Retrospective withdrawal of approval does not defeat deduction where payment was made while approval remained operative.

A retrospective withdrawal of approval does not defeat a deduction claim where the assessee acted while the approval was still operative. The court noted that, on the date of payment, the recipient society existed and its approval was current; a later retrospective cancellation could not prejudice reliance placed on that approval. On that basis, the assessee remained entitled to deduction under section 35CCA of the Income-tax Act, 1961, and the Revenue's challenge failed.

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Issues: Whether the assessee was entitled to deduction under section 35CCA of the Income-tax Act, 1961 when the approval of the society stood withdrawn with retrospective effect.

Analysis: The claim for deduction was examined in the light of the legal effect of a retrospective withdrawal of approval. It was noted that on the date of payment the society was in existence and the approval was current. The principle applied was that a retrospective cancellation or withdrawal does not prejudice a person who has acted on the basis of the approval or certificate while it remained operative.

Conclusion: The assessee was entitled to the deduction under section 35CCA of the Income-tax Act, 1961, and the Revenue's challenge failed.

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