ELECTROPHARMA, MUMBAI V. ASST CIT CIR 16(1), MUMBAI

ITA 6137/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0903 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 01-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E SANKARAN
• Section: 143(3); 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI C.N.PRASAD, JUDICIAL MEMBER ITA NO.6137/MUM/2014 (AY. 2010-11) M/S. ELECTROPHARMA, C-1, TIRUPATI UDYOG, I.B.PATEL ROAD, GOREGAON (EAST), MUMBAI 400 063 PAN: AAAFE0061B ...... APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 16(1), MUMBAI 400 063 .... RESPONDENT APPELLANT BY : MS CHAITEE LONDHE RESPONDENT BY : SHRI E. SANKARAN DATE OF HEARING : 06/04/2017 DATE OF PRONOUNCEMENT : 26/04/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-27, MUMBAI DATED 14/02/2014, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 22/01/2013. 2. THE FIRST ISSUE, IN THIS APPEAL IS WITH REGARD TO ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80G OF THE ACT WITH RESPECT TO A DONATION OF RS.30,00,000/- PAID TO PADMASHREE DR.D.Y.PATIL UNI VERSITY. IN THIS CONTEXT, 2 ITA NO.6137/MUM/2014 (AY. 2010-11) THE RELEVANT FACTS ARE THAT THE APPELLANT IS A PART NERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF SERVICING AND TRADING IN LABORATORY TESTING EQUIPMENTS FOR PHARMACEUTICAL INDUSTRY. IN THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT AN AM OUNT OF RS.30,00,000/- DONATED BY THE ASSESSEE FIRM TO PADMASHREE DR.D.Y. PATIL UNIVERSITY WAS NOT A VOLUNTARY DONATION, INASMUCH AS, IT WAS AN EX PENDITURE INCURRED IN ORDER TO SECURE ADMISSION OF SON OF THE PARTNER( SH RI ANIK MARFATIA) FOR POST GRADUATE MEDICAL COURSE IN THE UNIVERSITY. ACCORDI NGLY, THE ASSESSING OFFICER INFERRED THAT THE PAYMENT WAS MADE TO DERIVE A BENE FIT FOR THE PARTNER IN THE FORM OF SECURING ADMISSION OF HIS SON IN THE UNIVER SITY AND, THEREFORE, IT COULD NOT BE ALLOWED AS A VOLUNTARY DONATION. ACCORDIN GLY, THE DEDUCTION CLAIMED UNDER SECTION 80G OF THE ACT WITH RESPECT TO THE AF ORESAID SUM OF RS.30,00,000/- WAS DISALLOWED. THE CIT(A) HAS ALSO AFFIRMED THE ADDITION, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 3. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF M/S. ELECTROLAB, WHICH IS A SISTER CONCERN OF THE ASSESSEE FIRM AND THE TRIBUNAL IN ITA NO.4279/MUM/2014 VIDE ORDER DATED 08/03/2017 HAS AL LOWED THE CLAIM OF THE ASSESSEE. THE LD. REPRESENTATIVE FOR THE ASSES SEE, THEREFORE, CONTENDED THAT THE DENIAL OF DEDUCTION UNDER SECTION 80G OF T HE ACT IN THE PRESENT CASE IS UNSUSTAINABLE. 4. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE HAS NOT CONTROVERTED THE FACTUAL MATRIX BROUGHT OUT BY THE ASSESSEE, BUT HAS REITERATED THE STAND OF THE ASSESSING OFFICER. 