2024 (3) TMI 522 - AT - Income Tax

Donation to scientific research institute and weighted deduction u/s 35(l)(ii) - Claim denied as AO found that the said institute no longer had the approval necessary for raising donation for undertaking scientific research, as required by the provisions of the said section - HELD THAT - CIT(A) upheld the order of the AO, finding no facts brought out by the assessee before it, to contradict what was pointed out by the CBDT regarding fraudulent manner in which the donations were collected by the Research Trust, claiming to be approved u/s 35(1)(ii) of the Act. The ld.CIT(A) also noted that identical issue had come up for consideration before the ITAT, Chennai Bench in the case of DCIT Vs. Sudhakar Natarajan 2019 (5) TMI 2005 - ITAT CHENNAI wherein denial of weighted deduction under section 35(1)(ii) of the Act on identical donation made to the same institute, Shri Arvindo Institute of Applied Scientific Research Trust after the approval had expired, was upheld by the Tribunal vide order dated 24.5.2019. Before us, there was nothing to contradict the adverse findings of the Revenue authorities pertaining to the impugned donation being fraudulently taken in the absence of a valid approval for the same from the prescribed authority. Thus no reason to interfere in the order of the ld.CIT(A) upholding the denial of weighted deduction to the assessee u/s 35(1)(ii) of the Act on the donations made to Shri Arvindo Institute of Applied Scientific Research Trust. Book profit adjustment - The concurrent findings of the Revenue authorities, as noted by us above is that the said donation was a bogus donation, fraudulently made .In the light of the same that there is no scope for allowing bogus claims as deductions for determining the book profits of the assessee under section 115JB of the Act. Book Profits in any case refer to the profits as reflected in the Books of the assessee, for paying taxes thereon u/s 115JB of the Act. By no stretch of logic can a patently bogus and fraudulent claim be considered for arriving at the Book Profits. Assessee appeal dismissed.

Summary

Issues:
The judgment involves the denial of weighted deduction to the assessee on a donation made to a scientific research institute under section 35(1)(ii) of the Income Tax Act, 1961, and the related adjustment of book profits under section 115JB of the Act.

Denial of Weighted Deduction:
The appeal was filed against the order passed by the Ld. Commissioner of Income-Tax(Appeal) pertaining to Assessment Year 2016-17. The assessee failed to appear throughout the proceedings before the Tribunal, leading to an ex parte decision. The main issue revolved around the denial of weighted deduction on a donation of Rs. 1,25,00,000 made to a scientific research institute. Both the Assessing Officer and the Ld. CIT(A) disallowed the deduction, amounting to Rs. 2,18,75,000 in total, due to the institute's lack of necessary approval for raising donations for scientific research. The AO's inquiries revealed that the institute's approval had expired, rendering the donation claim as fraudulent. The Tribunal upheld the denial of deduction, citing the absence of valid approval and previous similar rulings.

Adjustment of Book Profits:
The assessee contended that the disallowed donation should not impact its book profits under section 115JB. However, the Revenue authorities found the donation to be fraudulent and bogus. The Tribunal concurred, stating that such claims cannot be considered for determining book profits, which must reflect actual profits for tax purposes. Therefore, the contention of the assessee was dismissed, and the appeal was ultimately rejected.

Separate Judgment:
No separate judgment was delivered by the judges in this case.