Case Law Details
PCIT Vs M/s Thakkar Covidbhai Ganpatlal HUF (Gujarat High Court)
The Expenses incurred on a Donation made through Banking Channel used for Scientific Research will be allowed to the assessee as Herbicure Foundation has confirmed that the amount has been utilized for scientific research and there is no evidence that the same is returned back in cash.
In the given case, the Assessing Officer was of view that the donation given to one M/s. Herbicure Healthcare Bio-Herbal Research Foundation (for short ‘the Herbicure’), was not a genuine research foundation. The Assessing Officer, relied upon the survey under taken under Section 133A of the Act, conducted by the DDIT (Investigation, Kolkata) at Herbicure and during the course of the survey it was found that the donor/beneficiaries in connivance with Herbicure with the active help of brokers, entry operators/bogus billers were engaged in bogus donation syndicate and the donations were returned back to the donors in lieu of commission. Therefore, the amount claimed under Section 35(1)(ii) was disallowed by the Assessing Officer.
But, the assessee proves that the Expenses incurred on a Donation made through Banking Channel and also found that the Herbicure Foundation has confirmed that the amount has been utilized for scientific research. Accordingly, the onus placed upon the assessee was discharged.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
1. This Appeal is filed under Section 260A of the Income-tax Act, 1961 (for short ‘the Act, 1961’), at the instance of Revenue and is directed against the order dated 17th July, 2019 passed by the Income Tax Appellate Tribunal, Ahmedabad, Bench ‘C’, Ahmedabad (for short the ‘Tribunal’) in ITA No.2318/Ahd/2017 for A.Y.2014-15.
2. The Revenue has proposed the following question, as substantial question of law:
“Whether Appellate Tribunal has erred in law and on facts in upholding the order of CIT(A) deleting disallowance of donation amounting to Rs.96,25,000/- under Section 35(1)(ii) of the Act”
3. The assessee filed its return of income for the year under consideration on 09.09.2014 declaring total income at Rs.31,23,870/-. A notice was issued under Section 143(2) of the Act by the Assessing Officer, calling upon the assessee to explain as to why the deduction of Rs.96,25,000/-, claimed under Section 35(1)(ii) being donation for scientific research of the I.T.Act, 1961, should not be disallowed. According to the Assessing Officer, the donation given to one M/s. Herbicure Healthcare Bio-Herbal Research Foundation (for short ‘the Herbicure’), was not a genuine research foundation. The Assessing Officer, relied upon the survey under taken under Section 133A of the Act, conducted by the DDIT (Investigation, Kolkata) at Herbicure and during the course of the survey it was found that the donor/beneficiaries in connivance with Herbicure with the active help of brokers, entry operators/bogus billers were engaged in bogus donation syndicate and the donations were returned back to the donors in lieu of commission. Therefore, the amount claimed under Section 35(1)(ii) was disallowed by the Assessing Officer.
4. Assessee, therefore, being aggrieved and dis-satisfied by the assessment order, preferred an Appeal before the CIT (Appeals). The CIT (Appeals) deleted addition, holding as under:
“In view of above facts and case law(supra), I agree with the appellant that the amount of donation has been transferred to the foundation through banking channel and there is no evidence that the same has been returned in cash. Moreover, the trust has confirmed that such amount has been utilized for scientific research vide confirmation dated 29.09.2016. The receiver foundation shall not be confirming the same unless the amount has been utilized for scientific research. The onus has been discharged by the appellant. In the circumstances, it cannot be concluded that the foundation was involved in 100% bogus activity in A.Y.2014-15 which was much before the cancellation notification issued by CBDT u/s. 35(1)(ii). The grounds of appeal are allowed.”
5. The Revenue carried the matter before the Tribunal. After considering the facts and findings given by the CIT (Appeals), relying upon the decision in the case of S.G.Vat Care Private Limited in ITA No.1943/Ahd/2017, Tribunal confirmed the deletion made by the CIT (Appeals) on the ground that the there was no disparity of facts in the present case and in the case of S.G.Vat Care Private Limited (Supra).
6. Learned Senior Advocate Mr.M.R.Bhatt for the appellant submitted that there no appeal is filed by the Revenue against the decision of the Tribunal in the case of S.G.Vat Care Private Limited (Supra). It would therefore be germane to refer to the following findings, given by the Tribunal in the case of S.G.Vat Care Private Limited (Supra):-
“2. In the first ground of appeal, the grievance of the assessee is that the ld.CIT(A) has erred in confirming addition of Rs.8,75,000/- on account of alleged bogus donation to Herbicure Heathcare Bio-Herbal Research Foundation.
3. Brief facts of the case are that the assessee has filed return of income on 20.11.2014 declaring total income at Rs.4,47,910/-. On scrutiny of the accounts, it revealed that the assessee-company has given donation to Herbicure Healthcare Bio-Herbal Research Foundation, Calcutta. A survey action was carried out at the premises of the donee wherein it revealed to the Revenue that this concern was misusing the benefit of notification issued by the Income Tax Department. It has been getting donation from various sources, and after deducting certain amount of commission, these donation were refused in cash. On the basis of that survey report registration granted to its favour was cancelled. On the basis of the outcome of that survey report, the ld.AO construed the donation given by the assessee as bogus. Appeal to the ld.CIT(A) did not bring any relief to the assessee.
4. Before us, the ld. Counsel for the assessee contended that donations were given on 25.03.2014. At that point of time, donee was notified as eligible institution and fall within the statutory eligibility criterion. Certificate for
receiving donation was cancelled on 6.9.2016. There is no mechanism with the assessee to verify whether such donee was a genuine institute or not, which can avail donation from the society.
5. The ld. DR, on the other hand, contended that in the investigation it came to know about bogus affairs conducted by the donee. Hence, these donations are rightly been treated as bogus, and addition is rightly made.
6. We have duly considered rival contentions and gone through the record carefully. The AO is harping upon an information supplied by the survey tern of Calcutta. He has not specifically recorded statement of representative of the donee. He has not brought on record a specific evidence wherein donee has deposed that donations received from the assessee was paid back in cash after deducting commission. On the basis of general information collected from the donee, the donation made by the assessee cannot be doubted. Neither representatives of the donee have been put to cross-examination, nor any specific reply deposing that such donation was not received, or if received the same was repaid in cash, has been brought on record. In the absence of such circumstances, donation given by the assessee to the donee, on which the assessee no mechanism to check the veraci, can be doubted, more particularly, when certificate to obtain donation has been cancelled after two years of the payment of donation. It is fact which has been unearthed subsequent to the donations. Therefore, there cannot be any disallowance on this issue. We allow this ground.”
7. In the facts of the present case, the CIT(Appeals) has given the finding of the fact that the amount of donation was transferred to the Herbicure through Bank channel and there is no evidence that the same is returned back in cash.
8. It is also found that the Herbicure Foundation has confirmed that the amount has been utilized for scientific research vide confirmation dated 29.09.2016. Accordingly, the onus placed upon the assessee was discharged.
9. In view of the aforesaid findings of the fact given by both the authorities below, no interfere in the impugned order passed by the Tribunal is required to be made. No substantial question of law arise from the order of the Tribunal. Therefore, the appeal fails and is hereby, dismissed.
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