M/s. GUJARAT AGROCHEM P. LTD, MUMBAI V. ACIT RG 9(3)(2), MUMBAI

ITA 2224/MUM/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1795 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 09-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH RAJORE
• Assessee Lawyers: G BASKAR
• Keywords: Retrospective amendment
• Section: 143(3)

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 2224/MUM/2019 (ASSESSMENT YEAR 2014-15 ) M/S GUJARAT AGROCHEM PVT. LTD. 601, EXPRESS CHAMBERS, VI FLOOR, NO.72, ANDHERI KURLA ROAD, ANDHERI (E), (NOW UNIT NO.505, ATRIUM-2, (KANAKIA), ANDHERI KURLA ROAD, NEAR HOTEL COURTYARD MARRIOT, ANDHERI (E), MUMBAI . PAN: AABCG1228L VS. ACIT-9(3)(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 APPELLANT RESPONDE NT APPELLANT BY : SHRI G. BASKAR (ADVOCATE) RESPONDENT BY : SHRI SATISH RAJORE (SR. DR) DATE OF HEARING : 11.06.2019 DATE OF PRONOUNCEMEN T : 11.06.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-16 [THE LD. CIT(A)], MUMBAI DA TED 29.03.2019 FOR ASSESSMENT YEAR 2014-15. THE ASSESSEE HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) IS ERRONEOUS, ILLEGAL, ARBITRARY, UNJUST AND LIABLE TO BE SET ASI DE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) GRAVELY ER RED IN SUMMARILY DISMISSING THE APPEAL WITHOUT APPRECIATING THE FACT S OF THE CASE IN PROPER PERSPECTIVE. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO H AVE CONSIDERED THAT THE WITHDRAWAL OF APPROVAL TO THE SCHOOL OF HUMAN G ENETICS AND POPULATION ITA NO. 2224 MUM 20 19-M/S GUJARAT AGROCHEM PVT. LTD. 2 HEALTH WAS WITHDRAWN ONLY ON 15.09.2016 AND THE APP ELLANT COULD NOT BE DENIED DEDUCTION U/S 35(1 )(II) OF THE ACT, FOR CON TRIBUTION MADE WHEN THE APPROVAL WAS IN FORCE. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO H AVE SEEN THAT THE APPELLANT HAD SATISFIED ALL THE CONDITIONS FOR GRAN T OF DEDUCTION AS LAID DOWN U/S 35(1)(II) OF THE ACT. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) GRAVELY ER RED IN NOT FOLLOWING THE DECISIONS OF THE HON'BLE TRIBUNAL HELD IN FAVOU R OF THE APPELLANT ON SIMILAR FACTS. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO H AVE NOTED THAT THE APPELLANT COULD NOT HAVE FORESEEN THE APPROVAL BEIN G WITHDRAWN, AT THE TIME OF PAYMENT OF ADVANCE TAX AND HENCE LEVY OF INTERES T U/S.234B IS UNTENABLE. 7. ANY OTHER GROUND THAT MAY BE RAISED AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF MANUFACTURING OF AGROCHEMICALS AND INTERMEDIATES JO B WORK SUPPLYING TO PESTICIDES AND INSECTICIDE INDUSTRIES GLOBALLY. