DUVVURU RL REDDY, JUDICIAL MEMBER:-This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 4, Chennai dated 12.09.2016 relevant to the assessment year 2012-13. The assessee has raised two effective grounds, viz., (i) the ld. CIT(A) erred in confirming the disallowance made under section 35(1)(ii) of the Income Tax Act, 1961 [“Act” in short] and (ii) the ld. CIT(A) erred in confirming disallowance made under section 14A of the Act.
2. Brief facts of the case are that the assessee is carrying on transport business in the name of M/s. DDP Transports and derives income from business. She has filed her return of Income on 29.09.2012 admitting total income of Rs.14,80,220/-. The case of the assessee was selected for scrutiny. Notice under Section 143(2) dated 06.08.2013 was issued and duly served on the assessee. During the year under consideration, an amount of Rs.15,00,000/- on which weighted deduction of Rs.26,25,000/- under section 35(1)(ii) of the Act was claimed to have been donated by the assessee to M/s. Herbicure Healthcare Bio-Herbal Research Foundation [“Herbicure” in short], Kolkata. The association was approved under section 35(1)(ii) of the Act and Notification to this effect held also been passed in the Gazette of India In order to confirm the donation contributed, the Department has sent a letter to the M/s. Herbicure and vide their letter dated 26.12.2014 M/s. Herbicure confirmed the voluntary donation of Rs.15 lakhs from the assessee. A copy of the trust’s Corporation Bank statement in which the donation received was also sent by the trust.
2.1 As per the information received from the ACIT, Non Corporate Circle 3, Chennai along with copy of the sworn statement recorded from Shri Swapan Ranjan Das Gupta, Founder Director of M/s Herbicure by the Office of the Director of Income Tax (Inv.), Kolkata during the course of survey under section 133A of the Act on 27.01.2015 at M/s. Herbicure. In the sworn statement, the Founder Director Shri Swapan Ranjan Das Gupta of M/s. Herbicure has admitted that his organization accept the donation and giving back of the same to the donor after deducting a commission @ 5% on the donation amount. In view of the above, the assessee was show-caused as to why the claim made under section 35(1)(ii) of the Act should not be disallowed along with copy of affidavit. The assessee has submitted before the Assessing Officer that the assessee has made donation directly to the done by cheque and not received back any cash or cheques from the donee. With regard to the approach of Shri Kishan Bhawasingka to adopt the prevalent practice of scientific and research organisations of giving accommodation entries on commission to different beneficiaries in the garb of donation, the assessee has strongly contended that the donation was given directly to the donor through cheque and the assessee was not one of the beneficiary as mentioned in that sworn statement. However, the Assessing Officer has not accepted the submissions of the assessee, the donation made and exemption claimed of Rs.26,25,000/- under section 35(1)(ii) of the Act was disallowed and brought to tax.
3. The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) confirmed the disallowance made on this account.
4. On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee vehemently argued that the donee M/s. Herbicure has confirmed having receipt of donation made by the assessee through account payee cheque. Further, the institution has confirmed the receipt of donation by filing the trust’s Corporation Bank statement. Once M/s. Herbicure is enjoying the approved under section 35(1)(ii) of the Act as on the date of donation given by the assessee, the assessee has rightly claimed exemption for the donation made by her. Once the Revenue has not proved that the assessee was repaid back the donation by the donee, the disallowance made by the Assessing Officer cannot be sustained under law and prayed that the disallowance made on this count may be deleted. It was also argued that it may be a fact that the notification granting approval under section 35(1)(ii) of the Act has been withdrawn with retrospective effect vide S.O.2882(E) dated 06.09.2016, but as on the date of donation given by the assessee, the organisation has been approved under section 35(1)(ii) of the Act and therefore, she prayed the disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) should be deleted.
5. On the other hand, the ld. DR strongly supported the orders of authorities below.
6. We have heard both sides, perused the materials available on record and gone through the orders of authorities below. First we shall adjudicate the issue as to whether withdrawal of approval under section 35(1)(ii) of income tax act apply retrospectively for exemption claimed by the assessee. Vide Notification No. 35/2008 dated 14.03.2008, the organization Herbicure Healthcare Bio-Herbal Research Foundation, Kolkata has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Act with effect from 01.04.2007. In view of the above notification, donation offered to the above institution is exempted to claim deduction under section 35(1)(ii) of the Act. Thus, the assessee paid donation of Rs.15.00 lakhs through cheque No. 023737 dated 24.02.2012 drawn on Union Bank of India towards corpus donation to the above institution. This fact was not under dispute. Since the assessee as given donation, claimed deduction of 175% as exempt as admissible under the provisions of section 35(1)(ii) of the Act.
7. The Assessing Officer denied the claim of the assessee on the ground that the above approval of the Central Government has been withdrawn retrospectively vide S.O. 2882(E) dated 06.09.2016 and the ld. CIT(A) confirmed the same. The Institution was enjoying the approval of the prescribed authority at that time and the assessee made donation was also not under dispute, the disallowance made by the Assessing Officer cannot be sustained under law. Our observation is duly fortified by the decision of Hon’ble Bombay High Court in the case of Seksaria Biswan Sugar Factory 184 ITR 123. The purport of the decision of Hon’ble Bombay High Court was that when the institution was enjoying the approval within the meaning of section 35(1)(ii) of the Act as on the date of receipt of donation and retrospective cancellation of approval of the concerned institution, the deduction claimed in respect of donation cannot be denied. Under the above facts and circumstances, denial of exemption claimed in respect of donation cannot be sustained.
8. With regard to the donation, M/s. Herbicure confirmed the voluntary donation of Rs.15 lakhs from the assessee. A copy of the trust’s Corporation Bank statement in which the donation received was also sent by the trust. Based on the sworn statement of the Founder Director Shri Swapan Ranjan Das Gupta of M/s. Herbicure, wherein, he has admitted that his organization accept the donation and giving back of the same to the donor after deducting a commission @ 5% on the donation amount. However, the Department has not made any effect to get any valid evidence that the organization has given back the donation to the donor after deducting a commission @ 5% on the donation amount. Under the above facts and circumstances, the Assessing Officer is directed to ascertain the means as well as actual amount repaid by the donee to the assessee and decide the issue afresh after giving sufficient opportunities of hearing to the assessee. Thus, the ground raised by the assessee is partly allowed for statistical purposes.
9. With regard to disallowance under section 14A of the Act, the Assessing Officer has observed that the assessee had shown an amount of Rs.20,36,486/- on dividend received from shares and mutual funds and claimed exemption under section 10(38) of the Act. The Assessing Officer disallowed a sum of Rs.58,888/- being the expenses incurred towards earning the exempt income. In the assessment order, the Assessing Officer has not given any basis and details of disallowance made under section 14A of the Act, such as total investment made by the assessee, application of relevant provisions of Income Tax Rules, etc. Under the above facts and circumstances, we direct the Assessing Officer to pass a speaking order with regard to the disallowance under section 14A of the Act. Thus, the ground raised by the assessee is allowed for statistical purposes.
10. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.