9911796707
TMI Blog2023 (7) TMI 1510X X X X Extracts X X X X X X X X Extracts X X X X ..... of facts, based on the material placed before it by the Revenue in voluminous paper books gathered in the course of survey conducted u/s. 133A in the case of the donee trusts as well as post survey enquiries. In the present case before us, the donee trusts are the same whose facts and credible material were brought on record by the Revenue and considered by the Coordinate Bench. Claim of deductions by the donors have already been disproved by the Revenue by dispelling the claim of first onus discharged by the donors, on the strength of credible material. These fact findings are substantive and cannot be overlooked in the present case wherein the donee trusts are the same. There is nothing brought on record by assessee to rebut these factual findings except for relying on the judgment of Chotatingrai Tea [ 1998 (12) TMI 81 - GAUHATI HIGH COURT] which is distinguished in the light of recent judgment of Batanagar Education and Research Trust (supra) as discussed above. Thus, we hold that assessee is not entitled for the deduction claimed u/s. 35(1)(ii) of the Act in respect of payments made to both SHGHP and MIERE(the done trusts). Relief granted by CIT (A) on this issue is set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted in the Fogla Group of cases. Requisite notices u/s. 143(2) and 142(1) were issued which were complied with. However, Ld. AO being not satisfied, disallowed the following expenses :- i) Expenditure on Scientific Research - Rs.1,00,00,000/- ii) Expenses u/s. 14A - Rs. 96,383/- 3.1. During the course of assessment proceedings, Ld. AO found that assessee had made donation to the tune of Rs. 50,00,000/-each to School of Human Genetics Population Health (SHGPH) and Matrivani Institute of Experimental Research Education (MIERE) and claimed the first Rs. 50 lacs paid to SHGPH as deduction u/s. 35(1)(ii) and the second Rs. 50 lacs paid to MIERE u/s. 80G of the Act. 3.2. During the course of assessment proceedings, assessee took note of its mistake in claiming deduction in respect of donation of Rs. 50 lacs made to MIERE u/s. 80G instead of u/s. 35(1)(ii) of the Act. The mistake was rectified by submitting a revised computation of total income which was of Rs. 6,59,73,070/-. Ld. AO did not give cognizance to the rectification as claimed by the assessee. 3.3. It is noted from the order of the Ld. AO that survey was conducted at the premises of both the donees mentioned above and found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p of shell companies and paper concerns. No original research was carried out by these institutions. Rather, they were showing published materials of other institutions as their research work. Most of the persons working in these institutions did not have educational qualification or experience to be a researcher. In view of these facts, assessee was asked to furnish explanation regarding genuineness of donation given. 4.1. In reply, assessee submitted that before giving donations, assessee had checked the antecedent of these institutions and it was found that they had met all the criteria as given in the Act for accepting donation u/s. 35(1)(ii). Even approval granted to these institutions was renewed by the Department in the year 2010. It was further submitted that as per section 35(1)(ii), deduction would not be denied merely on the ground that subsequent to the payment of such sum by the assessee, approval granted to the Association, University, College or other institutions has been withdrawn. Ld. A.O. was not satisfied with the reply of the assessee. Huge donations were being given to said institutions and these huge donations would not have been given without verifying the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lth and M/s. Matrivani Institute of Experimental Research Education, these Institutions had valid Registration under the I.T. Act the Society Registration Act and they also had valid approval as Scientific Industrial Research Organization. Approval granted u/s. 12A of the I.T. Act, 1961 was withdrawn vide order dated 25-04-2016 w.e.f. 01-04-2011. Thus, the order of withdrawal had a retrospective effect. Similarly, the approval granted by the Ministry of Science Technology was valid till 31-03-2016 and assessee had requested for renewal which was not accepted and its status as SIRO was withdrawn vide letter dated 14-03-2017. Appellant has cited a number of case laws where it has been held that subsequent withdrawal of approval would not have any adverse impact on the claim of deduction u/s. 35(1)(ii). Jurisdictional ITAT, Kolkata in the case of DCIT, Circle-12(1) vs. M/s. Maco Corporation (India) (P) Ltd. (supra) in its order dated 14-03-2018 has considered this issue and in that case also donations were given to the two institutions, they are i) M/s. School of Human Genetics Population Health and ii) M/s. Herbicure Healthcare Bio-Herbal Research Foundation. Facts in M/s. Maco Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Income-tax Appellate Tribunal, Gauhati ('the Tribunal'), remanding the matter back to the Assessing Officer for the purpose of determining whether the assessees who had, admittedly, fulfilled the conditions for claiming deduction under section 35CCA of the Income-tax Act ('the Act'), could subsequently become disentitled to the said deduction by reason of subsequent events. Section 35CCA provides : Expenditure by way of payment to associations and institutions for carrying out rural development programmes.