Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income-Tax vs Lee & Muirhead Ltd. on 25 March, 1996
Equivalent citations: [1997]60ITD57(MUM)
ORDER
Shri T.V. Rajagopala Rao, President
1. ITA No. 162 (Bom.)/90 is a penalty appeal from order of concealment passed under section 271(1)(c). ITA No. 8472 (Bom.)/90 is again an appeal against penalty order passed under section 273(2)(aa) for shortfall in payment of advance tax. ITA No. 8008 (Bom.)/89 is an appeal arising out of the order passed under section 104 of the I.T. Act for levy of additional tax for non-distribution of dividends. All these appeals are by the same assessee and they relate to assessment year 1983-84. The penalty appeal for concealment arises out of the order of the CIT (A)-VI, Bombay, dated 18.10.1989. The penalty appeal, which is the subject matter of ITA No. 8472 (Bom.)/90, arises out of the order of the CIT(A)-VI, Bombay, dated 6.7.1990 and ITA No. 8008 (Bom)/89 arises out of the order of the CIT(A)-V, Bombay, dated 17-7-1989.
2. The central point involved in all these appeals is about the donation of Rs. 5 lakhs said to have been made by the assessee company to M/s. Sigma Medical Aid & Research Society (hereinafter called "the said Society" or "donee institution") on 29-6-1989. The previous year relevant to the assessment year 1983-84 ended by 30-6-1982. The assessee company filed its return on 30-6-1983 disclosing an income of Rs. 10,39,755. The company carried on business of clearing and forwarding agents. During the assessment proceedings, the assessee-company claimed deduction of Rs. 5 lakhs under section 35CCA. The assessee filed a receipt obtained from the said Society. On 7-8-1985, the Assessing Officer gave a notice to the said Society calling for details listed in the assessment order. On 31-3-1983, the said Society filed its income and expenditure account for the year ended 31-3-1983 along with which it had filed details of its assets and liabilities as well as the receipts and payments for assessment year 1982-83 and also a balance sheet as at 31-3-1983. When books of account and vouchers were called for from the said Society, they were not produced before the IAC (Asst.). According to the IAC (Asst.), failure to file vouchers and books of account raked up suspicion and thereupon the assessee was addressed a letter dated 17-1-1985 stating that the said Society in spite of insistence did not produce the books, vouchers, bank pass books, list of donors, etc. The assessee was called upon to attend with necessary evidence on the following issues :
(1) Payment of donation.
(2) The conditions laid down under section 35CCA are completely satisfied in your case.
(3) Produce books of account, vouchers, bank pass books, etc. of M/s Sigma Medical Aid & Research Society.
It is also intimated that in the approval of the CIT dated 3-8-1985 what was approved was Cancer Detection Centre provided the facilities are restricted to rural population. The Agricultural development and nutritional programme was not approved. It is mentioned in the said letter that the expenditure showed by the Society revealed that the amount is spent for clothing and food and it does not mention any expenditure on Cancer Detection Centre. Therefore, it can be seen that the said Society does not qualify for deduction under section 35CCA and hence the assessee is called upon to show why the claim cannot be disallowed. In response to this notice, the assessee filed its reply dated 20-12-1985, inter alia, vehemently denying that it had received back either the whole or any part of the money paid as contribution to the said Society, contending that it had already submitted various proofs to substantiate the payment of contribution to the said Society. Further, it is contended that what sub-section (2) of section 35CCA lays down was the condition that the assessee should furnish a certificate from the association or institution to which contribution is made to the effect that such association or institution is for the time being approved by the prescribed authority. It is contended that in this regard it had already submitted a xerox copy of the approval given by the CIT, Bombay, specifying that the said Society had already been given approval under section 35CCA of the Act. It is also contended in the said letter that the duty to produce accounts, vouchers, Bank pass books, etc., is on the said Society, and not on them. The Assessing Officer ultimately came to the conclusion after considering the facts before him that the said Society had not complied with the conditions imposed when the approval under section 35CCA was granted. Taking up the issue whether the money donated came back to the assessee, the Assessing Officer mentioned that the assessee had relied on the receipt and payment by cheque and also the acceptance of donation by the Society. However, he held that they are self-serving evidences of two parties connected with each other. If the contention of the assessee is correct, the Assessing Officer held, the assessee could have compelled the Society to produce the books before him. Non-production of books raised a serious doubt about the bona fides of the Society. This also raised a presumption that the Society may only be a conduit-pipe to claim exemption under section 35CCA. The Assessing Officer, in fact, apprised all these facts in his letter dated 17-12-1985. However, the assessee did not take any steps to get the books of the Society produced before him and the non-production of books and vouchers led the IAC (Asst.) to draw the following conclusions :
(i) Either full or part of the money was returned to the assessee in cash or in kind, and
(ii) the conditions of section 35CCA are not strictly satisfied.
Therefore, ultimately, the Assessing Officer denied the deduction to the assessee under section 35CCA and added it as part of the income of the assessee. In the assessment order, donation of Rs. 5,00,000 which is added back, appears as part of Rs. 15,03,452 which is added to the returned income. Income accepted ultimately was Rs. 21,79,296 as per assessment order dated 23-1-1986. Penalty proceedings under sections 271(1)(c) and 273 were started while completing the assessment.
3. Against the disallowance, the assessee preferred an appeal before the CIT(A)-VI, Bombay, vide appeal No. AR/V/B/22/86-87. While the appeal was pending, the assessee-company withdrew their claim for deduction under section 35CCA and offered the amount for tax under the provisions of the Amnesty Scheme. The withdrawal of the claim for deduction of Rs. 5 lakhs under section 35AA was duly intimated to the Assessing Officer and copy of the letter withdrawing the same was found at pages 18 & 19 of the paper book and the actual withdrawal of grounds 8,9,10 & 11 out of the grounds preferred before the CIT(A) was found at pages 20,21 and 22 of the paper book filed by the assessee. The learned CIT, City-V, Bombay, vide letter dated 28-10-1988, informed the assessee that it was entitled only to a lenient view, i.e., levy of minimum penalty and immunity from prosecution. He also intimated that the case did not fall under Amnesty Scheme where complete immunity from penalty would be given. In the penalty proceedings, the Assessing Officer felt that under the Scheme of Amnesty, the Assessee is only entitled to a lenient view regarding the amount of donation made to the Society. He also held that the intimation cannot be treated as entirely voluntary and the case before him called for minimum penalty. He further held that the conduct of the assessee to withdraw the grounds of appeal regarding deduction under section 35CCA and payment of taxes thereon also confirms the presumption raised by the Assessing Officer while passing the assessment order that the assessee had received back the money either fully or in part from the Society. Therefore, keeping in view the directions of the CIT in his letter dated 28-10-1988 addressed to the assessee, he levied a penalty of Rs. 3,33,125 under section 271(1)(c) and passed penalty order dated 23-9-1989. The learned CIT(A), considering the appeal filed before him, identified that it is important to consider as to whether from the assessee's side there was any reason to believe that the institution to which a donation was being made was utilizing the funds in a fraudulent manner and whether the conditions laid down by the CIT while granting approval was being fulfilled by the institution. The responsibility of an assessee who is claiming the benefit under section 35CCA would end with his obtaining certificate from the institution that it is approved under the scheme. In this case, the assessee seems to have obtained a certificate from the institution which shows that the institution is approved for claiming exemption under section 35CCA. The learned CIT(A) held that if an institution, which is approved under the scheme of section 35CCA, deals with the funds in a fraudulent manner, to penalize the parties who have made donations to such institution under a genuine belief that the institution was applying its funds on approved objects would be unjust unless it is established that the institution has been used as a conduit-pipe for ploughing back the funds to the hands of the donor. The learned CIT(A) found that this allegation has not been established and, therefore, ultimately he found that this is not a case for penalty for concealment under section 271(1)(c) and cancelled the penalty and allowed the appeal filed before him vide his order dated 18-10-1989. Against the order of CIT(A) cancelling the penalty, the department filed second appeal before the Tribunal.