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 ON 27.11.2014. T HE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. THE ASSESSMENT WAS COMPL ETED UNDER SECTION 143(3) ON 16.12.2016. THE ASSESSING OFFICER WHILE P ASSING THE ASSESSMENT ORDER MADE AND ADDITION OF RS. 2,62,50,000/- ON ACC OUNT OF DISALLOWANCE UNDER SECTION 35(1)(II) ( BEING 175% OF RS. 1,50,00 ,000/-). THE ASSESSING OFFICER WHILE MAKING THE DISALLOWANCE NOTED THAT T HE APPROVAL OF INSTITUTION I.E. HUMAN GENETICS AND POPULATION HEALTH (SHG&PH), KOLKATA HAS BEEN WITHDRAWN VIDE NOTIFICATION DATED 15.06.2016 WITH R ETROSPECTIVE DATE I.E. 01.04.2007. ITA NO. 2224 MUM 20 19-M/S GUJARAT AGROCHEM PVT. LTD. 3 3. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSE SSING OFFICER WAS CONFIRMED. THE LD. CIT(A) WHILE CONFIRMING THE ACTI ON OF ASSESSING OFFICER ALSO CONCLUDED THAT THE APPROVAL OF INSTITUTION NAM ELY SHG&PH HAS BEEN WITHDRAWN BY CBDT W.E.F. 01.04.2007 VIDE NOTIFICATI ON DATED SO 2961(E) 82 OF 2016 DATED 15.09.2016. THUS, FURTHER AGGRIEVE D BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL B EFORE US. 4. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) F OR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. A R OF THE ASSESSEE SUBMITS THAT THE ASSESSEE DURING THE RELEVANT PERIOD TO THE ASSESSMENT YEAR UNDER CONSIDERATION PAID A CONTRIBUTION OF RS. 1.50 CRORE TO THE INSTITUTION NAMELY SHG&PH, AN INSTITUTION APPROVED BY CENTRAL GOVERNME NT VIDE NOTICE NO. 4/2010 DATED 28.01.2010. THE SAID INSTITUTION WAS E NGAGED IN THE ACTIVITIES OF RESEARCH, TEACHING, TRAINING AND CREATING AWARENESS IN THE FIELD OF HUMAN HEALTH. THE ASSESSEE, BEING IN THE BUSINESS OF AGRO CHEMICALS, HAD VITAL INTEREST IN SUPPORTING RESEARCH IN THE FIELD OF HUM AN HEALTH. THE ASSESSEE CLAIMED A WEIGHTED DEDUCTION OF RS. 2.62 CRORE BEIN G 175% OF TOTAL DONATION. THE ASSESSING OFFICER DISALLOWED WEIGHTED DEDUCTION HOLDING THAT THE CBDT HAS WITHDRAWN THE NOTIFICATION DATED 4/201 0 DATED 28.01.2010. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT ASS ESSEE HAS NO REASON TO DOUBT THE VERACITY OF INSTITUTION ESPECIALLY WHEN T HE SAME HAD BEEN APPROVED BY CBDT. THE ASSESSEE HAS CONTRIBUTED/DONATED DURIN G THE VALIDITY OF ITA NO. 2224 MUM 20 19-M/S GUJARAT AGROCHEM PVT. LTD. 4 APPROVAL BY CBDT. THERE IS NO FAULT ON THE PART OF THE ASSESSEE. THE ASSESSEE SHOULD NOT BE SUFFERED DUE TO WITHDRAWAL OF APPROVA L BY RETROSPECTIVE DATE. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESS EE RELIED UPON THE DECISION OF MUMBAI TRIBUNAL IN M/S MOTILAL DAHYABHAI JHAVERI & SONS VS. ACIT IN ITA NO. 3453/MUM/2018 DATED 24.04.2019. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. THE LD. D R FOR THE REVENUE SUBMITS THAT A SURVEY WAS CONDUCTED BY INVESTIGATION WING, KOLKATA, WHEREIN IT WAS REVEALED THAT THE INSTITUTION TO WHICH THE ASSESSEE HAS MADE DONATION WAS INDULGING IN ISSUING BOGUS RECEIPT AND ON THE RECOM MENDATION OF INVESTIGATION WING, THE APPROVAL OF THE INSTITUTION WAS WITHDRAWN. ONCE THE APPROVAL OF THE INSTITUTION IS WITHDRAWN THE ASSESS EE IS NOT ENTITLED FOR WEIGHTED DEDUCTION UNDER SECTION 35(1) (II). