Krupa Trading Co.,New v. The Income Tax Officer,Non Corporate Ward - 3 (4),Chennai - 34

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.12.2019 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARANandTHE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.No.55 of 2018andC.M.P.No.474 of 2018 Krupa Trading Co.,New No.9, Old No.6, Dhanamal Street, Chetpet,Chennai 600031.... Appellant/Respondent Vs The Income Tax Officer,Non Corporate Ward - 3 (4),Chennai - 34. ...Respondent/Appellant PRAYER: Tax Case Appeal filed under Section 260A of Income TaxAct, 1961 against the order dated 26.04.2017 inI.T.A.No.3219/Mds/2016 on the file of the Income Tax AppellateTribunal Chennai 'A' Bench for the assessment year 2012-13,against the order dated 12/09/2016 in ITA.NO.84/2015-16 on thefile of the Commissioner of Income Tax(Appeals)-4, and againstthe order dated 30/03/2015 in AAIFK5044J/HCW 3(4)/2014-15 on thefile of the Income Tax Officer Non-Corporate Ward 3(4). For Appellant : Mrs.T.C.A.SangeethaFor Respondent : Mr.T.Ravikumar, Senior Counsel. J U D G M E N T (Judgment of the Court was delivered by N.KIRUBAKARAN, J) This tax case appeal has been filed against the order oftheIncomeTaxAppellateTribunal26.04.2017inI.T.A.No.3219/Mds/2016 in partly allowing the appeal filed bythe assessee against the order of the Commissioner of Income Tax(Appeals) by which the appeal filed by the assessee was partlyallowed. 1/5 https://hcservices.ecourts.gov.in/hcservices/ 2.The facts of the case are as follows:The appellant is a partnership firm and is engaged in thebusiness of trading in shares. The appellant filed its returnof income for the assessment year 2012-13 on 29.09.2012admitting a total income of Rs.3,83,360/-. The case wasselected for scrutiny and assessment was completed under Section143(3) of the Income Tax Act, 1961. The appellant made acontribution of Rs.1,00,000/- during the year, to M/s.HerbicureHealthcare Bio-herbal Research Foundation, Calcutta. Theinstitution was approved to get the contributions under Section35(1)(ii) of the Income Tax Act by CBDT Notification No.35/2008dated 14.03.2008. The appellant had claimed the weighteddeduction of 175% of contribution paid M/s.Herbicure HealthcareBio-herbal Research Foundation in the Return of Income. 3.The donation was made only through A/c payee cheque.M/s.Herbicure also confirmed the donation received by therespondent vide letter dated 26.12.2014. A copy of the Trust'sCorporation Bank Statement in which the donation was received,was also sent to the respondent by the organization. 4.However, the Assessing Officer disallowed the claim ofRs.1,75,000/- on the ground that the Founder Director of theorganization Mr.Swapan Ranjan Das Gupta had recorded a swornstatement during a survey under Section 133A of the Income TaxAct, 1961 that donation made to the Organization was returnedafter deducting 5% commission. The Assessing Officer treatedthe donation as a bogus donation despite the appellantclarifying that the donation is genuine and made directly to theorganization. The Assessing officer disallowed the donation bytreating it as an accommodation entry despite the facts beingotherwise. 5.The appellant had shown an amount of Rs.1,78,833 asdividend received from shares and Mutual funds and claimedexemption under Section 10(38) of the Income Tax Act, 1961. TheAssessing officer also disallowed an amount of Rs.2,89,666/-under Section 14A of the Income Tax Act, 1961 treating it asexpenses incurred towards earning the exempt income. However,the Hon'ble Commissioner of Income Tax restricted the amount ofdisallowance to Rs.1,78,833/- the amount equal to the exemptincome, thereby taxing the entire exempt income. 6.Aggrieved by the order of the Assessing Officer, theappellant preferred an appeal to the Hon'ble Commissioner ofIncome Tax. The Hon'ble Commissioner summarily dismissed theappeal of the appellant without going into the merits of thematter. 2/5 6.Aggrieved by the order of the Assessing Officer, theappellant preferred an appeal to the Hon'ble Commissioner ofIncome Tax. The Hon'ble Commissioner summarily dismissed theappeal of the appellant without going into the merits of thematter. 2/5 7.On further appeal, the Income Tax Appellate Tribunal foundthat the appellant donated the amount and the donee confirmedthe receipt. The Tribunal further observed that the respondenthad not made any effort to get any valid evidence that thedonation was given back to the appellant after reducing acommission of 5%. Despite this finding the Tribunal chose toremit the matter back to the file of the Assessing Officer. TheTribunal also remitted the issue of disallowance under Section14 A of the Income Tax Act, 1961. Aggrieved by the order of theTribunal, the present appeal has been filed. 