BORSAD TOBACCO CO. P.LTD,MUMBAI vs. DCIT CEN CIR 8(1), MUMBAI

The present appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-50, Mumbai, dated 30.01.18 for AY 2014-15. Borsad Tobacco Co. Pvt. Ltd.

The solitary ground raised by the assessee relates to challenging the order of Ld. CIT(A) in denying the deduction claimed by the assessee u/s 35(1)(ii) of the I.T. Act in respect of donation paid by it to ‘School of Human Genetic and Population Health, Kolkata’. It was submitted that the present issue is raised by the assessee is squarely covered by a series of decisions made by the Coordinate Benches of ITAT Mumbai.

On the other hand, Ld. DR refuted the claim of the assessee and relied upon the orders passed by both the revenue authorities.

We have heard the counsels for both the parties and we have also perused the material placed on record, judgment cited by the parties as well as the orders passed by revenue authorities. We find that the identical ground has already been decided by the Coordinate Bench of ITAT in & 1584/Mum/2019 for AY 2013-14 & 2014-15 in the case of M/s Motilal Dahyabhai Jhaveri Vrs. ACIT. The operative portion of the order of ITAT passed in ITA No.3453/Mum/18 & Borsad Tobacco Co. Pvt. Ltd. 1584/Mum/2019 is contained in para no. 6.1, which are reproduced below:-

Apart from that, we find that another Coordinate Bench of ITAT in & 6673/Mum/13 for AY 2013-14 & 2014-15 in the case of Kitchen Essentials vrs. ACIT, has already decided the identical ground raised

We note that, during the course of hearing, before us, the Id Counsel for the assessee submitted that, the sums paid to "Matrivanil and "SHG, were genuine donations and both of the Institutions were admittedly registered under section 12A of the Income Tax Act, 1961. We note that both of the said two Institutions viz, "Matrivani" and "SHG", are Scientific Research Borsad Tobacco Co. Pvt. Ltd. Association approved as such by Central Government under section 35(l)(ii) of the Income Tax Act, 1961 vide Notification, bearing No. 229/2007 (F.No.203/135/2007/ITA-II) dated 21.08.2007 and Notification No. 4/2010 (F. No. 2B/A/2009,/ITA-II dated 28.01.2010 respectively, published in Official Gazette of India. The assessee categorically denied that it ever received back the amounts of donations in cash or in kind from the said Institutions and from any person whatsoever in lieu of the various amounts donated to these two institutions, we note that in the statements, of key persons and alleged brokers recorded by the Investigation Wing in course of survey proceedings, in their cases and the extracts of which was provided to the assessee in the show cause notice, the name of the assessee firm does not appear anywhere. It is to be noted that none of those persons implicate the assessee to have made bogus donations and that cash was paid to the donors assessee in lieu of the alleged bogus donation after deducting their commission. We note that the statements of the various parties and persons were recorded behind the back of the assessee and the Assessing Officer did not allow opportunity of cross examination. We note that in absence of opportunity of cross- Borsad Tobacco Co. Pvt. Ltd. examination no reliance could be made on such statements to draw any adverse inference against the assessee firm. The assessee firm denied its knowledge of the statements made by these institutes which were relied on by the Investigation Wing and the Assessing Officer. We note that not providing the opportunity of cross- examination is against the principle of natural justice and for that we rely of-the judgment of Hon ble Delhi High Court in the case of CIT vs. Dharam Pal Prern Chand Ltd. [2007] 295 ITR 105, 108 (del). We note that on identical facts, the similar proposition was upheld by the Coordinate Bench of Kolkata in the case of Rajda Polymers, Assessment Year 2013- 14 wherein it was held as follows: "10. .... Thus we note from the entire facts and circumstances, that the AO got swayed away with the statement recorded on oath of Mr. Swapan Ranjan Dasgupta during survey conducted at the premises of MIs. Herbicure. We have reproduced Question no. 22 and 23 and answers given by Shri Swapan Ranjan Dasgupta, wherein he admits to provide accommodation entries in lieu of cash. This information we should say can be the tool to start an investigation when the assessee made the claim for weighted Borsad Tobacco Co. Pvt. Ltd. deduction. The general statement of Shri Swapan Ranjan Dasgupta against donation made the claim of assessee for deduction suspicious. However, when the AO investigated, Shri Swapari Ranjan Dasgupta has confirmed that M/s. Herbicure was in receipt of the donation and it has not given any refund in cash, then the sole basis of disallowance of claim as a matter of fact disappeared. It should be remembered suspicion howsoever strong cannot take the place of evidence. The confirmation from Shri Swapan Ranjan Dasgup!a fortifies the claim of the assessee for weighted deduction u/s. 35(1)(ii) of the Act. The sole basis of the addition/disallowance based on statement recorded on oath during survey cannot be a//owed as held by Hon'ble Supreme Court in Kader Khan & Sons (supra). Moreover, we note that if the AO was hell bent determined to disallow the claim of the assessee, then he should have granted an opportunity to cross examine Shri Swapan Ranjan Das Gupta and Shri Kishan Bhawasingka as held by Hon'ble Supreme Court in Andaman Timber (supra).