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTED THAT IN PROFIT & LOSS ACCOUNT, THE ASSESSEE HAS DEBITED DONATION OF RS. 1.50 CRORE TO SHG&PH AND CLAIMED WEIGHTED DEDUCTION UNDER SECTION 35(1)( II) OF RS. 2.62 CRORE (175% OF TOTAL DONATION). THE ASSESSEE WAS ASKED TO PRODUCE THE ACKNOWLEDGEMENT RECEIPT, REGISTRATION DETAILS OF SO CIETY/INSTITUTION, APPROVAL UNDER SECTION 3591)(II) AND TO PROVE THE GENUINENES S. THE ASSESSEE WAS ALSO INFORMED THAT A SURVEY WAS CONDUCTED BY INVESTIGATI ON WING ON SHG&PH ITA NO. 2224 MUM 20 19-M/S GUJARAT AGROCHEM PVT. LTD. 5 AND APPROVAL HAS BEEN WITHDRAWN. IN RESPONSE TO THE SHOW-CAUSE NOTICE, THE ASSESSEE FURNISHED LETTER OF DONATION, CERTIFICATE ISSUED BY CBDT NO. 4/2010 DATED 28.01.2010 IN FAVOUR OF SHG&PH. THE RECEIPT/A CKNOWLEDGEMENT OF DONATION, DECLARATION/CONFIRMATION OF THE INSTITUTI ON THAT DONATION MADE BY ASSESSEE WOULD BE UTILIZED FOR SCIENTIFIC RESEARCH. THE ASSESSEE ALSO CONTENDED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING OF AGROCHEMICALS AND IS CONCERNED ABOUT THE EFFECT ON HUMAN HEALTH AND IS INTERESTED IN SUPPORTING RESEARCH IN THIS FIELD. TH E ASSESSEE ALSO STATED THAT FROM THE TAX PERSPECTIVE AND FULFILLING ITS SOCIAL RESPONSIBILITY IN THE FIELD OF HUMAN HEALTH, THE CONTRIBUTION WAS MADE. THE ASSESS EE HAS NO REASON TO DOUBT THE VERACITY OF INSTITUTION OR ITS GENUINENES S. THE ASSESSEE HAS NO KNOWLEDGE ABOUT THE ALLEGED WRONGFUL ACTIVITIES OR LEGAL ACTIVITIES OF THE ASSESSEE. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICER CONCLUDED THAT THE APPROVAL OF TH E INSTITUTION HAS BEEN WITHDRAWN BY CBDT VIDE ITS ORDER DATED 15.09.2016. THE ASSESSING OFFICER DENIED THE WEIGHTED DEDUCTION UNDER SECTION 3591)(I I). THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER WITH SIMI LAR OBSERVATION. 7. WE HAVE NOTED THAT ON ALMOST SIMILAR FACTS, THE COO RDINATE BENCH OF TRIBUNAL IN M/S MOTILAL DAHYABHAI JHAVERI & SONS VS. ACIT (S UPRA) WHILE CONSIDERING THE ISSUE OF IDENTICAL DONATION TO THE SAME INSTITUTION PASSED THE FOLLOWING ORDER: ITA NO. 2224 MUM 20 19-M/S GUJARAT AGROCHEM PVT. LTD. 6 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT THE LD AR PLACE D ON RECORD THE COPY OF THE NOTIFICATION NO. 4/2010 (F.NO. 203/64/2009/ITA-II) DATED 28.1.2010 ISSUED BY CBDT TO SHGPH RECOGNIZING THEM U/S 35(1)(II) OF THE ACT FROM ASST YEAR 2008- 09 ONWARDS. THE LD AR ALSO PLACED ON RECORD A COPY OF THE NOTIFICATION ISSUED BY CBDT DATED 15.9.2016 WITHDRAWING THE RECO GNITION OF APPROVAL GRANTED U/S 35(1)(II) OF THE ACT TO SHGPH WITH RETR OSPECTIVE EFFECT FROM 1.4.2007. ADMITTEDLY, THE ASSESSEE HAD GIVEN DONATI