2018 (3) TMI 1405 - AT - Income Tax

Eligibility to deduction u/s 35 (1) - donation made much before the withdrawal of notification - Held that - The assessee cannot suffer on account of withdrawal of notification given to M/s. School of Human Genetics and Population Health Kolkata granting approval u/s 35 (1) (ii) of the Act. This recognition was originally granted on 28th January 2010 and renewed on 17th June 2010 by Government of India . Ministry of Science and Technology. In response to letter dated 03.02.2014 given by M/s. School of Human Genetics and Population Health to the assessee donation of Rs. 15, 00, 000/- was made on 31.03.2014 by the assessee. The said amount was given to the donee on 31.03.2014 and withdrawal was on 15.09.2016. i.e. after 17 months from the date of donation made in March 2014. Such withdrawal in my view cannot take away the vested right of the assessee for claiming deduction under Section 35 (1) of the Act. As the donation to School of Human Genetics and Population Health was made while it was holding the approval in question we direct the AO to grant the said deduction as claimed. In the result this issue is decided in favour of the assessee.

Summary

Issues:
Claim of weighted deduction u/s 35(1)(ii) of the Income Tax Act, 1961 for a donation made to a specific institution.

Analysis:
1. The assessee claimed a weighted deduction u/s 35(1)(ii) of the Income Tax Act for a donation made to a school. The AO rejected the claim, alleging the donation was made with the motive to reduce total income and avoid tax payment. The AO considered the donation as bogus and disallowed the claimed deduction, adding it to the total income for the assessment year 2014-15.

2. The CIT(A) upheld the AO's decision, emphasizing that the institution to which the donation was made had lost its approval for weighted deduction as per a notification rescinding the earlier approval. The notification clarified that the earlier approval shall be deemed not to have been issued for any income tax benefits, rendering the claimed deduction invalid. The CIT(A) restricted the disallowance to the amount claimed as a deduction.

3. The Tribunal analyzed the situation, considering the timing of the donation, withdrawal of approval, and the vested right of the assessee. The Tribunal cited a similar case involving a different institution and donation, where the business expediency of the expenditure was discussed. It was emphasized that the businessman's prerogative to donate cannot be questioned by the revenue, and the genuineness of the donation was confirmed by the institution's director. The Tribunal directed the AO to grant the deduction claimed by the assessee, as the donation was made while the institution held the necessary approval.

4. Ultimately, the Tribunal allowed the appeal of the assessee, ruling in favor of granting the claimed deduction. The judgment highlighted the importance of the timing of the donation concerning the institution's approval status and the assessee's vested right to claim the deduction under Section 35(1) of the Income Tax Act.