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Facts
The assessee claimed a deduction of Rs. 1,27,67,676/- under Section 80G for donations made to two charitable institutions. The Assessing Officer disallowed this deduction, stating that the donation was in kind and not in cash. The CIT(A) upheld this disallowance. The assessee appealed to the ITAT.
Held
The Tribunal held that the deduction under Section 80G is available only for donations made in the form of money and not in kind, as per Explanation 5 to Section 80G. Considering the facts and the Apex Court judgment in H.H. Sri Rama Verma, the Tribunal found that the assessee's claim was not allowable.
Key Issues
Whether the donation made by the assessee qualifies for deduction under Section 80G of the Income Tax Act, considering it was paid to suppliers for equipment for donee institutions, and not directly to the donee institutions.
Sections Cited
80G, 143(3), 40(a)(ia), 271(1)(c)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 89/JPR/2024
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 28/04/2025 vkns'k@ ORDER PER: DR. S. SEETHALAKSHMI, J.M. The present bunch of three appeals relates the same assessee and even the assessment year is same. One relates to the quantum addition and second relates to levy of penalty which is filed by assessee as well as that of the revenue. Since these appeals were heard together with the consent of the parties and are disposed with this common order.
First we take up assessee’s appeal in A.Y. 2013-14. The assessee has taken following grounds of appeal:-
1. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has grossly erred in confirming the action of ld. AO in not allowing deduction worth Rs. 1,27,67,676/-claimed by assessee u/s 80G, without properly appreciating the directions of Hon'ble ITAT. Appellant prays that disallowance made is not in consonance with the specific directions of Hon'ble ITAT and deserves to be deleted. 1.1 That, Id.CIT(A) has further erred in confirming the disallowance of Donation made by assessee, by solely relying upon the observations of Id.AO and further by brushing aside the submission made and evidences adduced by assessee. Appellant prays that donation was actually made in monetary terms as the assessee has directly made the payment against the amount of donation to the suppliers of the donee societies thus the same cannot be termed as "Donation in kind" and therefore deduction has been rightly claimed by assessee, which deserves to be allowed as such.
2. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal.
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd.
3. Brief facts of the case are that the assessee filed its E-return of income for the A.Y. 2013-14 on 06.09.2013 declaring total income at Rs.88,15,430/-, Assessment was completed vide order 143(3) of the Act dated 20.03.2016 at total income of Rs.4.21,33,517/- as against the returned income of Rs.88.15.430-making additions of Rs.2,05,50,411/-. Against the order u/s 143(3) of the Act dated 20.03.2016, the assessee preferred an appeal before the ld. CIT(A)-1, Jaipur and Id. CIT(A) partly deleted the addition of Rs. 1,46,69,188/- out of total addition of Rs.2,05,50,411/- made on account of disallowance u/s 40(a)(ia) out of interest expense and confirmed the remaining additions and Rs. 58,81,223/-. Against the order of ld. CIT(A), the assessee preferred an appeal before the Hon'ble ITAT, Jaipur Bench, Jaipur on the issues of disallowance of Rs. 36,00,000/- for non-deduction of TDS on interest payment to M/s SE Investment Ltd. and disallowance of Rs. 1,27,67,676/-on account of disallowance of deduction u/s 80G and the Hon'ble ITAT, Jaipur Bench Jaipur vide its order dated 01.10.2018 set aside the aforesaid issues to the file of the AO to verify the claim of the assessee that recipient NBFCs has taken into account the amount of interest received from the assessee while computing the income in its return of income filed. The Hon'ble ITAT also directed the assessee to furnish the requisite information before the AD for verification of the fact . The assessee has not furnished any evidence to the effect that the 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. donation made to both the donee institutions are eligible for claim of 100% deduction out of Gross Total Income. Accordingly, the claim of deduction of Rs. 1,27,67,676/- u/s 80G was disallowed and added to the total income of the assessee. Assessment order was passed on 30.11.2019 u/s 143(3) rws 254 of the Act, by assessing total income at Rs. 2,38,64,320/-.
4. Being aggrieved by the assessment order assessee preferred an appeal before the learned Commissioner of Income Tax, (Appeals), being the National Faceless Appeal Center [ for short CIT(A) ]. Apropos to the ground raised the relevant finding of the ld. CIT(A) reads as under :- “6.2 I have considered the facts of the case, assessment order, appellant's written submissions and case-laws relied on by the appellant. The main issue to be decided in the instant appeal is regarding the disallowance u/s. 80G of Rs.1,27,67,676/-Appellant has raised ground from A to K against the disallowance of deduction claimed by the assessee u/s.80G of the I.T. Act being 100% of the donation made by it to Rajasthan Medicare Relief Society (PAN:AAATR5094F), S.M.S. Hospital, Jaipur at Rs.27,24,590/- and to Rajasthan Medicare Relief Society, S.P.M.C.H.I., Jaipur (PAN:AAABR0418D) at Rs. 1,00,43,086/- both totaling to Rs. 1,27,67,676/- 6.2.1 In second appeal filed by the assessee before the hon'ble ITAT, the hon'ble ITAT, Jaipur Bench, Jaipur vide its order dated 01/10/2018 in IT appeal No.346/JP/2018 titled as Nash Fashion (India) Ltd. Vs. DCIT has set aside the matter. of claim of deduction u/s 80G to the file of the Relevant Para of the order of ITAT is reproduces as under.- Para 8 "The question for consideration is therefore the determination of the finer distinction between the cash donation and donation in kind. In both the cases, there is outflow of money from the assessee's hand. However, there could be various scenarios in particular facts and circumstances of each case. In one scenario, the money is going directly from the assessee to the donee which doesn't create any confusion and it will be clearly eligible for deduction. In 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. another scenario, where the assessee has an existing asset/property/stock-in- trade in its possession/control and the same is thereafter transferred by way of donation, it will be a clear case of donation in kind and the same will not be eligible for deduction. There could be a third scenario where the assessee purchases any asset/property/equipments etc from a third party and thereafter, the same is donated. In this case, even though the money has been spent by the assessee in purchasing the asset/property/equipment, what has been actually onated is the asset/property/equipment. The act of donation is subsequent to purchase/acquisition by the assessee in its own right. Once the assessee has purchased/acquired the asset/property/equipment, the title/ownership in such asset/property/equipment has been transferred by way of gift. The gift in such cases is thus gift in kind and the same won't be eligible for deduction. Another scenario is where there is a necessity/requirement of certain asset/property/equipment by the donee institution and it reaches out to the donor to fund such acquisition/purchase of asset/property/equipment. In this case, the donee institution places the order firectly on the supplier of the asset/property/equipment, thereafter, the supplier supplies the equipment directly to the donee and the install the same at the premises of the donee institution. The limited role of the donor in such a scenario is to fund such acquisition/purchase and make the payment to the supplier on behalf of the donee institution." Para 9 "If we look at the last two scenarios as discussed above, the finer distinction between these two scenarios is that in the first sconario, the assessee donor has purchased/acquired the asset/property/equipment in its own right and thereafter, the title/ownership in such asset/property/equipment has been transferred by way of gift to the donee institution. In the second scenario, the donee institution itself has purchased/acquired the asset/property/equipment in its own right and therefore, there is no question of transfer of the title/ownership in such asset/property/equipment by the donor to the donee institution and which has been spent/transferred by the donor is the sum of money equivalent to the purchase price of the equipment purchased directly by the done institution. The first scenario will not qualify for deduction as what has been donated is property in kind, however the second scenario will quality for deduction as what has been spent and transferred is sum of money and not property in kind. In our view, the facts of the present scenario thus needs to be analysed in detail to determine which of the above scenarios it fits in and bases the same, whether the assessee is eligible for deduction under section 80G of the Act."
