Case Law Details
Parag Dave Vs DCIT (ITAT Ahmedabad)
Tax Deduction Denied to Assessee for Donation to Unapproved Research Body
Ahmedabad: The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench, has upheld the disallowance of a tax deduction claimed by an individual, Parag Dave, for a donation made to Shri Arvindo Institute of Applied Scientific Research Trust. The tribunal ruled that the trust’s approval under Section 35(1)(ii) of the Income Tax Act, 1961, had expired well before the donation was made, rendering the contribution ineligible for the weighted deduction.
Parag Dave, engaged in the business of soil testing, building material testing, and land survey, had filed his income tax return for the Assessment Year 2017-18, declaring a total income of Rs. 56,55,070. During the scrutiny assessment, the Assessing Officer (AO) noted a claim for deduction of Rs. 54,25,000 under Section 35(1)(ii) of the Act. This claim represented 175% of a Rs. 31,00,000 donation made to Shri Arvindo Institute of Applied Scientific Research Trust.
Section 35(1)(ii) of the Income Tax Act allows for a weighted deduction for sums paid to an approved scientific research association, university, college, or other institution to be used for scientific research. The 1 approval for such institutions is granted by the prescribed authority, which historically has involved the Department of Scientific and Industrial Research (DSIR) in concurrence with the Director General of Income Tax (Exemptions). This approval is typically granted for a specified period.
The AO, upon examining the claim, found that the approval granted to Shri Arvindo Institute of Applied Scientific Research Trust under Section 35(1)(ii) had expired on March 31, 2006. Consequently, the trust was not approved to receive donations eligible for deduction under this section for the relevant assessment year (2017-18). The AO issued a show cause notice to the assessee, but no response was received. The AO proceeded to disallow the entire claimed deduction of Rs. 54,25,000.
Aggrieved by the assessment order, Dave filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Before the CIT(A) and subsequently the ITAT, the assessee argued that he had made the contribution in good faith based on documents received from the trust and had done everything within his domain. He contended that he should not be penalised merely because the Central Board of Direct Taxes (CBDT) had not issued a fresh certificate. The assessee’s representative submitted that the CIT(A) had erred in observing that the claim was bogus solely because no certificate under Section 35(1)(ii) was issued by the CBDT.
However, the departmental representative countered that the approval of the trust had expired in 2006, a fact reflected in documents. The representative argued that the assessee, being a science graduate and conversant with financial matters and his business, ought to have been aware of the requirement for valid approval for claiming the weighted deduction and had ignored this fact to obtain an undue advantage.
The ITAT, after considering the submissions and reviewing the available records, concurred with the findings of the AO and the CIT(A). The tribunal noted that the approval for Shri Arvindo Institute of Applied Scientific Research Trust under Section 35(1)(ii) had indeed expired on March 31, 2006. Therefore, the entity was not recognised for the purposes of Section 35(1)(ii) during the period the donation was made and was not eligible to receive donations qualifying for the deduction under that section.
The tribunal further observed that the assessee’s argument of being unaware of the trust’s unapproved status was not convincing. The ITAT’s order highlighted that the assessee, being a science graduate and involved in business, should have been aware of the necessary approvals for claiming such a deduction. The assessment order itself had reportedly pointed out the lack of a valid recognition letter from the Bureau of Scientific and Industrial Research (BSIR), further suggesting the assessee’s potential awareness of the trust’s status.
The ITAT, Ahmedabad, in the present case of Parag Dave, found no grounds to interfere with the decision of the CIT(A) and upheld the disallowance of the deduction claimed under Section 35(1)(ii). The appeal filed by the assessee was accordingly dismissed. The order was pronounced on April 15, 2025. The case serves as a reminder to donors to verify the approval status of institutions before making contributions for which they intend to claim tax deductions under specific sections of the Income Tax Act.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee against order dated 25.10.2023, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18.
2. Th assessee has raised the following grounds of appeal:
“1. The CIT(A) erred both in law and on facts in rejecting the claim of deduction u/s.35(1)(ii) of Rs.54,25,000.00 in respect of amount of Rs.31,00,000.00 contributed by the appellant through RTGS merely on irrelevant and untenable grounds ignoring the documents received by the appellant produced before him. On the facts and in the circumstances of the case and the legal inference, the disallowance is patently wrong. It be so held now and deduction be granted as claimed.
