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TMI Blog1991 (2) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... the approved institution, and that he failed to note that the programmes implemented were not in accordance with the projects approved by the relevant authority. According to the assessing officer, the assessee had claimed deduction of Rs. 70 lakhs under section 35CCA being the amount paid to TARRA for rural development. TARRA is an association recognised for the purposes of section 35CCA. From the details furnished by the assessee, it was observed that four out of five programmes of rural development were approved by the State Level Committee on 11-11-1982 only, i.e., after the closure of the previous year. As one of the preconditions for the allowance of deduction under section 35CCA is that the programme of rural development has to be approved before payment was made, the Inspecting Assistant Commissioner, Salem Range, who examined the records, required the assessee to show cause under section 144A as to why direction should not be issued to the Income-tax Officer to disallow the claim. In response to the letter issued, the assessee filed its reply in writing on 18-3-1986. After hearing the assessee, the IAC held that the assessee was not entitled to deduction under section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in McDowell Co. Ltd. v. CTO [1985] 154 ITR 148. 6. In the appeal before the CIT (Appeals), the assessee's counsel assailed the allegation of the IAC that the payment made to TARRA was a kind of tax planning device resorted to avoid payment of tax. He objected to the allegation of the IAC that there was collusion between the assessee and TARRA with a view to hoodwink the Revenue authorities and to gain some wrongful advantage. He pointed out that the assessee was under the administrative and financial control of the Director of Sugar and came under the purview of the Industries Department of the Government of Tamil Nadu and the payment of Rs. 70 lakhs in question was given with the tacit approval of the Government and as per the specific direction of the Director of Sugar, Government of Tamil Nadu. Comparing the provisions of section 35CCA with the provisions of section 35CC of the Income-tax Act, 196 1, the assessee's counsel pointed out that prior approval of the programmes of rural development was a pre-condition only for the purposes of section 35CC and that if the legislature intended that such prior approval of the programmes was necessary for section 35CCA also, it could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was assisting TARRA in the implementation of the approved programmes as the former was interested in the completion of such programmes without much delay. The programmes were implemented only by TARRA through the assistance of the Assistant Executive Engineer (PWD) at the assessee's premises under the control and supervision of Superintending Engineer, P.W.D. of Tamil Nadu Sugar Corporation. The counsel also filed before the CIT(A) the following documentary evidence to prove that the programmes were in fact carried out by TARRA with the assistance of the assessee : 1. Expenditure incurred as on date on the programme by TARRA duly certified by the Assistant Executive Engineer, P.W.D. 2. Minutes from TARRA appointing Assistant Engineer, P.W.D. to implement the programme with the supervision of Superintendent Engineer, Tamil Nadu Sugar Corporation. 3. Minutes of the meeting held on 27-9-1984 at the Chamber of Chief Executive Engineer, TARRA regarding school building including vocational training. 4. Auditor's certificate regarding the use of funds received from TARRA. As the above evidences were filed for the first time before him, the IAC(Asst.) was given an opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nally held that the approval of the programmes in the assessee's case on 11-11-1982 did not stand in the way of the assessee claiming the deduction. He further observed that it had to be inferred that the State Level Committee had given its implied as well as tacit approval for the construction of a school building so as to accommodate higher secondary classes as well as vocational courses euphemistically referred to as polytechnic, and that the approval of the State Level Committee had not been violated in the matter of construction of school building. He also observed that there was ample evidence to show in the assessment records that TARRA had appointed an Assistant Executive Engineer, P.W.D. to implement the programmes with the supervision of Superintending Engineer of Tamil Nadu Sugar Corporation and the progammes of work had also been reviewed from time to time. He also observed that the assessee had been assisting TARRA in the matter of speedy implementation of the programmes. Finally he held that there was ample material evidence available in the records to indicate that the payment of Rs. 70 lakhs given by the assessee to TARRA had been used or being used by the latter on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book of 46 pages and reiterated his contentions advanced before the CIT(A) and supported the order of the CIT(A). He submitted that the assessee and TARRA are two Government institutions and are at arm's length. The payment of Rs. 70 lakhs has been made to the TARRA as per the permission of the Industries Department, Government of Tamil Nadu dated 30-9-1982 placed at page 34 of the paper book. TARRA and the rural development programmes were approved before 1-3-1983 as laid down in the amended section 35CCA(2)(a). The IAC in his directions under section 144A alleged collusion between the assessee and TARRA and flouting of the provisions of section 35CCA in the guise of tax avoidance and tax planning and invoked the judgment of the Supreme Court in McDowell Co. Ltd.'s case. As already mentioned above, the assessee and TARRA are Government bodies and the invoking of the case of McDowell is an argument in desperation. Further, the decision of the Gujarat High Court in the case of Kaka Ba Kala Budh Public Charitable Trust is not applicable. 10. We have considered the rival submissions, papers filed before us and the case law cited. Section 35CCA(1)(a) and Section 35CCA(2) relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval of the rural development programme before incurring the expenditure is necessary, it would have provided for the same in such explicit terms in section 35CCA itself. In this view of the matter, we uphold the decision of the CIT (A) that it was not a pre-condition that the approval of the rural development programme should precede the payment by way of donation to an approved agency. 12. The other arguments of the Departmental Representative that the execution of the rural development programmes was carried out by the assessee itself and not by TARRA and that the programmes implemented were not in accordance with the programmes approved by the relevant authority are all irrelevant. It is not the concern of the assessing officer as to how the rural development programmes have been executed and implemented or whether such rural development programmes have been executed or not. In the same manner, the assessee is also not concerned with the same. However, in the present case, the assessee had only assisted TARRA in the speedy execution of the rural development programmes. The rural development programmes were in fact carried out by TARRA itself. In this regard the CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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