2021 (10) TMI 658 - AT - Income Tax

Tribunal denies deduction for non-genuine donation citing Income Tax Act

Romana Herbal Care Pvt. Ltd. Versus ACIT, Circle :21 (2) New Delhi.

The tribunal upheld the lower authorities' decision to disallow a deduction under Section 35(1)(ii) of the Income Tax Act, 1961. Citing the misuse of ... Disallowance of deduction u/s 35(1)(ii) - donation made by the assessee to one donee organization is held to be non-genuine - HELD THAT:- As decided in Batanagar Education And Research Trust [2021 (8) TMI 139 - SUPREME COURT] where substantial amount of money received as donations by assessee-trust by way of cheques was ploughed back or returned to donors in cash and assessee, misused status of trust conferred upon it by section 12AA, cancellation of registration under sections 12AA and 80G was justified. Therefore the donation given by the assessee was never to a trust registered u/s 12 AA and 80 G. Thus we confirm the orders of the lower authorities where assessee has rightly been denied the deduction u/s 35 (1) (ii) of the act. Appeal filed by the assessee is dismissed. Issues Involved:1. Disallowance of deduction under Section 35(1)(ii) of the Income Tax Act, 1961.2. Legitimacy of the donation made by the assessee to the donee organization.3. Validity of the evidence provided by the Investigation Wing.4. Impact of the donee organization’s admission of facilitating bogus donations.5. Applicability of judicial precedents cited by the assessee.Detailed Analysis:1. Disallowance of Deduction under Section 35(1)(ii):The primary issue in this appeal is the disallowance of a deduction under Section 35(1)(ii) of the Income Tax Act, 1961. The assessee claimed a deduction of Rs. 17,50,000/- by making a donation of Rs. 10,00,000/- to M/s. Herbicure Healthcare Bio Herbal Research Foundation. The Assessing Officer (AO) disallowed the deduction, asserting that the donation was non-genuine based on an investigation report indicating that the donee organization was involved in facilitating bogus donations.2. Legitimacy of the Donation:The AO confronted the assessee with the report from the Investigation Wing, which included statements from the founders and trustees of the donee organization. The report indicated that the donee had accepted a commission for facilitating bogus donations totaling Rs. 253.06 crores. The AO noted that the name of the assessee appeared on the list of beneficiaries, confirming that the donation was non-genuine. Consequently, the AO disallowed the deduction and computed the assessed income accordingly.3. Evidence Provided by the Investigation Wing:The AO relied heavily on the investigation report and the statement of Mr. Swapan Ranjan Dasgupta, Director of the donee trust, who admitted to accepting commissions for facilitating bogus donations. The AO provided a copy of this statement to the assessee, who argued that they had produced all relevant information and certificates. However, the AO rejected the assessee's contention, emphasizing that the donee organization was not engaged in genuine research activities but was providing accommodation entries to donors.4. Admission of Facilitating Bogus Donations:The donee organization’s admission of facilitating bogus donations played a crucial role in the AO's decision. The AO highlighted that the donee had admitted to granting accommodation entries in return for a commission. The investigation corroborated this with evidence, including the list of beneficiaries where the assessee's name appeared. The AO concluded that the donation was non-genuine and disallowed the deduction.5. Judicial Precedents Cited by the Assessee:The assessee referred to several judicial precedents, including a decision by a co-ordinate bench in ITA No. 5385/Mum/2018 for the assessment year 2013-14, where a similar deduction under Section 35(1)(ii) was allowed. The assessee argued that the issue was covered in their favor based on these precedents. However, the Department's Representative (DR) contended that the donee organization’s admission and the investigation report conclusively proved the bogus nature of the donations, making these precedents inapplicable.Conclusion:After careful consideration of the rival contentions and judicial precedents, the tribunal upheld the orders of the lower authorities. The tribunal referenced the Supreme Court's decision in the case of Commissioner of Income-tax (Exemptions), Kolkata v. Batanagar Education And Research Trust, where it was held that misuse of the status conferred under Section 12AA and 80G justified the cancellation of registration. The tribunal confirmed that the donation made by the assessee was non-genuine and upheld the disallowance of the deduction under Section 35(1)(ii). The appeal filed by the assessee was dismissed.Order Pronouncement:The order was pronounced in the open court on 30/09/2021.