2. The CIT(A) erred both in law and on facts in not appreciating that the appellant submitted various documents like copies of certificates associated with Arvindo Institute of Applied Scientific Research Trust which it received on payment of contribution and appellant did all that was within its domain and furnished the papers issued to it based on which, the appellant made the contribution in good faith. The rejection of the claim of the appellant on the ground that appellant did not try to verify the facts from website of Income Tax Department. It be so held now.
3. The CIT(A) further erred both in law and on facts in observing that appellant made a bogus claim merely on the basis that as per letter received from CBDT no certificate under section 35(1)(ii) was issued. The CIT(A) erred in not accepting the reply of appellant in toto. It be so held now and disallowance made be deleted.
4. The CIT(A) erred in law and on facts in making various observations in the assessment order which are irrelevant and untenable when appellant had cooperated with AO by furnishing all the evidences and answers on facts which ought to be considered which AO has failed to consider. It be so held now and deduction rejected for no fault of appellant be allowed as claimed.”
3. The assessee is engaged in the business of Soil Testing, Building Material Testing like cement, tiles, bricks, steel etc. and land survey work and non-destructive testing works. The return of income was filed by the assessee on 26.09.2017 declaring total income of Rs.56, 55,070/-. The case was selected for complete scrutiny and notice under Section 143(2) of the Income Tax Act, 1961 was sent on 08.2 01 8. The Assessing Officer, after perusing the statement of total income and Annexure-4 of Column No.19 in the Form No.3CB in respect of amount admissible under Section 35(i)(ii) of the Act observed that the assessee claimed deduction under Section 35(1)(ii) of the Act of Rs.54,25,000/- being 175% of Rs.31,00,000/- for donation given to Shri Arvindo Institute of Applied Scientific Research Trust. After issuing show cause notice, the assessee did not respond and hence the Assessing Officer made disallowance of Rs.54,25,000/- which was claimed under Section 35(1)(ii) of the Act by the assessee.
4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. There is a delay of 282 days in filing the present appeal for which the assessee has filed the delay condonation application thereby stating that by oversight the signed appeal documents were not handed over to the Authorised Representative by the Clerk of the assessee and, therefore, the delay occurred. The requisite details appear to be genuine and reasonable and hence delay is condoned.
6. The Ld. AR submitted that the Assessing Officer as well as the CIT(A) was not justified in disallowing the deduction under Section 35(1)(ii) of the Act. The Ld. AR submitted that the CIT(A) has not appreciated various documents like copies of certificates associated with Arvindo Institute of Applied Scientific Research Trust which it received on payment of contribution and the assessee did all that was within its domain and furnished the papers issued to it based on which the assessee made the contribution in good faith. The assessee made a bogus claim merely on the basis that as per letter received from CBDT no certificate under Section 35(1)(ii) of the Act was issued. This observation of the CIT(A) is not justifiable.
7. The Ld. DR submitted that the Assessing Officer as well as the CIT(A) has categorically mentioned that the said Arvindo Institute of Applied Scientific Research Trust was approved till 31.03.2006 which was reflected in the documents which was reproduced in the Assessment Order. The assessee has totally ignored this fact and has made donation which is 175% more solely to obtain weighted deduction.
8. We have heard the Ld. AR and perused all the relevant material available on record. The said Arvindo Institute of Applied Scientific Research Trust was earlier approved under Section 35(1)(ii) of the Act which expired on 31.03.2006 and, thereafter, this entity being not recognised for purpose of Section 35(1)(ii) of the Act, is not eligible to raise donations for undertaking Scientific The assessee, at no point of time, can state that he was not aware about this position as the assessee is a Science Graduate conversant with financial updates and is very well aware about the business and the approval of the CBDT for this particular Institute up till 2006. The Assessing Officer as well as the CIT(A) has rightly disallowed the deduction. The Assessing Officer in Assessment Order itself has pointed out the recognition letter of the said Institute which was not issued by BSIR and, therefore, the assessee was well aware about the position of the said Trust. Thus, the CIT(A) has rightly dismissed the appeal of the assessee. There is no need to interfere with the findings of the CIT(A).
9. Inthe result, appeal filed by the assessee is dismissed.
Order pronounced in the open Court on this 15th April, 2025.
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