2019 (6) TMI 733 - AT - Income Tax

Denial of claim of deduction u/s 35(1)(iii) - Donation to School of Human Genetics and Population Health - A.O. declined the claim of deduction on the plea that the institution is not genuine - HELD THAT - As the facts and circumstances during the year under consideration are exactly similar wherein donation given to School of Human Genetics and Population Health was declined by the A.O. Discussing the very same factual position as discussed in the instant case the disallowance was deleted by the Tribunal after having a detailed observation as stated above. Respectfully M/S P.R. ROLLING MILLS PVT. LTD. VERSUS D.C.I.T. CIRCLE-3 JAIPUR 2018 (7) TMI 737 - ITAT JAIPUR and M/S MACO CORPORATION (INDIA) PVT. LTD. 2018 (3) TMI 811 - ITAT KOLKATA we do not find any merit in the disallowance so made by the A.O. Hence we direct the A.O. to delete the same. - Appeal of the assessee is allowed.

Issues Involved:
1. Denial of claim of deduction under Section 35(1)(iii) of the Income Tax Act, 1961.
2. Validity and genuineness of the institution receiving the donation.
3. Retrospective rescinding of approval by CBDT.
4. Applicability of legal precedents and statutory provisions.

Detailed Analysis:

1. Denial of Claim of Deduction under Section 35(1)(iii) of the Income Tax Act, 1961:
The assessee claimed a deduction under Section 35(1)(iii) of the Income Tax Act for donations made to the School of Human Genetics and Population Health, which was engaged in scientific research and notified by the Central Board of Direct Taxes (CBDT). The Assessing Officer (A.O.) denied this claim, arguing that the institution was not genuine. The CIT(A) upheld this disallowance, prompting the assessee to appeal further.

2. Validity and Genuineness of the Institution Receiving the Donation:
The assessee argued that the institution was duly notified by the CBDT at the time of the donation and that the approval was valid. The assessee contended that the CBDT's subsequent rescinding of the notification did not affect the genuineness of the institution at the time the donation was made. The assessee relied on the principle that no additional tax burden should be imposed retrospectively, especially when the taxpayer acted in good faith based on the existing approval.

3. Retrospective Rescinding of Approval by CBDT:
The CBDT rescinded the notification with retrospective effect from April 1, 2007. The assessee argued that such retrospective rescinding should not affect the deduction claim since the approval was valid at the time of donation. The Tribunal acknowledged this argument, citing legal precedents that retrospective operations should not impose new liabilities or obligations on transactions already completed. The Tribunal referred to the Supreme Court's decision in Hitendra Vishnu Thakur Vs. State of Maharashtra, which held that procedural statutes should not be applied retrospectively if they create new disabilities or obligations.

4. Applicability of Legal Precedents and Statutory Provisions:
The Tribunal referenced several precedents, including decisions from the Coordinate Benches in similar cases (M/s P.R. Rolling Mills Pvt. Ltd. Vs. DCIT and DCIT Vs. Maco Corporation (India) Pvt. Ltd.). These cases established that deductions under Section 35(1)(iii) should not be denied merely because the approval was withdrawn after the donation was made. The Tribunal also emphasized the explanation to Section 35(1) of the Act, which supports the assessee's claim that deductions should not be denied if the approval is withdrawn subsequent to the payment.

Conclusion:
The Tribunal concluded that the assessee's claim for deduction was justified as the donation was made in good faith to an institution that was validly recognized at the time. The Tribunal directed the A.O. to delete the disallowance, allowing the appeal in favor of the assessee. The decision was pronounced in the open court on June 6, 2019.

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