-(1) Where an assessee incurs any expenditure by way of payment of any sum- (a) to an association or institution, which has as its object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved by the prescribed authority; or ** ** ** the assessee shall, subject to the provisions of sub-section (2), be allowed a deduction of the amount of such expenditure incurred during the previous year. (2) The deduction under clause (a) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution referred to in the said clause unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essees, the Tribunal found, as a matter of fact that the assessee had fulfilled all the conditions under section 35CCA of the Act for grant of deduction thereunder. The Tribunal also found that the assessees' position could not be affected by any subsequent withdrawal of the certificate granted by the prescribed authority under section 35CCA but found that there was no evidence in support of the Revenue's case that the assessees had received back the amount donated by them to the society. However, the matter was remanded back to the Assessing Officer for fresh disposal for the purpose of determining whether the money had in fact been utilised of an approved programme. Pursuant to the directions of the High Court the following questions were referred under section 256(2) of the Act: 1. Whether, on the facts and in the circumstances of the case, the Tribunal having held that the assessees have fulfilled all the conditions laid down in section 35CCA of the Income-tax Act, 1961, read with rule 6AAA of the Income-tax Rules for deduction of the amount donated to the approved society, which had not come back to the assessee soon after or later on in some form or the other, that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord and gone through the judicial precedents referred before us. The issue before us has been dealt by the Coordinate Bench of ITAT, Kolkata recently in a bunch of cases namely, Tarasafe International Pvt. Ltd. and Others in ITA No. 261/Kol/2020 Ors. for which the order was pronounced on 07.03.2023. 7.1. The question in dispute before the Coordinate Bench in the bunch of appeals, the arguments put-forth on behalf of the assessee by various counsels and the finding arrived at by the Coordinate Bench after considering the facts and circumstances as well as various judicial precedents are reproduced as under: Question in dispute 13. With the assistance of ld. Representative, we have gone through the record carefully. The solitary issue involved in all these appeals relates to- whether the appellants are entitled to weighted deduction @ 175% of the donations given by them to allege Research Institute namely SHG PH under section 35(1)(ii) of the Act. 14. It is imperative upon us to take note of this provision, the relevant part reads as under:- Expenditure on scientific research 35. (1) In respect of expenditure on scientific research, the following deductions shall be allowed- (i) . (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department. In other words, the section contemplates approval of prescribed authority for carrying out research work. If such approval is available, then donations given by the donor is allowed to be deduction given in the provision. While elaborating this contention, he submitted that authorities whenever required to approve any Institute engaged in research work, they carry out necessary inquiries/ investigation to ensure the genuineness of such Institution and after analysis all the objects, activities, personnel, who will be managing such organisation, they approve such an organisation to receive donation. Thus a person/entity, who wishes to avail the benefit of section 35(1)(ii) by contributing a specified sum, is not supposed to and in fact is not equipped with so much tools to verify genuineness of the activities of such Institution. It is a bonafide belief that once approval is granted by CBDT, contribution made to such Institution will qualify exemption, more particularly when such Institution is not related at all to the assessee and the assessee has no control whatsoever over the activities of such Institution in any manner. Ld. Counsel for the assessees drew our att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 63 to 81, a list of the alleged bogus donors has been placed by the Revenue. Such list has been prepared on the basis of alleged brokers, who have arranged the donations to the Institution and a total revenue received through by means of such donation is Rs, 159,36,11,602/-. In other words, it is Rs. 159.36 crores. Similarly one more list has been placed on pages no. 136 to 159, where the Revenue has complied with PAN, Data, who has availed weighted deduction on this bogus donation. On the strength of all these details, it