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TMI Blog2018 (11) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... im of weighted deduction u/s 35(1)(ii). As relying on DCIT, CIRCLE-12 (1), KOLKATA VERSUS M/S MACO CORPORATION (INDIA) PVT. LTD. [2018 (3) TMI 811 - ITAT KOLKATA] we direct the AO to grant deduction u/s 35(1)(ii). Disallowance u/s 14A - Held that:- We note that in this ground of appeal the Assessee Firm has challenged the disallowance u/s 14A. We note that in the case of REI Agro Ltd.[2014 (4) TMI 713 - CALCUTTA HIGH COURT] has held that it is only the investments which yields dividend during the previous year that has to be considered while adopting the average value of investments for the purpose of Rule 8D(2)(ii) & (iii) of the Rules. The assessee has submitted the details of dividend income vis a vis the value of investments in those shares. We direct the AO to compute disallowance u/s 14A read with rule 8D, only after considering the investments which earned the exempt income. Therefore, we allow this ground for statistical purposes. - ITA No.42 & 43/Kol/2018 - - - Dated:- 27-7-2018 - Shri S. S. Godara, JM And Dr. A.L.Saini, AM For the Assessee : Shri A. K. Tibrewal, FCA Shri Amit Agarwal, Advocate For the Respondent : Md. Usman, CIT, Sr. DR ORDER P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y confirming the disallowance of claim under section35(1)(ii) of the Act in complete disregard of binding judgments of Hon'ble JurisdictionalKolkata Tribunal deciding the very same issue relating to claim for deduction under section35(1)(ii) of the Act on similar set of facts, in favour of the assessee. 5. That, the Ld. Commissioner of Income Tax (Appeals) erred in arbitrarily confirmingthe disallowance of ₹ 66,08,861 made by the Assessing Officer under section 14A of thelncome Tax Act, 1961 read with Rule 8D of the lncome Tax Rules, 1962 without recordingmandatory satisfaction as required under law. 6. That, without prejudice to the Ground No.5 hereinabove, the Ld. Commissioner of Income Tax (Appeals) erred in arbitrarily confirming the disallowance of ₹ 66,08,861 madeby the Assessing Officer under section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962 without considering that the disallowance has to becomputed on the average value of those investments which yielded exempt income. 7. That, the impugned order dated 22nd November, 2017 passed under section 250 of the Income Tax Act, 1961 by the Ld. Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) the order u/s 245(D)(1) of the Act passed by Hon'bleSettlement Commission in the case of SHG; (ii) the copy of the statement of Mr.Samadrita Mukherjee Sardar recorded by DDIT (Inv) Unit - 4(3), Kolkata recorded on 27th January, 2015 in course of survey u/s 133A on SHG and (iii) copy of Page No. 86 of SurveyReport of SHG. 7. In response, the assessee submitted beforethe AO that the donations made by the Assessee Firm were genuine and not bogus asalleged. Although the name of the assessee appeared in the list of donations received bythe said SHG as shown in the survey report, there is no evidence to show that the saidamounts of donation were bogus and that the assessee firm received back the saidamounts in cash or in any mode whatsoever against the said donations. The Statement of Smt. Samadrita Mukherjee recorded under section 131 of the Act during the course of survey on SHG has no evidentiary value whatsoever and the same cannot be relied on to be used against the assessee firm to draw any adverse inference there from. Withoutprejudice to admissibility of the said statement to be used as evidence against theassessee firm, it was submitted that the said statement did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld CIT(A) noted that once the recipient of the donantion, namely, M/s School of Human Genetics Population Health has confessed that it was indulging in the modus operandi that it could avail a commission for laundering the unaccounted money of various parties including the assessee himself, the case of against the assessee is strengthened beyond the pale of any doubt. The ld CIT(A) noted that whole gamut of transaction of the donations are unnatural and highly suspicious and there the rule of Suspicious Transactions ought to apply in the assessee`s case under consideration. The CIT(A) also noted that assessee had produced papers relating to alleged donations and therefore all these papers are mere documents and not any evidence, therefore ld CIT(A) confirmed the addition made by AO to the tune of ₹ 4,81,25,000/-. 