Deduction for scientific research contributions to a research foundation upheld in view of precedent directing allowance of deduction.

Deductibility of contributions for scientific research to a named charitable research foundation was contested on revenue's allegation that the recipient was a conduit for bogus donations; the tribunal noted the issue is settled by a coordinate-bench precedent involving the same recipient which rejected the revenue's accommodation-entry theory and directed the assessing officer to allow deduction. The decision therefore treats the donors claim for deduction as permissible in light of precedent that accepts the recipients genuineness, displacing the revenue's investigative suspicion without reopening merits.

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Issues: Whether the assessee is entitled to deduction under section 35(1)(ii) of the Income-tax Act, 1961 for donations made to M/s Herbicure Healthcare BioHerbal Research Foundation (HHBHRF), despite survey findings and subsequent rescission of the donee's approval.

Analysis: The Tribunal examined (i) the documentary proof of donation (bank payment, receipt and certificate issued by the donee) and that the donee was approved under section 35(1)(ii) at the time of donation; (ii) the reliance placed by revenue on statements recorded during survey under section 133A and related investigation reports alleging a bogus-donation modus operandi; (iii) whether statements recorded during survey, not furnished to the assessee nor tested by cross-examination, can be the sole basis for disallowance; (iv) the statutory Explanation to section 35(1)(ii) which provides that deduction shall not be denied merely because approval of the donee was subsequently withdrawn; and (v) applicable precedents on the limited evidentiary value of survey statements and the requirement of natural justice (opportunity to cross-examine) when adverse statements are relied upon. The Tribunal applied these principles and the coordinate bench decisions dealing with HHBHRF, finding that survey statements alone, without corroborative material and without opportunity for cross-examination, do not justify denial of deduction and that the donor's bona fide claim when the approval was in force must be respected under the Explanation to section 35(1)(ii).

Conclusion: The disallowances of deduction claimed under section 35(1)(ii) amounting to Rs. 6,17,750 for assessment year 2013-14 and Rs. 24,50,000 for assessment year 2015-16 are deleted and the appeals on that ground are allowed in favour of the assessee.

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