Income Tax Act, 1961, Section
35(1)(ii)
Business deduction
under section 35(1)(ii)--Scientific
research expenditure--Donation made to institute--Institute not having approval necessary for raising donation for
undertaking scientific research
Conclusion: Where
assessee claimed weighted deduction under section 35(1)(ii) on donation made to
an institute, however, the said institute no longer had the approval necessary
for raising donation for undertaking scientific research, AO was justified in
denying the above claim.
AO denied assessee s claim of weighted deduction under
section 35(1)(ii) on donation made to an institute, named S alleging that
said institute no longer had the approval necessary for raising donation for
undertaking scientific research, as required by provisions of said section. CIT
(A) upheld the order of AO. Held: AO carried out necessary
inquiries to verify authenticity of claim of assessee by issuing notice under
section 133(6) to S , but the same was returned back with remark left .
Further, AO also wrote to Under Secretary, ITA-II (Income Tax), who replied by
stating that approval of S , got expired on 31-3-2006, and thereafter the
said trust was not allowable to raise donations for undertaking scientific
research. The letter, further, added that the trust raised substantial
donations over the last six years on the basis of a forged certificate, while
the donors irregularly claimed weighted deduction under section 35(1)(ii) on
such donations. Based on the said fact, the AO held the assessee s claim of
deduction under section 35(1)(ii) to be bogus and fraudulent. Further, CIT (A)
noted that identical issue came up for consideration before Tribunal in the
case of The Dy. CIT, Corporate Circle-1 (1), Chennai v. Shri Sudhakar
Natarajan [ITA No.2205/Chny/2017, dt. 24-5-2019], wherein claim of weighted
deduction under section 35(1)(ii) was disallowed on identical donation made to
same institute. Hence, it was clear that impugned donation was fraudulently
taken in absence of valid approval and accordingly, assessee s claim of
weighted deduction, had rightly been denied.
Decision: In
assessee s favour
Referred: The Dy.
CIT, Corporate Circle-1 (1), Chennai v. Shri Sudhakar Natarajan [ITA
No.2205/Chny/2017, dt. 24-5-2019]
Income Tax Act, 1961, Section
115JB
MAT--Book profits
under section 115JB--Bogus donation
Conclusion: Where donation made by assessee was a bogus donation, fraudulently made,
there was no scope for allowing such bogus claim as deduction for determining
book profits of assessee under section 115JB.
Assessee-company contended that any disallowance made by
AO, could not change the income as per section 115JB, because income under
section 115JB, was to be taken as per profit and loss as per Companies Act.
Accordingly, book profit was not required to be adjusted with donation made by
it to S . Held: The concurrent finding of Revenue
authorities, was that donation made by assessee was a bogus donation,
fraudulently made. In the light of same, there was no scope for allowing bogus
claim as deduction for determining book profits of assessee under section
115JB. Book Profits in any case refer to the profits as reflected in books of
assessee, for paying taxes thereon under section 115JB. By no stretch of logic,
can a patently bogus and fraudulent claim be considered for arriving at book
profits.
Decision: Against
assessee
IN THE ITAT AHMADABAD BENCH
ANNAPURNA GUPTA, A.M. & T.R. SENTHIL KUMAR, J.M.
Iolite Cube Inframaterial Ltd. v. Dy. CIT
ITA No. 88/AHD/2022
6 March, 2024
Assessee by: None
Revenue by: Saumya Pandey
Jain, Sr. D.R.
Annapurna Gupta, A.M.
The present appeal has been filed by the assessee against
order passed by the learned Commissioner (Appeals)-12, Ahmadabad (hereinafter
referred to as ld. CIT (A) dated 18-2-2022 under section 250(6) of the Income
Tax Act, 1961 ("the IT Act" for short) pertaining to assessment year
2016-17.
2. None appeared on behalf
of the assessee at the time of hearing, and it is noticed by us that the
assessee has remained unrepresented throughout the proceedings before the
Tribunal. It is pertinent to note the sequence of events.
3. The appeal, presented
before the Tribunal by the assessee on 11-4-2022, was listed for hearing on
20-3-2023 when none appeared for the assessee and the case was adjourned. It
came up next for hearing on 10-5-2023 and following a request for adjournment by
the assessee, the case was rescheduled for 13-6-2023, 28-6-2023, 3-8-2023 &
30-8-2023 when the Bench did not function. Subsequently, on 4-10-2023 when the
matter came up for hearing none appeared for the assessee. On 6-11-2023, when
the matter was once again slated for hearing, the assessee's counsel sought an
adjournment through an application. Despite the adjournment being granted and
the matter being rescheduled for 12-12-2023, no representation from the
assessee was forthcoming.
The consistent and unexplained absence of the assessee or
its representative throughout these proceedings leaves the Tribunal with no
alternative but to proceed ex-parte against the assessee.
Consequently, the Tribunal is compelled to dispose of the appeal based on the
submissions of the learned Departmental Representative (DR) and the evidences
and other materials available on record.
