J G ENGINEERS PVT. LTD.,KOLKATA vs. I.T.,O,WARD-1(2), KOLKATA

order

: November 29th, 2024 ORDER

Per Pradip Kumar Choubey, Judicial Member:

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.1,25,00,000/- for the purpose of availing weighted deduction of 175% u/s 35(l)(ii) of the Act made to. M/s School of Human Genetics and Population Health, Kolkata is denied.ht 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 appellant as it relates, only to approvals which have been withdrawn subsequent to the payments made to Institutions to which clause (ii) or clause (iii) applies.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.1,25,00,000/-, however, he has claimed u/s 35(i)(i) and (ii) weighted deduction amounting to Rs.2,18,75,000/-from his return income. The disallowance is, therefore, restricted to the deduction claimed at Rs.2,18,75,000/-. After a careful consideration of the relevant assessment records and the submission of the appellant, the disallowance of Rs.2,18,75,000/- on account of expenditure made u/s 35(l)(i) and (ii) of the IT. Act, 1961 is, hereby, confirmed. The Assessing Officer is directed accordingly.

Being aggrieved and dissatisfied with the impugned order, the present appeal has been preferred. 1.2. The ld. Counsel for the assessee challenges the impugned order by citing a decision passed in the case of Principal Commissioner Of Income Tax 5,Kolkata Vs. J P Financial Services Pvt. Ltd. in ITAT/153/2023 IA NO: GA/2/2023 has submitted that issue in the present case and the issue before the Hon’ble High Court in the above cited decision are the same and his case is entirely covered with the cited decision as above. The ld. Counsel for the assessee submits that Ld. CIT(A) in its order has dismissed the appeal of the assessee in view of the notification that Section 35(i)(iii) of the Act shall not come to rescue the appellant as it relates only to approvals which have been withdrawn subsequent to the payments made to the institutions to which Clause 'ii' or Clause 'iii' applies. Ld. Counsel for the assessee submits that Page 3 of 8 I.T.A. No.: 1145/KOL/2019 Assessment Year: 2013-14 J G Engineers Pvt. Ltd. Hon'ble High Court has clearly dealt with this issue and passed an order in favour of the assessee 1.3. On the contrary, ld. DR supports the impugned order.

Page 4 of 8 I.T.A. No.: 1145/KOL/2019 Assessment Year: 2013-14 J G Engineers Pvt. Ltd. @ 175% u/s 35(l)(ii) of the Income Tax act, 1961 for any donation made to the Institution. The assessee further understood that the Institute was also registered u/s 12AA of the Income Tax Act, 1961, The assessee found that the Board of SHGPG was constituted by eminent persons in the field of life sciences. The assessee also had gone through the projects as carried on by the SHGPG as exhibited in the website and the assessee was approached by SHGPG to make donation so as to continue the research activities. 2.2. The assessee was also informed by SHGPG that since the year ending is approaching, the donation have to be made within 31/03/2013 to get the deduction u/s 35(l)(ii) of the Income Tax Act. On request of the assessee, M/s SHGPG had submitted the documents regarding its registration u/s 12AA of the Income tax Act and gazette notification issued by the Central Government dated 28/01/2010 approving SHGPG for the purpose of clause (ii) of sub- section (1) of Section 35 of the Income tax act, 1961. Based on the above, the assessee donated a sum of Rs. 1,25,00,000 through RTGS to the bank account of the donee. 2.3. By submitting all the documentary evidences during assessment, the assessee had shown that it had examined the credentials of M/s SHGPG. The assessee also explained about its objective for association with the Institute. The assessee had gone through the annual report provided by the Institute and relied on the information regarding the projects undertaken by the Institution. The assessee had examined the status of the board members of SHGPG. Tine assessee had taken information about the on-going projects of SHGPG. Thus, the assessee had all along acted as a man of ordinary prudence, examined the documents as are generally asked for, gathered facts from the Institution's website and thus completed its due-diligence about the Institution. The payment was not made by the assessee to an unknown person but to an organization approved by the Central Government which was valid till the date of payment. The payment was made through banking channels i.e. through RTGS so that the donee only gets the fund for carrying out its declared objectives. All the payments were duly covered by the money receipts of the donor. The claim was duly made in the return. Even during assessment, Page 5 of 8 I.T.A. No.: 1145/KOL/2019 Assessment Year: 2013-14 J G Engineers Pvt. Ltd. in respect of the AO's specific query about the investigation carried on by the DDIT(Inv), Kolkata and the statement of the Institute's director & treasurers before the investigation agencies about receipt fund for commission through bogus donation, the assessee explained that the company was not aware of any incident and the donation was given under bona fide belief. In the same context, the assessee requested the AO to supply the adverse material which however was not provided. 2.4. As we have already discussed in our preceding paragraph that the Ld. CIT(A) has confirmed the order of the Ld. AO on addition of Rs. 2,18,75,000/- in his return of income only on the basis of notification as stated above. We have gone through the judgment passed by the Hon'ble Calcutta High Court in the above cited decision and according to him it is essential to reproduce the judgment of the above cited decision which is as under:

