DCIT 2(3), MUMBAI vs. TATA STEEL LTD, MUMBAI

The AO withdrawn the deduction u/s 80GGB. On appeal before the ld. CIT(A), the deduction was allowed. Thus, being aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us. The assessee has also filed an application under Rule 27 of Income-tax (Appellate Tribunal) Rules, 1963 to on various grounds as pleaded in the application.

We have heard the ld. Departmental Representative (DR) for the Revenue and ld. Authorized Representative (AR) for assessee and perused the material available on record. The Ld. DR for Revenue supported the order of AO. The ld. DR for the Revenue to buttress his submission argued that assessee donated a sum of Rs. 3.5 Crore to its group concern i.e. ‘Electoral Trust’. The Electoral Trust is not the political parties. The legislature has not used the word “Electoral Trust” while inserting the provision of section 80GGB of the Act in the year 2003. The word ‘Electoral Trust’ was for the first time inserted and defined in the Act w.e.f. 01.04.2010 and thus, admittedly the same was not pertaining to the year under consideration and the claim of assessee for contribution to Electoral Trust was not allowable. The ld. DR for the Revenue prayed that order of ld. CIT(A) may be set- aside by restoring the order of AO. On the other hand, ld. AR of the assessee argued that assessment u/s 143(3) was completed on 26.12.2008. The notice u/s 148 was issued only on 29.03.2012. The re-opening of the assessment was done beyond the four years from the end of relevant AY. The re-opening is bad-in-law in absence of any material to show that there is failure on the part of assessee to disclose fully and truly all material facts. The re-opening was done beyond the four years from the end of relevant AY in absence of any new or additional material before the AO. The AO was not justified in disallowing the claim u/s 80GGB for contribution of Rs. 3.5 Crore made to Electoral Trust for onward contribution to the political parties, which was allowed to the assessee in the original assessment completed u/s143(3). The assessee objected the re-opening of the concluded assessment and the objection of assessee was overruled in a mechanical manner, the AO was not justified in 3 M/s. Tata Steel Ltd. disallowing the claim u/s 80GGB. The ld AR for assessee invited our attention to the Explanation with section 80GGB, wherein this section refers that for the porpose of this section, the word ‘contribute’ with its grammatical variation has the meaning as given is section 293A of the Companies Act. Accordingly, the section 293Aof Companies Act permits the contribution to any political parties by a company directly or indirectly. Hence, by virtue of which the contribution to the Electoral Trust is included u/s 80GGB of the Act. The ld. CIT(A) appreciated the fact of the case in a correct perspective and granted the relief. The Ld. AR of the assessee fully supported the order of ld. CIT(A). The Ld. AR of the assessee further argued that while passing the assessment order u/s 143(3) of the Act, the AO made the proper enquiries before allowing the deduction. The deduction was allowed after full satisfaction. The ld. AR of the assessee argued that in Schedule-F attached with the statement of total income, the assessee has disclosed the deduction u/s 80GGB of Rs. 3.5 Crore. During the original assessment proceeding, the assessee submitted letter dated 31.10.2015 disclosing the details of deduction claimed u/s 80G and 80GGB as per paragraph no. XII of letter dated 31.10.2005. Rs. 3.5 Crore was duly debited in the computation of income (page 21 and 22 of PB). The amount was duly reflected in the Auditor’s Report (page 27 to 29 of PB). The ld. AR further submitted that all these details and evidences were duly supplied to the AO before passing the order u/s 143(3) on 26.12.2008 and the assessee was granted deduction u/s 80GGB of the Act. In support of his submission that the re-opening is invalid for various reasons, the Ld. AR of the assessee relied upon the following decisions : 1. CIT v Bhanji Lavji [1971] 79 ITR 582 (SC) 2. CIT v Kelvinator of India Ltd [2002] 256 ITR 1 (Del) (FB) 3. CIT v Kelvinator of India Ltd [2010] 320 ITR 561 (SC) 4. Associated Stone Industries (Kotah) Ltd v CIT [1997] 224 ITR 560 (SC) 5. Consolidated Photo & Finvest Ltd v ACIT [2006] 281 ITR 394 (Del) 6. KLM Royal Dutch Airlines v ADIT [2007] 294 ITR 310 (Del) 7. CIT v Eicher Ltd [2007] 294 ITR 310(Del) 8. Ranbaxy Laboratories Ltd v DCIT [2013] 351 ITR 23 (Del) 9. 3i Infotech Ltd v CIT [2010] 329 ITR 257 (Bom) 10. ACIT v ICICI Securities Primary Dealership Ltd [2002] 348 ITR 299 (SC) 11. Bedmutha Industries Ltd v DCIT [2013] 87 DTR 305 (Bom) 12. Titanor Components Ltd v ACIT [2012] 342 ITR 183 (Bom) 13. Asian Paints Ltd v DCIT [2009] 308 ITR 195 (Bom) 14. Hindustan Lever Ltd v R B Wadkar, ITO [2004] 268 ITR 332(Bom) 15. NDT Systems v ITO [2014] 363 ITR 603 (Bom) 16. Johri Lal (HUF) v CIT [1973] 88 ITR 439 (SC)

