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Facts
The assessee claimed a deduction of Rs. 75,00,000/- under Section 35(1)(ii) for a donation made to Shri Arvindo Institute of Applied Scientific Research Trust. The Assessing Officer (AO) disallowed this claim, stating the institute was not approved for receiving such donations. The CIT(A) allowed the assessee's appeal, but the Revenue appealed this decision.
Held
The Tribunal considered the submissions and noted that the Institute's approval to receive donations under Section 35(1)(ii) had expired on March 31, 2006, and that subsequent donations were based on forged documents. The Tribunal also referred to previous judgments that upheld disallowance in similar cases.
Key Issues
Whether the disallowance of deduction under Section 35(1)(ii) for donation to an unapproved institution is justified, and if the appeal is admissible despite the tax effect being below the prescribed limit.
Sections Cited
35(1)(ii), 143(3), 144B, 12AA, 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA
O R D E R
PER SHRI NARENDRA PRASAD SINHA, AM:
This appeal by the Revenue and the cross objection filed by the assessee is directed against the order of the National Faceless Appeal C.O. No.44/Ahd/2025 (Assessment Year: 2018-19) ITO vs.Taylormade Renewables Ltd. Page 2 of 10 Centre (NFAC), Delhi (in short “the CIT(A)”) dated 13.12.2024 for the Assessment Year (A.Y.) 2018-19 in the proceeding under Section 143(3) read with Section 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2018-19 declaring total income of Rs.1,08,70,110/- The case of the assessee was selected for limited scrutiny to verify the deduction on account of donation for scientific research. The assessee had claimed deduction of Rs.75,00,000/- under Section 35(1)(ii) of the Act in respect of donation of Rs.50,00,000/- made to Shri Arvindo Institute of Applied Scientific Research Trust (hereinafter referred as “Institute”) for research in the field of solar and renewable energy products. The Assessing Officer had disallowed the claim of the assessee for the reason that the Institute was not approved to raise donation under Section 35(1)(ii) of the Act for the year under consideration. The assessment was completed under Section 143(3) of the Act on 02.09.2021 at a total income of Rs.1,83,70,110/-.
Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was allowed.
4. Now the Revenue is now in appeal before us. The following grounds have been taken in this appeal: - C.O. No.44/Ahd/2025 (Assessment Year: 2018-19) ITO vs.Taylormade Renewables Ltd. Page 3 of 10 “(a) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.75,00,000/- made by AO on account of disallowance of deduction u/s 35(1)(ii) of the Act, being bogus donation made to Shri Arvindo Institute of Applied Scientific research, without appreciating that the donee trust is engaged in non-genuine activities and has no valid approvals from competent authority.
(b) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.”
The assessee has filed cross objection, raising the following grounds: -
“1. Ground No. 1: The Ld. ITO has erred in filing law and guidelines by issued by the CBDT vide circular 09/2024 dated 17th September, 2024. wherein, CBDT has prescribed the monetary limits for filing of appeals in income-cases. In the circular CBDT has specified the monetary limit for filing an appeal before the Hon'ble Income Tax Appellate Tribunal as Rs.60,00,000.00 of Tax Effect.
In the instant matter, the tax effect determined by the Ld. ITO is of Rs.20,66,348.00/-, which is not exceeding the prescribed limit specified by CBDT vide circular 09/2024 dated 17th September, 2024.
The respondent prays to your lordships, to dismiss the appeal filed by the appellant before your lordships.
2. The appellant craves leave to add, alter and/or to amend all or any of grounds of cross objection before the final hearing of appeal.”
