Chemstar International Vs DCIT (ITAT Mumbai)
mere suspicion or cancellation of registration post-donation does not invalidate Section 35(1)(ii) deduction
Section 35(1)(ii) donation cannot be treated as bogus on Investigation wing report alone
The case of Chemstar International vs DCIT (ITAT Mumbai) revolves around the contentious issue of income tax deduction under section 35(1)(ii) of the Income Tax Act, 1961. This deduction is specifically related to donations made towards scientific research, with the taxpayer, Chemstar International, claiming deductions for donations made to Matrivani Institute of Experimental Research & Education and The School of Human Genetics and Population Health.
The controversy arose when the Assessing Officer (AO), relying on a report from the Investigation Wing, alleged that these donations were bogus and disallowed the deductions claimed by Chemstar International. However, the taxpayer contended that the donations were genuine, supported by proper documentation including receipts and recognition certificates under section 35(1)(ii) of the Act.
During the proceedings, it was highlighted that the Investigation Wing’s report lacked specific evidence implicating Chemstar International directly in any wrongdoing related to these donations. Furthermore, previous judicial precedents, such as those in the case of Sopariwala Exports Pvt. Ltd., supported the taxpayer’s claim that mere suspicion or cancellation of registration post-donation does not invalidate the initial eligibility for deduction.
