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2021 (2) TMI 97 - AT - Income TaxDisallowance of weighted deduction claimed u/s 35(1)(ii) - approval granted to the donee organization was rescinded with retrospective effect - HELD THAT:- There is no conclusive evidence on record to show that the appellant company had received back the money from the donee made either in cash or any other or through banking channels. Nor is there any other material to show that the appellant company is also a party to the fraud committed by the donee organization. No doubt the doctrine of promissory estoppels has no application to tax concession granted by the Legislature. However, keeping in view the provisions of Explanation inserted to section 35(1)(ii) by Finance Act, 2006, w.e.f. 01.04.2006 providing that the deduction in the hands of the donor shall not be denied merely because of the fact that an approval granted to the University which is the Research University, Colleges and other University which has been withdrawn subsequently to the payment of donations, the donors should not suffer on account of withdrawal of the approval to done organization. The intent of the Legislature is clear that the donors should not be made suffer on account of fraud committed by the donee organization Hon’ble Supreme Court in the case of CIT vs. Chotatingrai Tea & Ors.[2002 (10) TMI 3 - SUPREME COURT] following the decision of CIT vs. Bhartia Cutler Hammer Co.,[1997 (12) TMI 91 - CALCUTTA HIGH COURT]held that notwithstanding the fact that the approval granted earlier to the Research Organization was withdrawn subsequent to the payment of donation, the deduction cannot be withdrawn in the hands of the donors. Also see National Leather Cloth Manufacturing Co. vs. Indian Council of Agricultural Research & Ors., [1999 (10) TMI 55 - BOMBAY HIGH COURT] The above judgements of the Hon’ble Supreme Court in the case of Chotatingrai Tea & Ors. (supra) was rendered much prior to the insertion of the Explanation to section 35(1)(ii) of the Act and the Explanation inserted by the Finance Act, 2006 w.e.f. 01.04.2006 which means that the Parliament is deemed to have knowledge of the above judicial precedents and accepted the dictum laid therein. Therefore, this clearly establishes the legislative intent of Parliament to allow the deduction u/s 35(1)(ii) in the hands of the donors, notwithstanding the fact that the approval granted earlier to the Research Organization was withdrawn retrospectively. Therefore, the very fact that the approval granted to the donee organization i.e. SHGPH was rescinded with retrospective effect has no relevance to decide the allowability of deduction in the hands of the donors.. The claim made by the assessee company towards deduction u/s 35(1)(ii) of the Act on account of donation made to SHGPH is clearly allowable. Accordingly, the grounds of appeal filed by the assessee are allowed.
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