4. The only ground taken in this appeal is whether the learned CIT(A) erred in cancelling the penalty levied under section 271(1)(c) of the I.T. Act. We have heard Shri K.L. Tilakchand, the learned Senior Departmental Representative and Shri A.V. Sonde, the learned C.A. for the assessee, Shri Tilakchand argued the following :
(1) The donation was purported to have been made on 29-6-82 which is the last but one day of the accounting year.
(2) In the facts and circumstances of the case, it can easily be found out that under compelling circumstances where there is no escape route available to the assessee, the offer to surrender was made. Therefore, the withdrawal of the grounds before the CIT(A) should not be considered as voluntary or bona fide.
(3) From the facts and circumstances and taking into consideration the probabilities of the case, the inference drawn by the Assessing Officer that the amount donated was later brought back by the assessee and the donee institution is only serving the purpose of supplying false vouchers to assessee, for a small consideration, and help evading considerable tax payable by assessee, should be and help to have been proved. In this connection one of the strong circumstances was that the assessee did not make any attempt to get clarification from the donee society as to the way and method in which the amount was spent. The assessee did not file any complaint against the donee institution after coming to know that the said institution was a bogus institution and it has not been spending the donations for the approved social schemes for which it had got its recognition under section 35CCA.
(4) Under the Amnesty Scheme, no blank cheque is given in a case of this type. The assessee is no doubt covered under the Amnesty Scheme but it was utmost entitled only to a lenient treatment and cannot extricate itself fully from the payment of penalty under section 271(1)(c) according to CBDT's clarifications of the Amnesty Scheme given.
5. The learned DR relied upon the judgment of the Calcutta High Court in CIT v. Bankam Investment Ltd. [1994] 208 ITR 208. He also contended that the doctrine of promissory estoppel is not available to the assessee. He relied upon in Asstt. CIT v. Dalamal & Sons Investment Co. [1994] 49 ITD 80 (Bom.) and Varun Enterprises v. Asstt. CIT [1993] 47 TTJ (Delhi) 461 besides trying to distinguish the decisions cited on behalf of the assessee.
6. As against these arguments of the learned DR Shri Sonde, the learned C.A. for the assessee, submitted the following. Firstly, it is submitted that it is not correct that on three occasions the Assessing Officer had called the assessee to furnish information or details regarding the donee institution as stated in para 11 of the assessment order. Giving notice under section 131 to the donee institution does not amount to calling upon the assessee to furnish information. It is only on 17-12-1985 that for first time, the assessee was addressed a letter by the ITO. We are concerned with the assessment year 1983-84 for which the previous year ended by 30-6-1982. The recognition to the donee institution was never withdrawn from 1981 to 1987. It is no doubt, true that the recognition to Sigma Aid and Medical Research Society (hereinafter referred to as "the donee institution") was withdrawn and it was admitted in the assessee's letter dated 17-3-1987 filed before the CIT(A). The said withdrawal of recognition operates prospectively and not retrospectively unless and until the revenue is able to show that the Competent Authority had withdrawn the recognition to the donee institution retrospectively and unless the retrospectivity is ordered to commence on a particular date given. However, in this case, the revenue was unable to show that the withdrawal of recognition to the donee institution was made or ordered even when the donation was made to it by the assessee. When once the donation is made at a time when recognition was subsisting to the donee institution, bona fide believing that the donee institution would spend that amount for the purposes for which it was granted recognition under section 35CCA, the assessee cannot be denied the deduction to which it is entitled to. The existence of the donee institution cannot be denied. The assessment order would clearly show that the donee institution filed the details of assets and liabilities for assessment year 1982-83 as well as receipts and payments for the same assessment year. It had also filed balance sheet as at 31-3-1983 and the income expenditure account for the year ended 31-3-1983. According to the Assessing Officer, only certain suspicious circumstances existed in respect of expenditure on rural development programme since vouchers were not maintained by the trust. A reading of the assessment order would show that full accounts maintained by the donee institutions were furnished to the Assessing Officer. However, according to the Assessing Officer, out of the two objects for which the donation was expected to be channelised, money is said to have been spend only over one object and not over the other. The learned C.A. further contended that under the provisions and the clarifications given of the Amnesty Scheme, even in an extreme case where the donation money was recovered back and capitalized in the accounts of the donor assessee, still the amnesty is available to him. But, in the case of the assessee, the amount was never brought back from the donee institution, much less was it capitalized in the accounts of the assessee. In the facts and circumstances of this case where the department failed to show that the approval was withdrawn retrospectively, penalty cannot be levied. Even if the donee institution received back the donation, the assessee cannot be denied deduction under section 35CCA. The assessee relied upon the following case law in support of its submissions :
1. Pressman Advertising & Marketing (P.) Ltd. v. CIT [1994] 208 ITR 768 (Cal.)
2. B.P. Agarwalla & Sons Ltd. v. CIT [1994] 208 ITR 768 (Cal.)
3. Seksaria Biswan Sugar Factory Ltd. v. IAC [1990] 184 ITR 123 (Bom.)
4. ITO v. M.C. Ponnoose [1970] 75 ITR 174 (SC)
5. Smt. P.M. Celine v. Asstt. CIT [1991] 39 ITD 454 (Cochin)
6. Deter and Deter v. ITO [1992] 42 ITD 598 (Pune)
7. Vir Khanna v. IAC [1995] 51 TTJ 670 (Asr.)
8. Bombay Cloth Syndicate v. CIT [1995] 214 ITR 210/79 Taxman 352 (Bom.)
9. Varun Enterprises Ltd.'s case (supra)
10. Bakul Cashew Co. v. Sales - Tax Officer [1986] 159 ITR 565/28 Taxman 121 (SC)
11. Order of C-Bench of Bombay Tribunal in Alarsan v. Dy. CIT [IT Appeal No. 2885 (Bom.) of 1990, dated 19-7-1995]
7. The assessee also filed a paper book in concealment appeal containing 22 pages. On behalf of the revenue, a letter dated 10-3-1983 addressed by D.D.I., Inv. Unit No. 1, Bombay, to the assessee-company is filed on 17-6-1996, i.e., the date of final hearing of the appeals.
8. Thus, having considered the arguments on both sides and considering the documents produced on their behalf, we are of the opinion that the impugned order of CIT(A) does not call for interference from us and the appeal of the department merits dismissal. Our reasons are as follows.
