AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1996 (7) TMI 574
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....90 and ITA No. 8008 (Bom.)/89 arises out of the order of the CIT(A)-V, Bombay, dated 17-7-1989. 2. The central point involved in all these appeals is about the donation of Rs. 5 lakhs said to have been made by the assessee-company to M/s. Sigma Medical Aid & Research Society (hereinafter called "the said Society" or "donee institution") on 29-6-1989. The previous year relevant to the assessment year 1983-84 ended by 30-6-1982. The assessee-company filed its return on 30-6-1983 disclosing an income of Rs. 10,39,755. The company carried on business of clearing and forwarding agents. During the assessment proceedings, the assessee-company claimed deduction of Rs. 5 lakhs under section 35CCA. The assessee filed a receipt obtained from the said Society. On 7-8-1985, the Assessing Officer gave a notice to the said Society calling for details listed in the assessment order. On 31-3-1983, the said Society filed its income and expenditure account for the year ended 31-3-1983 along with which it had filed details of its assets and liabilities as well as the receipts and payments for assessment year 1982-83 and also a balance sheet as at 31-3-1983. When books of account and vouchers were c....
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....considering the facts before him that the said Society had not complied with the conditions imposed when the approval under section 35CCA was granted. Taking up the issue whether the money donated came back to the assessee, the Assessing Officer mentioned that the assessee had relied on the receipt and payment by cheque and also the acceptance of donation by the Society. However, he held that they are self-serving evidences of two parties connected with each other. If the contention of the assessee is correct, the Assessing Officer held, the assessee could have compelled the Society to produce the books before him. Non-production of books raised a serious doubt about the bona fides of the Society. This also raised a presumption that the Society may only be a conduit-pipe to claim exemption under section 35CCA. The Assessing Officer, in fact, apprised all these facts in his letter dated 17-12-1985. However, the assessee did not take any steps to get the books of the Society produced before him and the non-production of books and vouchers led the IAC (Asst.) to draw the following conclusions : (i)Either full or part of the money was returned to the assessee in cash or in kind, and....
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....er dated 23-9-1989. The learned CIT(A), considering the appeal filed before him, identified that it is important to consider as to whether from the assessee's side there was any reason to believe that the institution to which a donation was being made was utilizing the funds in a fraudulent manner and whether the conditions laid down by the CIT while granting approval was being fulfilled by the institution. The responsibility of an assessee who is claiming the benefit under section 35CCA would end with his obtaining certificate from the institution that it is approved under the scheme. In this case, the assessee seems to have obtained a certificate from the institution which shows that the institution is approved for claiming exemption under section 35CCA. The learned CIT(A) held that if an institution, which is approved under the scheme of section 35CCA, deals with the funds in a fraudulent manner, to penalize the parties who have made donations to such institution under a genuine belief that the institution was applying its funds on approved objects would be unjust unless it is established that the institution has been used as a conduit-pipe for ploughing back the funds to the ha....
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....given. 5. The learned DR relied upon the judgment of the Calcutta High Court in CIT v. Bankam Investment Ltd. [1994] 208 ITR 208. He also contended that the doctrine of promissory estoppel is not available to the assessee. He relied upon in Asstt. CIT v. Dalamal & Sons Investment Co. [1994] 49 ITD 80 (Bom.) and Varun Enterprises v. Asstt. CIT [1993] 47 TTJ (Delhi) 461 besides trying to distinguish the decisions cited on behalf of the assessee. 6. As against these arguments of the learned DR Shri Sonde, the learned C.A. for the assessee, submitted the following. Firstly, it is submitted that it is not correct that on three occasions the Assessing Officer had called the assessee to furnish information or details regarding the donee institution as stated in para 11 of the assessment order. Giving notice under section 131 to the donee institution does not amount to calling upon the assessee to furnish information. It is only on 17-12-1985 that for first time, the assessee was addressed a letter by the ITO. We are concerned with the assessment year 1983-84 for which the previous year ended by 30-6-1982. The recognition to the donee institution was never withdrawn from 1981 to 1987....