ON TO SHGPH ON 6.3.2013 FOR RS 15,00,000/- ( 175% OF 15 LACS IS RS 26,25,00 0) AND ON 22.1.2014 FOR RS 12,00,000/- (175% OF 12 LACS IS RS 21,00,000/-), WH ICH ARE AFTER THE DATE OF RECOGNITION OF SHGPH U/S 35(1)(II) OF THE ACT BUT B EFORE THE DATE OF WITHDRAWAL OF THE SAID APPROVAL BY CBDT IN THE CASE OF SHGPH. NOW THE SHORT POINT THAT ARISES FOR OUR CONSIDERATION IS AS TO WHETHER THE A SSESSEE DONOR COULD BE DENIED WEIGHTED DEDUCTION U/S 35(1)(II) OF THE ACT DUE TO SUBSEQUENT WITHDRAWAL OF RECOGNITION BY CBDT WITH RETROSPECTIVE EFFECT. WE F IND THAT THE ISSUE UNDER DISPUTE IS ALREADY ADDRESSED BY THE CO-ORDINATE BEN CH OF KOLKATA TRIBUNAL IN THE CASE OF DCIT VS M/S MACO CORPORATION (INDIA) PVT LTD IN ITA NO. 16/KOL/2017 DATED 14.3.2018 FOR ASST YEAR 2013-14 WHEREIN IT WA S HELD AS UNDER:- 8.1. THE BRIEF FACT PERTAINING TO SGHPH ARE AS UNDE R:- A) SGHPH WAS RECOGNIZED VIDE GAZETTE NOTIFICATION D ATED 28.1.2009 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT IN SHORT ), MINISTRY OF FINANCE (DEPARTMENT OF REVENUE), GOVERNMENT OF INDIA, U/S 3 5(1)(II) OF THE ACT. B) SGHPH WAS ALSO RECOGNIZED AS A SCIENTIFIC INDUST RIAL RESEARCH ORGANIZATION (SIRO) BY MINISTRY OF SCIENCE & TECHNO LOGY, GOVERNMENT OF INDIA. THE RENEWAL OF RECOGNITION AS SIRO BY THE DE PARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH UNDER THE SCHEME ON RECOGNI TION OF SCIENTIFIC AND INDUSTRIAL RESEARCH ORGANISATION , 1988 WAS MADE FO R THE PERIOD FROM 1.4.2010 TO 31.3.2013 VIDE COMMUNICATION IN F.NO. 1 4/473/2007-TU- V DATED 17.6.2010. 8.2. AT THE OUTSET, WE FIND THAT THE TAXATION LAWS (AMENDMENT) ACT , 2006 WITH RETROSPECTIVE EFFECT FROM 1.4.2006 HAD INTRODU CED AN EXPLANATION IN SECTION 35 OF THE ACT WHICH READS AS UNDER:- ITA NO. 2224 MUM 20 19-M/S GUJARAT AGROCHEM PVT. LTD. 7 SECTION 35(1)(II) - EXPLANATION THE DEDUCTION, TO WHICH THE ASSESSEE IS ENTITLED IN RESPECT OF ANY SUM PAID TO A RESEARCH ASSOCIATION, UNIVERSITY, COLLEGE OR OTHE R INSTITUTION TO WHICH CLAUSE (II) OR CLAUSE (III) APPLIES, SHALL NOT BE D ENIED MERELY ON THE GROUND THAT, SUBSEQUENT TO THE PAYMENT OF SUCH SUM BY THE ASSESSEE, THE APPROVAL GRANTED TO THE ASSOCIATION, UNIVERSITY, COLLEGE OR OTHER INSTITUTION REFERRED TO IN CLAUSE (II) OR CLAUSE (III) HAS BEEN WITHDRAWN. HENCE THE AFORESAID PROVISIONS OF THE ACT ARE VERY CLEAR THAT THE PAYER (THE ASSESSEE HEREIN) WOULD NOT GET AFFECTED IF THE RECO GNITION GRANTED TO THE PAYEE HAD BEEN WITHDRAWN SUBSEQUENT TO THE DATE OF CONTRIBUTION BY THE ASSESSEE. HENCE NO DISALLOWANCE U/S 35(1)(II) OF TH E ACT COULD BE MADE IN THE INSTANT CASE. 8.3. ............... 