TaxTMI 
TaxTMI 
2018 (11) TMI 1314
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....ing the above two appeal together. 3. The grievances raised by the assesseein its lead case being ITA No.42/Kol/2018, for Assessment Year 2013-14,are as follows: "1. That, on the facts and in the circumstances of the case and evidences on records, the Ld. Commissioner of Income Tax (Appeals)-21, Kolkata erred in confirming thedisallowance of Rs. 4,81,25,000 claimed by the Assessee under section 35(1)(ii) of the Income Tax Act, 1961 in respect of Donation of Rs. 2,75,00,000 made to "The School ofHuman Genetics and Population Health", an Institute approved by the Central Governmentvide notification no.4/2010 dated 28th January, 2009 for the purposes of sec. 35(1)(ii) of theAct read with Rule 5C and 5E of the Income Tax Rules. 2. That, the Ld. Commissioner of Income Tax (Appeals) erred in confirming theaforesaid disallowance of Rs. 4,81,25,000 claimed by the Assessee under section 35(1)(ii) ofthe Act disregarding the unimpeachable direct evidences furnished by the Assessee butrelying on circumstantial evidences and irrelevant considerations based on suspicions,surmises and conjectures. 3. That, various observations and findings of the Ld. Commissioner of Income Tax(Appeals) con....
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....1 to 5 raised by the assessee in ITA No.43/Kol/2018 relate to disallowance u/s 35(1)(ii) to the tune of Rs. 4,81,25,000/- and Rs. 10,50,00,000/- respectively." 6.The facts of the case which can be stated quite shortly, (as per lead case in ITA No.42/Kol/2018), are as follows: In ground No.1 to 4, the Assessee has challenged the disallowance of deduction( Weighted Deduction) ofRs.4,81,25,000/- claimed under section 35(i)(ii) of the Act, in respect of the donations ofRs.2,75,00,000/- made to 'The School of Human Genetics and Population Health' (hereinafterreferred to as SHG) on the alleged ground that the said donations were bogus. During the previous year relevant to the Assessment Year 2013-14, the assesseehad made donations of the aggregate sum of Rs, 4,00,50,000/- which interalia included thesum of Rs. 2,75,00,000 donated to "The School of Human Genetic and Population Health". The assessee claimed weighted deduction of Rs. 4,81,25,000 being @ 175% of Rs. 2,75,00,000 under section 35(1)(ii) of the Income Tax Act, 1961. During the course of assessment proceedings, the Assessing Officer asked theAssessee Firm to explain as to why the deduction of Rs. 4,81,25,000/- claimed by thea....
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....e witness whose statements were recorded behind theback of the assessee firm and which statement are being relied upon by him to be used inthe assessment. 8. However, the assessing officer rejected the contention of the assessee and noted that the Donee Trust approached the settlement commission in order to get immunity from penalty and prosecution, seemed inevitable by its malpractices of receiving donation on certain commission from the prospective benefitting parties who in guise of 'Donation' to trust, tried to evade tax arising out of undisclosed source of income. During the course of settlement proceedings the assessee not only accepted themodus operandiadopted for receiving the donation but also fully disclosed the service charges earned by the Donee trust by providing accommodation entries of Donation. In the revised income and expenditure account, instead of "donation" received, only the income towards the services charges was considered. The settlement commission while pronouncing the order stated categorically that though the object of approval granted U/s 80G or U/s 35 (1) (ii) of the Act was laudable but the trust 'misused' the exempt status under different provision ....
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....On the other hand, the ld. DR for the Revenue submitted before us that registration of 'Matrivani' and 'The School of HumanGenetics and Population Health'had been rescinded by the CBDT, vide Notification dated 6th September, 2016 which are reproduced below: The ld DR pointed out that since the registration had been cancelled by the CBDT, by issuing notification dated 06.09.2016 as mentioned above, therefore both the institutions viz: 'Matrivani' and 'The School of HumanGenetics and Population Health' are not entitle to claim benefit under section 35 (1) (ii) of the Act. Moreover, the notification for cancellation was issued by the CBDT with retrospective effect that is, with effect from 1st April 2007 therefore it is abundantly clear that by no stretch of imagination these institutions viz: 'Matrivani' and 'The School of HumanGenetics and Population Health' are entitled to claim benefit under section 35 (1) (ii) of the Act. 13 We have given a careful consideration to the rival submissions and perused the materials available on record, we note that the assessee has challenged disallowance of weighted deduction of Rs. 4,81,25,000/- for A.Y. 2013-14 and disallowance of weighted ded....
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....he Income Tax Act, 1961 vide Notification, bearing No. 229/2007 (F.No.203/135/2007/ITA-II) dated 21.08.2007 and Notification No. 4/2010 (F. No. 2B/A/2009,/ITA-II dated 28.01.2010 respectively, published in Official Gazette of India. The assessee categorically denied that it ever received back the amounts of donations in cash or in kind from the said Institutions and from any person whatsoever in lieu of the various amounts donated to these two institutions. We note that in the statements, of key persons and alleged brokers recorded by the Investigation Wing in course of survey proceedings, in their cases and the extracts of which was provided to the assessee in the show cause notice, the name of the assessee firm does not appear anywhere. It is to be noted that none of those persons implicate the assessee to have made bogus donations and that cash was paid to the donors assessee in lieu of the alleged bogus donation after deducting their commission. We note that the statements of the various parties and persons were recorded behind the back of the assessee and the Assessing Officer did not allow opportunity of cross examination. We note that in absence of opportunity of cross-exam....
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..... Therefore, we set aside the impugned order and direct the AO to allow the deduction of Rs. 26,28,500/- u/s. 35(1)(ii) of the Act. 15. Now, we deal with the arguments of ld DR for the Revenue. We note that the solitary grievance of the ld DR for the Revenue is that since the registration had been cancelled by the CBDT,with retrospective effect that is, with effect from 1st April 2007, by issuing notification dated 06.09.2016, for both the institutions viz: 'Matrivani' and 'The School of HumanGenetics and Population Health', therefore these institutions are not entitled to claim benefit under section 35 (1) (ii) of the Act. We note that the withdrawal of recognition u/s 35(1)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assesseeherein for claim of weighted deduction u/s 35(1)(ii) of the Act, for that we rely on the judgmentof the Coordinate Bench, Kolkata, in the case of M/s Maco Corporation India (P) Ltd, ITA No.16/Kol/2017, for Assessment Year 2013-14, wherein it was held as follows: "29. All the three High Courts after examining the issue, in the light of the object of Section 12A of the Act and Section 21 of the Gen....
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....cer u/s 14A of the Act. 18. The brief facts qua the issue are that on perusal of the computation of income it was observed that the assessee has disallowed expenses of Rs. 20,60,327/- u/s 14A of the Act,suo moto. The Assessing officer, based on the balance sheet of the company computed the disallowance under section 14A read with Rule 8D of the Income Tax Rules, as follows: Sl.no. Disallowance as per Rule - 8D Amount (Rs.) i) Expenditure directly related to exempt income - ii) Disallowance of interest (AxB/C) 2,649,736 iii) ½% of average value of investment 6,019,452 Total disallowance 8,669,188 i) Expenditure directly attributable - ii) Disallowance of interest (AxB/C) 2,649,736 A Amount of interest paid (after netting off) 9,395,714 B Average value of investment 1,203,890,402 Closing Balance Opening Balance Investment in equity shares 1,161,316,203 1,246,464,601 C Average total assets 4,269,881,115 Closing Balance Opening Balance Total assets 4,440,771,214 4,096,991,015 iii) ½% of average in....