Donation made to BJP-Congress not claimed in return allowed following Supreme Court judgment that ITAT powers not limited in dealing with claim of the assessee not made before AO.
ABCAUS Case Law Citation:
ABCAUS 1293 (2017) (07) HC
The Question for determination:
Whether in the facts and in the circumstances of the case the Learned Income Tax, Appellate Tribunal erred in law in allowing the deduction under section 80GGB in respect of donation made by the assessee to the political parties.
Important Case Laws Cited/relied upon:
Goetze (India) Ltd. Vs. CIT reported in 284 ITR 323
Jute Corporation of India Ltd. Vs. CIT (1991) 187 ITR 688 (SC)
Additional Commissioner of Income Tax, Gujarat vs. Gurjargravures Private Ltd. (1978) 111 ITR
CIT Vs. Mahalaxmi Sugar Mills Co. Ltd. reported in (1986) 160 ITR 920 (SC)
Brief Facts of the Case:
The respondent assessee was a reputed listed company of Wadia Group.During the FY 2005-06, the assessee made donation to political parties namely Congress and BJP to the tune of Rs. 45 lakhs and Rs. 80 lakhs respectively. However, in the return of income filed by the assessee this was not claimed as a deduction. The assessment was accordingly made. However the assessee preferred an appeal before the CIT(A) claiming that the Assessing Officer (‘AO’) did not allowed deduction of political contribution u/s 80GGB of the IT Act, 1961 (‘ the Act’).
CIT(A) observed that the appellant on its own disallowed the contribution in the return of income and neither claimed as a deduction under Chapter-VIA of the Act in its return nor claimed by filing a revised return nor made a claim before the A.O. during the course of assessment proceedings. and therefore, the claim of the assessee that the AO had not allowed deduction of political contribution u/s 80GGB of the Act was found to be factually incorrect.
Aggrieved by the order of the CIT(A), the assessee preferred an appeal before the Tribunal which held that the Hon’ble Supreme Court had held that the appellate authority being the tribunal did have the powers to direct the Assessing Officer to accept the claim of assessee, though the same has not been made in the original return nor has been claimed in the revised return. Following the ratio laid down by the Hon’ble Supreme Court, the ITAT directed the AO to grant the assessee’s claim of deduction u/s 80GGB of the donations made by the assessee to Congress party and BJP.
Contention of the Respondent Assessee:
It was contended that the Supreme Court in another case had held that there is a duty cast on the Income tax Officer to apply the relevant provisions of the Indian Income tax Act for the purpose of determining the true figure of the assessee’s taxable income and the consequential tax liability. Merely because the assessee fails to claim the benefit of a set-off, it cannot relieve the Income tax Officer of his duty to apply section 24 in an appropriate case.
Observations made by the Hon’ble Calcutta High Court:
The Hon’ble High Court observed that there was similarity on facts between the case at hand and that in Goetze (India) Ltd. in that the respective deductions were not claimed before the Assessing Officer. However, the CIT(A) dismissed the appeal of the assessee following Goetze (India) Ltd. in which the Supreme Court had declared that the issue was limited to the power of the assessing authority and does not impinge on the power of the Tribunal under section 254 of the Act. Hence, the CIT(A) held in favour of the Revenue at that stage and the Tribunal thereafter, in favour of the assessee.
The Hon’ble High Court further observed that In Jute Corporation of India Ltd. on similar facts the Supreme Court had remitted the matter to the Tribunal to consider the merits of the deduction raised before and permitted by the Appellate Assistant Commissioner..
The Hon’ble High Court also considered the facts in the case of Gurjargravures Private Ltd where the assessee had not claimed exemption before the I.T.O and the assessment was completed accordingly. The assessee then appealed to the Appellate Assistant Commissioner and one of the grounds of appeal was that the I.T.O had erred in not giving the assessee any benefit under section 84 of the Act. The Appellate Assistant Commissioner dismissed the appeal on the ground that the question of error on the part of the I.T.O did not arise as no claim for exemption had been made before him. On further appeal the Tribunal took a different view and referred the following question to the Gujarat High Court.
“Whether on the facts and in the circumstances of the case it was competent for the Tribunal to hold that the Appellate Assistant Commissioner should have entertained the question of relief u/s 84, and to direct the income tax officer to allow necessary relief?”
The Supreme Court in answering the question raised before the High Court held that the question referred to the High Court should have been answered in the negative.
The Hon’ble High Court opined that there is no conflict between the Gurjargravures Private Ltd. and Goetze (India) Ltd. In Gurjargravures Private Ltd. the Tribunal itself did not consider to allow the claim for relief. In the former a claim for exemption was for the first time put up before the Appellate Assistant Commissioner who rejected the claim as not made before the I.T.O. This rejection was set aside by the Tribunal with direction upon the Appellate Assistant Commissioner to entertain the question of relief claimed by the assessee in that case. The Supreme Court held that it was not competent for the Tribunal to have done so. The distinction between the two authorities eliminating any conflict is that in Gurjargravures Private Ltd. the competence of the Tribunal to direct the Appellate Assistant Commissioner to entertain a claim not made before the I.T.O was found to be lacking. In Goetze (India) Ltd. the Supreme Court held that the assessing Authority’s power was limited but not that of the Tribunal in the context of dealing with a claim of the assessee therein not put forward before the Assessing Officer.
The Hon’ble High Court answered the question in the negative and in favour of the assessee. The appeal of the Revenue was dismissed.