Retrospective withdrawal of approval does not defeat a donation deduction when valid approval existed on the payment date.

Deduction under section 35(1)(ii) was treated as available where the research institution held valid approval on the date of donation, and the donor acted on that approval; later retrospective withdrawal did not defeat the completed claim. The Tribunal also held that disallowance could not rest only on the trustee's statement and surrounding allegations, because there was no direct material showing that the assessee had received back the donation. On that basis, the adverse findings of the lower authorities were set aside and the deduction claim was allowed to survive.

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Issues: (i) Whether the assessee was entitled to deduction under section 35(1)(ii) in respect of donation made to the approved research institution when approval existed at the time of donation but was withdrawn later with retrospective effect; (ii) Whether the disallowance could be sustained on the basis of the trustee's statement and the surrounding material.

Issue (i): Whether the assessee was entitled to deduction under section 35(1)(ii) in respect of donation made to the approved research institution when approval existed at the time of donation but was withdrawn later with retrospective effect.

Analysis: The relevant statutory position is that deduction for donation to a research institution cannot be denied merely because approval is withdrawn after the payment is made. The record showed that the institution had a valid approval when the donation was made, and the assessee acted on that approval. The subsequent retrospective cancellation of approval did not alter the legal position governing the assessee's claim for the year in question. The Tribunal followed the principle already applied in earlier decisions involving the same institution and held that the later withdrawal of approval could not invalidate an otherwise valid claim.

Conclusion: The issue is answered in favour of the assessee. The deduction under section 35(1)(ii) could not be denied on the ground of later retrospective withdrawal of approval.

Issue (ii): Whether the disallowance could be sustained on the basis of the trustee's statement and the surrounding material.

Analysis: The statement relied upon by the revenue was not treated as sufficient to dislodge the assessee's claim in the absence of direct material showing that the assessee itself had received back the donation. The Tribunal also proceeded on the footing that the assessee had acted upon an approved status of the institution and that the later cancellation was only for the institution, not for the donor's completed claim. On that basis, the adverse inference drawn by the lower authorities was not sustained.

Conclusion: The issue is answered in favour of the assessee. The disallowance based on the trustee's statement and allied allegations was not upheld.

Final Conclusion: The assessee's claim for deduction survived, the contrary findings of the lower authorities were set aside, and the appeal was allowed.

Ratio Decidendi: A donation claim under section 35(1)(ii) cannot be denied to the donor when the recipient institution had a valid approval at the time of donation, merely because that approval was subsequently withdrawn with retrospective effect.

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