“The Court This appeal by the revenue filed under Section 260A of the Income Tax Act, 1961 (the Act) is directed against the order dated November 13, 2019 in as well as the order in M.A. No. 4/Kol/2021 dated May 27, 2022 for the assessment year 2015-16. The revenue has raised the following substantial questions of law for consideration A. Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in allowing the deductions claimed under Section 35(1 )(ii) of the Act by the assessee company for donation to the M/s. Herbicure Healthcare Bio-Herbal Research Foundation is perverse considering that there were ample evidence on the contrary and placed on record where it is clearly evident that such transactions were carried out by the assessee firm were I the nature of bogus donations made with the sole intention to evade taxes ? B. Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in giving relief to the assessee by allowing the claim of bogus donations under Section 35(1 )(ii) by stating that the CBDT had recognized such bogus entry providing concerns namely M/s. Herbicure Healthcare Bio-Herbal Research Foundation under section 35(1 )(ii) whereas on the contrary such approval and recognition had been withdrawn by the CBDT vide Gazettee Notification S.O. 2882(E) dated 6th September, 2016 and O.M. vide F. No. 203/09/2015/ITA.II dated 21st September, 2016 considering the nature of unscrupulous activities carried on by these donee concerns ?

Page 6 of 8 I.T.A. No.: 1145/KOL/2019 Assessment Year: 2013-14 J G Engineers Pvt. Ltd. We have heard Mr. Om Narayan Rai, learned standing counsel along with Mr. Soumen Bhattacharjee, learned Advocate for the appellant / revenue. The short issue which falls for consideration in this appeal is whether the Tribunal was right in allowing the deductions claimed by the assessee under Section 35(1 )(ii) of the Act for the donation to a organization who initially enjoyed a registration under Section 35(1) of the Act, which was subsequently withdrawn with retrospective effect. The learned Tribunal followed the decision of a co-ordinate Bench of the Tribunal dated 27.07.2018 in the case of Narbheram Vishram in LT.A. Nos. 42&43/Kol/2018. Apart from certain factual similarities the Tribunal in the said decision has also taken note of the decisions of the Hon’ble Supreme Court holding that there is no provision for withdrawal of recognition under Section 35(l)(ii) of the Act. The view taken by the learned Tribunal in the impugned order is supported by the decision of the Hon’ble Division Bench of this Court in the case of Commissioner of Income Tax Versus General Magnets Ltd. ; (2002) 256 ITR 471 wherein the Court after taking note of various decisions namely CIT v. Ethelbari Tea Co.(1931) Ltd., [2002] 256 ITR 470 (Cal), B.P. Agarwalla and Sons Ltd. v. CIT [1994] 208 ITR 863 (Cal), K.M. Scientific Research Centre v. Lakshman Prasad [1998] 229 ITR 23, Seksaria Biswan Sugar Factory Ltd.v. IAC [1990] 184 ITR 123, CIT v. Bhartia Cutler Hammer Co.[l 998] 232 ITR 785, Chotatingrai Tea Estate Put. Ltd. v. CIT [1999] 236 ITR 644, held that for the mistake committed by the department the assessee should not suffer. The withdrawal of approval to the society for retrospective effect is itself bad and no assessee should suffer for the mistake of the department. The department has power of withdrawal but in such cases withdrawal can be only with prospective effect. Further it was held that if the donation to the approved society is genuine, in that case withdrawal with retrospective effect does not affect the right of the assessee for deduction of the amount which has accrued to the assessee on the basis of the payment to an approved society under Section 35CCA of the Act. In the light of the above, the order passed by the learned Tribunal does not call for any interference. In the result, the appeal is dismissed and the substantial questions of law are answered against the revenue.”