9. Before setting foot into the real arguments on the merits of the issue, we may first deal with the document filed on behalf of the revenue on 17-6-1996 adverted to above. The purpose of filing the document appears to be to impress on us the possibility that like several other assessees the impugned donation of the assessee company to the donee institution also is bogus and almost the whole of the donation must have been got back from the donee institution and the donation was never utilized for the intended purposes and the donee institution was only aiding and abetting the tax evasion by offering accommodative bills and vouchers to its donor assessees. The learned D.R. argued that this document clearly reveal that the impugned donation is a bogus one. In this connection, the learned D.R. argued that direct evidence with regard to the bogus nature of the transaction may not be insisted upon in this category of cases since there is a collusion between the donors and donees and the case is to be determined only on broad probabilities and circumstantial evidences. The assessee's learned C.A., on the other hand, contended that assuming without admitting that the contents of the letter are true, among the names of donors provided in the letter, the assessee's name is not found. It is not alleged in the said letter that the recognition of the donee institution is withdrawn. The absence of these two allegations in the statement of the Chairman of M/s Sigma Medical Aid & Research Society will help the assessee argue that the donations made by it to the donee institution is a true one and not a bogus one. Though this letter dated 10-3-1987 does not seem to have been filed before anybody and for the first time produce before the Tribunal on 17-6-1996, the assessee's C.A. did not object to its admission and, therefore, the admissibility or otherwise of this document into the records of the appeal need not deter very much and we admit the same.
10. Now, let us take for our discussion the genuineness or otherwise of the donation made by the assessee to the donee institution. At page No. 1 of the paper book, a photocopy of the receipt given by the assessee institution after receiving Rs. 5 lakhs was provided. It is dated 29-6-1982. Cheque No. 2473/82 dated 28-6-1982 for Rs. 5 lakhs is stated to have been handed over to the assessee institution under the receipt. The donee institution was an approved institution under section 35CCA. The approval was granted on 9-6-1981. The programme of the donee institution for their proposed Hospital at Mahalunge with Mobile Vans and Ambulance, Cancer Research Detection Centre, T.B. Cottages, etc., involving an estimated total expenditure of Rs. 54 lakhs was approved and the approval was for three years. The donee institution came up with programme for Cancer Detection Centre at a cost of Rs. 1,88,51,600 and it was approved for the period from 17-7-1981 to 30-6-1984. Though the approval also is sought for nutrition and agricultural programme, the said programme was not approved. Even the programme for running the Cancer Detection Centre was approved with the condition that the facilities are restricted to rural population. The approval was granted for the period from 17-7-1981 to 30-6-1984 by the CIT, Bombay City-I, by his order dated 3-8-1981. Copy of the order is provided at pages 2 and 3 of the paper compilation. The receipt obtained by the assessee was filed before the Assessing Officer. The donee institution ultimately on 31-3-1983 filed before the Assessing Officer the details of assets and liabilities, receipts and payments, balance-sheet and income & expenditure account for the year ended 31-3-1983. However, there are some discrepancies found in the accounts submitted by the donee institution. On 17-12-1985, the Assessing Officer addressed a letter to the assessee. In the said letter, it is stated that the exemption was granted to the donee institution subject to the condition that proper accounts of receipts and payments and balance-sheet would be maintained by the Trust and these would be audited by a Chartered Accountant. Even after a significant period elapsed, the donee institution filed only a provisional balance-sheet and a provisional income and expenditure account. It is informally learnt that in respect of expenditure for rural development programme, vouchers were not maintained by the Trust. Since the conditions on which exemption was granted to the donee institution were not complied with, it is stated that the assessee-donor will not be entitled to exemption under section 35CCA. It is also stated significantly in the letter as follows :
"However, the payment of donation is not free from doubt. Looking to the state of affairs of accounts of the Society, it is also probable that a part of the money alleged to have been paid as donation might have been returned to you."
In reply to the letter dated 17-12-1985, the assessee-donor had addressed a letter dated 20-12-1985 to the Assessing Officer, inter alia, vehemently denying the allegation that they have received back either the whole or any part of the money paid as donation to the donee institution, contending that the various proofs to substantiate the payment of donation were already submitted to the Assessing Officer, such as stamp receipt of the contribution made and a letter from the Corporation Bank, Fort, Bombay, for the issue of Bank Draft to the donee institution. The approval given by the CIT, Bombay, under section 35CCA to the donee institution was also furnished. In the said letter, it is specifically stated that the onus of production of books of account, vouchers, bank pass books, etc., is on the donee institution and not on the assessee and the conditions set out for approval should be observed by the donee institution and not by the assessee. The Assessing officer, in the assessment order, found that on going through the income & expenditure account perhaps of the donee institution, it is very clear that the amount was diverted for other purposes. The Assessing Officer held that the donee institution had not complied with the conditions imposed when the approval under section 35CCA was granted. He also laid that the acceptance of donation by cheque and the obtaining of the receipt, etc., are all self-serving documents since the two parties are connected with each other. The Assessing Officer further stated that the assessee could have compelled the donee institution to produce the books before him in whatever shapes the books were there and therefore non-production of books raised doubt about the bona fides of the donee institution and also raised a presumption that the Society may be a conduit-pipe to claim exemption under section 35CCA. The Assessing Officer ultimately drew a conclusion that whole or part of the donation money was returned to the assessee in cash or kind and conditions under section 35CCA are not strictly satisfied. If it is the case of the revenue that only part of the donation was got back, how much amount was received back was not stated. If it is received back in kind, what is the kind in which it was received back was not made clear in the assessment order. Except the circumstance that the donee institution did not produce its books of account properly audited, there is no other premise on which the Assessing Officer based his conclusion that the assessee had got back the donated amount. Neither the Dy. CIT, Spl. Range, who passed the penalty order, cared to examine any person from the donee institution nor any person from the Corporation Bank before recording a finding that the donated amount had been got back either in full or in part by the assessee.
11. Now, let us see whether non-maintenance of proper account books by the donee institution automatically disentitles the assessee from claiming deduction under section 35CCA. Section 35CCA(1) is as follows :
"35CCA(1) : Where an assessee incurs any expenditure by way of payment of any sum -
(a) to an association or institution, which has as its object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved by the prescribed authority; or
(b) to an association or institution, which has as its object training of persons for implementing programmes of rural development; or
(c) to a rural development funds set up and notified by the Central Government in this behalf;
(d) to the National Urban Poverty Eradication Fund set up and notified by the Central Government in this behalf;
the assessee shall, subject to the provisions of sub-section (2), be allowed a deduction of the amount of such expenditure incurred during the previous year."
What is the true meaning of the words "to be used" occurring in sub-section (1)(a) above adverted to came up for decision of the Calcutta High Court in Pressman Advertising & Marketing (P.) Ltd.'s case (supra). The following is what is held to be the true meaning of the words as per the headnote :
"The phrase "to be used" in clause (1) presumes an action in future. The donor is not in a position to ensure whether in fact the donated sum is used for the purposes specified. On a reading of the provision, the relevant period of time as far as the donor is concerned is when the payment is made. This is borne out by the phrase "for the time being" in section 35CCA(2). The misapplication of the funds donated would necessarily be subsequent to the donation."