was submitted by the Revenue that during the course of assessment proceedings in all these appeals, the ld. Assessing Officer has confronted the assessees with the material discovered during the course of survey on the premises of the recipient. None of the assessees has justified their claim. They are only harping upon bonafide. He pointed out that originally the Institute might have prepared the documents and submitted for carrying out the research activities. The motive might be genuine but ultimately it detracted from its motive and indulged in fraudulent activities with the help of brokers. The ld. CIT(DR) thereafter made reference to the decision of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e strength of this decision, ld. Counsel for the assessee submitted that Hon'ble High Court has explained the ratio laid down in Batanagar Education Research Trust and, therefore, this subsequent decision is to be followed. Finding:- 23. The Department has filed a paper book containing 268 pages in M/s. Tarasafe International Pvt. Limited. On second page of the paper book, order of the Settlement Commission dated 22.07.2016 passed under section 245D(4) of the Income Tax Act has been placed on record. In this order, Settlement Commission has noticed the facts of assessee before them, i.e. SHG PH. Such facts have been noticed by them on the basis of statement of facts filed before them. We deem it appropriate to take note of the facts about the Institution, who has received such a huge donation. As emerging out from that order, the facts are that the Society SHG PH was registered under West Bengal Society Registration Act, 1961 on 26.04.1993. It was founded by Professor D.P. Mukherjee, the Society was formed with the objective of service oriented researches in the field of Human Genetics and to address all the problems ailing the population i.e. epidemics, ethnicity and ethos of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n various national international journals. The society had ongoing community projects i.e. Kangaroo Project exclusive breast feeding in urban and rural Ben; health situation assessment studies at Ruppur Birbhum, West Bengal and had acquired six acres of land at Ruppur, Birbhum, along with 3 building structures for care centre for elders and disabled senior citizens. Besides, the lab of applicant society is located in approx. 1000 sq. ft space at 6A, Malanga Lane, Kolkata-12, which has been taken on rent of Rs. 28,000/-p.m. Various machines and equipments have been purchased for various research/testing etc. by the society at Rs. 25 lakh. In addition, the donee has also incurred huge expenses or chemicals, Primars and other consumables for research work, salary and rent etc. 26. It was further, submitted that as the society had inadequate financial resources, it was made to understand by certain persons acting as mediators about a way of earning some income as commission through the route of giving accommodation entries for 'donations'. The Society was enticed into accepting cheques towards 'donations' and refunding almost similar amounts by debiting the payments und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt has reproduced the finding of the Tribunal recorded in paragraph no. 2, 4, 5 6 verbatim and thereafter held that no question of law is involved. This finding reads as under:- 6. Learned Senior Advocate Mr. M.R. Bhatt for the appellant submitted that there no appeal is filed by the Revenue against the decision of the Tribunal in the case of S.G. Vat Care Private Limited (supra). It would therefore be germane to refer to the following findings, given by the Tribunal in the case of S.G. Vat Care Private Limited (supra):- 2. In the first ground of appeal, the grievance of the assessee is that the ld.CIT(A) has erred in confirming addition of Rs. 8,75,000/-on account of alleged bogus donation to Herbicure Heathcare Bio-Herbal Research Foundation. 3. Brief facts of the case are that the assessee has filed return of income on 20.11.2014 declaring total income at Rs. 4,47,910/-. On scrutiny of the accounts, it revealed that the assessee-company has given donation to Herbicure Healthcare Bio-Herbal Research Foundation, Calcutta. A survey action was carried out at the premises of the donee wherein it revealed to the Revenue that this concern was misusing the benefit of notification issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough Bank channel and there is no evidence that the same is returned back in cash. 8. It is also found that the Herbicure Foundation has confirmed that the amount has been utilized for scientific research vide confirmation dated 29.09.2016. Accordingly, the onus placed upon the assessee was discharged. 9. In view of the aforesaid findings of the fact given by both the authorities below, no interfere in the impugned order passed by the Tribunal is required to be made. No substantial question of law arises from the order of the Tribunal. Therefore, the appeal fails and is hereby dismissed. Sd/- Sd/- (J.B. Pardiwala, J) (BHARGAV D. KARIA, J) 30. The same line of reasoning has been developed everywhere including ITAT, Kolkata. The order of the ITAT, Kolkata got the approval of the Hon'ble High Court, a reference can be made to the decision of the Hon'ble Calcutta High Court in the case of Pr. CIT-vs. Mackaw Corporation (2022) 8 TMI 1750, ITA 42 of 2020, G.A. No. 2 of 2019, Old G.A. No. 1477 of 2019. 