Tribunal Grants Deduction for Timely Donation Approval

The Tribunal allowed the appeal, ruling in favor of granting the claimed deduction under Section 35(1)(ii) of the Income Tax Act. The Tribunal emphasized the importance of the timing of the donation in relation to the institution's approval status and upheld the assessee's right to claim the deduction, rejecting the AO and CIT(A)'s disallowance of the deduction based on alleged tax avoidance motives.

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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.

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