Assessee wins deduction claim despite registration cancellation

The tribunal ruled in favor of the assessee, allowing the deduction claimed under section 35(1)(ii) of the Income Tax Act, 1961. The tribunal held that the subsequent cancellation of the institution's registration did not invalidate the deduction claim if the donation was made when the registration was valid. Consequently, the appeal was partly allowed, with other issues deemed academic or consequential.

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Issues:
1. Validity of re-opening of assessment under section 147 of the Income Tax Act, 1961.
2. Disallowance of deduction claimed under section 35(1)(ii) of the Act for an amount of Rs. 17.50 lakh.
3. Levy of interest under section 234B of the Act.

Analysis:

Issue 1: Validity of re-opening of assessment under section 147
The appeal challenged the order dated 28th February 2019, concerning the assessment year 2012-13. The assessee disputed the re-opening of assessment under section 147 of the Income Tax Act, 1961. However, the tribunal proceeded to address the grounds related to the disallowance of deduction claimed under section 35(1)(ii) of the Act.

Issue 2: Disallowance of deduction claimed under section 35(1)(ii) of the Act
The assessee, a partnership firm, claimed a deduction of Rs. 17.50 lakh under section 35(1)(ii) for a donation made to an institution. The assessing officer disallowed the deduction as the institution was found to be involved in bogus activities and had its registration retrospectively canceled. The assessee argued that the subsequent cancellation of registration should not affect the deduction claim, citing relevant legal provisions and court decisions supporting their position. The tribunal agreed with the assessee, emphasizing that if the donation was made when the institution had a valid registration, the subsequent withdrawal of approval does not invalidate the deduction claim. Citing legal precedents, the tribunal allowed the deduction of Rs. 17.50 lakh, stating that the cancellation of registration with retrospective effect does not impact the validity of the claim under section 35(1)(ii).

Issue 3: Levy of interest under section 234B
The tribunal did not address the issue of interest under section 234B as it was considered consequential and did not require adjudication following the decision on the deduction claim. The appeal was partly allowed based on the tribunal's decision to uphold the deduction claimed under section 35(1)(ii) of the Act.

In conclusion, the tribunal ruled in favor of the assessee, allowing the deduction claimed under section 35(1)(ii) of the Income Tax Act, 1961, and deemed other issues as academic or consequential, resulting in a partial allowance of the appeal.

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