13. Span Realtors vs. ITO (Mumbai) G. Manjunatha (A.M.) and Ravish Sood (J.M.) ITA No. 6399/Mum/2019 A.Y.: 2014-15 Date of order: 9th June, 2020 Counsel for Assessee / Revenue: Rashmikant Modi and Ketki Rajeshirke / V. Vinod Kumar
Section 35(1)(ii): Deduction claimed by an assessee in respect of donation given by acting upon a valid registration / approval granted to an institution cannot be disallowed if at a later point of time such registration is cancelled with retrospective effect
FACTS
The assessee firm, engaged in the business of real estate, had made a donation of Rs. 1 crore to a Kolkata-based institution, viz. ‘School of Human Genetics and Population Health’ (SHG&PH) and claimed deduction of Rs. 1.75 crores u/s 35(1)(ii) @ 175% on Rs. 1 crore. The A.O. called upon the assessee to substantiate the claim of such deduction. The assessee submitted all the evidences which were required to substantiate the claim of deduction.
However, the A.O. was not persuaded to subscribe to the genuineness of the aforesaid claim of deduction by the assessee. He observed that a survey operation conducted u/s 133A of the Act on 27th January, 2015 in the case of SHG&PH had revealed that the said research institution had indulged in providing accommodation entries of bogus donations to the donors through a network of brokers. The A.O. gathered that the secretary had admitted in her statement that was recorded in the course of survey proceedings u/s 131(1) of the Act that the said institution, in lieu of commission, was providing accommodation entries of bogus donations through a network of market brokers. Besides, the accountant of SHG&PH, in the course of survey proceedings, was found to be in possession of a number of messages from brokers regarding bogus donations and bogus billings. He also observed that as per the information shared by DDIT (Inv.), Kolkata, the said institution had filed a petition before the Settlement Commission, Kolkata Bench, wherein it had admitted that in consideration of service charge they had indulged in providing accommodation entries of bogus donations.
Moreover, the Ministry of Finance vide a Notification dated 15th September, 2016, had withdrawn its earlier Notification dated 28th January, 2010. Hence, the A.O. disallowed the claim of deduction of Rs. 1.75 crores.
Aggrieved, the assessee preferred an appeal to the CIT(A) who confirmed the action of the A.O.
Still aggrieved, the assessee preferred an appeal to the Tribunal.
HELD
The Tribunal observed that as on the date of giving of donation, SHG&PH was having a valid approval granted under the Act. Having regard to the language of the Explanation to section 35(1)(ii), the Tribunal was of the view that it can safely be gathered that a subsequent withdrawal of such approval cannot form a reason to deny the deduction claimed by the donor. By way of analogy, the Tribunal observed that the Supreme Court in the case of CIT vs. Chotatingrai Tea [(2003) 126 Taxman 399 (SC)] while dealing with section 35CCA of the Act, had concluded that a retrospective withdrawal of an approval granted by a prescribed authority would not invalidate the assessee’s claim of deduction. The Tribunal also observed that on a similar footing the Bombay High Court has in the case of National Leather Cloth Mfg. Co. vs. Indian Council of Agricultural Research [(2000) 100 Taxman 511 (Bom.)] observed that such retrospective cancellation of registration will have no effect upon the deduction claimed by the donor since such donation was given acting upon the registration when it was valid and operative.
The Tribunal held that if the assessee acting upon a valid registration / approval granted to an institution had donated the amount for which deduction is claimed, such deduction cannot be disallowed if at a later point of time such registration is cancelled with retrospective effect. It also observed that the co-ordinate Mumbai bench of the Tribunal in Pooja Hardware Pvt. Ltd. vs. ACIT [ITA No. 3712/Mum/2016 dated 28th October, 2019] has, after relying on the earlier orders of the co-ordinate benches of the Tribunal on the issue pertaining to the allowability of deduction u/s 35(1)(ii) of the Act in respect of a donation given to SHG&PH by the assessee, vacated the disallowance of the assessee’s claim for deduction u/s 35(1)(ii) of the Act. The Tribunal observed that the issue is squarely covered by the orders of the co-ordinate benches of the Tribunal, and therefore it has no justifiable reason to take a different view. Following the same, the Tribunal set aside the order of the CIT(A) and vacated the disallowance of the assessee’s claim for deduction u/s 35(1)(ii) of Rs. 1.75 crores.