In B.P. Agarwalla & Sons Ltd.'s case (supra), the Calcutta High Court as per the headnote held the following :
"On a plain reading of section 35 it is clear that a deduction is allowable if at the time when the amount is paid to the research association, the research association has, as its object, the undertaking of scientific research, etc., and that the association is for the time being approved by the prescribed authority. The subsequent withdrawal of the approval by the prescribed authority would not affect the right to claim the deduction."
Thus, the learned Representative for the assessee argued that even though after receiving the donation, the donee institution misapplied the donated money, since the assessee is not responsible for the way in which the amount is to be applied for various purposes set out while granting approval, the deduction under section 35CCA cannot be denied to the assessee. It is nobody's case that at the time of the donation, the donee institution was not granted approval under section 35CCA. There is no allegation and much less such allegation is proved by any satisfactory evidence that the assessee and the donee institution colluded together or in league with each other. Under the circumstances, except sheer suspicion on the part of the Assessing Officer, there is nothing tangible on record to substantiate the allegation that the donation is bogus or that the donated amount was received back subsequently either partly or wholly, either in each or in kind. Mere suspicion cannot supplant proof and cannot be given any credence whatsoever.
12. Next, let us consider whether the recognition of the donee institution was withdrawn. If so, when and whether such withdrawal is fatal to the claim of the assessee for deduction under section 35CCA. In this connection, the Dy. CIT, Spl. Range, Bombay, who had passed the order under section 273(2)(aa) for this very assessment year, had stated in the penalty order as follows :
"The assessee-company vide their letter dated 27-3-1989 have stated that the difference between the estimated income and assessed income is due to the fact that a contribution of Rs. 5,00,000 made in good faith to M/s. Sigma Medical Aid and Research Society was disallowed while assessing the total income. Subsequently, since the exemption certificate granted to Sigma Medical Aid and Research Society has been cancelled, the assessee offered the said contribution for tax under the Amnesty Scheme and paid tax and also withdrew the appeal in this connection."
Thus, it is contended by the learned Departmental Representative that the assessee itself had categorically admitted that the recognition to the donee institution was withdrawn. However, the learned Departmental Representative was not able to state the date form which the recognition was withdrawn nor was he able to file before us any order of the CIT, Bombay, or any other Competent Authority withdrawing the recognition. It is contented by the learned Representative for the assessee that unless the date of withdrawal was forthcoming from the department, it should be presumed to be a protective withdrawal and that too the withdrawal must be considered to have come into force only from the date of admission, namely, 27-3-1989, and never before. Shri Tilakchand vehemently tried to argue that the withdrawal of recognition even on a subsequent date would disentitle the assessee from the claim of deduction under section 35CCA and in this connection he heavily relied upon a Devision Bench decision of the Calcutta High Court in Bankam Investment Ltd.'s case (supra). In that case also, the relevant assessment year with which the Hon'ble High Court was concerned was 1985-86. The donee institution in that case was Society for Integral Development which was an approved institution under section 35CCA as per the letter of approval dated 17-12-1982 and approval was in force from 13-12-1982 to 12-12-1985. The approval was withdrawn by the Competent Authority on 3-3-1987 with retrospective effect from 13-12-1982. On behalf of the assessee, it was contended in that case that exemption once granted could not be withdrawn with retrospective effect and another contention advanced was that revenue must be held bound by the doctrine of promissory estoppel. In that case, the assessment was made under section 143(1) on 26-6-1987 and admittedly in the assessment thus made there was no valid approval. Therefore, it is easy to find that the facts of Calcutta case cited in support of the revenue's stand are quite distinguishable from the facts on hand and thus the ratio of that decision cannot be applied to the facts on hand except to the extent of the doctrine of promissory estoppel. Rejecting the plea that the assessee in that case was adequately protected by the doctrine of promissory estoppel, the Hon'ble Calcutta High Court held admitting that the theory of promissory estoppel, no doubt, applies to taxation but, at the same time, as held by the Hon'ble Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of UP [1979] 118 ITR 326, the said doctrine in public interest cannot be applied heedless of the circumstances. They further held that where the doctrine exposes the overriding public interest to a jeopardy, the doctrine was to yield. The doctrine in its application to taxation matters must be weighted against its impact on public interest. The Calcutta High Court quoted the judgment of the Hon'ble Supreme Court at page 362 at which the following is found :
"... the Count would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and after his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies."
Thus, the Hon'ble Calcutta High Court is an authority for the proposition that the approval granted to an institution under section 35CCA can be withdrawn retrospectively and retrospectively of such withdrawal cannot be open to callenge. However, this proposition was never doubted. Shri Sonde, while admitting the soundless of the proposition thus propounded, at the same time, contended that the date of retrospective withdrawal, if any, is more important in our case rather than the general proposition thus laid down as above. Since there is no definite evidence, the withdrawal must be deemed to have come into effect only from the date of admission, i.e., 17-3-1989. The order or notification under which the withdrawal of recognition to the donee institution was made was not produced before the Tribunal. It is common knowledge that admission can be proved to be wrong or mistake in which case the admission does not bind the party who makes the admission. In this case, the admission was only to be extent that the recognition to the donee institution was withdrawn. The date when the recognition was withdrawn was not admitted, and since the admission is contained in a letter of 1989, according to Shri Sonde, the admission of the assessee, if any, be taken to have prospective operation from 17-3-1989 only and not before. Even with regard to legislation passed by the State or Central Government, the law is that in the absence of clear words to the contrary, the legislation is presumed to be prospective and not retrospective : See P. Ganesh Nayak v. Commercial Tax Officer AIR 1964 Mys. 240. When the retrospectivity cannot be presumed in the interpretation of an Act much less the retrospectivity is permitted to be presumed in the case of an order or notification passed by an authority.
13. The only question which is left to be considered by us is that in a case where the recognition to an institution was withdrawn by the Competent Authority, whether donation given under section 35CCA prior to the withdrawal of such recognition was at all affected. In this case, there is no evidence whatsoever to show that the recognition to the donee institution was withdrawn prospectively or retrospectively on the date of the donation or on the date of completion of the assessment order against the assessee. From the state of evidence on record, we can only hold that long subsequent to the assessment was over in 1989, the recognition to the donee institution was withdrawn. In this connection, the Calcutta High Court in B.P. Agarwalla & Sons Ltd.'s case (supra) held that the approval rescinded subsequently with retrospective effect cannot have any effect on the eligibility to grant deduction under section 35CCA. The subsequent withdrawal of the approval by the prescribed authority would not affect the right to claim the deduction. The Bombay High Court in Seksaria Biswan Sugar Factory Ltd., v. IAC [1990] 184 ITR 123 held that the notification by the prescribed authority withdrawing approval with retrospective effect is not valid and the reassessment on the basis of such withdrawal withdrawing the deduction under section 35CCA is also not valid. The following is what is held in he said decision :
"Held, that section 295(4) empowers the Central Broad of Direct Taxes to make rules with retrospective effect. Even there, the rules can be amended retrospectively but not to the prejudice of the assessee. That apart, that was in connection with the power to make rules as distinct from the power to issue notifications and that too not by Board but by the prescribed authority other than the Board. Under the circumstances it had to be held that the information in the form of retrospective cancellation of the approval of the concerned institution as an agricultural institute within the meaning of section 35(1)(ii) by notification dated January 2, 1986, was invalid. The notice of reassessment based on that notification was also invalid and was liable to be quashed."