Shri Abhijit, Ld. Sr. DR, submitted that the Assessing Officer had rightly disallowed the deduction claimed under Section 35(1)(ii) of the Act for the reason that the Institute was not approved for receiving donations under Section 35(1)(ii) of the Act during the impugned year. He submitted that the Trust was not approved for receiving any such donation after 31.03.2006 and all the donations received subsequent to that date were C.O. No.44/Ahd/2025 (Assessment Year: 2018-19) ITO vs.Taylormade Renewables Ltd. Page 4 of 10 on the basis of forged documents. Therefore, the Assessing Officer had rightly rejected the claim for weighted deduction as made by the assessee under Section 35(1)(ii) of the Act. The Ld. Sr. DR further submitted that the CBDT had issued a notification dated 14.12.2018 clarifying that the Institute was approved under Section 35(1)(ii) of the Act which had expired on 31.03.2006. The CBDT has directed the field formation to examine the irregular claim of weighted deduction under Section 35(1)(ii) in respect of the donations made to this Institute. In view of this fact, the Assessing Officer had rightly disallowed the claim of the assessee. The Ld. Sr. DR also relied upon the following decisions in this regard: -
i) Iolite Cube Inframaterial Limited vs DCIT, 172 taxmann.com 617 (Ahmedabad Tribunal)
II) C K Zipper (P.) Limited vs. ACIT, 160 taxmann.com 1026 (Ahmedabad Tribunal) iii) Joshi Technologies International Inc. vs CIT (IT & TP) 157 taxmann.com 275 (Ahmedabad Tribunal) iv) DCIT vs. Sudhakar Natarajan, 173 taxmann.com 656 (Chennai Tribunal) v) Parag Dave vs. DCIT, dated 15.04.2025 (Ahmedabad Tribunal) vi) Kapadia Marketing Inc. vs. ITO, dated 17.01.2025 (Ahmedabad Tribunal)
Per contra, Shri Ashish Kanabar, Ld. AR of the assessee, submitted that the assessee had obtained all the relevant certificate/documents and C.O. No.44/Ahd/2025 (Assessment Year: 2018-19) ITO vs.Taylormade Renewables Ltd. Page 5 of 10 made donation to this Institute after due verification to the best of its satisfaction. Considering the documents provided by the Institute, the assessee had no reason to disbelieve the same and no other material was available with it to conclude that the donation made to the Institute was not genuine. The Ld. AR further submitted that the CBDT had communicated to the field authorities that approval granted to the Institute under Section 35(1)(ii) of the Act had expired in 2006, only vide notification dated 14.12.2018. However, the assessee had already made donation to the Institute prior to this letter on 30.03.2018. Therefore, on the date of making the donation, the assessee was not aware of any adverse report about the Institute that its approval under Section 35(1)(ii) of the Act had already expired. He further submitted that there was no evidence on record that the assessee had received any cash in lieu of the donation made through cheque, which could establish that the donation was not genuine. The Ld. AR further submitted that the ld. CIT(A) had allowed relief to the assessee after duly considering the decisions of the ITAT, Mumbai as well as the ITAT, Kolkata.
We have considered the rival submissions. The Assessing Officer had disallowed the claim of deduction under Section 35(1)(ii) of the Act for the reason that the Institute no longer had the approval necessary for raising donation, for undertaking scientific research as required by the provisions of the said section. The Assessing Officer had carried out necessary enquiries to verify the authenticity of the claim of the assessee by issuing notice under Section 133(6) of the Act to the Institute, which was not responded. Enquiries were also made with the CIT(Exemption), Mumbai, who had confirmed that no approval was granted to the Institute C.O. No.44/Ahd/2025 (Assessment Year: 2018-19) ITO vs.Taylormade Renewables Ltd. Page 6 of 10 to raise donations under Section 35(1)(ii) of the Act for the A.Y. 2018-19. In fact, the Ld. CIT(E) has also communicated that the Institute’s registration under Section 12AA of the Act was cancelled and that the activities of the Institute were not genuine. Merely because the assessee had made donation to the Institute on the basis of fraudulent documents, it does not make such donation eligible for deduction under Section 35(1)(ii) of the Act. The undisputed fact is that the Institute was not approved for the purpose of receiving donations under Section 35(1)(ii) after 31.03.2006 and all donations subsequently received by the Institute were on the basis of forged documents furnished by it. The CBDT, vide letter dated 14.12.2018, had issued an advisory to the field formation to examine the irregular claim of weighted deduction under Section 35(1)(ii) in respect of the donations made to this Institute. In view of these facts, the AO has rightly disallowed the weighted deduction claimed under Section 35(1)(ii) of the Act by the assessee, which was impermissible as per law.
8.1 The co-ordinate Bench of this Tribunal in the case of Iolite Cube Inframaterial Limited (supra) had held that there was nothing to contradict the adverse finding of the Revenue authorities pertaining to the impugned donation being fraudulently taken in the absence of a valid approval for the same from the prescribed authority. Under such circumstances, there was no reason to interfere with the denial of weighted deduction under Section 35(1)(ii) of the Act on donations made to the Institute. In the case of C K Zipper (P.) Limited (supra) also, the co-ordinate Bench of this Tribunal had upheld the disallowance of claim of weighted deduction under Section 35(1)(ii) of the Act in respect of donations made to Shri C.O. No.44/Ahd/2025 (Assessment Year: 2018-19) ITO vs.Taylormade Renewables Ltd. Page 7 of 10 Arvindo Institute of Applied Scientific Research Trust on the ground that the said entity was neither recognised for the purpose of Section 35(1)(ii) of the Act nor eligible to raise donations for undertaking scientific research. Identical decisions were taken by the co-ordinate Bench of this Tribunal in the case of Kapadia Marketing Inc. (supra) and also in the case of Parag Dave (supra) and the disallowance of deduction u/s 35(1)(ii) in respect of donation made to the said Institute was upheld.