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....s and circumstances of this case where the department failed to show that the approval was withdrawn retrospectively, penalty cannot be levied. Even if the donee institution received back the donation, the assessee cannot be denied deduction under section 35CCA. The assessee relied upon the following case law in support of its submissions : 1. Pressman Advertising & Marketing (P.) Ltd. v. CIT [1994] 208 ITR 768 (Cal.) 2. B.P. Agarwalla & Sons Ltd. v. CIT [1994] 208 ITR 768 (Cal.) 3. Seksaria Biswan Sugar Factory Ltd. v. IAC [1990] 184 ITR 123 (Bom.) 4. ITO v. M.C. Ponnoose [1970] 75 ITR 174 (SC) 5. Smt. P.M. Celine v. Asstt. CIT [1991] 39 ITD 454 (Cochin) 6. Deter and Deter v. ITO [1992] 42 ITD 598 (Pune) 7. Vir Khanna v. IAC [1995] 51 TTJ 670 (Asr.) 8. Bombay Cloth Syndicate v. CIT [1995] 214 ITR 210/1992 (9) TMI 7 (Bom.) 9. Varun Enterprises Ltd.'s case (supra) 10. Bakul Cashew Co. v. Sales-Tax Officer [1986] 159 ITR 565/1986 (3) TMI 77 (SC) 11. Order of C-Bench of Bombay Tribunal in Alarsan v. Dy. CIT [IT Appeal No. 2885 (Bom.) of 1990, dated 19-7-1995] 7. The assessee also filed a paper book in concealment appeal containing 22 pages. On behal....
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....eal need not deter very much and we admit the same. 10. Now, let us take for our discussion the genuineness or otherwise of the donation made by the assessee to the donee institution. At page No. 1 of the paper book, a photocopy of the receipt given by the assessee institution after receiving Rs. 5 lakhs was provided. It is dated 29-6-1982. Cheque No. 2473/82 dated 28-6-1982 for Rs. 5 lakhs is stated to have been handed over to the assessee-institution under the receipt. The donee institution was an approved institution under section 35CCA. The approval was granted on 9-6-1981. The programme of the donee institution for their proposed Hospital at Mahalunge with Mobile Vans and Ambulance, Cancer Research Detection Centre, T.B. Cottages, etc., involving an estimated total expenditure of Rs. 54 lakhs was approved and the approval was for three years. The donee institution came up with programme for Cancer Detection Centre at a cost of Rs. 1,88,51,600 and it was approved for the period from 17-7-1981 to 30-6-1984. Though the approval also is sought for nutrition and agricultural programme, the said programme was not approved. Even the programme for running the Cancer Detection Centr....
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....der section 35CCA to the donee institution was also furnished. In the said letter, it is specifically stated that the onus of production of books of account, vouchers, bank pass books, etc., is on the donee institution and not on the assessee and the conditions set out for approval should be observed by the donee institution and not by the assessee. The Assessing Officer, in the assessment order, found that on going through the income & expenditure account perhaps of the donee institution, it is very clear that the amount was diverted for other purposes. The Assessing Officer held that the donee institution had not complied with the conditions imposed when the approval under section 35CCA was granted. He also laid that the acceptance of donation by cheque and the obtaining of the receipt, etc., are all self-serving documents since the two parties are connected with each other. The Assessing Officer further stated that the assessee could have compelled the donee institution to produce the books before him in whatever shapes the books were there and therefore non-production of books raised doubt about the bona fides of the donee institution and also raised a presumption that the Soci....
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....se (1) presumes an action in future. The donor is not in a position to ensure whether in fact the donated sum is used for the purposes specified. On a reading of the provision, the relevant period of time as far as the donor is concerned is when the payment is made. This is borne out by the phrase "for the time being" in section 35CCA(2). The misapplication of the funds donated would necessarily be subsequent to the donation." In B.P. Agarwalla & Sons Ltd.'s case (supra ), the Calcutta High Court as per the headnote held the following : "On a plain reading of section 35 it is clear that a deduction is allowable if at the time when the amount is paid to the research association, the research association has, as its object, the undertaking of scientific research, etc., and that the association is for the time being approved by the prescribed authority. The subsequent withdrawal of the approval by the prescribed authority would not affect the right to claim the deduction." Thus, the learned Representative for the assessee argued that even though after receiving the donation, the donee institution misapplied the donated money, since the assessee is not responsible for the way ....
