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Income Tax Appellate Tribunal, “A”, BENCH KOLKATA
Before: SHRI S. S. GODARA, JM & Dr. A. L. SAINI, AM
BEFORE SHRI S. S. GODARA, JM & Dr. A. L. SAINI, AM आयकर अपीलसं/ ("नधा"रण वष" / Assessment Year: 2014-15) Cotton Emporium Vs. ACIT, Circle-34, Kolkata. P 36, Indian Exchange Place, 3rd Floor, Room No.44, Kol-1. "थायीलेखासं./जीआइआरसं./PAN/GIR No.: AADFC7880M (Appellant) .. (Respondent) Appellant by : Shri R.P. Agarwal, Adv. & N. Sheth. Respondent by : Shri Dhrubajyoti Ray, JCIT सुनवाई क" तार"ख/ Date of Hearing : 29/01/2020 घोषणा क" तार"ख/Date of Pronouncement : 21/02/2020 आदेश / O R D E R Per Shri S. S. Godara: This assessee’s appeal for assessment year 2014-15 arises against the Commissioner of Income Tax - 10, Kolkata’s order dated 14.09.2018 passed in case no.385/CIT(A)-10/Cir-34/2014-15/2016-17/Kol involving proceedings u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’). Heard both the parties. Case file persued.
The assessee’s former substantive ground challenges correctness of both the lower authorities’ action denying its section 35(i)(ii) deduction claim of Rs.35,00,000/- in the nature of contribution made to M/s School of Hanuman Genetics and Public Health on the ground that the recipient entity turns out to be a mere accommodation entry provider than carrying out any scientific research and development.
After hearing both the learned representatives, it transpires that the above issue is no more res integra as the tribunal’s coordinate bench’s order in Tushar Chawda vs. ITO dated 21.03.2018 declining the department’s similar stand as under:
“2. In this case the assessee had paid an amount of Rs.15,00,000/- as deduction u/s 35(1)(ii) of the I.T.Act, 1961 (Act) to School of Human Genetics and Population Health and claimed weighted deduction u/s 35 of the Act [175% of 1500000] amounting to Rs.26,25,000/- from income under the head business.
3. The AO rejected this claim by observing as follows :- “From the submissions of the assessee, it is clear that the assessee made the donation with a motive to get a huge deduction from business income only to reduce the total income for avoiding the payment of tax. Further, the .assessee has failed to substantiate the payment of donation satisfactorily. It is clear that the donation, made by the assessee, was a bogus payment and to get some benefit for which the assessee chose this particular organization and particular FY. The assessee must have got some benefit in lieu of donation payment of Rs.15,00,000/-. Hence, the weighted deduction claimed u/s.35 amounting to Rs. Rs.26,25,000/- from income under the head business is disallowed and added to the total income of the assessee for the AY 2014- 15.”
4. The ld. CIT(A) had rejected the contentions of the assessee by observing as follows :- 4.1. 1 have considered the submission of the appellant and perused the relevant assessment records. The M/S School of Genetics and Population Health, Kolkata had been granted approval u/s 35(1)(ii) of the I.TAct, 1961 vide Notification No. 4/201O/F. o. 203/64/2009/ITAT dated 28.01.2010 in the Official Gazetted by the Central Government. Any expenditure to such Notified .Institution which has as its object the undertaking of scientific research is eligible for weighted deduction equal one and three fourth times of any sum paid. However, the Ministry of Finance (Department of Revenue ) (Central Board of Direct Taxes) Vide Notification No. 82/2016/F.No. 203/64/2009/IT A.I1 dated 15.09.2016 in The Gazette of India: Extra Ordinary had rescinded the Notification granting approval by the Central Government to the appellant for the purpose of clause (ii) of sub section (1) of section 35 of the I.T. Act, 1961, read with Rule 5C and 5E of the Income tax Rule, 1962. The Notification reads as follows: "'Ministry of Finance, (Department of Revenue) (Central Board of Direct Taxes) Notification New Delhi, the 15th September, 2016, S.O. 2961(E)-In exercise of the powers conferred under clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 read with Rule 5e and 5E of the Income-tax Rules, 1962, the Central Government hereby rescinds the notification of the Government of India, Ministry of Finance, Department of Revenue number 4/2010 dated 28.01.2010 published in Gazette of India , Part 11, Section 3, Sub-section (ii) dated 28.01.2010 vide S.O. 348 with effect from 1st April, 207 and shall be deemed that the said notification has not been issued for any tax benefits under the Income-tax Act, 1961 or any other law of the lime being in force [Notification No. 82/2016/F.No.203/64/2009/ITA-ll] Cotton Emporium Deepshikha Sharma, Director." The above notification makes clear that the earlier notification.No. 4/2010 dated 28.01.2010 shall be deemed not to have been issued for any income- tax benefits under the Income-tax Act. Therefore, the payment of Rs.15,00,000/- for the purpose of availing weighted deduction of 175% u/s 35(1)(ii) of the Act made to M/s School of Human Genetics and Population Health, Kolkata is denied. It may be clarified here that explanation to section 35(l)(iii) of the Income-tax Act shall not come to the rescue of the appellant as it relates, only to approvals which have been withdrawn subsequent to the payment made to Institutions to which clause (ii) or cause (iii) applies. In the case of M/s School of Human Genetics and Population Health, Kolkata, the notifications had been deemed not to have been issued for any tax benefits under the Income-tax Act, 1961 or any other law of the time being in force. Though the appellant made a donation of only Rs.15,,00,000/-, however, he has claimed u/s 35(1 )(i) and (ii) weighted deduction amounting to Rs.26,25,,000/- from his return income. The disallowance is, therefore, restricted to the deduction claimed at Rs.26,25,,000/-.”