8.2 In view of the facts as discussed above and respectfully following the consistent view of the co-ordinate bench of this Tribunal in various cases as referred above, we are of the considered view that the Assessing Officer had rightly disallowed the claim for weighted deduction under Section 35(1)(ii) of the Act. Accordingly, the disallowance as made by the Assessing Officer is upheld and the order of the Ld. CIT(A), allowing relief to the assessee, is quashed.
In the result, the appeal of the Revenue is allowed.
C.O. No.44/Ahd/2025
The only ground raised by the assessee in the cross objection is about the monetary limit for filing the appeal. According to the assessee, tax effect involved in the present appeal was less than Rs.60,00,000/- and, therefore, the appeal of the Revenue was not admissible.
On the other hand, the Ld. Sr. DR submitted that the case was covered in the exception as provided in Circular No.5/2024 dated C.O. No.44/Ahd/2025 (Assessment Year: 2018-19) ITO vs.Taylormade Renewables Ltd. Page 8 of 10 15.03.2024 of the CBDT. He explained that the present case was covered under the Clause (m) of para 3.1 of the said Circular. He submitted that the CBDT had issued a notification dated 14.12.2018 to disallow the deduction claimed under Section 35(1)(ii) of the Act in respect of donation made to Shri Arvindo Institute of Applied Scientific Research Trust. Therefore, the matter was required to be contested in appeal irrespective of the tax effect involved.
We have considered the rival submissions. Clause (m) of paragraph no.3.1 of CBDT Circular No.5/2024 reads as under: -
“m. Any other case or class of cases where in the opinion of the Board it is necessary to contest in the interest of justice or revenue and specified so by a circular issued by Board in this regard.”
12.1 The monetary limit to file the appeal before the Tribunal is thus not applicable in a case or a class of cases where in the opinion of the Board it is necessary to contest it in the interest of justice. The CBDT had issued a notification F.No.225/351/2018-ITA(II) dated 14.12.2018 in respect of “Information regarding bogus donation racket under section 35(1)(ii) of the Act, 1961”, the relevant portion of which is reproduced below: -
“3. In this regard, upon perusal of records, it emerges that the above Trust was earlier approved under section 35(1)(ii) of the Act which expired on 31.03.2006. Thereafter, this entity, being not recognized for purpose of section 35(1)(ii) of the Act, is not eligible to raise donations for undertaking scientific research however, the Trust has raised substantial donations over the last six years on the basis of a forged certificate while the donors have irregularly claimed weighted deduction u/s 35(1)(ii) of the Act on donations made to the Trust.
In view of above, I am directed to state that the pending scrutiny assessment cases of donors who have claimed irregular weighted deduction C.O. No.44/Ahd/2025 (Assessment Year: 2018-19) ITO vs.Taylormade Renewables Ltd. Page 9 of 10 u/s 35(1)(ii) should be handled in light of above facts. In case of donors whose cases are presently not under scrutiny, the Board desires that a list of donors who had provided funds to the Trust u/s 35(1)(ii) of the Act should be drawn by CIT (Exemption), Mumbai for the period from A.Y 2012-13 to 2018-19 and circulated to the concerned field authorities expeditiously.”
12.2 When the CBDT has directed the field information to examine the claim for bogus deduction under Section 35(1)(ii) of the Act in respect of ineligible donation made to Shri Arvindo Institute of Applied Scientific Research Trust, it is imperative that not only disallowance for such bogus donations was required to be made but also that this issue had to be contested in appeal wherever necessary. In fact, the CBDT had also directed to prepare a list of all donors who had made donation to the said Institute, which was required to be circulated to field formation for necessary examination and passing of suitable assessment orders. In view of this explicit direction of the CBDT, the present case is found to be covered in the clause (m) of the CBDT Circular No.5/2024. Pursuant to the direction of the Board, the AOs were required to not only disallow the claim for bogus deduction under Section 35(1)(ii) of the Act but also to contest it in the appeal proceeding, irrespective of the tax effect involved. Therefore, the Revenue had rightly filed the present appeal which is found covered in the exceptions of Circular No.5/2024 dated 15.03.2024 issued by the CBDT. Accordingly, the cross objection filed by the assessee is dismissed.
C.O. No.44/Ahd/2025 (Assessment Year: 2018-19) ITO vs.Taylormade Renewables Ltd. Page 10 of 10 13. In the final result, the appeal of the Revenue is allowed whereas the cross objection of the assessee is dismissed.
Order pronounced in the open Court on this 26th November, 2025.