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2014 (11) TMI 396 - AT - Income Tax


Issues Involved:
1. Deduction under Section 80G of the Income Tax Act.
2. Nature of donation (cash vs. kind).
3. Validity of the order under Section 263 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deduction under Section 80G of the Income Tax Act:

The primary issue is whether the deduction of Rs. 86,41,387/- under Section 80G of the Income Tax Act was rightly allowed by the Assessing Officer (AO). The assessee claimed this deduction for donations made to the Rajasthan Medical Relief Society, S.M.S. Hospital, Jaipur, in the form of medical equipment. The AO allowed this deduction during the scrutiny of the assessee's return for the A.Y. 2009-10. However, the Commissioner of Income Tax (CIT) held that Section 80G allows deductions only for donations made in the form of money, not in kind. The CIT found that the AO had not verified the facts properly and considered the assessment erroneous and prejudicial to the interests of the revenue, issuing a notice under Section 263 of the Act.

2. Nature of Donation (Cash vs. Kind):

The assessee contended that although the donation was made in the form of equipment, the payment was made by cheque directly to the suppliers on behalf of the donee, which should be considered as a donation in cash. The assessee supported this claim with a certificate from the Medical Superintendent of the hospital, confirming the donation was utilized for purchasing ICU equipment. The CIT, however, maintained that the donation was in kind, as the invoices were issued in the name of the assessee and not the donee. The CIT cited various judicial precedents, including the Hon'ble Supreme Court and Gujarat High Court decisions, to support the view that only donations in cash qualify for deduction under Section 80G.

3. Validity of the Order under Section 263 of the Income Tax Act:

The assessee argued that the AO had applied her mind and allowed the deduction after considering all relevant facts, including the letter from the hospital. The CIT's action was deemed a change of opinion rather than a correction of an erroneous order. The assessee cited several judicial decisions to argue that if the substance of the transaction is a money transaction, the deduction under Section 80G should be allowed. The Tribunal found that the AO had indeed considered the facts and allowed the deduction appropriately. The Tribunal also noted that the genuineness of the donation was not in question, and the payments were made directly to suppliers on behalf of the donee to expedite the procurement of medical equipment.

Conclusion:

The Tribunal concluded that the CIT's order under Section 263 was based on a change of opinion and not on new facts. The Tribunal found that the AO had correctly allowed the deduction under Section 80G, as the substance of the transaction was a money donation. The Tribunal set aside the CIT's order and upheld the AO's decision to allow the deduction.

Final Judgment:

The appeal of the assessee was allowed, and the order passed by the CIT under Section 263 was set aside. The AO's decision to allow the deduction under Section 80G was upheld.

 

 

 

 

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