ITAT ruling: Deduction allowed under Section 35(1)(ii) & commission addition deleted

M/s Avis Life Care Pvt. Ltd. Versus. C.I.T., Circle-2, Jaipur.

M/s Avis Life Care Pvt. Ltd. Versus. C.I.T., Circle-2, Jaipur. - TMI Issues Involved:
1. Disallowance of claim of deduction under Section 35(1)(ii) of Rs. 14.00 lacs.
2. Addition of Rs. 1,12,000/- on account of alleged commission paid for acquiring accommodation entries for alleged bogus donation.

Issue-wise Detailed Analysis:

1. Disallowance of Claim of Deduction under Section 35(1)(ii):
The assessee appealed against the order confirming the disallowance of a Rs. 14.00 lacs deduction under Section 35(1)(ii) of the Income Tax Act, 1961. The donation was made to the "School of Human Genetics & Population Health" (SHG & PH), which was initially notified by the CBDT for claiming deductions. However, a survey conducted under Section 133A revealed the institute was providing accommodation entries, leading to the rescindment of its notification by CBDT. The assessee contended that the donation was made through banking channels when the institute had valid approval, and subsequent events should not affect the claim. The CIT(A) confirmed the AO's disallowance, which the assessee challenged before the ITAT.

The ITAT referenced similar cases, notably M/s P.R. Rolling Mills Pvt. Ltd. Vs. DCIT and DCIT Vs. M/s Maco Corporation (India) Pvt. Ltd., where donations to SHG & PH were allowed despite the institute's later disqualification. The Tribunal emphasized that the assessee's claim was justified since the approval was valid at the donation time. They cited the Supreme Court's ruling in Hitendra Vishnu Thakur Vs. State of Maharashtra, stating that procedural statutes should not impose new obligations retrospectively. They also referred to CIT(Central-1), Delhi Vs. Vatika Township Pvt. Ltd., asserting that beneficial amendments should have retrospective effects, not those imposing additional burdens. The Tribunal concluded that the assessee's deduction claim should not be denied based on the subsequent withdrawal of the institute's approval, thus directing the AO to delete the disallowance.

2. Addition of Rs. 1,12,000/- on Account of Alleged Commission:
The AO added Rs. 1,12,000/- to the assessee's income, alleging it was commission paid for acquiring accommodation entries for the bogus donation. The assessee argued that no evidence was presented to substantiate the commission payment claim and reiterated that the donation was genuine. The Tribunal found no material evidence provided by the AO to support the commission payment allegation. Given the donation's legitimacy, as established in the first issue, the Tribunal deemed the addition based on surmises and conjectures unwarranted and directed its deletion.

Conclusion:
The ITAT allowed the assessee's appeal, directing the deletion of both the disallowance of the Rs. 14.00 lacs deduction under Section 35(1)(ii) and the Rs. 1,12,000/- addition for alleged commission. The judgment was pronounced in the open court on 20th June 2019.