Section 35 deduction survives retrospective withdrawal of approval when donation was made during valid approval period.

Deduction under section 35(1)(ii) could not be denied where the donation was made when the recipient institution held a valid approval under the Income-tax Act. The Explanation to section 35(1)(ii) states that deduction is not to be refused merely because the approval is withdrawn later, even with retrospective effect. A subsequent cancellation therefore does not defeat a claim founded on a payment made during the period when approval was operative. On that reasoning, the disallowance of the deduction was not sustainable and the assessee's claim was accepted.

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Issues: Whether deduction under section 35(1)(ii) of the Income-tax Act, 1961 could be denied to the assessee on the ground that the approval granted to the recipient institution was withdrawn subsequently with retrospective effect.

Analysis: The assessee had made the donation when the recipient institution held a valid approval under the Act. The Explanation to section 35(1)(ii) provides that deduction shall not be denied merely because the approval is withdrawn after the payment. The later cancellation of approval could not, by itself, invalidate a claim founded on a donation made during the period when the approval was operative. The reasoning was consistent with the view adopted in prior decisions on the same institution and with the principle that a donor acting on a valid approval is not defeated by a subsequent retrospective withdrawal.

Conclusion: The issue is answered in favour of the assessee. The disallowance of deduction under section 35(1)(ii) could not be sustained.

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