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. 6.2.2 In terms of the issue set aside by the Hon'ble ITAT, the AO was given directions to examine the transactions from the point of view of two scenarios. First being that whether the assessee purchased the equipment in its own right and then donated it to the societies, and the second being whether the societies acquired the equipment's in their own right and then asked the assessee to make payments to the suppliers. 6.3 The assessing has noted relevant points in the order: According to AO it was apparent from the correspondence that Sh. Jai Singh Sethia would have discussed the requirement and technical specifications of the equipments required, with the office bearers of the respective societies and then placed the order for supply of the same. Thus the first scenario is applicable in this case. The Assessing officer has also pointed that from the perusal of stock register entries of the societies is that the receipt of goods is shown from Shri Jai Singh Sethia, and not from the assessee company "M/s Nash Fashion India Ltd.". Both the societies have not issued a receipt for donation u/s 80G but only a letter correspondence which state that the societies are registered u/s 12AA and donations made are eligible for deduction u/s 80G. Another pertinent issue which needs to be mentioned here is that the assessee has not furnished any evidence to the effect that the donation made to both the donee institutions are eligible for claim of 100% deduction out of Gross Total Income. The Assessing Officer has also noted that in this case the Gross Total Income of the assessee as per return of income is Rs. 2,15,83,102 and as per provisions of section 80G(4), the deduction claimed could not have exceeded 10% of the gross total income retumed/assessed. On this ground too, the claim of the assessee is not proper. 6.4 The appellant Has placed reliance on the judgement on Honourable Rajasthan high court in its own casein ay 2009-10 where the same issue of deduction u/s 80G has been decided in the favour of appellant. The issue of deduction u/s.80G of the I.T. Act also arose in assessee's case for assessment year 2009-10 i.e. for the previous year ended on 31.3.2009. In assessment year 2009-10 the appellant company filed its return of income for AY 2009 10 on 30.9.2009 declaring total income of Rs.68,77,320/-, The assessing officer-after scrutinizing the case u/s. 143(3) of the Income tax Act, 1961 and after examining the books of accounts of the assessee allowed the assessee's claim of deduction u/s.80G of the Income tax Act as claimed by the appellant company. Subsequently, Commissioner of Income tax by taking action uls.263 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. of the Income tax Act took a contrary view and disallowed the assessee's claim of deduction u/s.80G. Against this disallowance of deduction u/s.80G by the learned CIT assessee preferred an appeal before the Income Tax Appellate Tribunal which by order dated 5th Nov., 2014 allowed the claim of the assessee u/s 80G of LT. Act by holding that the order passed by Commissioner of Income tax uls 263 is not valid in law. Against this judgment of Hon'ble ITAT income tax department filed appeal before the Hon'ble Rajasthan High Court. The appeal number was DB Income tax Appeal No.54/2015. The appeal of the department was dismissed by the Hon'ble High Court and the order allowing the deduction u/s 80G by the learned ITAT was sustained by the Hon'ble High Court vide its judgment dated 11.8.2015. 6.5 The appellant did placed its reliance on the same judgement before the Hon'ble ITAT, Jaipur also but In para-11 of its order, the Hon'ble ITAT has clearly distinguished the decision of the coordinate bench in the case of the assessee for A.Y. 2009-10 and 2012-13. The Hon'ble ITAT has also specifically mentioned that the decision of the Hon'ble Rajasthan High court in the case of the assessee was distinguishable on facts and circumstances being related to exercise of powers of Ld. CIT u/s 263 of the I.T. Act. The Hon'ble ITAT also observed that apparently the decision of the Hon'ble Supreme Court in the case of H.H. Sri Rama Verma quoted at 1991 187 ITR 308 SC was not brought to the attention of the Hon'ble High Court. Thus appellant's reliance on the said judgement is not taken for consideration in view of tribunal's observation. 6.6 Donation in kind are not subject to benefit of Sec. 80G and therefore, the donor are not eligible to claim any deduction u/s 80G if the donations are made in kind. Explanation 5 to section 80G clearly provides that benefit under section 80G shall not be available unless the donation is received in the form of money. This explanation which was inserted by the Finance Act, 1976, w.e.f.01-04-1976 is reproduced as under: "For the removal of doubts, it is hereby declared that no deduction shall be allowed under this section in respect of any donation unless such donation is of a sum of money." 6.6.1 The language used in section 80G(2)(a) is clear and unambiguous. The use of the expression any sums paid contemplates payment of an amount of money. One of the dictionary meanings of the expression 'sum' means any indefinite amount of money. The context in which the expression 'sums paid by the assessee has been used makes the legislative intent clear that it refers to the amount of money paid by the assessee as donation. Therefore, for purposes of claiming deduction from income-tax under section 80G(2)(a), the donation must be a sum of money paid by the assessee.
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. 6.6.2 The Supreme Court judgement in case of H.H. Sri Rama Verma v. Commissioner of Income-tax 1991 [187 ITR 308 SC) confirms the above view. The relevant portion of the judgement has been reproduced as under: "The assessee-company donated certain shares to two charitable trusts. The ITO. however, rejected the assessee's claim for deduction of the donations under section 80G. The Tribunal held that the expression 'sums' occurring in section 80G did not include any donation made in kind in the shape of shares. On a reference, the High Court agreed with the view taken by the Tribunal. On appeal by certificate under section 261: HELD The language used in section 80G(2)(a) is clear and unambiguous. The use of the expression 'any sums paid contemplates payment of an amount of money. One of the dictionary meanings of the expression 'sum' means any indefinite amount of money. The context in which the expression 'sums paid by the assessee' has been used makes the legislative intent clear that it refers to the amount of money paid by the assessee as donation. The Act provides for assessment of tax on the income derived by an assessee during the assessment years; the income relates to the amount of money earned or received by an assessee. Therefore, for purposes of claiming deduction from income-tax under section BOG(2)(a), the donation must be a sum of money paid by the assessee. The plain meaning of the words used in the section does contemplate donations in kind. Since the expression and language used in section 80G(2)(a) is plain and clear, it is not open to the courts to enlarge the scope by its interpretative process founded on the basis of the object and purpose underlying the provisions for granting relief to an assessee. Further, in 9 Standards & Norms, Legal Series Vol. XV, Issue 11 NPO TAXATION-CONTRIBUTION IN KIND view of the conflicting opinions expressed by the various High Courts, the Parliament intervened and added Explanation 5 to section 80G by the Finance Act, 1976. After the insertion of the aforesaid Explanation, there cannot be any doubt that, for purposes of claiming deduction, only cash amounts which may have been donated would be taken into account. No doubt this provision is not retrospective in nature, none the less it indicates the legislative intent behind section 80G(2)(a) even prior to its amendment. Therefore, the assessee's claim was rightly rejected" 6.6.3 Considering the facts of the case and respectfully following the judgement of Apex court(supra), I am inclined to agree with the assessing officer that appellant's claim of deduction of Rs. 1,27,67,676/- u/s 80G is not allowable. Thusdisallowance made by the Assessing officer is upheld. Thus Ground No. A to J are dismissed.
