2022 (8) TMI 750 - HC - Income Tax

Bogus donations - addition made as donation in question to the trust was not genuine - registration granted to those organisations / trusts u/s 35C were cancelled with retrospective effect - tribunal noted that there is nothing on record to show that the respondent/assessee connived with the scheme of arrangement between the concerns in bogus billing etc. and deleted the additions - HELD THAT - We need not travel thus far to decide the substantial question of law in the case on hand as we are considering the case falling under Section 35 of the Act. In terms of Explanation to Section 35(1)(iii) of the Act, deductions to which the assessee is entitled to in respect of any sum paid to a research organisation, university etc. shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee, the approval granted to the research organisation or university etc. has been withdrawn. This issue was considered by the Hon ble Supreme Court in the case of Commissioner of Income Tax vs. Chotatingrai Tea Ors. 2002 (10) TMI 3 - SUPREME COURT We find the reasoning given by the tribunal to be just and proper and cannot be held to be perverse. In the result, the appeal filed by the revenue is dismissed.

Summary

Issues involved:
1. Appeal filed by revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal.
2. Whether the donation given by the assessee to two organizations can be considered not genuine due to cancellation of registration.
3. Interpretation of Section 35(1)(iii) of the Act regarding deductions for sums paid to research organizations.

Analysis:
1. The High Court considered the appeal filed by the revenue against the order of the Income Tax Appellate Tribunal. The substantial question of law raised was whether the tribunal's order was perverse for not considering the genuineness of the donation made to a trust and the effect of cancellation of registration of the donee organizations. Both parties were represented by their respective counsels before the court.

2. The main issue in this case was whether the donation made by the assessee to two organizations could be deemed not genuine due to the retrospective cancellation of their registration. The tribunal found no evidence to suggest the assessee's involvement in any improper activities related to the organizations. The tribunal's decision was based on factual findings and legal precedents, including the case of Industrial Infrastructure Development Corporation (Gwallior) M.P. Ltd. vs. Commissioner of Income Tax. The High Court emphasized that under Section 35(1)(iii) of the Act, deductions cannot be denied merely because the approval granted to the research organization has been withdrawn after the payment was made.

3. The court referred to the case of Commissioner of Income Tax vs. Chotatingrai Tea & Ors. to highlight that once the assessee fulfills all conditions for claiming deduction under Section 35CCA of the Act, there is no obligation to ensure the funds are utilized as intended. The High Court upheld the tribunal's decision, stating that the reasoning was just and proper, dismissing the appeal filed by the revenue and answering the substantial question of law against the revenue. Consequently, the connected application for stay was also closed.

This detailed analysis of the judgment addresses the issues involved, the court's reasoning, and the legal principles applied in reaching the decision.