Therefore, the withdrawal of recognition to the donee institution does not affect the impugned donation and the claim of deductibility under section 35CCA either in the case that the retrospective withdrawal is invalid or in the case we hold that the withdrawal comes into force prospectively but not retrospectively.
14. The next question which falls for our consideration is about applicability of the Amnesty Scheme and how far does not Scheme save the assessee from exigibility of penalty. Shri Tilakchand argued that at the most the assessee is entitled to only a lenient view as regards imposition of penalty and cannot completely exonerate it form the penalty. He invites our attention to Question Nos. 26 and 28 and the answers given thereunder by the CBDT Circular No. 451 dated 17-2-1986. The said questions and answers are the following :
"Q. 26 : Where an order has been set aside and assessment proceeding under section 147(a)/(b), whether the assessee can surrender the amount which is the subject-matter of dispute. Whether such a surrender would be taken as suo motu declaration before the detection by the Department ?
Ans. : Such a surrender cannot be taken as a suo motu declaration but naturally a lenient view would be taken if an assessee turns honest even at this stage.
Q. 28 : Where an addition is contested in appeal, whether an assessee could make a declaration and agree to pay tax thereon ?
Ans. : Yes; the assessee should withdraw the appeal and make a declaration before the Administrative Commissioner. In such a case, a lenient view would be taken though such a declaration cannot be taken as entirely voluntary."
Shri Tilakchand argued that the fact of the case directly come under Question No. 28. In the assessment order, the claim for deduction under section 35CCA was negatived to the assessee on the ground that the donee institution failed to maintain accounts, failed to get them audited by a Chartered Accountant and also failed to spend the donation amount in the recognized channels or for the intended purposes which only would secure the recognition under section 35CCA. Against the rejection of the claim of assessee, it came up in first appeal before the CIT(A) and ground Nos.9, 10 and 11 preferred before the CIT(A) were later withdrawn as can be seen from the letter addressed to the CIT(A) dated 17-3-1983, copy of which is provided at pages 20 to 22 of the assessee's paper book. In those grounds, it is vehemently contended that the contribution is correct, that the institution is a recognised institution, that the assessee did everything within their power to substantiate the claim and they did not control over the donee Society to get the accounts audited in time and get their accounts produced before the IAC. By another letter dated 17-3-1987 filed before the IAC (Asst.), copy of which is marked as pages 18 and 19 of the paper boom filed by the assessee, it is categorically stated that they are withdrawing their claim for deduction in respect of the said contribution of Rs. 5 lakhs made to donee institution and they are offering the same for taxation under the Amnesty Scheme. They have also informed that they are withdrawing their appeal on this grounds also and they have specifically requested the IAC(Asst.) to drop the penalty proceedings initiated under section 271(1)(c). In those circumstances, the claim of the assessee under the provisions of the Amnesty Scheme is consequently covered by the answers extracted above and, therefore, the assessee is only entitled to a lenient view but complete exoneration from penalty is not available or possible for it. Shri Sonde, on the other hand, contended that the argument of Shri Tilakchand, amounts to putting the cart before the horse. He elaborated his arguments by stating that Shri Tilakchand argument would come into play only if the revenue is able to establish the concealment on the part of the assessee and not until then. Simply because the assessee surrendered Rs. 5 lakhs, it does not amount to admitting concealment. From the mere fact of the assessee agreeing to addition, it does not follow that the amount agreed to be added was concealed income - Sir Shadilal Sugar & General Mills Ltd. v. CIT [1987] 168 ITR 705/33 Taxman 460A. Shri Sonde argued that there may be hundred and one reasons for such admission. When the assessee does not dispute the disallowance, it does not automatically absolve the revenue from proving mens rea of quasi-criminal offence. The assessee himself, as an explanation to its surrender, stated that it has been doing so only to purchase peace with the department. Therefore, Shri Sonde argued that under the facts and circumstances, the concealment on the part of the assessee cannot be inferred and there is no room for Shri Tilakchand's argument to readily apply the answers given under Question Nos. 26 and 28 extracted above. On the other hand, Shri Sonde argued that the proper provisions under the Amnesty Scheme which are applicable to its case are the following. Adverting to Circular No. 451 dated 17-2-1986 published at (1986) 158 ITR (Statutes), our attention is drawn to Question No. 7 and Question No. 19 as well as the answers given thereunder. Question No. 7 is given at page 136 of 158 ITR (Statutes). It is as follows :
"Question No. 7. - Where the investigation in the case of person other than the assessee indicate concealment of income by the assessee and the assessee makes a true and full disclosure of his income, would he be entitled to immunity under these circulars ?
In this case also, Shri Sonde argued that the Assessing Officer is said to have made investigations into the affairs of the donee institution and came to know ultimately that there is concealment of income on the part of the assessee as per his investigations conducted against a third party, namely, the donee institution. However, the Amnesty Scheme as extracted above even in such a case would given opportunity to the assessee to invoke the provisions of the Amnesty Scheme and surrender the amount Question No. 19 and answer given thereunder are the following :
"Question No. 19 - Kindly clarify the expression "before detection by the department" ?
Answer - If the Income-tax officer has already found material to show that there has been concealment, that would mean the Department has detected the concealment. If the Income-tax Officer only had prima facie belief, that would not mean concealment has been detected."
So, the question in this case is whether the Assessing Officer had sufficient material to show that there has been concealment or from the facts and circumstances it can only be said that the Assessing Officer has only a prima facie belief. According to Shri Sonde's argument, with which we entirely agree, the Assessing Officer in this case has only a prima facie belief and never had any sufficient material to hold that the assessee concealed the donated amount of Rs. 5 lakhs. Therefore, when the concealment is not proved, the assessee is not liable for penalty even under the provisions of section 271(1)(c). The question of lenient view or otherwise comes only later which is neither here nor there for our present purpose.
15. In the view that we have taken on the main issue of concealment, the question whether promissory estoppel operates against the revenue does not directly call for our consideration and, therefore, we have not dealt with the decision of the Bombay High Court in Bombay Cloth Syndicate's case (supra) or the following decisions cited on behalf of the assessee, namely :
(1) Smt. P.M. Celine's case (supra) (2) Deter and Deter's case (supra) (3) Deepak Singh & Family (HUF) v. Asstt. CIT [1994] 48 ITD 465 (Delhi) (4) Vir Khanna's case (supra) (5) Varun Enterprises Ltd.'s case (supra).