We have considered the rival contention of the parties and gone through the orders of authorities below. We have also perused documents submitted before us in the form of PB (documents) and the PB (Legal). The AO re-opened the assessment u/s 147 on the ground that assessee was wrongly granted the deduction u/s 80GGB in respect of its donation to Electoral Trust. The assessee objected to the re-opening of the completed assessment. The objection of the assessee was rejected and AO completed the assessment u/s 143(3) r.w.se 147 and disallowed the deduction, which was originally allowed assessment order u/s 143(3) of the Act. Before the ld. CIT(A), the assessee agitated the action of AO, on the ground that re-opening was invalid and the disallowance u/s 80GGB of the Act. The ground with regard to re- opening of the assessment was rejected by ld CIT (A). However, the grounds with regard to the disallowance of claim u/s 80GGB was allowed by the ld. CIT(A). The assessee has no occasion to file the appeal against the order of ld. CIT(A), as ultimately the assessee succeeded on the merit of the appeal. On service of notice of appeal by Revenue, the assessee has filed application under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 for supporting of the order appealed. For proper appreciation of legal position we may refer section 80GGB, which was inserted w.e.f. 11.09.2003, which may be read as under: “80GGB. In computing the total income of an assessee, being an Indian company, there shall be deducted any sum contributed by it in the previous year to any political party. Explanation.-For the removal of doubts, it is hereby declared that for the purposes of this section, the word "contribute", with its grammatical variation, has the meaning assigned to it under Section 293A of the Companies Act, 1956 (1 of 1956). We may also refer section 293A of Companies Act as under: 293A. (1) Notwithstanding anything contained in any other provision of this Act- (a) no Government company; and 5 M/s. Tata Steel Ltd. (b) no other company which has been in existence for less than three financial years, shall contribute any amount or amounts, directly or indirectly, (i) to any political party; or (ii) for any political purpose to any person.

On careful reading of the provision of section 293A, it made clear that assessee falls in the category as referred under sub-section 2 of section 293A. Sub-section (2) of section 293A permits contribution to any Political Parties by a Company either directly or indirectly. The ld. AR of the assessee throughout his submission argued that the contribution made to ‘Electoral Trust’ is covered by the word “indirectly” and qualified for the deduction u/s 80GGB of the Act for the year under consideration. We are in full agreement with the submission of ld AR of assessee that the case of the assessee is covered by the Explanation attached with section 80GGB. We have seen that the ld. CIT(A) correctly appreciated that the contribution to a Political Parties can be either directly or indirectly to qualify the deduction u/s 80GGB of the Act. Ld. CIT(A) after appreciating the fact made the following conclusion:

We have seen that the ld. CIT(A) correctly appreciating the provisions of section 293 of Companies Act and the deduction in respect of contribution given by the Company to the Political Parties. The order of ld. CIT(A) is based on correct appreciation of the provisions and we do not find any infirmity or illegality for our interference. Thus, the grounds of appeal