4. The grounds appeal raised
by the assessee read as under:
(1) The learned assessing has
disallowed Rs. 1,25,00,000 as donation to scientific research institute and
weighted education under section 35(l)(ii) by this act amounting to Rs.
93,75,000 gross amounting to Rs. 2,18,75,000.
Without prejudice to above we
would like to state that any disallowance made by assessing officer cannot
change income as per section 115JB, because income as per section 115JB is to
be taken as per profit and loss as per companies act. If your honour need to
made addition under section 115JB then addition to extent of Rs. 1,25,00,000 is
made because the assessee has debited Rs. 1,25,00,000 to profit and loss
account.
5. As is evident from the
above, solitary issue in the present appeal relates to denial of weighted
deduction to the assessee on donation made to a scientific research institute
in terms of section 35(1)(ii) of the Act. The amount of donation being Rs. 1,25,00,000
and weighted deduction allowable and claimed on the same amounting to Rs.
93,75,000. Thus, resulting in total deduction claimed by the assessee, which
was denied concurrently both by the assessing officer and the learned
Commissioner (Appeals), amounting to Rs. 2,18,75,000. The assessee has also
raised the issue of the denial of this deduction of donation of Rs. 1.25 Crs
while computing its Books Profits for the purposes of paying taxes thereon in
accordance with the provisions of section 115JB of the Act, thus increasing its
Book Profits to they said extent.
6. We have gone through the
orders of the authorities below with the assistance of the learned Departmental
Representative and we have noted that the impugned claim of the assessee to the
weighted deduction under section 35(1)(ii) of the Act was denied on the
donation of Rs. 1,25,00,000 made by the assessee to Shri Arvindo Institute of
Applied Scientific Research Trust during the impugned year. The reason for the
same was that the assessing officer found that the said institute no longer had
the approval necessary for raising donation for undertaking scientific
research, as required by the provisions of the said section. The order of the
learned Commissioner (Appeals) reveals that the assessing officer had carried
out necessary inquiries to verify the authenticity of the claim of the assessee
by issuing notice under section 133(6) of the Act to the above Trust, but the
same were returned back with the remark left . The assessing officer also
wrote to the Under Secretary, ITA-II (Income Tax), New Delhi, who replied by
stating that the approval of the Shri Arvindo Institute of Applied
Scientific Research Trust had expired on 31-3-2006, and thereafter the said
Research Trust was not allowable to raise donations for undertaking scientific
research. The letter, further, added that the Trust has raised
substantial donations over the last six years on the basis of a forged
certificate while the donors have irregularly claimed weighted deduction under
section 35(1)(ii) of the Act on donations made to the Trust. Based on
this fact, the assessing officer held the assessee s claim to deduction under
section 35(1)(ii) of the Act to be bogus and fraudulently claimed and denied
the same to the assessee.
7. The learned Commissioner
(Appeals) upheld the order of the assessing officer, finding no facts brought
out by the assessee before it, to contradict what was pointed out by the CBDT
regarding fraudulent manner in which the donations were collected by the
Research Trust, claiming to be approved under section 35(1)(ii) of the Act. The
learned Commissioner (Appeals) also noted that identical issue had come up for
consideration before the Income Tax Appellate Tribunal, Chennai Bench in the
case of Dy. CIT v. Sudhakar Natarajan in ITA No. 2205/CHNY/2015 wherein
denial of weighted deduction under section 35(1)(ii) of the Act on identical
donation made to the same institute, Shri Arvindo Institute of Applied
Scientific Research Trust after the approval had expired, was upheld by the
Tribunal vide Order dated 24-5-2019.
8. Before us, there was
nothing to contradict the adverse findings of the Revenue authorities
pertaining to the impugned donation being fraudulently taken in the absence of
a valid approval for the same from the prescribed authority.
In the light of the same, we see no reason to interfere in
the order of the learned Commissioner (Appeals) upholding the denial of
weighted deduction to the assessee under section 35(1)(ii) of the Act on the
donations made to Shri Arvindo Institute of Applied Scientific Research Trust
amounting in all to Rs. 2,18,75,000.
9. As for other contention
raised by the assessee, in the grounds of appeal, that its book profits need
not to be adjusted with amount of donations, debited to its Profit & Loss
account, made to the concerned party i.e. Shri Arvindo Institute of Applied
Scientific Research Trust, we are not in agreement with the same. The
concurrent findings of the Revenue authorities, as noted by us above is that
the said donation was a bogus donation, fraudulently made .In the light of the
same that there is no scope for allowing bogus claims as deductions for
determining the book profits of the assessee under section 115JB of the Act.
Book Profits in any case refer to the profits as reflected in the Books of the
assessee, for paying taxes thereon under section 115JB of the Act. By no
stretch of logic can a patently bogus and fraudulent claim be considered for
arriving at the Book Profits.
10. In view of the same, the
other contention of the assessee is also found to be devoid of any merits, and
thus stands dismissed.
The grounds of appeal of the assessee are rejected.
11. In the result, the
appeal of the assessee is dismissed.
Order pronounced in the Court on 6-3-2024 at Ahmadabad.