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. 7. Through Ground No. K the appellant urged that other grounds shall be taken at the time of hearing. No such option has been exercised, Hence, this ground of appeal is dismissed.
8. In the result, the appeal is Dismissed.”
5. Feeling aggrieved by that order of the ld. CIT(A) the assessee is in appeal before this tribunal on the grounds as stated herein above. Apropos to the grounds so raised by the assessee, ld. AR of the assessee filed a detailed written submission which reads as under : “With reference to above and in continuation to paper book filed earlier on 29/01/2025 it is respectfully submitted as under: GROUNDS OF APPEAL NO.1 & 1.1 1.0 Both these grounds of appeal mentioned above, are against sustenance by the ld. CIT(A) of the AO’s order whereby he(the AO) disallowed deduction claimed by the assessee u/s.80G of the I.T. Act at Rs. 1,27,67,676/- in respect of the donation made by it to Rajasthan Medicare Relief Society (PAN:AAATR5094F), S.M.S. Hospital, Jaipur at Rs. 27,24,590/- and to Rajasthan Medicare Relief Society, S.P.M.C.H.I., Jaipur (PAN:AAABR0418D) at Rs. 1,00,43,086/- both totaling to Rs.1,27,67,676/-. 1.1 Before making under mentioned submissions the appellant craves leave to give unique facts and circumstances of the case which are that vide order u/s. 143(3) dated- 20/03/2016 original assessment was made at total income of Rs. 4,21,33,517/- as against the returned income of Rs. 88,15,430/-, making two kinds of additions, one of Rs. 2,05,50,411/- by way of disallowing u/s. 40(a)(ia) out of interest expenses and the other of Rs.1,27,67,676/- by way of disallowing of deduction u/s. 80G claimed by the assessee. In first appeal, the ld. CIT(A) deleted the addition of Rs. 1,46,69,188/- [total addition made by the A.O. u/s. 40(a)(ia) Rs. 2,05,50,411/- minus addition confirmed u/s. 40(a)(ia) at Rs. 58,81,223/- by CIT(A)]. However no relief was granted by the CIT(A) in respect of claim of deduction u/s. 80G of the IT Act at Rs. 1,27,67,676/- on above mentioned donations as per details mentioned above. In second appeal the hon’ble ITAT sent back the matters relating to both the issues, one u/s. 40(a)(ia) and the other u/s. 80G, to the file of the A.O., who vide the assessment order u/s. 143(3) r.w.s 254 dated 30/11/2019 allowed deduction of Rs. 36,00,008/- u/s. 40(a)(ia) but maintained balance addition of Rs. 22,81,215/- u/s. 40(a)(ia) of the Act. The assessee is not in appeal against maintenance of remaining addition of Rs. 22,81,215/-. But as regards assessee’s claim of deduction u/s. 80G at Rs.
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. 1,27,67,676/-, the same was not allowed and he again made the addition of Rs. 1,27,67,676/-. Against this addition the assessee filed appeal before the ld. CIT (A) who vide the impugned order dismissed assessee’s appeal. Against this dismissal order of the ld. CIT (A) the assessee is in appeal before the hon’ble ITAT. 1.2 That the observations of the learned CIT[A] that the donation given is otherwise than by way of money is not correct. The factual position is that on the request of M/s. Rajasthan Medicare Relief Society, S.M.S. Hospital, Jaipur as well as SPMCHI, Jaipur, the cheques were issued by the assessee for total amount of Rs. 1,27,67,676/- in favor of supplier’s of medical equipment, who directly supplied and installed the equipment in both the hospitals. To support its claim that donation given by it is in money and not in kind, the assessee company submitted before the AO certificates issued by hospital authorities confirmingboth the donations, one made to Rajasthan Medicare Relief Society (PAN:AAATR5094F) SMS Hospital, Jaipur and the other to Rajasthan Medicare Relief Society (PAN:AAABR0418D) S.P.M.C.H.I. Jaipur for total donations of Rs.1,27,67,676/-. 1.3 That firstly list of medical equipment required by hospital authorities was sent by Rajasthan Medicare Relief Society to the suppliers of medical equipment and thereafter the assessee company sent the payment by way of account payee cheques issued by it in favor of the suppliers of medical equipment. 1.4 In the above backdrop, if the facts of the assessee’s case are analyzed it can be noted that the assessee made payment by cheque to the various suppliers of the medical equipments and thereafter the suppliers supplied the equipment directly to the Medical Superintendent of both hospitals. At the time of placing of the order by the hospital authorities to the supplier, 10% payment is made in advance and the remaining 90% payment is made after installation of the equipment to the satisfaction of the Medical Superintendent of the Hospital. As such the fact remains is that medical equipments are directly sent to hospital authorities and installation is also made by the suppliers at the premises of the Hospitals. But for getting the payment invoices were issued by supplier in the name of the appellant company. This is evident from the various papers/documents forming part of the paper book presented before the hon’ble ITAT on 29/01/2025. Therefore, only because invoices are raised by the supplier in the name of the assessee would not make any difference particularly when all other correspondences by the supplier is with Medical Superintendent of the hospitals. All these facts show that the transaction in substance is a money transaction and the donation is in fact a donation in cash. 1.5 That the learned AO failed to consider that the assessee donor is not itself a supplier nor does he carry on business of medical equipmentsetc which were installed in the above mentioned government owned Hospitals in Jaipur. The factual position is that at the instance of Hospital authorities the money for purchase of the equipment/items for both the hospitals was paid by the appellant assessee to the suppliers of those medical eqipmentsby way of account payee 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. cheques. Meaning thereby what the appellant assessee donated was money i.e. cash and not donation in kind. Besides the medical equipment were directly sent by the suppliers to the above mentioned Hospitals and the same were installed at the Hospitals with the prior consent of the Hospital authorities and the medical equipment and machineries were installed in the hospital to provide medical assistance to the poor people. 1.6 That the AO failed to note that in this case on the advice of the hospital authorities the money was sent directly by the assessee to the suppliers of the medical equipment and machineries for and on behalf of both the Hospitals and there was a due confirmation by hospital authorities in regard to medical equipment and machineries being installed at the above mentioned Hospitals and amount having been paid by account payee cheque by the assessee to the suppliers. It is further submitted that the AO should have appreciated that after installation of the medical equipmentsin Hospitals there was a counter check by the government authorities i.e. medical superintendent etc. 1.7 That the AO failed to take into consideration the fact that so far as assessee is concerned he has paid the amount of donation by way of account payee cheque issued to the manufacturers/suppliers on the directions of Hospital authorities and soon after getting the cheque from the assessee, the manufacturers/suppliers directly supplied machinery and equipment to the Hospitals and not to the assessee. To make the things clear it is respectfully submitted that on the advise of the hospital authorities the assessee issued cheques in favor of the manufacturers/suppliers to directly supply the desired machinery and equipments to Hospitals. After getting the cheque from the assessee the manufacturers/supplier directly sent the machinery and equipments to the Hospitals. The Medical equipments sent by manufacturers were directly delivered to the hospital authorities and also got installed in the hospital premises. The Hon’ble Bench will see that at no stage equipments are delivered to the assessee company. Moreover after having made the payments by way of cheques to the suppliers the assessee has no connection with the suppliers. As said above all works including placing of order of medical equipments required by hospital authorities, taking of delivery of goods, checking of quality and quantity of the medical equipments and getting installed these medical equipments in the hospitals are under direct supervision of the medical superintendent and at no stage assessee came into picture nor has he any say in the supply of the equipments and installation thereof. In other words it can be said that so far as assessee is concerned it has paid the donation in money i.e. by way of issuing cheque from its bank account in favor of suppliers of medical equipments and in such a situation by no canon of law can it be said that donation is in kind or nor in cash. 1.8 The factual position as given above is that the assessee had made the payments by cheques to the suppliers of equipment on behalf of donee which tantamount to donation made in a sum of money. That the learned Commissioner (Appeals) should have taken into consideration the substance of the entire transaction and other facts and circumstances of the case.
