2021 (7) TMI 194 - AT - Income Tax

Deduction u/s 35(1)(ii) - Disallowance of donation made to School of Human Genetics Population Health, Kolkata - assessee submitted that assessee had made donation to the aforesaid Trust on 21/02/2012 and claimed benefit of deduction u/s 35(1)(ii) - HELD THAT - Undisputedly, on the date of donation institute was holding valid approval un// 35(1)(ii) - assessee has made donation to the institute through banking channel against receipt. Assessee's claim of deduction in return of income was accepted by the Department - withdrawal notification by the Revenue in 2016 would not operate retrospectively to disallow assessee's claim of deduction under section 35(1) in A.Y. 2012-13. The assessee would be eligible for benefit of weighted deduction u/s 35(1)(ii) in assessment year 2012-13. Subsequent withdrawal of approval under section 35(1)(ii) of the Act from the institution by the Department would not prejudice the assessee's claim of donation in the impugned assessment year. Hon'ble Supreme Court of India in the case of CIT vs. Chotatingrai Tea Ors 2002 (10) TMI 3 - SUPREME COURT where the assessee had claimed deduction u/s 35CCA and the same was withdrawn by the Department on the ground that approval granted by the prescribed authority to the society to whom assessee had made donations was withdrawn with retrospective effect, the Hon'ble Court dismissing Revenue's appeal concurred with the reasoning wherein it was held that, 'once it was found that the assessee had fulfilled all the conditions which had been laid down u/s 35CCA for claiming deduction of the amount donated by it, there was no obligation on the part of the assessee to see that the amount was utilised for the purpose for which it was donated - deduction was allowed on the certificate furnished and it was not for the assessee to show whether the institution to which the money had been donated was carrying, on the rural development work, as envisaged u/s 35CCA of the Act.' Similar view has been expressed in the case of National Leather Cloth Manufacturing Co. 1999 (10) TMI 55 - BOMBAY HIGH COURT , Seksaria Biswan Sugar Factory Ltd. 1990 (3) TMI 47 - BOMBAY HIGH COURT and Bhanumati Malraj Kabali 2019 (1) TMI 1482 - BOMBAY HIGH COURT . The Tribunal has also been taking consistent view on this issue in allowing assessee's claim of deduction where on the date of donation the donee institute was having valid approval. The findings of CIT(A) on assessee's claim of deduction u/s 35(1) are set-aside are allowed.

Summary

Issues:
1. Reopening of assessment for assessment years 2012-13 and 2014-15.
2. Disallowance of donation made to School of Human Genetics & Population Health.
3. Validity of notice issued under section 148 of the Act.

Analysis:

Issue 1: Reopening of assessment
The appeals by the assessee were directed against the order of Commissioner of Income Tax(Appeals)-38 for the assessment years 2012-13 and 2014-15. The grounds raised in both appeals were identical, challenging the reopening of assessment. The assessee decided not to press the legal ground of challenging the reopening of assessment.

Issue 2: Disallowance of donation
The key issue raised by the assessee was against the disallowance of a donation made to School of Human Genetics & Population Health. The assessee had made a donation and claimed a deduction under section 35(1)(ii) of the Income Tax Act, which was later disallowed during reassessment. The Department alleged that the institution engaged in money laundering activities and the assessee was a beneficiary. However, the assessee argued that there was no evidence to suggest the donation was bogus, as the institution had valid approval at the time of donation. The Tribunal, citing relevant case laws, held that the withdrawal of approval post-donation did not affect the assessee's eligibility for deduction.

Issue 3: Validity of notice
In one of the appeals, the assessee challenged the validity of the notice issued under section 148 of the Act. However, the authorized representative of the assessee decided not to press this ground, resulting in the dismissal of this challenge.

In conclusion, the Tribunal partly allowed the appeals of the assessee for both assessment years 2012-13 and 2014-15, based on the findings related to the disallowance of the deduction for donations made to different institutions. The Tribunal emphasized that the withdrawal of approval post-donation did not impact the eligibility of the assessee for the claimed deductions. The orders were pronounced in open court on June 15, 2021.