3 ITA NO.6137/MUM/2014 (AY. 2010-11) 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. NOTABLY, THE DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT THE ASSESSING OFFICER WAS CONSCIOUS OF THE FACT THAT IN THE CASE OF ASSESSEE S SISTER CONCERN M/S. ELECTROLAB(SUPRA), AN AMOUNT OF RS.30,00,000/- WAS ALSO DONATED TO PADMASHREE DR.D.Y.PATIL UNIVERSITY. THE ASSESSING OFFICER ALSO NOTED THAT THE WIFE OF ASSESSEES PARTNER SMT. AMITA MARFATIA WAS A PARTNER IN M/S.ELECTROLAB. THE CASE MADE OUT BY THE ASSESSING OFFICER WAS THAT THE DONATION WAS NOT VOLUNTARY, BUT WAS MADE TO SECURE THE ADMISSION OF MR. ANIK MARFATIA, WHO WAS THE SON OF ASSESSEES PARTNE R SHRI AMIT MARFATIA. IDENTICAL SITUATION WAS CONSIDERED IN THE CASE OF M /S. ELECTROLAB,(SUPRA) ALBEIT, IN THE CONTEXT OF SMT. AMITA MARFATIA, WHER EIN SIMILAR AMOUNT OF DONATION WAS PAID AND WHICH WAS VIEWED BY THE ASSES SING OFFICER TO BE FOR SECURING ADMISSION OF HER SON MR. ANIK MARFATIA. T HE TRIBUNAL VIDE ORDER DATED 08/03/2017(SUPRA) REJECTED THE OBJECTION OF T HE ASSESSING OFFICER AND ALLOWED THE CLAIM FOR DEDUCTION UNDER SECTION 80G O F THE ACT, NOTICING THAT THERE WAS NO SPECIFIC PROVISION IN SECTION 80G OF T HE ACT PROHIBITING THE DEDUCTION IN CASE ANY PERSON RELATED TO THE DONOR W AS GETTING EDUCATION IN THE DONEE INSTITUTION. SINCE OUR CO-ORDINATE BENCH HAS CONSIDERED A SIMILAR SITUATION, ALBEIT, IN THE CASE OF THE SISTER CONCER N, FOLLOWING THE RATIO LAID DOWN THEREIN, IN THE PRESENT CASE ALSO, ASSESSEES CLAIM FOR DONATION UNDER SECTION 80G DESERVES TO BE ALLOWED. 6. APART FROM THE AFORESAID, ONE OF THE POINTS BROU GHT OUT BY THE LD. REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE SON O F THE PARTNER HAD OBTAINED ADMISSION IN THE DONEE UNIVERSITY BASED ON MERIT, INASMUCH AS, THE DONEE INSTITUTION HAS ISSUED A CERTIFICATE THAT THE STUDENT HAD OBTAINED ADMISSION ON MERITS. IT WAS THEREFORE, CONTENDED T HAT THERE WAS NO 4 ITA NO.6137/MUM/2014 (AY. 2010-11) JUSTIFICATION TO SAY THAT THE DONATION WAS MADE WIT H A VIEW TO SECURE ADMISSION FOR THE RELATIVE OF THE PARTNER. WE FIND THAT THE AFORESAID FACTUAL ASPECT HAS ALSO NOT BEEN REBUTTED AND, THEREFORE, C ONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY JUSTIFICATION FOR DENYING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UND ER SECTION 80G OF THE ACT WITH RESPECT TO THE DONATION OF RS.30,00,000/- MADE TO PADMASHREE DR.D.Y.PATIL UNIVERSITY. THUS, ON THIS ASPECT ASS ESSEE SUCCEEDS. 7. ANOTHER RELATED ADDITION IS OF A SUM OF RS.60,00 0/- REPRESENTING DISALLOWANCE OF INTEREST PAID TO THE PARTNERS. IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT THE ASSESSEE FIRM HAD CLAIMED AN EXP ENDITURE OF RS.73,37,952/- REPRESENTING INTEREST PAID TO PARTNERS. SINCE THE DONATION OF RS.30,00,000/- PAID TO PADMASHREE DR.D.Y.PATIL UNIVERSITY WAS CO NSIDERED AS PERSONAL EXPENDITURE OF ONE OF THE PARTNERS, THE ASSESSING O FFICER HELD THAT THE CAPITAL ACCOUNT OF THE PARTNER WOULD STAND REDUCED TO THAT EXTENT; ACCORDINGLY, HE REDUCED THE INTEREST PAID TO THE PARTNER ON THE CA PITAL ACCOUNT BALANCE BY A SUM OF RS.60,000/-. QUITE CLEARLY, THE AFORESAID D ISALLOWANCE IS UNSUSTAINABLE SINCE WE HAVE DISAGREED WITH THE ASSESSING OFFICER AND UPHELD THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80G OF THE ACT OF RS.30,00,000/- TOWARDS DONATION PAID TO PADMASHREE DR.D.Y.PATIL UNIVERSIT Y. THUS, THE SAID ADDITION IS DIRECTED TO BE DELETED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 26/04/2 017 SD/- SD/- (C.N.PRASAD ) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 26/04/2017 5 ITA NO.6137/MUM/2014 (AY. 2010-11) VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI