TMI Blog1996 (7) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... V, Bombay, dated 17-7-1989. 2. The central point involved in all these appeals is about the donation of ₹ 5 lakhs said to have been made by the assessee-company to M/s. Sigma Medical Aid Research Society (hereinafter called the said Society or donee institution ) on 29-6-1989. The previous year relevant to the assessment year 1983-84 ended by 30-6-1982. The assessee-company filed its return on 30-6-1983 disclosing an income of ₹ 10,39,755. The company carried on business of clearing and forwarding agents. During the assessment proceedings, the assessee-company claimed deduction of ₹ 5 lakhs under section 35CCA. The assessee filed a receipt obtained from the said Society. On 7-8-1985, the Assessing Officer gave a notice to the said Society calling for details listed in the assessment order. On 31-3-1983, the said Society filed its income and expenditure account for the year ended 31-3-1983 along with which it had filed details of its assets and liabilities as well as the receipts and payments for assessment year 1982-83 and also a balance sheet as at 31-3-1983. When books of account and vouchers were called for from the said Society, they were not produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad not complied with the conditions imposed when the approval under section 35CCA was granted. Taking up the issue whether the money donated came back to the assessee, the Assessing Officer mentioned that the assessee had relied on the receipt and payment by cheque and also the acceptance of donation by the Society. However, he held that they are self-serving evidences of two parties connected with each other. If the contention of the assessee is correct, the Assessing Officer held, the assessee could have compelled the Society to produce the books before him. Non-production of books raised a serious doubt about the bona fides of the Society. This also raised a presumption that the Society may only be a conduit-pipe to claim exemption under section 35CCA. The Assessing Officer, in fact, apprised all these facts in his letter dated 17-12-1985. However, the assessee did not take any steps to get the books of the Society produced before him and the non-production of books and vouchers led the IAC (Asst.) to draw the following conclusions : (i)Either full or part of the money was returned to the assessee in cash or in kind, and (ii)the conditions of section 35CCA are not strictly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A), considering the appeal filed before him, identified that it is important to consider as to whether from the assessee s side there was any reason to believe that the institution to which a donation was being made was utilizing the funds in a fraudulent manner and whether the conditions laid down by the CIT while granting approval was being fulfilled by the institution. The responsibility of an assessee who is claiming the benefit under section 35CCA would end with his obtaining certificate from the institution that it is approved under the scheme. In this case, the assessee seems to have obtained a certificate from the institution which shows that the institution is approved for claiming exemption under section 35CCA. The learned CIT(A) held that if an institution, which is approved under the scheme of section 35CCA, deals with the funds in a fraudulent manner, to penalize the parties who have made donations to such institution under a genuine belief that the institution was applying its funds on approved objects would be unjust unless it is established that the institution has been used as a conduit-pipe for ploughing back the funds to the hands of the donor. The learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the judgment of the Calcutta High Court in CIT v. Bankam Investment Ltd. [1994] 208 ITR 208. He also contended that the doctrine of promissory estoppel is not available to the assessee. He relied upon in Asstt. CIT v. Dalamal Sons Investment Co. [1994] 49 ITD 80 (Bom.) and Varun Enterprises v. Asstt. CIT [1993] 47 TTJ (Delhi) 461 besides trying to distinguish the decisions cited on behalf of the assessee. 