We only found that the C-Bench of this Tribunal in their order passed in the case of Alarson (supra), had considered a case containing similar facts and ultimately the matter was decided in favour of the assessee. We have already stated that this Tribunal order was already filed before us. At para 12 of their orders, the earlier Tribunal also found after adverting to Question No. 19 already extracted that it is clear that the question as to whether the benefits of the Amensty Scheme is available to the assessee or not will depend upon the fact whether the department detected concealed income of the assessee or whether it was only a prima facie belief that the assessee has wrongly claimed the deduction. It had further held the following :
"The word 'detection' has not been defined in the Income-tax Act, 1961. Dictionary meaning of the word 'detection' is discovery of something hidden' or not easily observed; 'state of being found out'. From the dictionary meaning of the word 'detection', it is clear that detection is a process which is to be followed up step by step by patent enquiry or probe. Now in the present case, admittedly some steps were taken by the Assessing Officer in finding out as to whether the claim of donation made by the assessee to Christian Medical College and Hospital, Vellore and the Society for Integral Development, Calcutta were genuine or not and the reply from the Christian Medical College and Hospital, Vellore indicated that the said college has not received any donation from the assessee. With regard to the donation of Rs. 1 lakh allegedly claimed to have been made to the Society for Integral Development, Calcutta, there was no response to the summons issued by the Assessing Officer. But the above fact will only establish a prima facie belief that the detection on account of the donation claim may be bogus and the detection of this bogus claim would be complete only after an opportunity is allowed to the assessee to rebut the evidence allocated by the Assessing Officer. It is pertinent to note that the Assessing Officer made inquiries from the Metropolitan Co-op. Bank with regard to the account of M/s. Christian Medical College & Hospital, which was open in the Metropolitan Co-op. Bank, Bombay but the result of those inquiries were not confronted to the assessee nor the assessee was allowed any opportunity to cross-examine the persons associated with the operation of the bogus account of Christian Medical College & Hospital in Bombay."
In the earlier case decided by the 'C' Bench, it was obtained from the donee institution that the so-called donation said to have been made to it was bogus. However, there is no such investigation made in this case and, therefore, we only observe that the facts of this case are on a better footing than the facts of the cited case before us.
16. For all the above reasons, we hold that there is no concealment and that the CIT(A), who held that there is no concealment and that the assessee is not liable for any penalty under section 271(1)(c) is perfectly justified and, therefore, the impugned orders of the CIT(A) are confirmed and the departmental appeal is dismissed.
17. Now, let us take up IT Appeal No. 8472 (Bom.)/90 which is another penalty appeal under section 273(2)(aa) of the I.T. Act. The facts leading to this appeal are the following. The assessee filed the statement of advance tax in Form No. 28A on 10-6-1982 showing total income at Rs. 2,74,720. Subsequently, the assessee filed estimate of advance in Form No. 29 on 15-12-1982 estimating income at Rs. 9,65,000 and advance tax payable at Rs. 2,50,000 and paid advance tax of Rs. 2,50,000. The regular return of income has been filed on 30-6-1983 showing total income at Rs. 10,31,755. The assessment has been completed on 23-1-1986 determining the total income at Rs. 21,79,296 and the tax payable at Rs. 14,51,956. Since there was shortfall in the payment of advance tax, proceedings under section 273(2)(aa) were initiated. Notice under section 274 was issued to the assessee to show cause why penalty should not be levied for filing estimate of advance tax which it knew or had reason to believe to be untrue. The assessee-company filed its explanation by its letter dated 27-3-1989 stating that the difference between the estimated income and assessed income is due to the fact that a contribution of Rs. 5 lakhs made in good faith to M/s. Sigma Medical Aid & Research Society (hereinafter referred to as "the donee Institution") was disallowed while assessing the total income. The Assessing Officer duly took into consideration the fact that the assessee had withdrawn the appeal before the CIT (Appeals) an account of claim under section 35CCA vide its letter dated 17-3-1987 and offered the sum of Rs. 5 lakhs under the Amnesty Scheme and paid tax of Rs. 3,33,125 on 25-3-1987. The Assessing Officer further found that even after giving effect to the order of CIT (Appeals), the total income works out to Rs. 15,99,750 and the tax payable at Rs. 10,65,834. He further found that the quantum appeal was confirmed by the CIT(A). Therefore, the Assessing Officer held that the assessee is in default of filing the estimate of advance tax which it knew or had reason to believe to be untrue. However, since it is a case coming under the Amnesty Scheme recognising that a lenient view is to be taken, a minimum penalty of Rs. 31,078 which represents 10% of the difference between 83-1/3% of the assessed tax and advance tax paid was levied under section 273(2)(aa). The Assessing Officer also duly took into consideration the fact that the recognition granted to the donee institution was later withdrawn and thereafter the assessee offered the contribution made to the donee institution to tax under the Amnesty Scheme and also paid the tax after duly withdrawing the appeal in this connection.
18. Aggrieved against the penalty, the assessee went in appeal before the CIT(A)-VI, Bombay. The learned CIT(A), following his own appellate orders passed in the appeal regarding concealment, held that donation of Rs. 5 lakhs, should not be considered while imposing penalty under section 273(2)(aa) and the penalty quantum should be reduced accordingly. Thus, he partly allowed the appeal.
19. Against the said impugned order passed by the CIT(A) dated 6-7-1990, the revenue came up in second appeal before the Tribunal. The only ground raised was that the CIT(A) erred in directing that the donation of Rs.5 lakhs should not be considered while imposing the penalty under section 273(2)(aa) of the I.T. Act and the quantum of penalty be reduced to the extent. The learned Departmental Representative contended that as per the order dated 9-2-1987 passed by CIT, Bombay City I, in Officer Ref. No. 118/81, the learned CIT, who had granted recognition to the donee institution originally, had withdrawn the recognition. We have already held while deciding the penalty appeal that there was nothing on record to show that the donation of Rs. 5 lakhs by the assessee to the donee institution is bogus or a make-believe. So long as the main point was not brought out by the revenue against the assessee, the assessee is not obliged to pay advance tax on that impugned Rs. 5 lakhs. Therefore, it is easy to find in this appeal that the learned CIT(A) is perfectly justified in his orders to reduce the amount of Rs. 5 lakhs for the purpose of levy of advance tax or the penalty under section 273(2)(aa). We find the appeal without any merits and hence it is dismissed.
ITA No. 8003 (Bom.)/89 :
20. This is an appeal by the department arising out of the order of the Assessing Officer dated 30-3-1989 passed under section 104. The assessee-company, according to the computation given by the Assessing Officer, had a distributable income of Rs. 5,26,068 and 60% thereof, namely, Rs. 3,15,640, is to be distributed as dividend amongst the shareholders. However, it had not declared any dividend and hence the Assessing Officer held that the provisions of section 104 are attracted. The assessee submitted its reply through letters dated 19-2-1987 and 25-3-1987, according to which the distributable profits are 'nil'. The Assessing Officer found in his order under section 104 that during the assessment proceedings, the following two items were not included as part of assessee's income :
(1) Shipping refund and clearing refund Rs. 4,35,160 (2) Donation to Sigma Trust under section 35CCA Rs. 5,00,000
He held, following the decision in the case of Chourangee Sales Bureau's case, that the refunds received by the assessee are income of the assessee in the year in which such refunds were received. Following the Madras High Court decision in the case of Industrial Chemical Works (Vellore) (P.) Ltd. v. CIT [1975] Tax LR 802 (Mad.), he held that the shipping and clearing refunds received by the assessee were in the nature of trading receipts and they were to be considered for the purposes of section 104. The claim of the assessee under section 35CCA was also rejected on the ground that the donee institution did not satisfy all the requirements set out in section 35CCA. Ultimately, he computed the shortfall in the dividends at Rs. 3,15,640 and levied additional tax at 25% of Rs. 5,26,068, i.e., Rs. 1,31,517.
