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Income Tax Appellate Tribunal, KOLKATA BENCH “SMC” KOLKATA
Before: Shri S.S, Godara
Shri Miraj D. Shah, Advocate अपीलाथ� क� ओर से/By Appellant Shri Jayanta Khanra, SR-DR ��यथ� क� ओर से/By Respondent 04-02-2020 सुनवाई क� तार�ख/Date of Hearing 14-02-2020 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R These two assessee’s appeals for assessment years 2012-13 & 2013-14, arise against the Commissioner of Income-tax (Appeals)-11, Kolkata’s separate orders dated 30.10.2019 & 26.09.19 passed in case Nos.CIT(A)-11/10051/17-18/Kol and 168/ CIT(A)-11/Cir-37/15-16/Kol, involving proceedings u/s. 147 r.w.s.143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard Shri Shah representing assessee and Shri Khanra; senior departmental authority appearing at the Revenue’s behest. Case files perused.
The assessee’s identical sole substantive grievance challenges correctness of both the lower authorities’ action disallowing its sec.35(1)(ii) deduction claims of ₹17,50,000/- and ₹8,75,000/- ;( assessment year-wise) respectively qua its contributions made to M/s Herbicure Healthcare Bio-Herbal Research Foundation on ITA No.2544-46/Kol/2019 A.Ys. 12-13 & 13-14 Ever Shine Jewel House Vs. ACIT, Cir-37 Kol. Page 2 the ground that latter was an accommodation entry provider only. I notice with the able assistance of both the learned representatives that this issue of sec. 35(1)(ii) deduction in case of very recipient is no more res integra as per tribunal’s co-ordinate bench’s decision in & 465/Kol/2018 M/s Indian Coal Agency vs. Assistant Commissioner of Income Tax, Circle-35, Kolkata decided on 23.10.2019 as under:- “6. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee had claimed exemption u/s. 35(1)(ii) of the Act for making donation of Rs.1,55,00,000/- to M/s. Herbicure Healthcare Bio-Herbal Research Foundation which enjoyed registration u/s. 35(1)(ii) of the Act granted on 14.03.2008 and renewed vide dated 13.08.2012 which fact has not been disputed. The only ground on which the AO has denied the claim of weighted deduction was that it has come to his knowledge that the founder of M/s. HHBHRF has admitted before the department that it was indulging in the nefarious practice of giving accommodation entry to the entities like assessee and a whistleblower has also supported this allegation. However, when the AO issued notice u/s.133(6) to M/s. HHBHRF, it did not support the allegation of AO and on the other hand, corroborated the fact of assessee giving donation of Rs.2,71,25,000/- to it. And it was brought to our notice that the founder of M/s. HHBHRF has retracted the allegation made earlier. And the assessee pleaded before the Ld. CIT(A) that even if the certificate granted u/s. 35(1)(ii) of the Act has been withdrawn retrospectively, that cannot be a ground to disallow the claim of the assessee. We note that this issue is no longer res integra. It is not in dispute that M/s. HHBHRF was enjoying the approval under Sec. 35(1)(ii) of the Act as on the date of receipt of donation and by retrospective cancellation of approval of the concerned institution, the deduction claimed in respect of the donation given by the assessee cannot be denied. This view of ours has been approved by the Hon’ble Bombay High Court in M/s Seksaria Biswan Sugar Factory Ltd. and Another vs. Inspecting Assistant Commissioner and Others (1990) 184 ITR 123 and we note that this view has been consistently taken when application of weighted deduction has been claimed against M/s. HHBHRF. Moreover, our view is fortified by the Explanation given u/s.35(1)(ii) of the Act is reproduced under: “Section 35(1)(ii) - Explanation. The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution to which clause (ii) or clause (iii) applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) has been withdrawn.”
We find that there is no provision in section 35(1)(ii) of the Act to withdraw the recognition granted to the assessee therein. When there is no provision for withdrawal of recognition in the Act, the action of the revenue in withdrawing the recognition with retrospective effect from 1.4.2007 is unwarranted. In this regard, the recent decision of the Hon’ble Supreme Court in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd vs CIT Gwalior reported in (2018) 90 taxmann.com 281 (SC) wherein it was held that:- 21. In our considered opinion, the CIT had no express power of cancellation of the registration certificate once granted by him to the assessee under Section 12A till 01.10.2004. It is for the reasons that, first, there was no express provision in the Act vesting the CIT with the power to cancel the registration certificate granted under Section 12A of the Act. Second, the order passed under Section 12A by the CIT is a quasi judicial order and being quasi judicial in nature, it could be withdrawn/recalled -46/Kol/2019 A.Ys. 12-13 & 13-14 Ever Shine Jewel House Vs. ACIT, Cir-37 Kol. Page 3 by the CIT only when there was express power vested in him under the Act to do so. In this case there was no such express power.