10. Aggrieved by the order of ld CIT(A), the assessee is in further appeal before this Tribunal. 11. The ld. Counsel for the assessee begins by pointing out that theassessee made donation to the School of Human Genetics and Population Health (SHG) and M/s. Matrivani, Kolkata u/s 35(1)(ii) of the Act and is eligible to claim weighted deduction @175%. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r referred to as Matrivani ) and The School of HumanGenetics and Population Health (hereinafter referred to as SHG ). The Assessee Firm in A.Y. 2014-15, madedonation of Rs,2,00,00,000/ to Matrivani and Rs,4,00,00,000/ to SHG and claimed weighted deduction of ₹ 10,50,00,000 under section 35(1)(ii) of the Income Tax Act, 1961, being 175% of the aggregate sum of ₹ 6,00,00,000/- (Rs,2,00,00,000 + Rs,4,00,00,000) donated to these two institutes which were approved bythe Central Government for the purposes of section 35(l)(ii) of the Act read with Rule 5C and5E of the Income Tax Rules, 1962. In the assessment year 2013-14, the assessee claimed weighted deduction of ₹ 4,81,25,000/- under section 35(1) (ii) of the Act, which is 175% of the amount of donation being the sum of ₹ 2,75,00,000/- in respect of the donation given to The School of HumanGenetics and Population Health . We note that the Notifications to this effect, that these two institutions viz: Matrivani and SHG , were approved by the Central Government for the purpose of section 35 (1) (ii) of the Act,was published in theGazette of India. However, the deduction claimed by the assessee was denied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Investigation Wing and the Assessing Officer. We note that not providing the opportunity of cross-examination is against the principle of natural justice and for that we rely of the judgment of Hon ble Delhi High Court in the case of CIT vs. Dharam Pal Prem Chand Ltd. [2007] 295 ITR 105, 108 (del).We note that on identical facts, the similar proposition wasupheld by the Coordinate Bench of Kolkata in the case of Rajda Polymers, ITA No.333/Kol/2017,for Assessment Year 2013-14 wherein it was held as follows: 10 ..Thus we note from the entire facts and circumstances, that the AO got swayed away with the statement recorded on oath of Mr. Swapan Ranjan Dasgupta during survey conducted at the premises of M/s. Herbicure. We have reproduced Question 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 Ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on the CIT by Section 12AA(3) of the Act w.e.f. 01.10.2004. We hold that the ratio decidendi of the aforesaid judgement of the Hon'ble Apex Court would squarely be applicable to the facts of the instant case. Infact the assessee's case herein falls on a much better footing than the facts before the Hon'ble Apex Court. In the case before Hon'ble Apex Court, the power of cancellation of registration us 12A of the Act was conferred by the Act on the ld CIT w.e.f. 1.10.2004 and the Hon'ble Apex Court held that prior to that date , no cancellation of registration could happen. But in the instant case, there is absolutely no provision for withdrawal of recognition u/s 35(1)(ii) of the Act . Hence we hold that the withdrawal of recognition u/s 35(1)(ii) of the Act in the hands of the payee organizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,203,890,402 Closing Balance Opening Balance Investment in equity shares 1,161,316,203 1,246,464,601 C Average total assets 4,269,881,115 Closing Balance Opening Balance Total assets 4,440,771,214 4,096,991,015 iii) % of average investment 6,019,452 Since the expenses disallowed u/s 14A as per computation submitted by the assessee company was only ₹ 20,60,327/- whereas total disallowable expenditure u/s 14A r.w.r 8D,as derived by the AO in the above mentioned table came to ₹ 86,69,188/-, the difference of disallowable expenses amounting to ₹ 66,08,861/- (Rs.86,69,188- ₹ 20,60,327) was disallowed and added back in the total returned income of the assessee. 19. On appeal by the assessee, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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