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. 1.9 That both the lower authorities failed to appreciate that Explanation-5 of Section 80G do not mandate that the payment should be made directly to the donee.The factual position as given above is that the assessee had made the payments by cheques to the suppliers of equipments on behalf of donee which tantamount to donation made as a sum of money. That the AO should have seen the substance and not the form of the donation. After viewing the totality of facts your honour will please find that the transaction in substance is a money transaction and the donation is in fact a donation in cash and it is prayed that assessee’s claim of deduction u/s.80G should be allowed. 1.10 It is further submitted that the assessee had made payments by cheque to suppliers of equipments/items and goods were supplied/installed at SMS Hospital as well as Sir PadampatMatriAvamShishuSwasthyaSansthan(S.P.M.C.H.I) JLN Marg, Jaipur. The assessee filed two Certificates both dated 17.08.2013 of Medical Superintendent Sir PadampatMatriAvamShishuSwasthyaSansthan(S.P.M.C.H.I) JLN Marg, Jaipur and Chief Accounts Officer, SMS Hospital Jaipur regarding receipt of the equipments/items. On similar facts the ITAT Jaipur Bench in assessment year 2009-10, in assessee’s own case, in assessment year 2009-10, relying on judgments in case of CIT Vs. Associated Cement Company Ltd., 68 ITR 478(Bombay) and CIT Vs. Benglore Woolen Cotton & Silk Mills, 91 ITR 166(Mysore), held that the transaction in substance is a money transaction and the donation is virtually a donation of sum of money and assessee is entitled to deduction u/s.80G of the I.T. Act. As mentioned above appeal by the department against the ITAT order has been dismissed by the Rajasthan High Court. It is, therefore, prayed that the deduction u/s.80G may therefore be allowed to the assessee and disallowance made be deleted. The assessee had made payments by cheques to the suppliers of equipment on behalf of donee which tantamount to donations made in a sum of money. 1.11 That the humble appellant further craves leave to refer to and rely upon the judgment dated 15.11.2017 of Hon’ble Income Tax Appellate Tribunal “A” Bench: Jaipur (BEFORE HON’BLE SHRI VIJAY PAL RAO, J.M. & SHRI ARJUN LAL SAINI, AM) in I.T.A.NO.1069/JP/2016 for assessment year 2012-13 in assessee’s own case i.e. in the case of Nash Fashions India Ltd. Jaipur (PAN:AABCN0909K) (Appellant) Vs. DCIT, Jaipur-2, Jaipur wherein the Hon’ble Tribunal held as under: “We also note that this issue is fully covered by the assessee’s own case decided by the Jaipur ITAT Bench, in ITA NO.298/JP/2014 A.Y. 2009-10 wherein it was held that transaction in substance is money transaction and the donation is virtually the donation in cash. Therefore, respectfully following the judgment of the Co-ordinate Bench on the same identical facts, we allow the appeal of the assessee.” 1.12 That the above mentioned issue of deduction u/s.80G of the I.T. Act also arose in assessee’s case for assessment year 2009-10 i.e. for the previous year ended on 31.3.2009. In assessment year 2009-10 the appellant company filed its return of income for AY 2009-10 on 30.9.2009 declaring total income 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. of Rs.68,77,320/-. The assessing officer after scrutinizing the case u/s.143(3) of the Income tax Act, 1961 and after examining the books of accounts of the assessee allowed the assessee’s claim of deduction u/s.80G of the Income tax Act as claimed by the appellant company. Subsequently, Commissioner of Income tax by taking action u/s.263 of the Income tax Act took a contrary view and disallowed the assessee’s claim of deduction u/s.80G. Against this disallowance of deduction u/s.80G by the learned CIT assessee preferred an appeal before the Income Tax Appellate Tribunal which by order dated 5th Nov., 2014 allowed the claim of the assessee u/s.80G of I.T. Act by holding that the order passed by Commissioner of Income tax u/s.263 is not valid in law. Against this judgment of Hon’ble ITAT, Income tax department filed appeal before the Hon’ble Rajasthan High Court. The appeal number was DB Income tax Appeal No.54/2015. The appeal of the department was dismissed by the Hon’ble High Court and the order allowing the deduction u/s.80G by the learned ITAT was sustained by the Hon’ble High Court vide its judgment dated 11.8.2015. 1.13 In regard to binding force of a High Court judgment the humble appellant craves leave to submit that a decision of a High Court would have binding force in the state in which the court has jurisdiction, but not outside that state. Decisions of the High Court are binding on the subordinate courts, authorities and Tribunal situated within its jurisdictional territory. 1.14 That in support of the above submissions the humble appellant craves leave to refer to and rely upon various judicial pronouncements mentioned in the enclosed sheet. If in the backdrop of the judicial pronouncement narrated in enclosed sheet the fact of the case are analyzed your honour will kindly see that the assessee made payment by cheque to the various suppliers of the medical equipments and thereafter the suppliers supplied the equipments directly to the Medical Superintendent of Rajasthan Medicare Relief Society (PAN:AAATR5094F) SMS Hospital, Jaipur and also to the Medical Superintendent of Rajasthan Medicare Relief Society (PAN:AAABR0418D) S.P.M.C.H.I. Jaipur for total donations of Rs.1,27,67,676/- and installed the equipments to the satisfaction of both the Medical Superintendents. After viewing the totality of facts your honour will please find that the transaction in substance is a money transaction and the donation is made by way of issuing account payee cheques to the suppliers and accordingly this donation of Rs.1,27,67,676/- is made in a sum of money and it is in commensurate with and in full compliance of the language used in Explanation 5 to Section 80G of the IT Act. 1.15 In regard to counter submissions made by the AO and filed before the hon’ble ITAT by the Additional CIT (Sr. DR), ITAT Jaipur and a copy there of given to the assessee inter-alia mentioning that the assessee failed to bring any evidence on record that the donation was made in monetary terms and in receipt register of the donee society name of managing director of the assessee company Mr. Jai Singh Sethia is mentioned at some places in instead of the name of the company, it is humbly explained as under: i. That the managing director of assessee companyMr. Jai Singh Sethia, 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. aged about 70 years, has regularly been giving substantial amount of donations in his individual capacity as well as through the business concerns like Nash Fashions (India) Ltd. (i.e. the appellant assessee) under his management, to Rajasthan Medicare Relief Society and other organs/branches of the S.M.S. hospital, Jaipursincemore than one decade. On account of his regularly making of donations and regularly visiting to S.M.S. Hospital he is very popular with the S.M.S. Hospital doctors and managing body. On account of his philanthropic nature, the S.M.S Hospital doctors and managing body, as and when they realized the necessity of some medical equipments for the treatment and other bare necessities of indoor as well as outdoor patientsof S.M.S. Hospital or in S.P.M.C.H.I., they immediately contact persons like Mr. Jai Singh Sethia and put their immediate requirement of items like medical equipment, related items and/or bare necessities of the patients and their attendants/relatives. Such was the fact and circumstance in the previous year relevant to A.Y. 2013-14,which is year under appeal, when there arose necessity/requirement of medical