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....l and that too the withdrawal must be considered to have come into force only from the date of admission, namely, 27-3-1989, and never before. Shri Tilakchand vehemently tried to argue that the withdrawal of recognition even on a subsequent date would disentitle the assessee from the claim of deduction under section 35CCA and in this connection he heavily relied upon a Devision Bench decision of the Calcutta High Court in Bankam Investment Ltd.'s case (supra). In that case also, the relevant assessment year with which the Hon'ble High Court was concerned was 1985-86. The donee institution in that case was Society for Integral Development which was an approved institution under section 35CCA as per the letter of approval dated 17-12-1982 and the approval was in force from 13-12-1982 to 12-12-1985. The approval was withdrawn by the Competent Authority on 3-3-1987 with retrospective effect from 13-12-1982. On behalf of the assessee, it was contended in that case that exemption once granted could not be withdrawn with retrospective effect and another contention advanced was that revenue must be held bound by the doctrine of promissory estoppel. In that case, the assessment was made und....
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....ed to be wrong or mistaken in which case the admission does not bind the party who makes the admission. In this case, the admission was only to the extent that the recognition to the donee institution was withdrawn. The date when the recognition was withdrawn was not admitted, and since the admission is contained in a letter of 1989, according to Shri Sonde, the admission of the assessee, if any, be taken to have prospective operation from 17-3-1989 only and not before. Even with regard to legislation passed by the State or Central Government, the law is that in the absence of clear words to the contrary, the legislation is presumed to be prospective and not retrospective : See P. Ganesh Nayak v. Commercial Tax Officer AIR 1964 Mys. 240. When the retrospectivity cannot be presumed in the interpretation of an Act much less the retrospectivity is permitted to be presumed in the case of an order or notification passed by an authority. 13. The only question which is left to be considered by us is that in a case where the recognition to an institution was withdrawn by the Competent Authority, whether donation given under section 35CCA prior to the withdrawal of such recognition was a....
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.... Scheme save the assessee from exigibility of penalty. Shri Tilakchand argued that at the most the assessee is entitled to only a lenient view as regards imposition of penalty and cannot completely exonerate it from the penalty. He invites our attention to Question Nos. 26 and 28 and the answers given thereunder by the CBDT Circular No. 451 dated 17-2-1986. The said questions and answers are the following : "Q. 26 : Where an order has been set aside and assessment proceeding under section 147(a)/( b), whether the assessee can surrender the amount which is the subject-matter of dispute. Whether such a surrender would be taken as suo motu declaration before the detection by the Department ? Ans. : Such a surrender cannot be taken as a suo motu declaration but naturally a lenient view would be taken if an assessee turns honest even at this stage. Q. 28 : Where an addition is contested in appeal, whether an assessee could make a declaration and agree to pay tax thereon ? Ans. : Yes; the assessee should withdraw the appeal and make a declaration before the Administrative Commissioner. In such a case, a lenient view would be taken though such a declaration cannot be taken as ....
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....does not amount to admitting concealment. From the mere fact of the assessee agreeing to addition, it does not follow that the amount agreed to be added was concealed income - Sir Shadilal Sugar & General Mills Ltd. v. CIT [1987] 168 ITR 705/1987 (7) TMI 3. A. Shri Sonde argued that there may be hundred and one reasons for such admission. When the assessee does not dispute the disallowance, it does not automatically absolve the revenue from proving mens rea of quasi-criminal offence. The assessee himself, as an explanation to its surrender, stated that it has been doing so only to purchase peace with the department. Therefore, Shri Sonde argued that under the facts and circumstances, the concealment on the part of the assessee cannot be inferred and there is no room for Shri Tilakchand's argument to readily apply the answers given under Question Nos. 26 and 28 extracted above. On the other hand, Shri Sonde argued that the proper provisions under the Amnesty Scheme which are applicable to its case are the following. Adverting to Circular No. 451 dated 17-2-1986 published at (1986) 158 ITR 135 (Statutes), our attention is drawn to Question No. 7 and Question No. 19 as well as the ans....
