The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) observed that No claim for weighted deduction on donation can be claimed under Section 35(1) (ii) of Income Tax Act, 1961
The counsels for the assessee S.N. Soparkar and Parin Shah strongly relied on a decision from the ITAT Mumbai Bench in the matter of M/s. Long Life Realtors LLP vs. Pr. CIT-17, It was emphasized that the ITAT had nullified a similar revisionary order, noting an erroneous claim of weighted deduction under section 35(1) (ii) of Income Tax Act, 1961, permitted by the Assessing Officer on a donation made to the very same Institute, M/s. Arvindo Institute of Applied Scientific Research Trust. A copy of this order was presented for our reference.
The counsel for the Revenue Darsi Suman Ratnam argued that, as highlighted by the Commissioner of Income Tax ( CIT ), the fact remains that the Trust, namely M/s. Arvindo Institute of Applied Scientific Research Trust, was not approved for the purposes of section 35(1)(ii) of Income Tax Act, 1961, for the relevant assessment year, A.Y. 2015-16. This approval had expired on 31/03/2006.
The counsel for the Revenue pointed out that, according to the CBDT Instruction in F.No.225/351/2018-ITA(II) dated 14/12/2018, all field officers were informed that the Institute was fraudulently accepting donations under section 35(1)(ii) of Income Tax Act, 1961, after the expiry of approval, based on forged documents. He argued that the assessee had clearly been granted a deduction under section 35(1)(ii) of Income Tax Act, 1961, which they were otherwise ineligible for, rendering the assessment order erroneous and prejudicial to the Revenue.
The counsel for the assessee highlighted that the claim in question underwent thorough examination during the assessment proceedings. The assessee had submitted pertinent documents to substantiate its eligibility for the claim. Furthermore, the genuineness of the claim was supported by furnishing documents that demonstrated the donation had been transacted through legitimate banking channels. Additionally, the donee Institute had provided receipts and certificates issued by the Central Board of Direct Taxes ( CBDT ), confirming its approval for receiving donations under section 35(1)(ii) of Income Tax Act, 1961
The bench observed that the assessee made donations during the relevant year, and subsequently claimed weighted deduction under section 35(1) (ii) of Income Tax Act, 1961. It is evident that the Institute in question did not possess approval for the specified purposes during the relevant year, as per the records available with the Commissioner of Income Tax ( CIT ). The approval granted to the Institute expired on March 31, 2006, while the assessment year in question before us is A.Y 2015-16. This discrepancy was explicitly highlighted in an advisory issued by the Central Board of Direct Taxes ( CBDT ) in December 2018 to all field officers. Explicitly highlighted in an advisory issued by the Central Board of Direct Taxes ( CBDT ) in December 2018 to all Field Officers.
Consequently, it is established that the said Institute was not authorized to receive donations under section 35(1)(ii) of Income Tax Act, 1961, during the relevant assessment year. Given this incontrovertible fact, it is undeniable that the assessee’s claim for weighted deduction under section 35(1)(vii)of Income Tax Act, 1961, at the time when the assessment order was issued by the Assessing Officer ( AO ) was legally impermissible. It follows, therefore, that the allowance of this claim in the assessment conducted was manifestly erroneous. The assessment order, by permitting a deduction that the assessee was patently ineligible for, was clearly erroneous.
The two member bench comprising Siddhartha Nautiyal ( Judicial member) and Annapurna Gupta ( Accountant member ) concluded that the unequivocally endorsed the decision of the Commissioner of Income Tax ( CIT ) in deeming the assessment order flawed for permitting a clearly ineligible claim of weighted deduction to the assessee.
In the result, the appeal of the assessee was dismissed.
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