S. 80G Deduction is allowable in the Year of Actual Payment even without Donation Receipt: ITAT [Read Order]

Donation - CBDT

In the case between General Capital and Holding Company Pvt. Ltd vs Income Tax Officer, Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) held that deduction under Section 80G of the Income Tax Act 1961 is allowable in the year of actual payment as well as that of getting the necessary donation receipt.

Assessee Company in the case filed its return of income for the relevant financial year. During the assessment period the Assessing Officer (AO) noticed that the Assessee had claimed deduction for Rs. 11,11,111 on account of donation paid to a trust named as Shankersingh Vaghela Bapu Charitable Trust which enjoys a valid registration under Section 80G of the Income Tax Act.

However the AO observed that before him the Assessee had placed on record payee’s registration only without its acceptance receipt. Thereafter, he concluded that the assessee’s books stated the amount in question as opening balance which meant that the same was not paid during the relevant previous year as per Section 80G(1) & (2) of the Act. Accordingly he made disallowance of the said amount in the hands of the Assessee.

On appeal, the CIT(A) also upheld the action of the Assessee and confirmed the disallowance made by the AO. Aggrieved by the order of the authority, Assessee filed an appeal before the Tribunal.

After considering the facts and circumstances, the Tribunal bench comprising of Judicial Member S.S.Godara and Accountant Member Pradip Kumar Kedia jointly rejected the findings of the lower authorities and held that “the lower authorities have erred in law as well as on facts in this peculiar circumstances to interpret the relevant statutory provision Section 80G of the Act in an unsustainable manner which tantamounts to denying the necessary relief in both assessment years such as the year of actual payment as well as that of getting the necessary donation receipt”.

The division bench further observed that “the purpose of using the crucial expression “in relevant previous year” in statute is to ensure actual payment on or before the relevant previous year rather than altogether rejecting a case alike the instant facts only”. After verifying the books of accounts submitted by the Assessee, the bench found that the assessee having actually transferred the money to donee trust through banking channel only and the said trust is an approved institution. Therefore, the bench directed the Revenue to delete the disallowance under section 80G of the Income Tax Act.

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