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....behalf of the assessee, namely : (1) Smt. P.M. Celine's case (supra) (2) Deter and Deter's case (supra) (3) Deepak Singh & Family (HUF) v. Asstt. CIT [1994] 48 ITD 465 (Delhi) (4) Vir Khanna's case (supra) (5) Varun Enterprises Ltd.'s case (supra). We only found that the C-Bench of this Tribunal in their order passed in the case of Alarson ( supra), had considered a case containing similar facts and ultimately the matter was decided in favour of the assessee. We have already stated that this Tribunal order was already filed before us. At para 12 of their orders, the earlier Tribunal also found after adverting to Question No. 19 already extracted that it is clear that the question as to whether the benefit of the Amnesty Scheme is available to the assessee or not will depend upon the fact whether the department detected concealed income of the assessee or whether it was only a prima facie belief that the assessee has wrongly claimed the deduction. It had further held the following : "The word 'detection' has not been defined in the Income-tax Act, 1961. Dictionary meaning of the word 'detection' is 'discovery of something hidden' or not easily observed; 'state o....
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....ding to this appeal are the following. The assessee filed the statement of advance tax in Form No. 28A on 10-6-1982 showing total income at Rs. 2,74,720. Subsequently, the assessee filed estimate of advance in Form No. 29 on 15-12-1982 estimating income at Rs. 9,65,000 and advance tax payable at Rs. 2,50,000 and paid advance tax of Rs. 2,50,000. The regular return of income has been filed on 30-6-1983 showing total income at Rs. 10,31,755. The assessment has been completed on 23-1-1986 determining the total income at Rs. 21,79,296 and the tax payable at Rs. 14,51,956. Since there was shortfall in the payment of advance tax, proceedings under section 273(2)(aa) were initiated. Notice under section 274 was issued to the assessee to show cause why penalty should not be levied for filing estimate of advance tax which it knew or had reason to believe to be untrue. The assessee-company filed its explanation by its letter dated 27-3-1989 stating that the difference between the estimated income and assessed income is due to the fact that a contribution of Rs. 5 lakhs made in good faith to M/s. Sigma Medical Aid & Research Society (hereinafter referred to as "the donee institution") was dis....
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....ld while deciding the penalty appeal that there was nothing on record to show that the donation of Rs. 5 lakhs by the assessee to the donee institution is bogus or a make-believe. So long as the main point was not brought out by the revenue against the assessee, the assessee is not obliged to pay advance tax on that impugned Rs. 5 lakhs. Therefore, it is easy to find in this appeal that the learned CIT(A) is perfectly justified in his orders to reduce the amount of Rs. 5 lakhs for the purpose of levy of advance tax or the penalty under section 273(2)(aa). We find the appeal without any merits and hence it is dismissed. ITA No. 8003 (Bom.)/89 : 20. This is an appeal by the department arising out of the order of the Assessing Officer dated 30-3-1989 passed under section 104. The assessee-company, according to the computation given by the Assessing Officer, had a distributable income of Rs. 5,26,068 and 60% thereof, namely, Rs. 3,15,640, is to be distributed as dividend amongst the shareholders. However, it had not declared any dividend and hence the Assessing Officer held that the provisions of section 104 are attracted. The assessee submitted its reply through letters dated 19....
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....p; 10. Donation to Sigma under section 35CCA 5,00,000 16,76,433 Distributable income 74,962 In the above calculation or while arriving at the distributable income, the assessee had deleted the sum of Rs. 5 lakhs which was purported to have been given by it to the donee institution and for which deduction under section 35CCA was claimed on Rs. 5 lakhs. While submitting the above calculation, the assessee urged before the learned CIT(Appeals) that it did not include interest under sections 215 and 216 and also the surtax and penalties payable by the assessee-company which have arisen because of the additions made in the assessment. If all these were taken into consideration, the distributable profits would be reduced to 'nil' as against which the reserves of the assessee-company were only Rs. 48,607. Further, there are considerable amounts of accumulated losses. It is submitted that the secured loans are only Rs. 29 lakhs as against the current liability of the assessee-company of Rs. 2 crores. If 2% of the debts of the company became bad, then the entire share ....