Indeed, the functions exercisable by the CIT under Section 12A are neither legislative and nor executive but as mentioned above they are essentially quasi judicial in nature.
Third, an order of the CIT passed under Section 12A does not fall in the category of "orders" mentioned in Section 21 of the General Clauses Act. The expression "order" employed in Section 21 would show that such "order" must be in the nature of a "notification", "rules" and "bye laws" etc. (see - Indian National Congress(I) v. Institute of Social Welfare [2002] 5 SCC 685.
In other words, the order, which can be modified or rescinded by applying Section 21, has to be either executive or legislative in nature whereas the order, which the CIT is required to pass under Section 12A of the Act, is neither legislative nor an executive order but it is a "quasi judicial order". It is for this reason, Section 21 has no application in this case.
The general power, under Section 21 of the General Clauses Act, to rescind a notification or order has to be understood in the light of the subject matter, context and the effect of the relevant provisions of the statute under which the notification or order is issued and the power is not available after an enforceable right has accrued under the notification or order. Moreover, Section 21 has no application to vary or amend or review a quasi judicial order. A quasi judicial order can be generally varied or reviewed when obtained by fraud or when such power is conferred by the Act or Rules under which it is made. (See Interpretation of Statutes, Ninth Edition by G.P. Singh page 893). 26. ………… 27. It is not in dispute that an express power was conferred on the CIT to cancel the registration for the first time by enacting sub-Section (3) in Section 12AA only with effect from 01.10.2004 by the Finance (No.2) Act 2004 (23 of 2004) and hence such power could be exercised by the CIT only on and after 01.10.2004, i.e., (assessment year 2004-2005) because the amendment in question was not retrospective but was prospective in nature.
The issue involved in this appeal had also come up for consideration before three High Courts, namely, Delhi High Court in the case of DIT (Exemptions) v. Mool Chand Khairati Ram Trust [2011] 11 taxmann.com 42/199 Taxman 1/339 ITR 622, Uttaranchal High Court in the case of Welham Boys' School Society v. CBDT [2006] 285 ITR 74/[2007] 158 Taxman 199 and Allahabad High Court in the case of Oxford Academy for Career Development v. Chief CIT [2009] 315 ITR 382.
All the three High Courts after examining the issue, in the light of the object of Section 12A of the Act and Section 21 of the General Clauses Act held that the order of the CIT passed under Section 12A is quasi judicial in nature. Second, there was no express provision in the Act vesting the CIT with power of cancellation of registration till 01.10.2004; and lastly, Section 21of the General Clauses Act has no application to the order passed by the CIT under Section 12A because the order is quasi judicial in nature and it is for all these reasons the CIT had no jurisdiction to cancel the registration certificate once granted by him under Section 12A till the power was expressly conferred on the CIT by Section 12AA(3) of the Act w.e.f. 01.10.2004.
ITA No.2544-46/Kol/2019 A.Ys. 12-13 & 13-14 Ever Shine Jewel House Vs. ACIT, Cir-37 Kol. Page 4 8. We hold that the ratio decidendi of the aforesaid judgement of the Hon’ble Apex Court would squarely be applicable to the facts of the instant case. Infact the assessee’s case herein falls on a much better footing than the facts before the Hon’ble Apex Court. In the case before Hon’ble Apex Court, the power of cancellation of registration us 12A of the Act was conferred by the Act on the ld CIT w.e.f. 1.10.2004 and the Hon’ble Apex Court held that prior to that date , no cancellation of registration could happen. But in the instant case, there is absolutely no provision for withdrawal of recognition u/s 35(1)(ii) of the Act . Hence, we hold that the withdrawal of recognition u/s 35(1)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1)(ii) of the Act.
We also find that the co-ordinate bench of this tribunal in exactly similar facts had decided the issue in favour of the assessee in the following cases:- a) Rajda Polymers vs DCIT in for Asst Year 2013-14 dated 8.11.2017. b) Saimed Innovation vs ITO in ITA No. 2231/Kol/2016 for Asst Year 2013-14 dated 13.9.2017. c)DCIT Vs. M/s. Maco Corporation (India) Pvt. Ltd. in ITA No. 16/Kol/2017 for AY 2013- 14 dated 14.03.2018. d) DCIT Vs. M/s. Desmet Reagent Pvt. Ltd. in ITA No. 15/Kol/2017 for AY 2013-14 dated 10.10.2018 The findings of those decisions are not reiterated herein for the sake of brevity.
In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon hereinabove, we hold that the ld CITA had wrongly confirmed the disallowance as made by the AO u/s 35(1)(ii) of the Act of Rs. 2,71,25,000/-. Therefore, following the ratio of the aforesaid decisions, we allow this ground of appeal
in favour of assessee.”
3. I adopt the above extracted detailed reasoning mutatis mutandis to delete sec.35(1)(ii) disallowance(s) forming subject matter of both the appeals. Necessary computation to follow as per law. The assessee succeeds its identical sole substantive grievance.