A.K. Exporters Vs DCIT (ITAT Kolkata)
Section 35(1)(ii) Deduction Restored: Donation Can’t Be Denied Due to Later Withdrawal of Approval
Issue concerned denial of weighted deduction u/s 35(1)(ii) in respect of donations made to M/s Herbicure Healthcare Bio Herbal Research Foundation, Kolkata, on the ground that its approval was subsequently withdrawn retrospectively.
Tribunal noted that the issue stands squarely covered by binding judgments of the Calcutta High Court in Maco Corporation India Pvt. Ltd. & J.P. Financial Services Pvt. Ltd., which hold that deduction once validly claimed on the basis of approval existing at the time of donation cannot be denied merely because approval is later withdrawn with retrospective effect, & that assessee is not required to ensure utilisation of funds by the donee. Respectfully following the jurisdictional High Court, ITAT directed AO to allow deduction u/s 35(1)(ii) for both years. Appeals allowed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
These two appeals filed by the assessee against the separate orders of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, both dated 19.08.2025 for the assessment year 2012-2013 & 2013-2014.
2. It was submitted by the ld.AR that the issue was in regard to the deduction u/s.35(1)(ii) of the Act in respect of donations to M/s Herbicure Healthcare Bio Herbal Research Foundation, Kolkata. It was the submission that the issue was now squarely covered by the decision of the Hon’ble Jurisdictional High Court in the case of M/s Maco Corporation India Pvt. Ltd., passed in ITA/35/2021, dated 12.08.2022 as also the decision of the Hon’ble Jurisdictional High Court in the case of M/s J.P. Financial Services Pvt. Ltd., in ITAT/153/2023, dated 02.08.2023. The Hon’ble Jurisdictional High Court in the case of M/s Maco Corporation India Pvt. Ltd., referred to supra, has held as follows :-
We have heard Ms. Smita. Das De, learned standing Counsel for the appellant and Mr. J. P. Khaitan, learned senior counsel for the respondent.
The learned tribunal while dismissing the revenue’s appeal in the impugned order had followed its earlier decision in the assessee’s own case in ITA/16/2017 dated 14.3.2018 the previous appeal against this order. Against the said order, the revenue preferred appeal in ITA/42/2020 which was dismissed by judgment dated 12.8.2022. The operative portion of the judgment reads as follows:-
“In our considered view, we need not travel this far to decide the substantial question of law in the case on hand as we are considering the case falling under Section 35 of the Act. In terms of Explanation to Section 35(1) (iii) of the Act, deductions to which the assessee is entitled to in respect of any sum paid research organisation, university etc. shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee, the approval granted to the research organisation or university etc. has been withdrawn. This issue was considered by the Hon’ble Supreme Court in the case of Commissioner of Income Tax vs. Chotatingrai Tea & Ors, reported in (2002) 258 ITR 529 (SC). The operative portion of the said decision is as follows:
“It is not in dispute that the assessees had made donations Society Integral Development, Calcutta, which had as its object the undertaking to carry out approved programmes of rural development. The society had granted a certificate to the assessee which had also been approved by the prescribed authority.
According Revenue authorities the assessees were not entitled to deduction as claimed despite the aforesaid because subsequently the approval granted by the prescribed authority was withdrawn with retrospective effect. was also alleged that the assessees had received back the donation which had been made by them to the society. When the matter came up It before the Tribunal at the instance of the assessees, the Tribunal found, as a matter of fact that the assessee had fulfilled all the conditions under section 35CCA of the Act for grant of deduction thereunder. The Tribunal also found that the assessees’ position could not be affected by any subsequent withdrawal of the certificate granted by the prescribed authority under section 35CCA but found that there was no evidence in support of the Revenue’s case that the assessees had received back the amount donated by them to the society. However, the matter was remanded back to the Assessing Officer for fresh disposal for the purpose of determining whether the money had in fact been utilised for an approved programme. Pursuant to the directions of the High Court the following questions were referred under section 256 (2) of the Act (page 645) :
(1) Whether, on the facts and in the circumstances of the case, the Tribunal having held that the assessee have fulfilled all the conditions laid down in section 35CCA of the Income-tax Act, 1961, read with rule 6AAA of the Income-tax Rules for deduction of the amount donated to the approved society, which had not come back to the assessee soon after or later on in some form or the other, that the Tribunal was justified in law in restoring the matter to the Assessing Officer on the reasons and grounds given in the order passed on appeal?
(2) Whether, on the facts and in the circumstances of the case, and in view of the findings of facts recorded by the Tribunal on questions of facts arising for decision, the Tribunal was justified in law in holding that the entitlement of the assessee for claiming deduction of the amount donated to the approved society would depend upon the utilisation of such fund by the approved society in the approved programme before the date specified in the section and on this basis only restoring the matter to the Assessing Officer?”
The High Court followed the reasoning of the Calcutta High Court in CIT v. Bhartia Culter Hammer Co. [1998] 232 ITR 785, and came to the conclusion that once it was found that the assessees had fulfilled all the conditions which had been laid down under section 35CCA of the Act for claiming deduction of the amount donated by it, there was no obligation on the part of the assessee to see that the amount was utilised for the for which it purpose was donated. Furthermore, deduction was allowed on the certificate furnished and it was not for the assessee to show whether the institution to which the money had been donated was carrying on the rural development work, as envisaged under section 35CCA of the Act. the
In our view, the reasoning of the High Court while answering the question referred to it in favour of the assessee is sound and calls for no interference.
In the light of the above decision, we find the reasoning given by the tribunal to be just and proper and cannot be held to be perverse. In the result, the appeal filed by the the substantial and revenue (ITA/42/2020) is dismissed question of law is answered against the revenue.”
Thus, following the above decision substantial questions of law nos. 1, 2 and 3 are answered against the revenue.
3. It was the submission that the claim of deduction u/s.35(1)(ii) of the Act for both the years under consideration may be directed to be allowed.