8.4. WE ALSO FIND THAT THE CO-ORDINATE BENCH OF THI S TRIBUNAL IN EXACTLY SIMILAR FACTS HAD DECIDED THE ISSUE IN FAVOUR OF TH E ASSESSEE IN THE FOLLOWING CASES:- A) RAJDA POLYMERS VS DCIT IN ITA NO. 333/KOL/2017 FOR ASST YEAR 2013- 14 DATED 8.11.2017. B) SAIMED INNOVATION VS ITO IN ITA NO. 2231/KOL/2016 FOR ASST YEAR 2013-14 DATED 13.9.2017. THE FINDINGS OF THOSE DECISIONS ARE NOT REITERATED HEREIN FOR THE SAKE OF BREVITY. 8.5. IN VIEW OF THE AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE VARIOUS JUDICIA L PRECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT THE LD CITA HAD RIGHTLY D ELETED THE DISALLOWANCE U/S 35(1)(II) OF THE ACT IN THE SUM OF RS 3,06,25,0 00/- MADE BY THE LD AO. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6.1. WE FIND THAT THE RELIANCE PLACED BY THE LD AR ON THE DECISIONS OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS CHOTATINGRAI TEA REPORTED IN (2003) 126 TAXMAN 399 (SC) DATED 29.10.2002 AND STATE OF MAHARASHTRA VS SURESH TRADING COMPANY REPORTED IN (1998) 1998 TAXMANN.COM 1747 (SC) DATE D 7.2.1996 ARE ITA NO. 2224 MUM 20 19-M/S GUJARAT AGROCHEM PVT. LTD. 8 VERY WELL FOUNDED AND ARE SQUARELY APPLICABLE TO TH E FACTS OF THE INSTANT CASE BEFORE US. THE RATIO DECIDENDI OF THE SAID JUDGEMEN TS ARE NOT REPRODUCED HEREIN FOR THE SAKE OF BREVITY. WE ALSO FIND THAT THE LD A R HAD RIGHTLY PLACED RELIANCE ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL REPORTED IN (2000) 110 TAXMAN 511 (BOM) DA TED 7.10.1999 IN THE CONTEXT OF WITHDRAWAL OF DEDUCTION U/S 35(1)(II) OF THE ACT DUE TO WITHDRAWAL OF RECOGNITION WITH RETROSPECTIVE EFFECT . IN ANY CASE , WE FIND THAT THE PROVISIONS OF SECTION 35(1)(II) OF THE ACT VIDE ITS EXPLANATION REPRODUCED HEREINA BOVE CLEARLY PROVES THAT THE DONOR (I.E ASSESSEE HEREIN) CANNOT BE AFFECTED DUE TO SUBSEQUENT WITHDRAWAL OF RECOGNITION WITH RETROSPEC TIVE EFFECT. RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS AND THE PROVISION S OF THE ACT, WE DIRECT THE LD AO TO GRANT DEDUCTION U/S 35(1)(II) OF THE ACT IN T HE SUMS OF RS 26,25,000/- AND RS 21,00,000/- FOR THE ASST YEARS 2013-14 AND 2014- 15 RESPECTIVELY. IN VIEW OF THESE FINDINGS, THE OTHER ARGUMENTS ADVANCED BY THE LD AR ON MERITS ARE NOT ADJUDICATED HEREIN AND ARE LEFT OPEN. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE FOR BOTH THE YEARS ARE ALLOWED. 8. CONSIDERING THE DECISION OF COORDINATE BENCH ON ALM OST SIMILAR FACT AND ON IDENTICAL DONATION TO THE SAME INSTITUTION, WE FIND THAT THE ISSUE IS COVERED BY THE SAID DECISION, THEREFORE, RESPECTFULLY FOLLOWIN G THE DECISION OF CO-ORDINATE BENCH, THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/06/2019. SD/- SD/- M. BALAGANESH, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 11.06.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT ITA NO. 2224 MUM 20 19-M/S GUJARAT AGROCHEM PVT. LTD. 9 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI