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TMI Blog2021 (11) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... could have done the impossible and known that subsequently the approval will be withdrawn. Accordingly,we set aside the order of authorities below. The assessee is therefore held to be eligible for deduction under section 35(1)(ii) - Decided in favour of assessee. - I.T.A. No. 4461/Mum/2019 - - - Dated:- 21-10-2021 - Shri Shamim Yahya ( AM ) Assessee by : None Department by : Ms. Smita Verma ORDER This appeal by the assessee is directed against the order of learned CIT(A) dated 24.1.2019 pertains to A.Y. 2014-15. 2. Grounds of appeal read as under:- 1. On the facts and in the circumstances of the case and in aw the order passed by the Hon'ble CIT (Appeal) is invalid and bad in law. 2. The Ld. AO as well as Hon'ble CIT(Appeal) failed to interpret and apply the explanation to Section 35 which states that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings u/s. 147 of the Income-tax Act, 1961 and obtaining necessary approval u/s. 151 of the Income-tax Act, 1961. 5. The Assessing Officer and learned CIT(A) have disallowed the said payment on following reasoning:- The assessee has failed to explain as to how such payment made to M/s. School of Human Genetics and Population Health, Kolkata could qualify as 'expenditure laid out or expended on scientific research related to the business, has led to or facilitated an extension of that business', so as to fulfill the conditions of section of the Income Tax Act, 1961, On the contrary, as per the submission made by the assessee vide letter dated 01.11.2017, it is seen that the net profit margin of 'Business' have been constantly deteriorating from 53.05% to 49.14% from A.Y. 2012-13 to A.Y. 2014-15. In any case, the assessee is an Agent for Insurance, mutual funds and Bonds operating from residence, for which any 'Scientific Research' is highly unlikely to be required. Further on the other hand, it has been proven beyond doubt that the activities of M/s. School of Human Genetics and Population Health; Kolkata are not genuine. 6. Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udice to the assessee rather primary onus that lay on the assessee was not discharged by the assessee. Thus, we uphold/sustain the orders of learned CIT(A) in which we do not find any infirmity, which we confirm/sustain. The assessee fails in this ground. We order accordingly. 7.2.8 In this regard, the pivotal point to be noted here is whether the appellant has proved that the donation given by her has been utilized by the said trust in carrying out scientific industrial research activities for which it had been noticed by the Income Tax Authorities to avail the benefits of Section 35(1)(u) of the LT. Act, 1961. Unless the appellant has made sure that the said trust is into scientific research, it is very unlikely that the appellant would donate such a huge amount of money. In this regard, if is considered appropriate to take support of the ratio laid down by the Hon'ble ITAT C Bench, Mumbai in its order dated 21.06.2017 wherein the Hon'ble Tribunal in adjudicating the issue relating to Section 35(1)(iv) has held as under:- 11. We fail to understand how the assessee incurs only capital expenditure on R D relating to its own business without incurring any rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indore Tribunal) it was found as a fact that the assessee was doing research in the field of development of wind power on its own which was used for the benefit of public. Therefore, it was held that the assessee was eligible for deduction Under Section 35(1)(iv) of the Act However, the facts are different in case of the assessee, as the assessee is not doing anything for the benefit of the public. On the other hand, in case of Ciba India (P.) Ltd. v. Income tax Officer, 9(1)3, Mumbai (Supra) the Tribunal held that assessee is not entitled to claim deduction Under Section 35(1)(iv) of the Act as the capital expenditure on scientific research related to its subsidiaries. The ITA Nos. 4240/Mum/2013 (AY. 2007-08) M/s. SI GROUP INDIA LTD other decisions cited by the Learned. AR were found to be factually distinguishable, hence, not applicable to the assessee's case. In view of the aforesaid upholding the impugned order of Ld. CIT we dismiss the grounds raised by the assessee. 12. In the result assessee's appeal is dismissed. 8. Against the above order the assessee is in appeal before the ITAT. 9. I have heard learned Departmental Representative and perused the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be penalized and the amount of donations claimed by the assessee on account of payment to the said school cannot be denied. In the case of Narbheram Vishram Qua, ITA No. 42 43/Kol/2018, order dated 27.07.2018, the Kolkata Bench of the Tribunal under similar circumstances and facts has held as under:- 13 we have given a careful consideration to the rival submissions and perused the materials available on record, we note that the assesses has challenged disallowance of weighted deduction of ₹ 4,81,25,000/- for A.Y. 2013-14 and disallowance of weighted deduction of ₹ 10,50,00,000/-, for A.Y. 2014-15, claimed by him under section 35(1)(ii) of the Act in respect of the amounts of donations made to two Institutions viz. 'Matrivani Institute Experimental Research Education' (hereinafter referred to as 'Matrivani') and 'The School of Human Genetics and Population Health' (hereinafter referred to as 'SHG'). The Assessee Firm in A.Y. 2014-15, made donation of ₹ 2,00,00,000/to Matrivani and ₹ 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% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rokers recorded by the Investigation Wing in course of survey proceedings, in their cases and the extracts of which was provided to the assesses in the show cause notice, the name of the assessee firm does not appear anywhere. It is to be noted that none of those persons implicate the assessee to have made bogus donations and that cash was paid to the donors assessee in lieu of the alleged bogus donation after deducting their commission. We note that the statements of the various parties and persons were recorded behind the back of the assessee and the Assessing Officer did not allow opportunity of cross examination. We note that in absence of opportunity of cross-examination no reliance could be made on such statements to draw any adverse inference against the assessee firm. The assessee firm denied its knowledge of the statements made by these institutes which were relied on 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;The School of Human Genetics and Population Health', therefore these institutions are not entitled to claim benefit under section 35 (1) (ii) of the Act. We note that the withdrawal of recognition u/s. 35(1)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assesses herein for claim of weighted deduction u/s. 35(1)(ii) of the Act, for that we rely on the judgment of the Coordinate Bench, Kolkata, in the case of M/s. Maco Corporation India (P) Ltd., ITA No. 16/Kol/2017, for Assessment Year 2013-14, wherein it was held as follows: 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 fill 01.10.2004; and lastly. Section 21 of 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 cance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, hold that the deduction u/s. 35(1)(ii) of the Act cannot be denied to the assessee. Accordingly, we direct the AO to grant deduction u/s. 35(1)(ii) of the Act. Appeal of the assessee for the assessment year 2013-2014 (ITA No. 6672/Mum/2017) is hereby allowed. 12. We note that facts in the present case are identical. The withdrawal of the approval to the payee has taken place subsequent to the payment by the assessee. The assessee's case duly follows under section 35(1)(ii) of the Act which read as under:- Section 35(1)(ii) : an amount equal to one and one half times of any sum paid to a research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research: Provided that such association, university, college or other institution for the purposes of this clause- (A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and (B) such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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