In the light of the aforesaid facts and circumstances, we cannot sustain the order of the authorities below. Therefore, we set aside the 11 Borsad Tobacco Co. Pvt. Ltd. impugned order and direct the AO to allow the deduction ofRs.26,28,5001- u/s. 35(I) (ii) of the Act.

Now, we deal with the arguments of Id DR for the Revenue. We note that the solitary grievance of the Id DR for the Revenue is that since the registration had been cancelled by the CBDT, with retrospective effect that is, with effect from islApril 2007, by issuing notification dated 06.09.2016, for both the institutions viz: 'Matrivani' and 'The School of Human Genetics and Population Health, therefore these institutions are not entitled to claim benefit under section 35(1) (ii) of the Act. We note that the withdrawal of recognition u/s 35(l) (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, for that we rely on the judgment of the Coordinate Bench, Kolkata, in the case of M/s Maco Corporation India (P) Ltd, ITA No.161KoI1201 7, for Assessment Year 2013-14, wherein it was held as follows: '29. 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 12 I.T.A. No. 2040/Mum/2018 Borsad Tobacco Co. Pvt. Ltd. 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 fill 01.10.2004; and lastly. Section 21 of 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 I2AAC3) of the Act w. e. f. 01.10.2004. 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. In fact 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 Id 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 (I) (ii) of the Act. Hence we hold that the withdrawal Borsad Tobacco Co. Pvt. Ltd. of recognition u/s 35(l) (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 )(H) of the Act." 16. 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 direct the Id AO to grant deduction u/s 35(l) (ii) of the Act, in the sum of Rs. 4,81,25,000/- for A. Y, 2013-14 and in the sum of Rs. 10,50,00,0001-, for A. Y. 2014- 15, as claimed by him under section 35(l) (ii) of the Act in respect of the amounts of donations made to two Institutions viz. 'Matrivani Institute Experimental Research & Education' and The School of Human Genetics and Population Health' Accordingly, the Grounds 1 t 4 raised by the assessee for A. Y. 2013-14 and the Grounds 1 to 5 raised by the assessee for A. Y. 2014-15 are allowed."

Similarly in various other decisions the issue has been decided by the Tribunal in favour of the assessee by disregarding the revenue's contentions that the registration of the school has been cancelled by the CBDT with retrospective effect by issuing Notification and, therefore, the assessee is not entitled to benefit Borsad Tobacco Co. Pvt. Ltd. uls.35(1 )(ii) of the Act. The facts before us being materially same involving the same school, namely, "The School of Human Genetics and Population Health", we, therefore, respectfully following the decisions of the coordinate benches of the Tribunal, hold that the deduction u/s.35(1)(ii) of the Act cannot be denied to the assessee. Accordingly, we direct the AO to grant deduction u/s.35(1 )(ii) of the Act. Appeal of the assessee for the assessment year 2013-2014 (ITA No.6672/Mum/2017) is hereby allowed.

After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and orders of the Coordinate Benches of ITAT as mentioned above, we find that as per the facts of the present case, admittedly, the assessee had given donation to SHGPH, which was after the date of recognition of SHGPH u/s 35(1)(ii) of the Act, but before the date of withdrawal of said approval by CBDT in the case of SHGPH. Now, the short point for consideration before us is as to whether the assessee /donar could be denied weighted deduction u/s 35(1)(ii) of the Act due to the subsequent withdrawal of recognition by CBDT with retrospective effect. We find that the issue under consideration has already been addressed /considered Borsad Tobacco Co. Pvt. Ltd. by the Coordinate Bench of Kolkata Tribunal in the case of DCIT vrs. Maco Corporation (I) Pvt. Ltd. in dated 14.03.18 for AY 2013-14.

Apart from this, Ld. AR had also placed on the decisions of Hon’ble Supreme Court in the case of CIT vs Chotatingrai Tea reported in (2003) 126 Taxman 399 (SC) dated 29.10.2002 and State of Maharashtra vs Suresh Trading Company reported in (1998) 1998 taxmann.com 1747 (SC) dated 7.2.1996 which are squarely applicable to the facts of the instant case before us. The ratio decidendi of the said judgements are not being reproduced herein for the sake of brevity. In any case, we find that the provisions of section 35(1)(ii) of the Act vide its Explanation reproduced hereinabove clearly proves that the donor (i.e assessee herein) cannot be affected due to subsequent withdrawal of recognition with retrospective effect. Therefore, respectfully following the provisions of the Act and the decisions of the Coordinate Benches of ITAT as mentioned above and in order to maintain judicial consistency and judicial discipline, we apply the same findings which are applicable mutatis mutandis in the present case. Therefore, we direct the AO Borsad Tobacco Co. Pvt. Ltd. to grant deduction u/s 35(1)(ii) of the Act to the assessee as claimed by him for the year under consideration.