After hearing rival contentions, I am of the view that the assessee cannot suffer on account of withdrawal of notification given to M/s. School of Human Genetics and Population Health, Kolkata granting approval u/s 35 (1) (ii) of the Act. This recognition was originally granted on 28th January, 2010 and renewed on 17th June, 2010 by Government of India . Ministry of Science and Technology. In response to letter dated 03.02.2014 given by M/s. School of Human Genetics and Population Health, to the assessee, donation of Rs.15,00,000/- was made on 31.03.2014 by the assessee. The said amount was given to the donee on 31.03.2014 and withdrawal was on 15.09.2016. i.e. after 17 months from the date of donation made in March, 2014. Such withdrawal in my view cannot take away the vested right of the assessee for claiming deduction under Section 35 (1) of the Act.
The Tribunal in the case of Rajda Polymers vide order dated 08.11.2017 at page 7 has held as follows :- “5.6. We find that the ld CITA had made an observation which has been heavily relied upon by the ld DR that the assessee’s line of business has got nothing to do even remotely with the healthcare or herbal healthcare industry much less in the area of research thereon and accordingly there was no need for the assessee to give donation of Rs 14,00,000/- to HHBRF . We find that this aspect has been duly addressed by the assessee by stating that one Cardiologist Doctor had introduced the assessee to HHBRF and donations were given after due satisfaction of the assessee based on personal visits to the two research centres of HHBRF and activities carried on by them. Moreover, it is well settled that it is always the prerogative of the assessee to give or not to give any donation to a particular institution, which wisdom cannot be questioned by the revenue. The question of business expediency of an expenditure had to be viewed from the point of view of the businessman and not from the view point of the revenue. The businessman knows his interest best. However, it cannot be denied that this donation paid to HHBRF is free from any suspicion. It definitely leads to further probe by the revenue, which has been carried out by the revenue by summoning the Director of HHBRF . The said Director Shri Swapan Ranjan Dasgupta, though could not appear in person before the ld AO for crossexamination (which was sought by the assessee) but had confirmed in writing that the donations given by the assessee to HHBRF were genuine in nature and had further confirmed that HHBRF had not paid any cash back to assessee in lieu of cheque donations paid to them. The revenue had left the matter at this stage itself and did not further probe Cotton Emporium into it to check the veracity of the confirmation made by Shri Swapan Ranjan Dasgupta. Therefore, the ld AO proceeded to make the addition only based on the statement recorded from Swapan Ranjan Dasgupta at the time of survey. It may be true that in the said statement, Swapan Ranjan Dasgupta may have deposed to the fact that HHBRF were in receipt of various donations from various persons in cheques and the same were routed back to the donors in cash after retaining certain portion as their commission and intermediaries’ commission. This is only a general statement given by Swapan Ranjan Dasgupta about the modus operandi carried out by HHBRF. But nowhere in the said statement or in the subsequent enquires / investigation , it came to light that the assessee herein had indeed received back the cash in lieu of cheque donations given to HHBRF. This serves as a clinching missing evidence in the entire gamut of this case.
Respectfully applying the proposition of law laid down in this case law to the facts of case on hand and as the donation to “ School of Human Genetics and Population Health” was made while it was holding the approval in question, we direct the AO to grant the said deduction as claimed. In the result this issue is decided in favour of the assessee.”
We adopt the foregoing detailed reasoning mutatis mutandis and direct the Assessing Officer to delete the impugned disallowance. This former substantive ground is accepted therefore.
5. Next comes the assessee’s latter grievance seeking to reverse the lower authorities’ action disallowing carrying forward of short-term capital loss on sale of car of Rs.1,33,695/-. Mr. Agarwal’s only plea is that the assessee’s instant grievance requires factual reconciliation/verification from the Assessing Officer’s side for appropriate computation of short-term capital loss as per law. The Revenue is fair enough in not disputing the same. We therefore restore the instant latter issue back to the Assessing Officer for fresh adjudication/computation as per law.
6. This assessee’s appeal is partly allowed in above terms.