equipment/machinery with Rajasthan Medicare Relief Society at SMS Hospital as well as at S.P.M.C.H.I, Jaipur, their management authorities approached the donor company Nash Fashion (India) limited (through its managing director Mr. Jai Singh Sethia) and put its requirement of medical equipment/machinery before the assessee company through its managing director Mr. Jai Singh Sethia and requested to fund for such acquisition/ purchase and in turn the assessee company agreed to bear the cost of such medical equipment. On assessee company’s assurance, donee institution, namely, Rajasthan Medicare Relief Society contacted the manufactures/suppliers of such medical equipment and placed the order directly on the manufactures/suppliers of the medical equipment and thereafter the manufactures/suppliers directly supplied the same i.e. the medical equipment/machinery to the donee institution and installed the same at the premises of the S.M.S. Hospital and S.P.M.C.H.I. Jaipur and the assessee company made the payment to the manufactures/suppliers on behalf of the donee institution through account payee cheques/banking channel. It may be that on account of Mr. Jai Singh Sethia being the managing director of the company and he being well known to them, the lower staff of the society for the purpose of brevity/preciousness name of Jai Singh Sethia might have written but in anyway the donation has been given by the appellant company. ii. That in the paper book filed on 29/01/2025 the appellant has enclosed copies of such donation bills/invoices at page no. 9 to 37 of the paper book. From the perusal of these invoices/bills the hon’ble Bench will please find that all these bills are in the name of donor company, namely, Nash Fashions (India) limited. Besides, the assessee is enclosing herewith copy of Note no. 24 of the audited financial statements of the donor company under the head, “Notes on financial statements for the year ended on 31/03/2013” wherein under the sub-head 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. “Administrative expenses” amount of donation paid at Rs. 1,27,76,776/- is mentioned. Copy of audited financial statement of the appellant company for the FY ended on 31/03/2013 are enclosed herewith for the ready reference. iii. All the payments to the suppliers have been made through banking channel by way issuing accounts payee cheques. The audited financial statements as well as bank statements, confirmations of suppliers, etc., stands already filed with the lower authorities for the year under appeal. iv. That both the AO’s who passed assessment orders u/s 143(3) and 143(3) r.w.s section 254 have nowhere made any adverse observation in relation to genuineness of the donation given. 1.16 In view of above submissions it is humbly prayed that assessee’s appeal may be allowed.” The ld. AR of the assessee also filed another written submissions 6. on 11.03.2025 which reads as under:-
“In continuation to part hearing which took place on 05/03/2025 and with reference to the observations/query made by the hon’ble Bench in the course of part hearing on 05/03/2025 in regard to different scenarios visualized by the hon’ble co-ordinate Bench of the Jaipur Tribunal in its appellate order dated 01/10/2018 at Para 8 of page no. 20 & 21 setting-aside this issue of section 80G in for AY 2013-14 in the case of Nash Fashion (India) Limited versus The DCIT, Circle 2, Jaipur to the file of the AO to examine this issue afresh, it is humbly submitted as under:
1.
In the above mentioned appellate order passed by the co-ordinate Bench in for AY 2013-14 in the case of Nash Fashion (India) Limited versus The DCIT, Circle 2, Jaipur, the co-ordinate Bench visualized various scenarios of donations on the facts and circumstances of each such case of donation in Para 8 at page no. 20 & 21 of the above mentioned order. Last of such scenarios is visualized by the co-ordinate Bench in last eleven lines of Para 8, which reads, “Another scenario is where there is a necessity/requirement of certain asset/property/equipment by the donee institution and it reaches out to the donor to fund such acquisition/purchase of asset/property/equipment. In this case, the donee institution places the order directly on the supplier of the asset/property/equipment, thereafter, the supplier supplies the equipment directly to the donee and they install the same at the premises of the donee institution. The limited role of the donor in such a scenario is to fund such acquisition/purchase and make the payment to the supplier on behalf of the donee institution.”
2. That to determine as to whether the facts and circumstances of the appellant’s case fits in above mentioned scenario given in inverted sign of Para 1(in bold 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. letters) above, one has to analyse the modus operandi of the case under which donation was given.
The modus operandi of the present case of the appellant is that the managing director of the appellant company Mr. Jai Sing Sethia, aged about 70 years, is a man of philanthropic nature and have been regularly giving substantial amount of donations in his individual capacity as well as through the business concerns like the appellant company under his management to Rajasthan Medicare Relief Society of the S.M.S. hospital, Jaipur as well as of Sir PadampatMatriAvamShishuSwasthyaSansthan (S.P.M.C.H.I), JLN Marg, Jaipur., since more than one decade. Under such fact and circumstances of the present case, in the previous year relevant to A.Y. 2013-14, which is year under appeal, when there arose necessity/requirement of medical equipment/machinery with Rajasthan Medicare Relief Society at SMS Hospital as well as at S.P.M.C.H.I, Jaipur, their management authorities approached the donor company Nash Fashion (India) limited (through its managing director Mr. Jai Singh Sethia) and put their requirement of medical equipment/machinery before the assessee company and requested to fund for such acquisition/ purchase and in turn the assessee company agreed to bear the cost of such medical equipment/machinery. On assessee company’s assurance, donee institution, namely, Rajasthan Medicare Relief Society of both the above mentioned hospitals contacted the manufactures/suppliers of such medical equipment/machinery and placed the order directly on the manufactures/suppliers and thereafter the manufactures/suppliers directly supplied the same i.e. the medical equipment/machinery on the premises of both the institutions and also installed these medical equipment/machinery at the premises of the S.M.S. Hospital and S.P.M.C.H.I. Jaipur.The fact of delivery/installation of the medical equipment/machinery at the premises of both the institutions, namely S.P.M.C.H.I. (i.e JK Loan Hospital, JLN Marg, Jaipur) Jaipur and SMS Hospital, Jaipur is even mentioned in the invoice issued by the suppliers, which are of Jaipur city itself. The copy of invoices, installation and commissioning reports, etc., forms part of the paper book. The assessee company made the payment to the manufactures/suppliers on behalf of the donee institution through account payee cheques/banking channel. All the above mentioned facts of the modus operandi of the donation are duly mentioned in an affidavit duly signed and sworn by the managing director of the appellant company and it forms part of the paper book.
That from the perusal of modus operandi and facts & circumstances given above and the supporting documents forming part of paper book your honors will very kindly find that all the ingredients of the scenario mentioned in last 12 lines of Para 8 at page 20 & 21 of the order of the co-ordinate Bench mentioned above are present in this case which duly confirms that donation is by way of sum of money and not in kind.”
