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TMI Blog2018 (10) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14. 2. The sole issue involved in this appeal of revenue is against the action of Ld. CIT(A) in deleting the disallowance of deduction u/s. 35(1)(ii) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) of ₹ 1,05,00,000/-. 3. Briefly stated facts are that the AO noted from the details filed by the assessee that the assessee has made donations to M/s. Herbicure Healthcare Bio-Herbal Research Foundation (hereinafter M/s. HHBHRF) a sum of ₹ 60 lakhs and claimed weighted deduction of 175% u/s. 35(1)(ii) of the Act from its taxable income. The AO also noted that a survey operation was conducted by the Investigation Wing, Kolkata against the said concern M/s. HHBHRF on 27.01.2015 and it was found that the aforesaid concern was engaged in providing bogus donation u/s. 35(1)(ii) of the Act to beneficiaries like assessee to enable them to claim deduction of 175% of the amounts purported to have been paid as donation to it. Consequently, the AO issued show cause notice which is available from page 2 to 5 of the assessment order. Reply was filed by assessee, which is available at pages 5 and 6 of the assessment order. The reply of the assessee was unaccept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) rightly allowed the claim of the assessee. It is not in dispute that M/s. HHBHRF was enjoying the approval within the meaning of Sec. 35(1)(ii) of the Act as on the date of receipt of donation and retrospective cancellation of approval of the concerned institution, the deduction claimed in respect of donation cannot be denied. This view of ours has been approved by the Hon ble Bombay High Court in Seksaria Biswan Sugar Factory Ltd. and Another vs. Inspecting Assistant Commissioner and Others (1990) 184 ITR 123 and this view this Tribunal has been consistently taken when application of weighted deduction claimed against M/s. HHBHRF has come before us. Moreover, our view is fortified by the Explanation given u/s. 35(1)(ii) of the Act is reproduced under: Section 35(1)(ii) - Explanation. The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution to which clause (ii) or clause (iii) applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nized in the year 2006-07 as a Scientific Industrial Research Organisation (SIRO) by Ministry of Science Technology, Govt. of India. M/s. Herbicure was also recognized vide gazette notification no. 35/2008 dated 14.03.2008 issued by CBDT, Ministry of Finance u/s. 35(1)(ii) of the Act (Paper book page 23). The Ld. AR drew our attention to letter dated 01.02.2013 by M/s. Herbicure which is evident from page 21 of the paper book wherein the said M/s. Herbicure has requested the assessee for donation u/s. 35(1)(ii) of the Act. A perusal of the letter shown that M/s. Herbicure has claimed itself to be a non profitable scientific research institute carrying out research, drug testing and other allied activities as per the objective of the Ministry of Science Technology, Govt. of India seeking generous donation and has given its details like name, certificate of incorporation, 12A registration, gazette notification u/s. 35(1)(ii) of the Act, renewal of SIRO dated 31.03.2015 vide order dated 13.08.2012 in Memo No. 14/444/2006TUV by the Ministry of Science Technology, Govt. of India. FCRA registration renewal of 80G which was renewed vide certificate of exemption u/s. 80G(5)(vi) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith whom the said transactions are being made. Your attention is further been drawn to the computer extracts taken out of the tally which was found in your e-mail. These pages are related to the bank book of Herbicure Healthcare Bio-Herbal Research Foundation wherein it is clearly reflected that the amount of ₹ 25 lakh (in two trenches) received from OCL India Ltd on 15.07.2011, ₹ 25 lakh received from OCL India Ltd. on 11.08.2011 17.08.2011 are immediately being transferred to A.S. Enterprises which is a paper company on the same dates. Similar trend is visible in the case of Donations received from other parties where just immediately after the receipt of donation amount the same is being transferred to the account of any paper company. In view of the same you are once again being given an opportunity to speak the truth and explain the transaction reflected from your bank book as above. Ans. Sir, I wish to state that our concern Herbicure Health are Bio-Herbal Research Foundation was incorporated in the year 2003 u/s 25 of the Companies Act, 1956 which was recognized in 2006-07 as a scientific and industrial research organization (SIRO) by the Ministry of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus companies on account of bogus purchase/expenses on the advice of Mr Kishan Bhawasingka. The remaining transaction is also managed on paper by him only which happens in the form of routing of the donation amount through his bogus/paper companies in 2 to 3 layer. Finally, cheque of the donation amount (after deducting the cut of commission charged by us and broker Mr Kishan Bhawasingka) is given back to the original beneficiary who gave donation to us. Sometimes, the amount is withdrawn at 3rd or 4th level and cash is given back to the original beneficiary (after deducting the cut of commission charged by us and broker Mr Kishan Bhawasingka) who gave donation to us. In this entire process of providing entry in the form of bogus Donation to different beneficiary Companies/ Individuals a commission of 5 % approx is charged by us which is the actual donation we receive front that particular donor in reality. The commission of almost 5 to 8 % is charged by Mr. Kishan Bhawnsingka for facilitating the said accommodation entry. Subsequently, a sanction letter is received from the donor reflecting the amount of donation and mode of payment. The particulars are then verified w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the partners answered that they had visited the premises of M/s. Herbicure on two occasions and for question no. 16 as to whether the partners were satisfied with the work of scientific research carried on by the said M/s. Herbicure, the partners of the assessee firm had replied that during their visit at Pailan and Baral they were satisfied with the scientific research work and for question no. 17 the partners replied that they had seen the certificate issued by Govt. of India and also have gone through the research paper of the people working there. For question no. 20 they have given the name of the doctor who was a Cardiologist who introduced them to M/s. Herbicure. We note that the AO enquired about Dr. Bhuban Chakraborty s address for which the partner replied that the doctor resides at Kshudiram Sarani, Rathtala, Kolkata. For question no. 21 as to whether they knew about the Directorate of Investigation, Kolkata carried out survey u/s. 133A and that its investigation is found that the activities were not genuine, the partners replied that they were not aware of the survey, however, they added that after their visit of the two centers they were on a bonafide belief that M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion no. 22 and 23 and answers given by Shri Swapan Ranjan Dasgupta, wherein he admits to provide accommodation entries in lieu of cash. This information we should say can be the tool to start an investigation when the assessee made the claim for weighted deduction. The general statement of Shri Swapan Ranjan Dasgupta against donation made the claim of assessee for deduction suspicious. However, when the AO investigated, Shri Swapan Ranjan Dasgupta has confirmed that M/s. Herbicure was in receipt of the donation and it has not given any refund in cash, then the sole basis of disallowance of claim as a matter of fact disappeared. It should be remembered suspicion howsoever strong cannot take the place of evidence. The confirmation from Shri Swapan Ranjan Dasgupta fortifies the claim of the assessee for weighted deduction u/s. 35(1)(ii) of the Act. The sole basis of the addition/disallowance based on statement recorded on oath during survey cannot be allowed as held by Hon ble Supreme Court in Kader Khan sons (supra). Moreover, we note that if the AO was hell bent determined to disallow the claim of the assessee, then he should have granted an opportunity to cross examine Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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