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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI G.S.PANNU & SHRI C.N.PRASAD
ORDER PER G.S.PANNU,A.M:
The captioned appeal filed by the assessee pertaining to assessment year 2010-11 is directed against an order passed by CIT(A)-27, Mumbai dated 14/02/2014, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 22/01/2013.
The first issue, in this appeal is with regard to assessee’s claim for deduction under section 80G of the Act with respect to a donation of Rs.30,00,000/- paid to “Padmashree Dr.D.Y.Patil University”. In this context,
(AY. 2010-11) the relevant facts are that the appellant is a partnership firm, which is engaged in the business of servicing and trading in laboratory testing equipments for pharmaceutical industry. In the course of assessment proceedings, the Assessing Officer noted that an amount of Rs.30,00,000/- donated by the assessee firm to “Padmashree Dr.D.Y.Patil University” was not a voluntary donation, inasmuch as, it was an expenditure incurred in order to secure admission of son of the partner( Shri Anik Marfatia) for Post Graduate medical course in the university. Accordingly, the Assessing Officer inferred that the payment was made to derive a benefit for the partner in the form of securing admission of his son in the university and, therefore, it could not be allowed as a voluntary donation. Accordingly, the deduction claimed under section 80G of the Act with respect to the aforesaid sum of Rs.30,00,000/- was disallowed. The CIT(A) has also affirmed the addition, against which the assessee is in appeal before us.
Before us, the Ld. Representative for the assessee pointed out that similar issue had come up before the Tribunal in the case of M/s. Electrolab, which is a sister concern of the assessee firm and the Tribunal in vide order dated 08/03/2017 has allowed the claim of the assessee. The Ld. Representative for the assessee, therefore, contended that the denial of deduction under section 80G of the Act in the present case is unsustainable.
On the other hand, the Ld. Departmental Representative has not controverted the factual matrix brought out by the assessee, but has reiterated the stand of the Assessing Officer.
(AY. 2010-11) 5. We have carefully considered the rival submissions. Notably, the discussion in the assessment order reveals that the Assessing Officer was conscious of the fact that in the case of assessee’s sister concern M/s. Electrolab(supra), an amount of Rs.30,00,000/- was also donated to “Padmashree Dr.D.Y.Patil University”. The Assessing Officer also noted that the wife of assessee’s partner Smt. Amita Marfatia was a partner in M/s.Electrolab. The case made out by the Assessing Officer was that the donation was not voluntary, but was made to secure the admission of Mr. Anik Marfatia, who was the son of assessee’s partner Shri Amit Marfatia. Identical situation was considered in the case of M/s. Electrolab,(supra) albeit, in the context of Smt. Amita Marfatia, wherein similar amount of donation was paid and which was viewed by the Assessing Officer to be for securing admission of her son Mr. Anik Marfatia. The Tribunal vide order dated 08/03/2017(supra) rejected the objection of the Assessing Officer and allowed the claim for deduction under section 80G of the Act, noticing that there was no specific provision in section 80G of the Act prohibiting the deduction in case any person related to the donor was getting education in the donee institution. Since our Co-ordinate Bench has considered a similar situation, albeit, in the case of the sister concern, following the ratio laid down therein, in the present case also, assessee’s claim for donation under section 80G deserves to be allowed.
Apart from the aforesaid, one of the points brought out by the Ld. Representative for the assessee was that the son of the partner had obtained admission in the donee university based on merit, inasmuch as, the donee institution has issued a certificate that the student had obtained admission on merits. It was therefore, contended that there was no (AY. 2010-11) justification to say that the donation was made with a view to secure admission for the relative of the partner. We find that the aforesaid factual aspect has also not been rebutted and, therefore, considering the entirety of facts and circumstances of the case, we do not find any justification for denying the claim of the assessee for deduction under section 80G of the Act with respect to the donation of Rs.30,00,000/- made to “Padmashree Dr.D.Y.Patil University”. Thus, on this aspect assessee succeeds.
Another related addition is of a sum of Rs.60,000/- representing disallowance of interest paid to the partners. In this context, the relevant facts are that the assessee firm had claimed an expenditure of Rs.73,37,952/- representing interest paid to partners. Since the donation of Rs.30,00,000/- paid to “Padmashree Dr.D.Y.Patil University” was considered as personal expenditure of one of the partners, the Assessing Officer held that the capital account of the partner would stand reduced to that extent; accordingly, he reduced the interest paid to the partner on the capital account balance by a sum of Rs.60,000/-. Quite clearly, the aforesaid disallowance is unsustainable since we have disagreed with the Assessing Officer and upheld the assessee’s claim for deduction under section 80G of the Act of Rs.30,00,000/- towards donation paid to “Padmashree Dr.D.Y.Patil University”. Thus, the said addition is directed to be deleted.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 26/04/2017