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. 7. The ld. AR for the assessee also further filed written submissions on 11.03.205 which reads as under:- “In continuation to part hearing which took place on 06/03/2025 and with reference to the observations/query made by the hon’ble Bench it is humbly submitted as under:
1. 1. Total donations paid by the appellant company in the previous year ended on 31/03/2013 relevant to year under appeal are of Rs. 1,27,76,776/- and this payment is duly reflected under sub-head ‘Administrative Expenses’ of major head ‘Other Expenses’ of note no. 24 forming part of audited financial statements of the appellant company for the year ended on 31/03/2013 relevant to year under appeal.
2. That in addition to above, the appellant is also enclosing herewith following supporting documents: (i) Ledger account of donation from the books of account of appellant company for the PY ended on 31/03/2013 i.e. year under appeal of donations paid through banking channel containing brief description. (ii) Audit report u/s 44AB along with audited financial statements of the appellant company for the previous year ended on 31/03/2013 relevant to year under appeal. (iii) Relevant extract of bank statements of erstwhile SBB&J (now merged with SBI) of account no. 00000051025353335 of the appellant company confirming payments made by the appellant company to suppliers through banking channels of PY ended on 31/03/2013 relevant to year under appeal.
3. That for ready reference of the hon’ble Bench, the appellant company is also enclosing herewith copy of extract of Para 107.7 under the head ‘Deduction in respect of Donations to certain funds, charitable institutions, etc. (Section 80G)’ of page no. A-266 to A-269 of Taxman’s Direct Taxes Ready Reckoner.
4. The documents mentioned above in Para 1 & 2 were submitted before the lower authorities.”
8. To support the various grounds so raised by the ld. AR of the assessee and has relied upon the following evidences in support of the contentions so raised:-
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. S. No. Particulars Page No.
1. Copy of return of income along with computation of income 1-4 filed u/s 138(1) of the Act.
2. Copy of notice dated 30.10.2019 issued u/s 133(6) of the 5-6 Act./ 3. Copy of replies filed by Donee in response to notice u/s 7-8 133(6) of the Act 4. Copy of donation bills made to the Denee Hopsital 9-37 5. Copy of confirmation of Donee Hospital in respect of the 38-39 donation made by the assessee company 6. Copy of 80G certificate of done Hospital 40-45 7. Copy of Affidavit of Shri Jai Singh Sethia 46-47 8. Copy of written submission filed before ld. CIT(A) 48-63
9. The ld. AR of the assessee submitted that the assessee has is big corporation and has given similar type of donation in past and the same has been considered so. Even in the set aside proceeding the citeria given by the ITAT to be checked was met and for that he relied upon the following finding of the ITAT in dated 01.10.2018 wherein the ITAT held that [ page 21 of ITAT order] Another scenario is where there is a necessity/requirement of certain asset/property/equipment by the donee institution and it reaches out to the donor to fund such acquisition/purchase of asset/property/equipment. In this case, the donee institution places the order directly on the supplier of the asset/property/equipment, 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. thereafter, the supplier supplies the equipment directly to the donee and the install the same at the premises of the donee institution. The limited role of the donor in such a scenario is to fund such acquisition/purchase and make the payment to the supplier on behalf of the donee institution.
The assessee situation is same what is settled by the ITAT and therefore, the denial of deduction was not correct. The assessee placed on record delivery of instrument, installation certificate at page 21 to 24 of the paper book page no 18 invoice shows that the delivery was made at the Hospital where the donation was given even the assessee filed a confirmation of the institution. The donee is institution working for the health of common public and this tribunal in Past has allowed similar claim in earlier year and the same is not disputed even by the revenue.
On the other hand ld. DR relied upon the decision of the apex court in the case of Shri Rama Verma and also filed a detailed report of the ld. AO dated 31.01.2025 which reads as under:- “Sub.- Forwarding of report for appellate proceedings in the case of M/s Nash Fashion (India) Ltd. Jaipur (PAN:-AABCN0909K) ITA 160/JPR/2024 for the AY 2013-14- reg- Please refer to your office letter no. 791 dated 04.12.2024 on the subject cited above vide which comments was sought in the case of M/s Nash Fashion (India) Ltd. Jaipur (PAN:- AABCN0909K) ITA 160/JPR/2024 for the AY 2013-14.
2. In this case, assessee filed e- return of Rs.88,15,430/- for A.Y. 2013-14 on 06.09.2013. The assessing officer passed order u/s 143(3) on 20.03.2016 and assessed total income of Rs.4,21,33,250/- after disallowing deduction u/s 80G of Rs. 1,27,67,676/- and disallowance u/s 40(a)(ia) at Rs. 2,05,50,411/- The 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. assessee preferred appeal before the CIT(A) who has allowed relief of Rs. 1,50,53,315/- on account of disallowance u/s 40(a)(ia). Thereafter, on appeal, the Hon'ble ITAT, Jaipur, has set aside the assessment for re-examination of issue and for consideration of submissions made by the appellant. In light of directions issued by the Hon'ble ITAT, the AO has passed set aside assessment order u/s 143(3)/254 of the Income Tax Act, 1961 on 30.11.2019 after making enquiries from different sources and providing opportunity to the assessee and assessed total income at Rs. 2,38,04,320. The AD Tas found that the donation made by the appellate, were supplied made to Rajasthan Medicare Relief Society, SMS Hospital, Jaipur etc. Penalty u/s 271(1)(c) for furnishing of inaccurate particulars of Income was initiated in the assessment order dated 30.11.2019. Penalty order u/s 271(1)(c) of the L. T. Act, 1961 was passed on 10.02.2022 and imposed penalty of Rs. 1,46,47,830/-. The appellant filed appeal before the Hon'ble CIT(A) against the penalty order dated 10.02.2022 passed under section 271(1)(c) of the Income Tax Act, 1961 by the NFAC, Delhi for A.Y. 2013-14. The Hon'ble CIT(A), vide order dated 28.12.2023 partly allowed appellant appeal on ground No.4 and reduced penalty to 100% from 300%.
3. In the grounds of appeal before the Hon'ble ITAT the appellant has taken grounds that the CIT(A) has erred in confirming the penalty to the tune of 100% out of penalty levied by Ld AO u/s 271(1)(c) of the Income Tax Act, 1961. Further, the assessee claimed that the donation was made in monetary terms and deduction u/s 80G was genuinely claimed. The grounds of appeal taken by the appellant is not acceptable. The assessee was asked vide notice u/s 274 r.w.s 271(1)(c) of the IT Act dated 30.11.2019 followed by show cause notice dated 09.09.2021 and reminder letter dated 30.11.2021, as to why an order imposing a penalty u/s 271(1)(c) of the Income Tax Act, 1961 should not be made. Further, a show cause notice u / s * 271(1)(c) of the Income Tax Act, 1961 was sent to the designated verification unit through speed post and the same was delivered. In response to the notices, no reply was received from the assessee. Even after, the ample opportunities, reply was not submitted by the assessee. The assessee had no valid explanation to offer. As per section 271(1)(c) of the income Tax Act, 1961:- "271 (1) If the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person- (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. (iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits.
