Approval u/s 35(1)(ii) For Donee's trust Expired: ITAT Upholds ₹26.25 Lakh Disallowance [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) upheld the disallowance of Rs. 26,25,000 claimed as a deduction u/s 35(1)(ii) of the Income Tax Act, 1961 citing the approval under section 35(1)(ii) for donee’s trust was expired.

Parag Dave (assessee), an individual engaged in the business of soil testing, building material testing, and land survey work, filed a return declaring a total income of Rs. 21,58,700 on 12.08.2016.

The case was selected for scrutiny, and the Assessing Officer (AO) observed that the assessee claimed a deduction u/s 35(1)(ii) of Rs. 26,25,000 (which is 175% of Rs. 15,00,000) for a donation made to Shri Arvindo Institute of Applied Scientific Research Trust.

The AO noted that the trust was not an approved entity u/s 35(1)(ii) or 35(1)(iii) of the Act. The AO treated the donation as a non-genuine claim for a trust allegedly involved in money laundering through bogus donations.

Aggrieved by the assessment order, the assessee appealed to the Commissioner of Income Tax (Appeals) (CIT(A)), who dismissed the appeal. The assessee then filed an appeal before the ITAT.

The assessee's counsel argued that the CIT(A) was wrong in rejecting the deduction claim u/s 35(1)(ii), as the amount was contributed through RTGS, and the assessee had provided evidence, including a letter dated 14.05.2012, which stated the exemption u/s 35(1)(ii) was valid.

The counsel also contended that the donation was made to a scientific research organization, which was duly registered with the Ministry of Science and Technology of India and that the conditions of Section 35(1)(ii) were fully complied with.

The two-member bench, comprising Suchitra Kamble (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) observed that the Shri Arvindo Institute of Applied Scientific Research Trust was earlier approved u/s 35(1)(ii) of the Act, but this approval expired on 31.03.2006.

The bench noted that the assessee, being a Science Graduate conversant with financial updates, was aware of this position. The bench noted that the disallowance made by the lower authorities was sustainable.

The Tribunal held that the CIT(A) rightly dismissed the appeal, and there was no need to interfere with the findings of the lower authorities. The appeal filed by the assessee was dismissed.

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