2019 (5) TMI 2005 - AT - Income Tax

LTCG - Deduction u/s 54EC - date of actual transfer of shares - As per AO in respect of investment said to be made AO found that it was beyond the period of six months from the date of transfer of shares, therefore, not eligible for deduction - HELD THAT - Share Transfer Form in Form 7B is not completely filled up. The attestation column is left blank. Moreover, the occupation and address columns were also left blank. In the computation of statement, the assessee admittedly mentioned the date of transfer as 30.09.2013. Moreover, for transfer of shares, a resolution by the company s Board of Directors is essential. In this case, the assessee could not clarify immediately before this Tribunal when the resolution was passed. In view of the above factual situation, this Tribunal is of the considered opinion that the matter needs to be re-examined by the AO. Accordingly, orders of both the authorities below are set aside and the entire issue is remitted back to the file of the AO. AO shall re-examine the issue in the light of the material that may be filed by the assessee and thereafter decide the issue afresh in accordance with law. Disallowance u/s 35(1)(ii) - weighted deduction in respect of the donation made to Shri Arvindo Institute of Applied Scientific Research Trust - According to revenue assessee was misrepresented by the Trust saying that the approval granted for deduction u/s 35(1)(ii) of the Act was renewed and a forged gazette notification was also said to be obtained by the Trust - HELD THAT - Shri Arvindo Institute of Applied Scientific Research Trust was not recognized beyond 31.03.2006. Forged document has been filed before the authorities to misrepresent as if the said Trust was recognized beyond 31.03.2006. Moreover, it is also not the case of the assessee that the recognition was extended beyond 31.03.2006. Therefore, the CIT(Appeals) is not justified in allowing the claim of the assessee under Section 35(1)(ii) of the Act. When the Trust was not renewed beyond 31.03.2006, it is not known what made the assessee to make donation. Allowability of business loss / expenditure u/s 37(1) - The assessee now claims that he is a science graduate connected with pharmaceutical research and consultancy, therefore, it has to be allowed as business loss / expenditure under Section 37(1) of the Act. This Tribunal is of the considered opinion that the claim of the assessee cannot be allowed under Section 37(1) of the Act also. The payment was admittedly said to be made as donation for scientific research and not for any business expenditure. When the approval was not available on the date of payment and admittedly forged document has been produced before the authorities below to claim that Shri Arvindo Institute of Applied Scientific Research Trust was approved under Section 35(1)(ii) of the Act, this Tribunal is of the considered opinion that this kind of claim cannot be appreciated. Once the recognition was not granted and the claim was made on the basis of forged and false document, including one of gazette notification, this Tribunal is of the considered opinion that the CIT(Appeals) ought not to have allowed the claim of the assessee. Since it is not a business expenditure and the claim is one of donation, it cannot be allowed under Section 37(1) of the Act also. - Decided in favour of revenue.

Summary

Issues:
1. Assessment of capital gain - eligibility for deduction under Section 54EC of the Income-tax Act, 1961.
2. Disallowance under Section 35(1)(ii) of the Act.

Assessment of Capital Gain:
The dispute revolved around the eligibility of the assessee for deduction under Section 54EC of the Income-tax Act, 1961, concerning investments in REC bonds. The Assessing Officer disallowed the claim for an investment made on 08.04.2014, stating it was beyond the six-month period from the date of share transfer on 30.09.2013. The assessee contended that the actual transfer date was 18.10.2013, supported by a Share Transfer Form dated 8th October, 2013. However, due to discrepancies in documentation and lack of clarity on the resolution for share transfer, the Tribunal remitted the issue back to the Assessing Officer for re-examination.

Disallowance under Section 35(1)(ii) of the Act:
The Assessing Officer disallowed the weighted deduction claimed under Section 35(1)(ii) concerning a donation made to a Trust not approved for scientific research. The assessee argued that the donation was related to their business activity in medical sciences, thus allowable under Section 37(1) of the Act. However, investigations revealed the Trust's lack of approval beyond 31.03.2006 and the use of forged documents. The Tribunal held that the donation claim could not be justified under Section 37(1) as it was based on false documents, leading to the restoration of the Assessing Officer's disallowance and rejection of the CIT(Appeals) decision.

The Tribunal's detailed analysis highlighted the importance of accurate documentation and compliance with legal provisions in determining the eligibility for deductions and allowances under the Income-tax Act, emphasizing the need for genuine and verifiable transactions to support claims.