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2017 (3) TMI 35 - AT - Income TaxReopening of assessment u/s 147 - assessee was wrongly granted the deduction u/s 80GGB in respect of its donation to Electoral Trust - Held that - On careful reading of the provision of section 293A it made clear that assessee falls in the category as referred under sub-section 2 of section 293A. Sub-section (2) of section 293A permits contribution to any Political Parties by a Company either directly or indirectly. The ld. AR of the assessee throughout his submission argued that the contribution made to Electoral Trust is covered by the word indirectly and qualified for the deduction u/s 80GGB of the Act for the year under consideration. We are in full agreement with the submission of ld AR of assessee that the case of the assessee is covered by the Explanation attached with section 80GGB. We have seen that the ld. CIT(A) correctly appreciated that the contribution to a Political Parties can be either directly or indirectly to qualify the deduction u/s 80GGB of the Act. CIT(A) correctly appreciating the provisions of section 293 of Companies Act and the deduction in respect of contribution given by the Company to the Political Parties. The order of ld. CIT(A) is based on correct appreciation of the provisions and we do not find any infirmity or illegality for our interference. - Decided against revenue
Issues Involved:
1. Validity of re-opening the assessment under Section 147 of the Income Tax Act. 2. Allowability of deduction under Section 80GGB for contributions made to the Electoral Trust. Issue-wise Detailed Analysis: 1. Validity of Re-opening the Assessment under Section 147: The appeal concerns the re-opening of the assessment under Section 147 of the Income Tax Act. The original assessment for AY 2005-06 was completed under Section 143(3) on 26.12.2008. The re-opening notice under Section 148 was issued on 29.03.2012, beyond the four-year period from the end of the relevant assessment year. The assessee objected to this re-opening, citing the absence of any new or additional material and arguing that there was no failure on their part to disclose fully and truly all material facts. The objection was overruled by the Assessing Officer (AO), who then completed the re-assessment and disallowed the deduction under Section 80GGB. The CIT(A) upheld the re-opening's validity but allowed the deduction. The Tribunal noted that the AO re-opened the assessment on the ground that the deduction under Section 80GGB was wrongly allowed. The Tribunal considered various judicial precedents cited by the assessee, including decisions from the Supreme Court and High Courts, which emphasize that re-opening beyond four years is invalid in the absence of new material or failure by the assessee to disclose material facts. 2. Allowability of Deduction under Section 80GGB: The core issue was whether the contribution of Rs. 3.5 Crore to the Electoral Trust qualifies for deduction under Section 80GGB. The Electoral Trust was established by the Tata Group for distributing contributions to political parties. The Revenue contended that the term "Electoral Trust" was not included in the Act during the relevant assessment year and was only defined from 01.04.2010. The Revenue argued that the deduction was not allowable as the Electoral Trust was not a political party. The assessee countered that Section 80GGB, read with Section 293A of the Companies Act, permits contributions to political parties directly or indirectly, thus including contributions to the Electoral Trust. The Tribunal examined Section 80GGB and Section 293A of the Companies Act, noting that contributions to political parties can be direct or indirect. The CIT(A) had concluded that contributions to the Electoral Trust qualify for deduction under Section 80GGB to the extent that these funds were actually given to political parties. The Tribunal agreed with the CIT(A)'s interpretation, stating that the contribution to the Electoral Trust falls under the "indirect" contribution category and qualifies for the deduction. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal on this ground. Conclusion: The Tribunal upheld the CIT(A)'s decision, confirming that the re-opening of the assessment was valid but ultimately agreeing that the deduction under Section 80GGB for contributions to the Electoral Trust was allowable. The Revenue's appeal was dismissed, and the CIT(A)'s order was affirmed, allowing the deduction for contributions made to the Electoral Trust that were subsequently donated to political parties. The Tribunal's decision was based on a thorough interpretation of the relevant sections of the Income Tax Act and the Companies Act, supported by judicial precedents.
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