4. Further, the assessee has taken ground that the donation was made in monetary terms and deduction u/s 80G was genuinely claimed. The ground of appeal
taken by the appellant is not acceptable as the assessing officer during the assessment proceedings u/s 143(3) r.w.s 254, the AO has conducted details enquiry from recipients of donation and considered replies of appellant assessee before passing the order. The AO also perused stock register entry of the society (donee) and found that receipts of goods was shown from Shree Jai Singh Sethia not from the assessee company. The assessee failed to bring any evidence on record in support of its claim that donation was made in monetary term. The appellant assessee has also failed to bring any evidence on record that the donation was made in monetary terms. The AO has therefore, held that purchases of goods were made by the appellant assessee and given to society (donee). It was therefore held that the donation made by the appellant were made in kind. 3.1 The AO has discussed the relevant para of memorandum explaining the provision of Finance Bill, 1976 which reads as under:- "Donations in kind not to qualify for tax concession: Donations made to certain funds, charitable institutions, etc., qualify for tax concession under section 80G of the Income-tax Act. The deduction under this section is available in respect of "sums" paid by the taxpayer to funds charitable Institutions, etc., referred to in that section and not to donations in kind. The existing provisions is section 800 of the Income tax Act have, however, been interpreted in certain judicial pronouncements to include even donations in kind. As donations in kind were not intended to qualify for this concession, it is proposed to make a provision for the removal of doubts clarifying that no deductions will be allowed under section 80G unless the donation is a sum of money, that is to say, it is made in case (or by cheque, bank draft, etc.) and not in kind.”
4. Moreover, the AD has also noticed that the appellant has also failed to furnish any evidence to the effect that the donee institutions are eligible for claim of 100% deduction out of gross total income. The AO has also made remarks that the amount of deduction claimed by the assessee is also not qualified for deduction as per provisions of section 80G(4). Section 80G(4) says that:-
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. (4) Where the aggregate of the sums referred to in sub-clauses (iv), (v), (vi), (via) and (vii) of clause (a) and in clauses (b) and (c) of sub-section (2) exceeds ten per cent of the gross total income (as reduced by any portion thereof on which income-tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), then the amount in excess of ten per cent of the gross total income shall be ignored for the purpose of computing the aggregate of the sums in respect of which deduction is to be allowed under sub-section (1).
After considering of facts, the AO has made 1,27,67,676/- by disallowing deduction u/s 80G. Further, addition u/s 40(a)(ia) was made at Rs. 2281225/-. The finding of AO are discussed in detail in the AO order and also in para 6 of the CIT(A) order dated 26.12.2023.”
Ld. DR vehemently argued that the ITAT in past has not considered that decision of the apex court and has allowed the appeal. The assessee has not given the donation of money but is evidently clear that the same is given that of of kind and same is not eligible for claim. Ld. DR also raised the issue that the deduction is allowable u/s. 80G to the extent of the 50 % of the income but when controverted by the ld. AR with that of the provision of the Act these hospital were considered for 100 % of the donation and therefore, based on that argument ld. DR supported the order of the lower authority.
We have considered the rival contention. The bench noted that this is the second round of litigation. In the first round the ITAT held as under :-
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd.
The question for consideration is therefore the determination of the finer distinction between the cash donation and donation in kind. In both the cases, there is outflow of money from the assessee’s hand. However, there could be various scenarios in particular facts and circumstances of each case. In one sceanrio, the money is going directly from the assessee to the donee which doesn’t create any confusion and it will be clearly eligible for deduction. In another scenario, where the assessee has an existing asset/property/stock-in- trade in its possession/control and the same is thereafter transferred by way of donation, it will be a clear case of donation in kind and the same will not be eligible for deduction. There could be a third scenario where the assessee purchases any asset/property/equipments etc from a third party and thereafter, the same is donated. In this case, even though the money has been spent by the assessee in purchasing the asset/property/equipment, what has been actually donated is the asset/property/equipment. The act of donation is subsequent to purchase/acquisition by the assessee in its own right. purchased/acquired the Once the assessee has asset/property/equipment, the title/ownership in such asset/property/equipment has been transferred by way of gift. The gift in such cases is thus gift in kind and the same won’t be eligible for deduction. Another scenario is where there is a necessity/requirement of certain asset/property/equipment by the donee institution and it reaches out to the donor to fund such acquisition/purchase of asset/property/equipment. In this case, the donee institution places the order directly on the supplier of the asset/property/equipment, thereafter, the supplier supplies the equipment directly to the donee and the install the same at the premises of the donee institution. The limited role of the donor in such a scenario is to fund such acquisition/purchase and make the payment to the supplier on behalf of the donee institution.
If we look at the last two scenarios as discussed above, the finer distinction between these two scenarios is that in the first scenario, the assessee donor has purchased/acquired the asset/property/equipment in its own right and thereafter, the title/ownership in such asset/property/equipment has been transferred by way of gift to the donee institution. In the second scenario, the donee institution itself has purchased/acquired the asset/property/equipment in its own right and therefore, there is no question of transfer of the title/ownership in such asset/property/equipment by the donor to the donee institution and which has been spent/transferred by the donor is the sum of money equivalent to the purchase price of the equipments purchased directly by the done insitution. The first scenario will not qualify for deduction as what has been donated is property in kind, however the second scenario will qualify for deduction as what has been spent and transferred is sum of money and not property in kind. In our view, the facts of the present scenario thus needs to be analysed in detail to determine which of the above scenarios it fits in and bases the same, whether the assessee is eligible for deduction under section 80G of the Act.
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd.
10. In the present case, the ld AR has contended that on the advise of the Hospital authorities, the assessee issued a cheque in favour of the manufacturers to directly supply the desired machinery and equipments to Hospitals. After getting the cheque from the assessee, the manufacturers directly sent the machinery and equipments to the Hospitals. The machinery and equipments sent by manufacturers were directly delivered to the hospital authorities and also got installed in the hospital premises. It was submitted that at no stage, equipments are delivered to the assessee company. Moreover after having made the payments by way of cheques to the suppliers, the assessee has no connection with the suppliers. It was submitted that all works including placing of order of medical equipments required by hospital authorities, taking of delivery of goods, checking of quality and quantity of the medical equipments and getting installed these medical equipments in the hospitals are under direct supervision of the medical superintendent and at no stage assessee comes into picture nor it has any say in the supply of the equipments and installation thereof. It was submitted that so far as assessee is concerned, it has paid the donation in money i.e. by way of issuing cheque from his bank account in favour of suppliers of medical equipments and in such a situation by no canon of law, can it be said that donation is in kind or nor in cash. The above contentions of the ld AR need to be tested in terms of actual verifiable documentation right from placing the order by the Hospital authorities, raising of invoices by the supplier on the hospital authorities, delivery/supply/installation at the hospital premises and payment by cheque by the assessee equivalent to the invoice value directly to the suppliers. However, we find that there is nothing on record in terms of verifiable evidence/documentation in support of aforesaid contentions so raised by the ld AR. Further, we find that there is no finding recorded by the AO or the ld CIT(A) examining the aforesaid contentions so raised by the ld AR. In absence of the same, we are unable to take a view in the matter and the matter deserves to be set-aside.