31. The ld. Counsels have emphasized that under identical circumstances, deductions have been allowed by the ITAT and the order of ITAT has been upheld by the Hon'ble High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like to refer the statement of one of the brokers Shri Vijay Kumar Agarwal, son of Late Mohan Lal Agarwal, aged about 65 years. His statement was recorded under section 131 of the Income Tax Act, 1961 on Oath on 23.02.2015, which was in continuation of his statement recorded dated 13.02.2015 i.e. subsequent to the survey conducted upon SHG PH. Copy of this statement along with the statements of other brokers have been placed by the Revenue and copy of the statement of Shri Vijay Kumar Agarwal is available on pages 82 to 90 of the paper book. Certain questions and their answers are very important in order to demonstrate the modus operandi adopted by them:- Q. 6. What is your source of income? Ans. My main source of income is from brokerage by raising bogus bills for various beneficiaries/parties. Q. 13. How do you know the Trust called School of Human Genetics Population Health (SHGPH)? Ans. Initially, I came with the contact of Smt. Moumita Raghavan, President and Smt. Samadrita Mukherjee Sardar, Secretary of School of Human Genetics Population Health through a market broker named Shri Sailesh Gupta, residing at howrah who approached me for bogus billing. After that, I have direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of note number. The Angaria's commission was given by the donors and Angaria's commission was not the part of my job. This is how the whole system was run. Q. 11. Kindly provide the list of donors with amount for whom you have worked. Ans. I will submit all the required details by 27.03.2015. 36. In identical manner, other brokers have deposed and thereafter provided the details of the donors, which are also compiled with and certain details are available on pages 63 to 81 of the paper book filed by the Revenue. The ld. Assessing Officer armed with the above materials, confronted all these assesses during the assessment proceedings itself, the Officer brought to the notice of the assessees about the outcome of the survey and how these donations are to be treated as bogus. 37. The stand of all these appellants right from the ld. Assessing Officer upto the Tribunal is that since Institution was approved by the Competent Authority to receive donation. This approval was intact when they have made the donation. Therefore, under bonafide belief, they have given the donations and on the basis of post donation, material collected by the Revenue should not be used against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which point a figure to the circumstances, which are to be explained by each appellant. Their first onus discharged by them has been dispelled by the ld. Assessing Officer with credible material. If the appellants are of such a spirited Corporate House, who wants to build the research organisation of the nation, then they have to demonstrate how such donations were given in the past or in the subsequent period. We have confronted them specifically, but none of the assesses except M/s. H.K. Dutta Company could submit anything in this regard. In the case of this Company, ld. Counsel for the assessee has submitted that small amount of donation has been given to a different organisation in the next year. Therefore, if we weigh the simple plea of the appellants about their bonafide belief for giving such donations, vis-a-vis huge materials collected by the Revenue demonstrating the fact how such a belief is misplaced, then, the scale would tilt in favour of the revenue. It is to be appreciated that roughly 720 entities including individuals available in a part-list on pages no. 72 to 81 of the paper book compiled by the Revenue would have not formed a bonafide belief about giving donat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this judgment, a judgment of the Hon'ble Calcutta High Court in the case of Mackaw Corporation has been passed, which has been relied upon by the ld. Counsel, but in this decision, Hon'ble High Court has not considered the judgment of the Hon'ble Supreme Court, because the judgment of the Hon'ble Supreme Court in the case of Batanagar Education Research Trust was not cited by both the parties. 40. The ld. Counsel for the assessee, Shri Soumitra Chowdhury, during the course of argument submitted that in the decision rendered on 26.04.2022 in the case of Commissioner of Income Tax (Exemption), Kolkata-vs.-Sanskriti Sagar, this judgment of the Hon'ble Supreme Court was considered. 