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....TR 703. In that case, the assessee claimed deduction of Rs. 1,02,223 which was spent on charity and donations since it was authorised by the memorandum of association of the assessee-company in that case. It was held by the Bombay High Court rejecting that it cannot be allowed as a deduction while computing commercial profits under section 23A of the Indian Income-tax Act, 1922, corresponding to section 104 of the I.T. Act, 1961, as follows : "No material was brought on record by the assessee-company to show that all or a major part of the donations amounting to Rs. 1 lakh and odd were guided by commercial principles or out of business considerations. The mere fact that an amount has been spent is not by itself sufficient to exclude it in determining the amount of commercial or accountable profits available for distribution amongst shareholders under section 23A. The amount of Rs. 1,02,223 was not allowable in computing the profits available for distribution as dividends." Shri Tilakchand, the learned Departmental Representative, further contended that this being a Bombay High Court decision, which is the jurisdictional High Court, is to be followed than over the decisions of....
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.... non for deduction was that it should not only be an expenditure of revenue nature but it should also be incurred for the purposes of business. Therefore, so long as the assessee does not succeed in establishing that the donation of Rs. 5 lakhs to the donee institution is for business considerations, the deduction claimed is not available. Further, it is contended by Shri Tilakchand that the provisions of sections 104 to 109 of the Income-tax Act are self-contained code and no other deductions except those stated in section 109(i)( a) to (h) are eligible to be considered while computing the distributable income. On the other hand, Shri Sonde, the learned Representative for the assessee, contended that the provisions of sections 104 to 109 of the I.T. Act should not be read in isolation but they should be read in conjunction with other provisions of the Act and harmonization of the effect of sections 104 to 109 with other provisions of the I.T. Act is essential to be made. 23. Thus, after evaluating the learned arguments on either side, we are of the view that the contentions of the learned Departmental Representative cannot be accepted. Firstly, we have already held that the don....
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....pany was proceeded against under section 23A of the Indian Income-tax Act, 1922, which is the predecessor of section 104 of the I.T. Act, 1961. Under the provisions of section 23A of the Indian Income-tax Act, the exempted dividend of Rs. 17,027 under section 56A was not specifically deductible. In that case also, a similar argument, which is now advanced by the Sr. Departmental Representative, that section 23 of the Indian Income-tax Act, 1922, should be treated as a self-contained code and for the purpose of determining the permissible deductions thereunder, the deductions available under the provisions of the Indian Income-tax Act, 1922, which might have been considered for the purpose of determining the total income of the assessee-company, should not be brought in or considered, was advanced. It is significant that the Hon'ble Judges who decided the cases of Seksaria Biswan Sugar Factory Ltd. v. CIT [1975] 101 ITR 703 (Bom.) as well as the case of Gopal Investors' Corpn. (P.) Ltd. (supra) are common and, therefore, while deciding Gopal Investors' Corpn. (P.) Ltd.'s case (supra), they were reasonably presumed to be well aware of what they had held in their previous decision in ....
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....d "super-tax" is used in the Act it is an additional duty of income-tax as contemplated by section 55. The expression in this Act is wide enough to include section 23A even though it is contained in Chapter IV. If the provisions of section 23A were read in mere isolation, then there will be an apparent conflict between the provisions of section 23A and those of section 56A. If the provisions of section 23A were merely looked at, then the dividend which falls within the provisions of section 56A will be subjected to liability of payment of super-tax even though section 56A states that no super-tax shall be payable by a company on such part of its total income as consists of dividends as specified therein. In our opinion, when such a situation arises, it will not be proper to treat the provisions of one as overriding those of the other and both the provisions should be harmonized together. When looked at from that point of view even in applying the provisions of section 23A, the provisions of section 56A shall not be overlooked as both the sections deal with the topic of super-tax. Thus, even though in section 23A no specific reference is made to dividend which is exempt from super-t....