6. As against these arguments of the learned DR Shri Sonde, the learned C.A. for the assessee, submitted the following. Firstly, it is submitted that it is not correct that on three occasions the Assessing Officer had called the assessee to furnish information or details regarding the donee institution as stated in para 11 of the assessment order. Giving notice under section 131 to the donee institution does not amount to calling upon the assessee to furnish information. It is only on 17-12-1985 that for first time, the assessee was addressed a letter by the ITO. We are concerned with the assessment year 1983-84 for which the previous year ended by 30-6-1982. The recognition to the donee institution was never withdrawn from 1981 to 1987. It is no doubt, true that the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the department failed to show that the approval was withdrawn retrospectively, penalty cannot be levied. Even if the donee institution received back the donation, the assessee cannot be denied deduction under section 35CCA. The assessee relied upon the following case law in support of its submissions : 1. Pressman Advertising Marketing (P.) Ltd. v. CIT [1994] 208 ITR 768 (Cal.) 2. B.P. Agarwalla Sons Ltd. v. CIT [1994] 208 ITR 768 (Cal.) 3. Seksaria Biswan Sugar Factory Ltd. v. IAC [1990] 184 ITR 123 (Bom.) 4. ITO v. M.C. Ponnoose [1970] 75 ITR 174 (SC) 5. Smt. P.M. Celine v. Asstt. CIT [1991] 39 ITD 454 (Cochin) 6. Deter and Deter v. ITO [1992] 42 ITD 598 (Pune) 7. Vir Khanna v. IAC [1995] 51 TTJ 670 (Asr.) 8. Bombay Cloth Syndicate v. CIT [1995] 214 ITR 210/ 1992 (9) TMI 7 (Bom.) 9. Varun Enterprises Ltd. s case (supra) 10. Bakul Cashew Co. v. Sales-Tax Officer [1986] 159 ITR 565/ 1986 (3) TMI 77 (SC) 11. Order of C-Bench of Bombay Tribunal in Alarsan v. Dy. CIT [IT Appeal No. 2885 (Bom.) of 1990, dated 19-7-1995] 7. The assessee also filed a paper book in concealment appeal containing 22 pages. On behalf of the revenue, a letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we admit the same. 10. Now, let us take for our discussion the genuineness or otherwise of the donation made by the assessee to the donee institution. At page No. 1 of the paper book, a photocopy of the receipt given by the assessee institution after receiving ₹ 5 lakhs was provided. It is dated 29-6-1982. Cheque No. 2473/82 dated 28-6-1982 for ₹ 5 lakhs is stated to have been handed over to the assessee-institution under the receipt. The donee institution was an approved institution under section 35CCA. The approval was granted on 9-6-1981. The programme of the donee institution for their proposed Hospital at Mahalunge with Mobile Vans and Ambulance, Cancer Research Detection Centre, T.B. Cottages, etc., involving an estimated total expenditure of ₹ 54 lakhs was approved and the approval was for three years. The donee institution came up with programme for Cancer Detection Centre at a cost of ₹ 1,88,51,600 and it was approved for the period from 17-7-1981 to 30-6-1984. Though the approval also is sought for nutrition and agricultural programme, the said programme was not approved. Even the programme for running the Cancer Detection Centre was approved w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCA to the donee institution was also furnished. In the said letter, it is specifically stated that the onus of production of books of account, vouchers, bank pass books, etc., is on the donee institution and not on the assessee and the conditions set out for approval should be observed by the donee institution and not by the assessee. The Assessing Officer, in the assessment order, found that on going through the income expenditure account perhaps of the donee institution, it is very clear that the amount was diverted for other purposes. The Assessing Officer held that the donee institution had not complied with the conditions imposed when the approval under section 35CCA was granted. He also laid that the acceptance of donation by cheque and the obtaining of the receipt, etc., are all self-serving documents since the two parties are connected with each other. The Assessing Officer further stated that the assessee could have compelled the donee institution to produce the books before him in whatever shapes the books were there and therefore non-production of books raised doubt about the bona fides of the donee institution and also raised a presumption that the Society may be a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (1) presumes an action in future. The donor is not in a position to ensure whether in fact the donated sum is used for the purposes specified. On a reading of the provision, the relevant period of time as far as the donor is concerned is when the payment is made. This is borne out by the phrase for the time being in section 35CCA(2). The misapplication of the funds donated would necessarily be subsequent to the donation. In B.P. Agarwalla Sons Ltd. s case (supra ), the Calcutta High Court as per the headnote held the following : On a plain reading of section 35 it is clear that a deduction is allowable if at the time when the amount is paid to the research association, the research association has, as its object, the undertaking of scientific research, etc., and that the association is for the time being approved by the prescribed