41. We find that in this case, the assesese was recipient of a small donation of Rs. 85,000/-from Herbicure and on the basis of receipt of this donation, its registration was sought to be cancelled. The Hon'ble High Court has propounded that the decision in the case of Batanagar Education Research Trust is not applicable on the facts of that case because Sanskriti Sagar has neither given any donation to this Trust and claimed deduction under section 35(1)(ii) nor it has returned the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge number of assessees have claimed long-term capital gain/loss. The Income Тах Department has carried out search/survey upon different entities, which unearthed that certain companies and professionals were providing such claim in the shape of accommodation by manipulating the stocks of certain shell companies. The Hon'ble Court has made a detailed analysis of the material found during the course of search and survey on the premises of third entities and set aside the orders of the ITAT in a group of appeals by holding that such claim by the assessees for long-term capital gain was a bogus claim. The Hon'ble Court has considered the material collected by the Investigating Wing of the Department on the premises of certain companies, who were manipulating the stocks or indulging any accommodation entry business. If we apply the ratio of this judgment upon these cases, then it would reveal that the benefit of claim under section 35(1)(ii) is outcome of an organized fraud with the help of certain manipulators. Therefore, we do not find any material in the first-fold of arguments raised by the ld. Counsels for the assessees. The appellants are not entitled fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set at rest. 8.2. The apprehension stated above was addressed in the Hon'ble Apex Court judgment subsequent to the above judgment of Chotagtingrai Tea (supra), wherein issue relating to status of SGHPH as a trust for retaining its registration under section 12AA and 80G of the Act came before it in the case of CIT(E) Vs. Batanagar Education and Research Trust [2021] 129 taxmann.com 30(SC) dated 02.08.2021. Important fact noted in this case in para 3 reads as under: 3. In a survey conducted on an entity named School of Human Genetics and Population Health, Kolkata under section 133A of the Act, it was prima facie observed that the Trust was not carrying out its activities in accordance with the objects of the Trust. A show cause notice was, therefore, issued by the CIT on 04.12.2015. 8.3. By invoking section 12AA(3), registration of the said trust was cancelled including the approval granted u/s. 80G. Appeal filed by the trust before the Tribunal was dismissed by recording fact-based finding that from the evidence on record, it is clear that activities of the trust were not genuine and hence their registration is liable to be cancelled. conclusion of the Tribunal arrived at afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear from the evidence on record that the activities of the Assessee were not genuine and hence their registration is liable to be cancelled u/s. 12AA(3) of the Act, and was rightly cancelled by the CIT(E). We therefore, uphold his orders and dismiss both the appeals by the assessee. [emphasis supplied by us by bold and underline] 8.4. Matter travelled before the Hon'ble Apex Court who gave its factual finding that the donations were bogus, out of which substantial money was ploughed back or returned to the donors in cash. According to the Hon'ble Court, registration conferred upon it under section 12AA and 80G of the Act was completely being misused by the Trust. Thus, cancellation of registration is justified. Hon'ble Supreme Court in conclusion, further noted that High Court erred in not dealing with the conclusion drawn by the CIT and the Tribunal. Relevant extracts of the conclusion arrived at by the Hon'ble Supreme Court in para 11 and 12 are as under: 11. The answers given to the questionnaire by the Managing Trustee of the Trust show the extent of misuse of the status enjoyed by the Trust by virtue of registration under section 12AA of the Act. These answers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Lahiri, Managing Trustee of the assessee, i.e. Batanagar Society was recorded. The Secretary, Smt. Samadrita Mukherjee Sardar and Treasurer Smt. Moumita Raghavan of SHG PH have categorically deposed in their statements that source of income of SHG PH was the money received in the form of donations from Corporate Bodies as well as from individuals. The assessee Batanagar Society was selected by the brokers, who have arranged the donations to SHG PH as a conduit for receiving the donations from SHG PH. This donation was to be returned back to those Corporate Houses and individuals in cash after layering the transaction and the Batanagar Education Research Trust would also retain commission income for such an activity. On the basis of that, its registration was cancelled by the ld. Commissioner (Exemption) by exercising the powers under section 12AA(3). This order was upheld by the ITAT. However, on further appeal, Hon'ble High Court has reversed this order but Hon'ble Supreme Court restored this order, in other words upheld the cancellation of the registration to Batanagar Education Research Trust. In this judgment, Hon'ble Supreme Court has made reference to the outco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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