21. The assessee, being aggrieved against the additional tax imposed, went in appeal before the CIT(A), Bombay. Before the CIT(A), the distributable income was shown by the assessee at Rs. 74,962 as under
Gross total assessed income after giving effect to the Rs.
CIT(A)'s order 16,01,471
Rs.
Less : 1. Income-tax 10,65,833
2. Donations 3,452
3. Under section 6-D disallowances 7,642
4. Under section 40-A(8) disallowance 39,467
5. Presentation articles 3,070
6. Disallowance under section 40-A(5) 32,674
7. Entertain expenses (37691-14000-6519) 17,172
8. Chandala and marriage gifts 2,816
9. Revenue expenses treated capital
(4775-10% depr. allowed 478) 4,297
10. Donation to Sigma under section 35CCA 5,00,000 16,76,433
--------- --------
Distributable income 74,962
--------
In the above calculation or while arriving at the distributable income, the assessee had deleted the sum of Rs. 5 lakhs which was purported to have been given by it to the donee institution and for which deduction under section 35CCA was claimed on Rs. 5 lakhs. While submitting the above calculation, the assessee urged before the learned CIT(Appeals) that it did not include interest under section 215 and 216 and also the surtax and penalties payable by the assessee-company which have arisen because of the additions made in the assessment. If all these were taken into consideration, the distributable profits would be reduced to 'nil' as against which the reserve of the assessee-company were only Rs. 48,607. Further, there are considerable amounts of accumulated losses. It is submitted that the secured loans are only Rs. 29 lakhs as against the current liability of the assessee-company of Rs. 2 crores. If 2% of the debts of the company became bad, then the entire share capital and other assets will be liquidated as clearly stated in the auditors' report, to which the attention of the learned CIT(A) was invited. Further, the assessee relied upon the Madras High Court decision in CIT v. Anamalai Bus Transports (P.) Ltd. [1976] 105 ITR 267 and the Calcutta High Court decision in CIT v. National Razors & Blades (P.) Ltd. [1985] 153 ITR 593/[1984] 19 Taxman 40 for the proposition that in a case where there is no other fact except that the assessee failed to prove the genuineness of certain loan transactions, it would not make the amount added back available for considering the distributable surplus under the provisions of section 104 of the I.T. Act. Reference was also made to another Calcutta High Court decision in CIT v. Industry Side (P.) Ltd. [1985] 154 ITR 686/22 Taxman 28. The learned CIT(A), after having followed those decisions, felt that the working of the distributable income given above by the assessee was reasonably correct. He also held that if interest, penalty etc., are taken into consideration, it would appear to be a case where the provisions of the section 104 of the I.T. Act would not be applicable. With this reasoning, he allowed the appeal.
22. As against the impugned order dated 17-7-1989 thus passed by the CIT(A), the revenue came up in second appeal before the Tribunal. The only ground urged was that the CIT(A) erred in cancelling the order passed under section 104 of the I.T. Act, 1961, Shri Tilakchand vehemently contended that in the first instance the donation of Rs. 5 lakhs to the donee institution is not genuine and, therefore, it cannot be excluded from computation of distributable profits for the purposes of section 104 of the I.T. Act. Alternatively, he contended that even in case the Tribunal comes to a conclusion that the donation of Rs. 5 lakhs to the donee institution is genuine, it is not entitled to any deduction under section 104 of the I.T. Act since under the I.T. Act what is to be determined is commercial profits and the amount of Rs. 5 lakhs cannot by any stretch of imagination be considered to have been given for business considerations. If it is not an amount spent for business considerations, then it cannot be considered as a deduction allowable under section 104. He had cited before us the Bombay High Court decision in Seksaria Biswan Sugar Factory Ltd. v. CIT [1995] 101 ITR 703. In that case, the assessee claimed deduction of Rs. 1,02,223 which was spent on charity and donation since it was authorised by the memorandum of association of the assessee-company in that case. It was held by the Bombay High Court rejecting that it cannot be allowed as a deduction while computing commercial profits under section 23A of the Indian Income-tax act, 1922, corresponding to section 104 of the I.T. Act, 1961, as follows :
"No material was brought on record by the assessee-company to show that all or a major part of the donation amounting to Rs. 1 lakh and odd were guided by commercial principles or out of business considerations. The mere fact that an amount has been spent is not by itself sufficient to exclude it an determining the amount of commercial or accountable profits available for distribution amongst shareholders under section 23A. The amount of Rs. 1,02,223 was not allowable in computing the profits available for distribution as dividends."
Shri Tilakchand, the learned Departmental Representative, further contended that this being a Bombay High Court decision, which is the jurisdictional High Court, is to be followed than over the decisions of Madras and Calcutta High Courts relied upon by the lower authority since in those decisions the Bombay High Court decision was neither cited nor distinguished. Shri Sonde, the learned Representative for the assessee, on the other hand, contended that the concept of 'commercial profits' is different from the concept 'distributable income'. Whereas the former is used in section 23A of Indian Income-tax Act, 1922, the latter is used in section 109(1)(g) of the Income-tax Act, 1961. Further, Shri Sonde argued that the provisions of section 23A of the Indian Income-tax Act, 1922, are not quite similar with the provisions of section 104 to 109 of the Income-tax Act, 1961. Especially, he argued that the definition of "distributable income" given under section 109 is very important. He further argued that the words of section 109(i)(g)(iv) is very important to be noted for correct appreciation of the facts on records. They are the following :
"Sec. 109. For the purposes of sections 104, 105 and 107A and this section, -
(i) "distributable income" means the gross income of a company as reduced by -
(g) any expenditure actually incurred for the purposes of the business, but not deducted in computing the income chargeable under the head "Profits and gains of business or profession" being -
(iv) any expenditure claimed as a revenue expenditure but not allowed to be deducted as such and not resulting in the creation of an asset or enhancement in the value of an existing asset."
Shri Sonde argued that the above part of the definition of "distributable income" would clearly show that whatever expenditure is incurred, which is either allowed or allowable as revenue expenditure during the assessment of the assessee-company, is clearly allowable as deduction from out of the distributable income which is to be computed under section 104. Furthermore, some of the items of revenue expenditure, which were claimed in the assessment but which were not allowed in the assessment order, also are entitled for deduction, provided the nature of the expenditure was such that it did not result in creation of an asset or in enhancement of the value of an existing asset. Shri Sonde commended the above interpretation to our acceptance. Shri Tilakchand, the learned Departmental Representative, contended that in the provisions extracted above it is clearly stated that sine qua non for deduction was that it should not only be an expenditure of revenue nature but it should also be incurred for the purposes of business. Therefore, so long as the assessee does not succeed in establishing that the donation of Rs. 5 lakhs to the donee institutions is for business considerations, the deduction claimed is not available. Further, it is contended by Shri Tilakchand that the provisions of section 104 to 109 of the Income-tax Act are self-contained code and no other deductions except those stated in section 109(i)(a) to (h) are eligible to be considered while computing the distributable income. On the other hand, Shri Sonde, the learned Representative for the assessee, contended that the provisions of section 104 to 109 of the I.T. Act should not be read in isolation but they should be read in conjunction with other provisions of the Act and harmonization of the effect of sections 104 to 109 with order provisions of the I.T. Act is essential to be made.