8.This tax case appeal is admitted on the followingsubstantial questions of law:"(i)Whether in the facts and circumstances of thecase, Income Tax Appellate Tribunal was justified inremitting the matter back to the file of the assessingofficer instead of allowing the appeal, when theTribunal has accepted the fact that the donation hasbeen made as per Section 35(1)(ii) of the Income TaxAct, 1961? (ii)Whether in the facts and circumstances of thecase, Income Tax Appellate Tribunal was justified inremitting the matter back to the file of the assessingofficer instead deciding the issue of dis allowanceunder Section 14A of the Income Tax Act, 1961 in viewof the fact that no expenditure was incurred forearning the dividend income?" 9.The only question which is focused before this Court iswith regard to the remand of the matter for adjudicating is asto whether the donee sent back the donation to the donor viz.,the appellant which claimed allowance under explanation toSection 35(1)(ii) of the Income Tax Act. 10.The learned Counsel for the appellant would submit thatonce the Tribunal found that the organization to which thedonation had been made, has valid recognition or approvalgranted by the Central Government, the appellant is entitled toexemption. Merely, because a statement had been made by thefounder director of the donee that they sent back the donationmoney to the donor cannot be a ground for remanding the matterto the assessment officer. 11.However, Mr.T.Ravikumar, learned Senior Counsel for therespondent would submit that it is a statement made by the 3/5 founder director of the donee that the donation received fromthe appellant was sent back to the donor and therefore, theTribunal is right in remanding the matter to ascertain the meansas well as the actual amount repaid by the donee to the assesseeand decide the issue afresh after giving sufficientopportunities of hearing to the assessee. 12.Heard Mrs.T.C.A.Sangeetha, learned Counsel for theappellant and Mr.T.Ravikumar, learned Senior Counsel for therespondent. 13.It is stated by the appellant that the donation for a sumof Rs.1,00,000/- was made to M/s.Herbicure Healthcare Bio-herbalResearch Foundation, Calcutta which is proved by the receiptgiven by the said organization and the same was acknowledged.When the donation was made, the approval given by the CentralGovernment to the Kolkatta Trust is found to be valid. In thiscircumstances, the Tribunal found that the donation made by theappellant in favour of M/s.Herbicure Healthcare Bio-herbalResearch Foundation would attract exemption under explanation toSection 35(1)(ii) of the Income Tax Act. 12.Heard Mrs.T.C.A.Sangeetha, learned Counsel for theappellant and Mr.T.Ravikumar, learned Senior Counsel for therespondent. 13.It is stated by the appellant that the donation for a sumof Rs.1,00,000/- was made to M/s.Herbicure Healthcare Bio-herbalResearch Foundation, Calcutta which is proved by the receiptgiven by the said organization and the same was acknowledged.When the donation was made, the approval given by the CentralGovernment to the Kolkatta Trust is found to be valid. In thiscircumstances, the Tribunal found that the donation made by theappellant in favour of M/s.Herbicure Healthcare Bio-herbalResearch Foundation would attract exemption under explanation toSection 35(1)(ii) of the Income Tax Act. 14.Having given a finding that the appellant is entitled toexemption, the Tribunal went further and based on swornstatement of founder director of M/s.Herbicure Healthcare Bio-herbal Research Foundation that the organization returned thedonation to the assessee, thought it fit to remand the matter toascertain the means of the assessee and the actual amount paidby the assessee and decide the issue afresh after affordingsufficient opportunities to the assessee. 15.This Court does not find anything wrong with that. Theapproach of the Tribunal is very balanced. Initially, it foundthat the disallowance made by the lower authorities isunsustainable and allowance should be given, however, based onthe statement made by the donee, the Tribunal rightly remandedthe matter to the assessing officer. 16.The learned Counsel for the appellant and the respondentwould submit that pursuant to the remand made by the Tribunal,the assessment officer had conducted enquiry and the re-assessment order was passed. Further, it is stated that theissue is covered by the Judgment of this Court in the case of"CIT Vs.Chettinad Logistics P. Ltd.,"" in T.C.A.No.24 of 2017dated 13.03.2017. 4/5 17.Though it is covered by the Judgment of this Courtagainst the assessee, it is seen that the Tribunal had onlyremanded the matter for re adjudication by the assessmentofficer after giving opportunity to the appellant. Hence, thereis no infirmity in the order passed by the Tribunal. Thequestions of law framed are answered in favour of therespondent. Hence, the appeal fails and the same is dismissed.No costs. Consequently, connected miscellaneous petition isclosed. Sd/- Assistant Registrar(CS V)//True Copy// Sub Assistant Registraray To1.The Income Tax Officer,Non Corporate Ward - 3 (4),Chennai - 34.2.The Income Tax Appellate Tribunal,Chennai 'A' Bench.3.The Commissioner of Income Tax(Appeals)-4,Non-Corporate Ward 3(4), Chennai-34.+1cc to Mr.T.Ravikumar, Advocate sr.103846 T.C.A.No.55 of 2018andC.M.P.No.474 of 2018nr(co)nr 05/03/2020 5/5 https://hcservices.ecourts.gov.in/hcservices/