Gauhati High Court
Chotatingrai Tea Estate Pvt. Ltd. And ... vs Commissioner Of Income-Tax on 22 December, 1998
Equivalent citations: [1999]236ITR644(GAUHATI)
JUDGMENT
N.C. Jain, Actg. C.J.
1. By virtue of this judgment, we intended to dispose of Income-tax References Nos. 14, 15 and 16 of 1995 as the questions of law referred to us by the Tribunal are similar and they arise out of common orders of the assessing authority, the appellate authority and the Income-tax Tribunal. This court directed the Tribunal under Section 256(2) of the Income-tax Act (hereinafter referred to as "the Act"), to prepare the statement of the case and refer the two questions. The questions which have been so referred in pursuance of the order of this court are given below :
"(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 ?"
2. In order to appreciate the controversy involved herein, it is necessary to have a brief look at the facts of the case. The assessee, a tea estate company, incurred the expenditure in question in the sum of Rs. 10,00,000 (rupees ten lakhs) only by way of donating the aforesaid amount in favour of a society for integral development, Calcutta. The said society was engaged in rural development and more particularly in the task of laying of roads, sinking of wells, deep tubewells, pump sets and pipes relating thereto. At the relevant time, the society had the approval under section 35CCA(2) of the Act and it was holding an authorisation to issue certificate. After the assessee incurred the expenditure, the approval was withdrawn by the prescribed authority with retrospective effect. The assessing authority on withdrawal of the approval disallowed the claim for deduction on two grounds. It was held that since the approval has been withdrawn with retrospective effect, the assessee could not claim the deduction. It was further held that the donation amount given by the assessee came back from the society to the assessee and, therefore, it was not entitled to claim the deduction. An appeal was carried to the appellate authority which on the same reasoning affirmed the order of the assessing authority. On further appeal to the Tribunal, it was held by an exhaustive judgment that the approval could not be withdrawn by the prescribed authority with retrospective effect. The Tribunal was also of the view that there was no evidence or material to come to the conclusion that the money donated by the assessee reverted back to it. After recording the findings in favour of the assessee on both the points, the Tribunal restored back the case to the assessing authority for re-examination in order to find out whether the donated amount was utilised by the society for the approved programme. The questions have since been referred by the Tribunal on the direction of this court, this is how the matter has been placed before us.
3. The findings recorded by the Tribunal clearly show that the assessee has fulfilled all the conditions which have been laid down in section 35CCA of the Act read with Rule 6AAA of the Rules for claiming deduction of the amount donated by the assessee. It has also been found that there was absolutely no evidence and material to come to the conclusion that the amount donated to the society was ever received back by the assessee. After the aforesaid findings were recorded, the question arises whether the Tribunal was justified in remanding the case to the assessing authority. Another limb of the question which has fallen for our consideration is whether the entitlement of the assessee for claiming deduction of the amount donated to the approved society would depend upon the utilisation of such donated amount. Our answer straightaway is that the assessee is not to see the utilisation of the money by the approved society.
4. As long as the society is holding a valid certificate for an approved programme of rural development and the assessee donates the amount after seeing the certificate, it was under no obligation to see that the amount was utilised for the purpose for which it was donated. The registration of the society for integrated rural development was a sufficient representation to the assessee that it could donate the money and that it would not be required to see that the same was being utilised for the approved programme. If such an interpretation is given by a court of law, the assessee would be facing several problems. The law never intended to place the assessee in such a situation. The view taken by the Calcutta High Court in CIT v. Bhartia Cutler Hammer Co. [1998] 232 1TR 785 completely covers the present case.
5. It has been held in Bhartia Cutler Hammer Co.'s case [1998] 232 ITR 785 (Cal) that under Section 35CCA of the Act if an assessee has incurred any expenditure by donating any sum to a society or institution which has as its object the undertaking of any programme of rural development and the donation has been given for being used for carrying out the programme of rural development approved by the prescribed authority, the assessee is entitled to a deduction of the amount of expenditure incurred by him during the relevant year. It has further been held that the only condition for claiming the deduction is furnishing a certificate from the society or institution and that he is not to show whether the two institutions were actually not carrying out the rural development work as was envisaged under Section 35CCA of the Act. The following observation of the Calcutta High Court can be reproduced with advantage (headnote) :
"Under Section 35CCA of the Income-tax Act, 1961, where an assessee incurs any expenditure by way of any sum which he donates to an association or institution which has as its object the undertaking of any programme of rural development and the donation is meant for being used for carrying out the programme of rural development approved by the prescribed authority, the assessee is entitled to be allowed a deduction of the amount of such expenditure incurred by him during the previous year. The only condition for claiming deduction is for the assessee to furnish a certificate from the association or the institution to the effect that the prescribed authority has approved the association or the institution before March 1, 1983, and the training of persons for implementing any programme of rural development had been started by the association or institution before March 1, 1983.
Held, on the facts, that the deduction under Section 35CCA could not be disallowed on the ground that either the two institutions were not traceable after notices were issued to them under Section 131 of the Income-tax Act, 1961, or that the two institutions were actually not carrying out the rural development work as was envisaged under Section 35CCA of the Act and for which approval had been granted by the prescribed authority to the two institutions under the section. It was no part of the assessee's obligation to either keep track of the movement of the institutions or to find out as to whether the rural development work was actually being carried out or not. It had not been found that either the assessee did not make the payment to the institutions or that the certificate as required under Subsection (2A) of Section 35CCA was not furnished by the assessee or that the institutions were not granted approval for the purpose mentioned in Section 35CCA by the prescribed authority."
6. We are in respectful agreement with the view taken by the Calcutta High Court. For the reasons recorded above, we answer both the questions in the negative. As a necessary corollary it follows that the remand order would stand quashed and the assessee is held entitled to claim deduction.