authority. The subsequent withdrawal of the approval by the prescribed authority would not affect the right to claim the deduction. Thus, the learned Representative for the assessee argued that even though after receiving the donation, the donee institution misapplied the donated money, since the assessee is not responsible for the wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdrawal and that too the withdrawal must be considered to have come into force only from the date of admission, namely, 27-3-1989, and never before. Shri Tilakchand vehemently tried to argue that the withdrawal of recognition even on a subsequent date would disentitle the assessee from the claim of deduction under section 35CCA and in this connection he heavily relied upon a Devision Bench decision of the Calcutta High Court in Bankam Investment Ltd. s case (supra). In that case also, the relevant assessment year with which the Hon ble High Court was concerned was 1985-86. The donee institution in that case was Society for Integral Development which was an approved institution under section 35CCA as per the letter of approval dated 17-12-1982 and the approval was in force from 13-12-1982 to 12-12-1985. The approval was withdrawn by the Competent Authority on 3-3-1987 with retrospective effect from 13-12-1982. On behalf of the assessee, it was contended in that case that exemption once granted could not be withdrawn with retrospective effect and another contention advanced was that revenue must be held bound by the doctrine of promissory estoppel. In that case, the assessment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be proved to be wrong or mistaken in which case the admission does not bind the party who makes the admission. In this case, the admission was only to the extent that the recognition to the donee institution was withdrawn. The date when the recognition was withdrawn was not admitted, and since the admission is contained in a letter of 1989, according to Shri Sonde, the admission of the assessee, if any, be taken to have prospective operation from 17-3-1989 only and not before. Even with regard to legislation passed by the State or Central Government, the law is that in the absence of clear words to the contrary, the legislation is presumed to be prospective and not retrospective : See P. Ganesh Nayak v. Commercial Tax Officer AIR 1964 Mys. 240. When the retrospectivity cannot be presumed in the interpretation of an Act much less the retrospectivity is permitted to be presumed in the case of an order or notification passed by an authority. 13. The only question which is left to be considered by us is that in a case where the recognition to an institution was withdrawn by the Competent Authority, whether donation given under section 35CCA prior to the withdrawal of such recogni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far does not Scheme save the assessee from exigibility of penalty. Shri Tilakchand argued that at the most the assessee is entitled to only a lenient view as regards imposition of penalty and cannot completely exonerate it from the penalty. He invites our attention to Question Nos. 26 and 28 and the answers given thereunder by the CBDT Circular No. 451 dated 17-2-1986. The said questions and answers are the following : Q. 26 : Where an order has been set aside and assessment proceeding under section 147(a)/( b), whether the assessee can surrender the amount which is the subject-matter of dispute. Whether such a surrender would be taken as suo motu declaration before the detection by the Department ? Ans. : Such a surrender cannot be taken as a suo motu declaration but naturally a lenient view would be taken if an assessee turns honest even at this stage. Q. 28 : Where an addition is contested in appeal, whether an assessee could make a declaration and agree to pay tax thereon ? Ans. : Yes; the assessee should withdraw the appeal and make a declaration before the Administrative Commissioner. In such a case, a lenient view would be taken though such a declaration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered ₹ 5 lakhs, it does not amount to admitting concealment. From the mere fact of the assessee agreeing to addition, it does not follow that the amount agreed to be added was concealed income - Sir Shadilal Sugar General Mills Ltd. v. CIT [1987] 168 ITR 705/ 1987 (7) TMI 3. A. Shri Sonde argued that there may be hundred and one reasons for such admission. When the assessee does not dispute the disallowance, it does not automatically absolve the revenue from proving mens rea of quasi-criminal offence. The assessee himself, as an explanation to its surrender, stated that it has been doing so only to purchase peace with the department. Therefore, Shri Sonde argued that under the facts and circumstances, the concealment on the part of the assessee cannot be inferred and there is no room for Shri Tilakchand s argument to readily apply the answers given under Question Nos. 26 and 28 extracted above. On the other hand, Shri Sonde argued that the proper provisions under the Amnesty Scheme which are applicable to its case are the following. Adverting to Circular No. 451 dated 17-2-1986 published at (1986) 158 ITR 135 (Statutes), our attention is drawn to Question No. 7 and Ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) or the following decisions cited on behalf of the assessee, namely : (1) Smt. P.M. Celine s case (supra) (2) Deter and Deter s case (supra) (3) Deepak Singh Family (HUF) v. Asstt. CIT [1994] 48 ITD 465 (Delhi) (4) Vir Khanna s case (supra) (5) Varun Enterprises Ltd. s case (supra). We only found that the C-Bench of this Tribunal in their order passed in the case of Alarson ( supra), had considered a case containing similar facts and ultimately the matter was decided in favour of the assessee. We have already stated that this Tribunal order was already filed before us. At para 12 of their orders, the earlier Tribunal also found after adverting to Question No. 19 already extracted that it is clear that the question as to whether the benefit of the Amnesty Scheme is available to the assessee or not will depend upon the fact whether the department detected concealed income of the assessee or whether it was only a prima facie belief that the assessee has wrongly claimed the deduction. It had further held the following : The word detection has not been defined in the Income-tax Act, 1961. Dictionary meaning of the word detection is discovery of somethi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 273(2)(aa) of the I.T. Act. The facts leading to this appeal are the following. The assessee filed the statement of advance tax in Form No. 28A on 10-6-1982 showing total income at ₹ 2,74,720. Subsequently, the assessee filed estimate of advance in Form No. 29 on 15-12-1982 estimating income at ₹ 9,65,000 and advance tax payable at ₹ 2,50,000 and paid advance tax of ₹ 2,50,000. The regular return of income has been filed on 30-6-1983 showing total income at ₹ 10,31,755. The assessment has been completed on 23-1-1986 determining the total income at ₹ 21,79,296 and the tax payable at ₹ 14,51,956. Since there was shortfall in the payment of advance tax, proceedings under section 273(2)(aa) were initiated. Notice under section 274 was issued to the assessee to show cause why penalty should not be levied for filing estimate of advance tax which it knew or had reason to believe to be untrue. The assessee-company filed its explanation by its letter dated 27-3-1989 stating that the difference between the estimated income and assessed income is due to the fact that a contribution of ₹ 5 lakhs made in good faith to M/s. Sigma Medical Aid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d granted recognition to the donee institution originally, had withdrawn the recognition. We have already held while deciding the penalty appeal that there was nothing on record to show that the donation of ₹ 5 lakhs by the assessee to the donee institution is bogus or a make-believe. So long as the main point was not brought out by the revenue against the assessee, the assessee is not obliged to pay advance tax on that impugned ₹ 5 lakhs. Therefore, it is easy to find in this appeal that the learned CIT(A) is perfectly justified in his orders to reduce the amount of ₹ 5 lakhs for the purpose of levy of advance tax or the penalty under section 273(2)(aa). We find the appeal without any merits and hence it is dismissed. ITA No. 8003 (Bom.)/89 : 20. This is an appeal by the department arising out of the order of the Assessing Officer dated 30-3-1989 passed under section 104. The assessee-company, according to the computation given by the Assessing Officer, had a distributable income of ₹ 5,26,068 and 60% thereof, namely, ₹ 3,15,640, is to be distributed as dividend amongst the shareholders. However, it had not declared any dividend and hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under section 40-A(8) disallowance 39,467 5. Presentation articles 3,070 6. Disallowance under section 40-A(5) 32,674 7. Entertain expenses (37691-14000-6519) 17,172 8. Chandala and marriage gifts 2,816 9. Revenue expenses treated capital (4775-10% depr. allowed 478) 4,297 10. Donation to Sigma under section 35CCA 5,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal. 22. As against the impugned order dated 17-7-1989 thus passed by the CIT(A), the revenue came up in second appeal before the Tribunal. The only ground urged was that the CIT(A) erred in cancelling the order passed under section 104 of the I.T. Act, 1961, Shri Tilakchand vehe-mently contended that in the first instance the donation of ₹ 5 lakhs to the donee institution is not genuine and, therefore, it cannot be excluded from computation of distributable profits for the purposes of section 104 of the I.T. Act. Alternatively, he contended that even in case the Tribunal comes to a conclusion that the donation of ₹ 5 lakhs to the donee institution is genuine, it is not entitled to any deduction under section 104 of the I.T. Act since under the I.T. Act what is to be determined is commercial profits and the amount of ₹ 5 lakhs cannot by any stretch of imagination be considered to have been given for business considerations. If it is not an amount spent for business considerations, then it cannot be considered as a deduction allowable under section 104. He had cited before us the Bombay High Court decision in Seksaria Biswan Sugar Factory Ltd. v. CIT [1995] 101 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business, but not deducted in computing the income chargeable under the head Profits and gains of business or profession being- (iv)any expenditure claimed as a revenue expenditure but not allowed to be deducted as such and not resulting in the creation of an asset or enhancement in the value of an existing asset. Shri Sonde argued that the above part of the definition of distributable income would clearly show that whatever expenditure is incurred, which is either allowed or allowable as revenue expenditure during the assessment of the assessee-company, is clearly allowable as a deduction from out of the distributable income which is to be computed under section 104. Furthermore, some of the items of revenue expenditure, which were claimed in the assessment but which were not allowed in the assessment order, also are entitled for deduction, provided the nature of the expenditure was such that it did not result in creation of an asset or in enhancement of the value of an existing asset. Shri Sonde commended the above interpretation to our acceptance. Shri Tilakchand, the learned Departmental Representative, contended that in the provisions extracted above it is clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputing the income of a company under the head Profits and gains of business or profession . Therefore, to our mind, section 109(i)( g) is intended to be supplementary and has to be read conjointly with the assessment made under the head Business or profession . It is, no doubt, true that decision in Seksarai Biswan Sugar Factory Ltd. v. CIT [1975] 101 ITR 703 (Bom.) relied upon by the learned Departmental Representative fully supports his argument but we ourselves have come across a later Bench decision of the Bombay High Court reported in CIT v. Gopal Investors Corpn. (P.) Ltd. [1976] 103 ITR 563 . It is worthy to be examined on this occasion. The short point for consideration in that case was that the assessee-company derived dividend income of ₹ 17,027 from Tata Co. which was specifically made exempt under the then section 56A of Indian Income-tax Act, 1922. The total income of the assessee in that case was ₹ 48,948. The income-tax payable by the assessee-company was ₹ 25,433 and after deducting the same from the total income the surplus came to ₹ 23,515. However, the assessee-company in that case distributed only dividends of ₹ 21,000 and for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay super-tax and when such liability has to be determined or considered then all the other relevant provisions pertaining to such liability for payment of super-tax cannot be ignored. It is undoubtedly true that in no part of the language of section 23A reference is to be found even impliedly to the provisions of section 56A, but section 56A is a declaratory section which deals with non-liability of a company to pay super-tax qua particular types of income by way of dividends of the nature specified therein. The material part thereof states that no super-tax shall be payable by a company on such part of its total income as consists of dividends of the nature specified in that section. Both the provisions of section 23A and of section 56A were introduced later on when the provisions of the Act were from time to time amended. Section 23A is contained in Chapter IV which deals with deductions and assessment, while section 56A is contained in Chapter IX which deals with super-tax. Both the provisions of section 23A as well as the provisions contained in Chapter IX have a common genus, namely, liability to pay super-tax. Section 55 which defines super-tax as additional duty of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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