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TMI Blog2018 (4) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER Per M.Balaganesh, AM 1. This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-4, Kolkata [in short the ld CIT(A)] in Appeal No.11123/CIT(A)- 4/Circle-12(1)/16-17 dated 27.12.2016 against the order passed by the DCIT, Circle- 12(1), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 22.09.2016 for the Assessment Year 2014-15. 2. The only effective issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the disallowance made u/s 35(1)(ii) of the Act in the sum of ₹ 4,37,50,000/- in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a private limited company engaged in the business of import and export of machinery spares, equipment component and project execution work. The return of income for the Asst Year 2014-15 was filed by the assessee on 30.9.2014 disclosing total income of ₹ 35,46,93,990/-. The ld AO observed that the assessee claimed donation of ₹ 4,37,50,000/- (being 175% of ₹ 2,50,00,000/-) u/s 35(1)(ii) of the Act for the scientific research o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have few persons with good CV who are associated only in honorary position and they are not involved in the day to day activities. The research work shown is just reproduction of published material. Details in respect of research work could not be furnished by these institutions. These institutions have miniscule presence and their contribution to scientific research is too negligible for the kind of donation they received. The research facilities are near about missing in these institutes. These institutes have blatantly violated Rule 5C, 5D 5E of Income Tax Rules which are required to be complied by the institutes approved u/s 35(1)(ii) of the Act. In the light of above points the AO wanted the appellant to explain its claim of deduction amounting to ₹ 4,37,50,000/- u/s 35(1)(ii) of the Act. 4. The assessee in response to show cause notice replied as under:- These institutions are duly registered with the registrar of companies, Income Tax Department, SIRO and other authorities and are engaged in the research activities. These institutions enjoy registrations u/s 35(1)(ii) of the Act. These are not bogus donations as alleged. The donations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of HHBHRF reflecting bogus donation transaction of the assessee company. The ld AO extracted the statements recorded by the DDIT, Investigation Wing, Kolkata from various persons belonging to HHBHRF. The ld AO finally stated that on perusal of extracts of survey reports and statements of Sri Manoj Kumar Kothary, Sri Swapan Ranjan Dasgupta, Sri Anand Krishna Maitin, Sri Kalipada Bhattacharya, Smt Sujata Ghosh Dastidar, Sri Sanker Kumar Khetan, Sri Kishan Bhawsinghka, Sri Kailash Kumar Rungta, it is clear that the assessee company had paid bogus donation. The ld AO also issued summons u/s 131 of the Act to Shri Nagesh M Patel, Managing Director of the assessee company and recorded statement from him. He concluded that the assessee company had not verified the concerns properly. The MD of the assessee company does not know any person of these concerns and does not remember the name of the broker who had brought the details of these concerns. Accordingly, the ld AO disallowed the weighted deduction claimed in the sum of ₹ 4,37,50,000/- u/s 35(1)(ii) of the Act in the assessment. 6. The assessee filed a detailed written submissions before the ld CITA meeting out each and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein bogus donation had been availed. 5. That on the facts circumstances of the case and in law, the Ld. CIT(A) has erred by not appreciating the facts that CBDT, vide Notification No. 79/2016/F. No. 203/ 135/2007/ITA.II dated 06.09.2016 82/2016/F.No. 203/642009/ITA.II dated 15.09.2016 has withdrawn the approval Notification of donees concern namely Herbicure Healthcare Bio-Herbal Research Foundation, Kolkata and School of Human Genetics Population Health, Kolkata with effect from 1st April, 2007. 6. That on the facts circumstances of the case and in law, the Ld. CIT(A) has erred by not appreciating the facts that on the basis of enquiry made on Survey post survey operations by the Investigation Wing of the Department in the case of the donee concerns, the Hon'ble CBDT has withdrawn the approval Notification of the donee concern w.e.f. 1st April, 2007. 8. We have heard the rival submissions and perused the materials available on record. We find that this issue is squarely covered in favour of the assessee by the order of this tribunal in assessee s own case for the Asst Year 2013-14 in ITA No. 16/Kol/2017 dated 14.3.2018 wherein it was held as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that the payer (the assessee herein) would not get affected if the recognition granted to the payee had been withdrawn subsequent to the date of contribution by the assessee. Hence no disallowance u/s 35(1)(ii) of the Act could be made in the instant case. 8.3. We find that there is no provision in section 35(1)(ii) of the Act to withdraw the recognition granted to the assessee therein. When there is no provision for withdrawal of recognition in the Act, the action of the revenue in withdrawing the recognition with retrospective effect from 1.4.2007 is unwarranted. In this regard, the recent decision of the Hon ble Supreme Court in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd vs CIT Gwalior reported in (2018) 90 taxmann.com 281 (SC) wherein it was held that :- 21. In our considered opinion, the CIT had no express power of cancellation of the registration certificate once granted by him to the assessee under Section 12A till 01.10.2004. It is for the reasons that, first, there was no express provision in the Act vesting the CIT with the power to cancel the registration certificate granted under Section 12A of the Act. Second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n nature. 28. The issue involved in this appeal had also come up for consideration before three High Courts, namely, Delhi High Court in the case of DIT (Exemptions) v. Mool Chand Khairati Ram Trust [2011] 11 taxmann.com 42/199 Taxman 1/339 ITR 622, Uttaranchal High Court in the case of Welham Boys' School Society v. CBDT [2006] 285 ITR 74/[2007] 158 Taxman 199 and Allahabad High Court in the case of Oxford Academy for Career Development v. Chief CIT [2009] 315 ITR 382. 29. All the three High Courts after examining the issue, in the light of the object of Section 12A of the Act and Section 21 of the General Clauses Act held that the order of the CIT passed under Section 12A is quasi judicial in nature. Second, there was no express provision in the Act vesting the CIT with power of cancellation of registration till 01.10.2004; and lastly, Section 21of the General Clauses Act has no application to the order passed by the CIT under Section 12A because the order is quasi judicial in nature and it is for all these reasons the CIT had no jurisdiction to cancel the registration certificate once granted by him under Section 12A till the power was expressly conferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rules under the normal provisions of the Act, in the facts and circumstances of the case. 9.1. We find that the issue is squarely covered in favour of the assessee by the decision of this tribunal in the case of REI Agro Ltd reported in 144 ITD 141 (Kol Trib) wherein it was held that only dividend bearing investments is to be considered for computing disallowance under Rule 8D(2)(ii) and 8D(2)(iii) of the Rules. We hold that the ld CITA had rightly granted relief to the assessee in this regard by placing reliance on the said decision. Hence we hold that only dividend bearing investments are to be considered for the purpose of computing disallowance u/s 14A of the Act read with Rule 8D of the Rules. Accordingly, the Grounds raised by the revenue in this regard are dismissed. 10. The next issue to be decided is as to whether the disallowance u/s 14A of the Act read with Rule 8D of the Rules could be made while computing book profits u/s 115JB of the Act, in the facts and circumstances of the case. 10.1. We find that this issue is squarely covered in favour of the assessee by the decision of this tribunal in the case of M/s.CD Equifinance Pvt Ltd vs DCIT in ITA No. 577/Kol/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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