11. Regarding reliance placed by the ld AR on the findings of the Coordinate Benches in earlier years which has been decided in favour of the assessee, we find that the decision of the Coordinate Bench in AY 2009-10 was rendered in the context of exercise of powers by the ld CIT u/s 263 where the AO has already examined the matter in the course of assessment proceedings u/s 143(3) and which has been followed subsequently by the Coordinate Bench in AY 2012-13. In our view, the act of donation whether cash or in kind being a factual matter needs to be examined for the each of the years under consideration. Even if we were to follow the orders passed by the Coordinate Benches in earlier years, the matter needs to be examined on facts prevailing in the impunged assessment year to determine whether the findings of the earlier years can be applied to the facts of the impunged assessment year. As we have noted above, there has been no findings recorded by the lower authorities regarding actual transaction details and documentation of the donation made by the assessee, we are unable to accede to the contention of 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. the ld AR to blindly follow the findings of the Coordinate Benches in the earlier years. Similarly, reliance placed by the ld AR on the decision of the Hon’ble Rajasthan High Court doesn’t support the case of the assessee as the said decision has been rendered in the peculiar facts and circumstances of the case in the context of exercise of powers by the ld CIT u/s 263 of the Act and apparently, the decision of the Honb’le Supreme Court in case of H.H. Sri Rama Verma (supra) was not brought to the notice of Hon’ble High Court.
12. In the entirety of facts and circumstances of the case and in light of above discussions and in particular, the decision of the Hon’ble Supreme Court in case of H.H. Sri Rama Verma (supra) referred supra, we set-aside the matter to the file of the AO to examine the same afresh taking into consideration the above discussions, after providing reasonable opportunity to the assessee.
In the result, the ground is allowed for statistical purposes.
As is evident from the above direction of the ITAT in first round wherein the bench already held that in case of another scenario wherein there is a necessity of the certain equipment by the donee institution place the order directly on the supplier, thereafter supplier of the equipment supplied the equipment directly and install the same at the premises of the done institution wherein the limited role of the done is to fund such acquisition which is met with in the case and therefore, when the order, installation and delivery is directly at the done premises and the role of the assessee is to finance that equipment cannot be considered merely donation in kind. Here in this case order was direct, installation and delivery of the equipment was not with the premises of the assessee and the assessee has not recorded the purchase and merely recorded the donation in their books of account cannot be termed as donation in kind 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. and it is purely a donation of cash. Even this issue has already been decided by the co-ordinate bench of this tribunal in past for other year we do not see no reason to hold that the donation was in kind. Since the evidence advanced before us clearly shows that the donation of was money and therefore the decision cited of having paid the donation in kind are not applicable and therefore, the appeal of the assessee is allowed. Even when the matter challenged by revenue before our High Court for earlier year allowance of donation that appeal was dismissed wherein the High Court has noted as under:- “Instant appeal u/s 260A of the Income Tax Act, 1961 (“Act”) has been preferred against order of the Income Tax Appellate Tribunal (“Tribunal”) dt. 05.11.20214 and the controversy confined to the deduction claimed by the assessee respondent of Rs. 86,41,387/- u/s 80G of the Act. The case as set up by the assessee before the Assessing Authority was that be being engaged in the business of trading &export of readymade garments filed return of income for the assessment year 2009-10 declaring total income of Rs. 68,77,320/-. However, the Assessing Officer scrutinized the case of the present petitioner u/s 143(3) of the Act and while examining the books allowed the deduction as claimed by the assessee in computation of income. The learned CIT held that the deduction u/s 80G of the Act made in the form of various equipments/items to M/s Rajasthan Medical Relief society, SMC Hospital, Jaipur in view of Explanation-5 of Sec. 80G no deduction was allowed in respect of any donation unless such donation is a sum of money and since the assessee made donation in the form of equipments and not as a sum of money, such deduction was not permission in law and which came to be challenged by the assessee in appeal before the ld. Tribunal and after perusal of the recoreds the Ld. Tribunal arrived to a conclusion that the money was paid to the manufacturer of those machines which were installed at the SMS Hospital with the prior consent and such machines were installed to provide medical assistance to the poor people and also observed that if the money would have been paid directly to the SMS Hospital donation u/s 80G 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. was permissible but there was a confirmation in regard to machines being installed and paid by cheque to the manufacturer and machines once installed in SMS Hospital has been counter checked by the revenue, taking note thereof and the facts which come before the Tribunal into consideration allowed the appeal of the assessee & held that he is entitled for deduction u/s 80G of the Act. ] After hearing counsel for the parties, we do not find any substantial question of law emerges in the instant appeal for our consideration. Consequently, the appeal stands dismissed.”
Thus, respectfully following the earlier decision of the co-ordinate bench in the case of the assessee, order of the High Court dismissing the appeal which has been decided against the revenue and considering the evidence advanced before us the appeal clearly show it was case of donation in cash and not of kind. Thus, appeal of the assessee in is allowed.
13. Now coming to the cross appeal of the assessee and that of the revenue wherein the ground raised are as under: Assessee’s appeal in In this appeal the assessee has taken following grounds of appeal:-
1. The facts and in the circumstances of the case and in law, Ld. CIT(A) has grossly erred in confirming the penalty to the tune of 100% out of penalty levied by Id.AO u/s 271(1)(c) of the Income Tax Act. 1.1 That, Id. CIT(A) has further erred in not considering the submission of made by assessee that the assessee actually made donation in monetary terms and deduction u/s 80G was genuinely claimed, which stood disallowed and this does not tantamount to concealment/furnishing of inaccurate particulars in any manner. It is therefore prayed that penalty confirmed by Id.CIT(A) deserves to be deleted.
159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. 1.2 That, Id.CIT(A) has further erred in confirming penalty imposed by Id.AO without recording independent satisfaction during penalty proceedings. Appellant prays that both Quantum and penalty proceedings are independent proceedings and conclusion drawn in quantum proceedings though relevant, cannot be solely relied upon for imposing penalty, and therefore penalty confirmed by ld.CIT(A) deserves to be deleted. 1.3 That, Id. CIT(A) has further erred in confirming the penalty ignoring the fact that donation was disallowed for the sole allegation that the same was in kind without doubting the claim of the assessee that donation was made of the said amount.
2. That the appellant craves the right to add, delete samgadorables.a.okabe grounds of appeal either before or at the time of hearing of appeal.”
The Department has taken following grounds of appeal:-
1. Whether on the facts and in the circumstances of this case, the Ld. CIT(A) is justified in restricting the penalty from 300% ti 100% without any basis ignoring the fact that AO has discretionary power to levy penalty ranging from 100% to 300% and his order is prima facie devoid of merits and contrary to the law and needs to be quashed.
14. As is evident from the above grounds raised in the cross appeal that relates to the levy of penalty by ld. AO @ 300 %, whereas the same is reduced to 100 % by the ld. CIT(A). The assessee challenges the levy @ 100 % and revenue challenges the reduction in the penalty. Since the quantum appeal of the assessee is decided herein above in favour of the 159 & 160/JPR/2024 ACIT vs. Nash Fashion (India) Ltd. assessee in the issue of levy of penalty on the addition become academic at this stage and the same is disposed off. In the result, the appeal of the assessee is allowed in ITA no. 159/JP/2024 and that of cross of assessee and revenue treated as dismissed. Order pronounced in the open Court on 28/04/2025.