective withdrawal, which was confirmed by the Commissioner of Income Tax (Appeals). 4. Non-consideration of specific provisions under Section 35(1)(ii) explanation: The assessee argued that the Commissioner of Income Tax (Appeals) did not consider the specific provisions in the explanation to the proviso under Section 35(1)(ii). This explanation states that the deduction should not be denied merely because the approval granted to the association was withdrawn after the payment. 5. Non-following of ITAT Kolkata decisions on similar facts: The assessee cited decisions from ITAT Kolkata, where similar issues were decided in favor of the appellant. Cases referenced included DCIT Vs. Maco Corporation (India) P. Ltd., Rajda Polymers Vs. DCIT, and Saimed Innovation vs. ITO. The assessee also mentioned a favorable decision from ITAT Bangalore for Assessment Year 2014-15 in their own case. 6. Reopening of the case under Section 148 of the Income Tax Act: The assessee filed the return of income for the Assessment Year 2015-16, which was reopened by the issuance of a notice under Section 148. The assessee requested to consider the original return as due compliance. The Assessing Officer issued a notice under Section 143(2), and after discussions and submissions, disallowed the deduction claimed under Section 35(1). Tribunal’s Decision: The Tribunal reviewed the rival contentions and material on record. The core issue was the denial of deduction under Section 35(1) due to the retrospective withdrawal of approval by CBDT. The Tribunal noted that the explanation to Section 35(1)(iii) specifies that the deduction should not be denied merely because the approval was withdrawn after the payment. The Tribunal referenced a similar case from the assessee's own history and other ITAT decisions, which supported the assessee's claim. Consequently, the Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and directed the Assessing Officer to delete the addition, allowing the assessee's appeal. Conclusion: The Tribunal allowed the assessee's appeal, emphasizing that the deduction under Section 35(1)(ii) should not be denied based on the retrospective withdrawal of approval by the CBDT. The Tribunal's decision was pronounced in the open court.
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