23. Thus, after evaluating the learned arguments on either side, we are of the view that the contentions of the learned Departmental Representative cannot be accepted. Firstly, we have already held that the donation in favour of the donee institution was true and the said donation is rightfully to be deducted while computing its total income under section 35CCA. Therefore, the deduction which the assessee is entitled to under section 35CCA should be deemed to have gone into computation of the total income of the assessee-company under section 4 and 5 of the I.T. Act. The argument of the learned Departmental Representative that the deduction given under section 109 under the definition of "distributable income" are the only deduction allowable and section 104 to 109 constitute a complete code and because the deduction under section 35CCA is not one of the enumerated deductions under section 109(i) the said deduction cannot be claimed or cannot be allowed to the assessee while computing the distributable income, is unacceptable to us. The clear wording of section 109(i)(g) already extracted above shows that it had duly taken into consideration the computation of income under the head "Profits and gains of business or profession". Further, that sub-clause contemplates a further deduction of certain items over and above whatever allowed as deduction while computing the income of a company under the head "Profits and gains of business or profession. "Therefore, to our mind, section 109(i)(g) is intended to be supplementary and has to be read conjointly with the assessment made under the head "Business or profession". It is, no doubt, true that decision in Seksarai Biswan Sugar Factory Ltd. v. CIT [1975] 101 ITR 703 (Bom.) relied upon by the learned Departmental Representative fully supports his arguments but we ourselves have come across a later Bench decision of the Bombay High Court reported in CIT v. Gopal Investors' Corpn. (P.) Ltd. [1976] 103 ITR 563. It is worthy to be examined on this occasion. The short point for consideration in that case was that the assessee-company derived dividend income of Rs. 17,027 from Tata Co. which was specifically made exempt under the then section 56A of Indian Income-tax Act, 1922. The total income of the assessee in that case was Rs. 48,948. The income-tax payable by the assessee-company was Rs. 25,433 and after deducting the same from the total income the surplus came to Rs. 23,515. However, the assessee-company in that case distributed only dividends of Rs. 21,000 and for short distribution of dividends, the assessee-company was proceeded against under section 23A of the Indian Income-tax Act, 1922, which is the predecessor of section 104 of the I.T Act, 1961. Under the provisions of section 23A of the Indian Income-tax Act, the exempted dividend of Rs. 17,027 under section 56A was not specifically deductible. In that case also, a similar argument, which is now advanced by the Sr. Departmental Representative, that section 23 of the Indian Income-tax Act, 1922, should be treated as a self-contained code and for the purpose of determining the permissible deductions thereunder, the deductions available under the provisions of the Indian Income-tax Act, 1922, which might have been considered for the purpose of determining the total income of the assessee-company, should not be brought in or considered, was advanced. It is significant that the Hon'ble Judges who decided the cases of Seksaria Biswan Sugar Factory Ltd. v. CIT [1975] 101 ITR 703 (Bom.) as well as the case of Gopal Investors' Corpn. (P.) Ltd. (supra) are common and, therefore, while deciding Gopal Investors' Corpn. (P.) Ltd.'s case (supra), they were reasonably presumed to be well aware of what they had held in their previous decision in Seksaria Biswan Sugar Factory Ltd. v. CIT [1975] 101 ITR 703. Their Lordships of the Bombay High Court held the following for repelling the contention of Shri Hajarnavis. For the purpose of better appreciation, the contention on behalf of the department as well as the decision thereon are extracted as under :
"Replying upon the provisions of this part of sub-section (1) it is strenuously urged by Mr. Hajarnavis that the undistributed balance of the total income of the previous year has to be computed only after deducting the amounts referred to in clauses (a), (b) and (c) and the dividends actually distributed, if any. No other item has to be taken into accounts for determining the amount of undistributed balance of the total income of the previous year. If the provisions of section 23A were the only provisions to be looked at for determining this question, then Mr. Hajarnavis is right, but we should not overlook the fact that the provisions of section 23A are penal in character. When applying this provisions it will be erroneous to read the provisions of a particular section in mere isolation. Section 23A deals with liability to pay super-tax and when such liability has to be determined or considered then all the other relevant provisions pertaining to such liability for payment of super-tax cannot be ignored. It is undoubtedly true that in no part of the language of section 23A reference is to be found even impliedly to the provisions of section 56A, but section 56A is a declaratory section which deals with non-liability of a company to pay super-tax quo particular types of income by way of dividends of the nature specified therein. The material part thereof stated that no super-tax shall be payable by a company on such part of its total income as consists dividends of the nature specified in that section. Both the provisions of section 23A and of section 56A were introduced later on when the provisions of the Act were from time to time amended. Section 23A is contained in Chapter IV which deals with deductions and assessment, while section 56A is contained in Chapter IX which deals with super-tax. Both the provisions of section 23A as well as the provisions contained in Chapter IX have a common genus, namely, liability to pay super-tax. Section 55 which defines "super-tax" as additional duty of income-tax clearly makes it clear that whenever the word "super-tax" is used in the Act it is an additional duty of income-tax as contemplated by section 55. The expression in this act is wide enough to include section 23A even though it is contained in Chapter IV. If the provisions of section 23A were read in mere isolation, then there will be an apparent conflict between the provisions of section 23A and those of section 56A. If the provisions of section 23A were merely looked at, then the dividend which falls within the provisions of section 56A will be subjected to liability of payments of super-tax even though section 56A states that no super-tax shall be payable by a company on such part of its total income as consists of dividends as specified therein. In our opinion, when such a situation arises, it will not be proper to treat the provisions of one as overriding those of the other and both the provisions should be harmonized together. When looked at from that point of view even in applying the provisions of section 23A, the provisions of section 56A shall not be overlooked as both the sections deals with the topic of super-tax. Thus, even though in section 23A no specific reference is made to dividend which is exempt from super-tax under section 56A, as all the provisions of the statute have to be taken into account for determining the liability for payment of super-tax, even in determining the statutory percentage of liability for payment of super-tax under section 23A the dividend which is exempt from super-tax cannot be ignored. In our opinion, the Tribunal was right in deducting the sum of Rs. 17,027 which was exempt from payment of super-tax under section 56A in determining the liability of the assessee-company for payment of super-tax under section 23A."
Following the said decision, we have to hold that even though no specific mention was made about deduction under section 35CCA in section 109, while computing the distributable income of the assessee-company, the total income computed by the Assessing Officer should be duly taken into consideration and, therefore, the deduction allowed or allowable under section 35CCA should also be allowed as deduction while computing the distributable income of the assessee for the purposes of section 104.
24. With regard to shipping and clearing refund of Rs. 4,35,160, though it is initially assessed as part of the income by the Assessing Officer, in appeal against the said addition, the first appellate authority had deleted the said addition. Thus, the deletion of Rs. 4,35,160 formed part of the assessment which is ultimately made against the assessee. As already stated, the assessed income should be duly taken into consideration while computing the distributable income under section 104. Since the said amount is no longer available as part of the distributable income, the question of contravention of section 104 with regard to the said amount does not arise.
25. In the result, since the department fails in all the three appeals, they are dismissed.