Is there any High Court authority that a donor keeps his s.35(1)(ii) weighted deduction when the donee's approval is cancelled with retrospective effect after the payment?
Yes. The Calcutta High Court dismissed the Revenue's appeal and answered the questions on s.35(1)(ii) against it, holding that under the Explanation in s.35(1) a deduction shall not be denied merely because the approval granted to the research organisation has been withdrawn after the payment, and applying the Supreme Court's decision in CIT v Chotatingrai Tea. The Tribunal's finding that nothing on record showed the assessee had connived in the arrangement was held not to be perverse.
Decided by the High Court (T.S. Sivagnanam J and Hiranmay Bhattacharyya J) on 2022-08-12, reported as ITA/35/2021, High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side; cited in later orders as (2022) 144 taxmann.com 39 (Calcutta); Assessment Year 2014-15. It bears on section 35(1)(ii), section 35(1), section 35(1)(iii), section 35CCA, section 14A, section 260A of the Income Tax Act 1961, in Deductions & Disallowances, Appeals and Evidence & Burden of Proof matters.
This is the only High Court decision on the point that this pass could retrieve, and it is what makes the taxpayer line more than a run of Tribunal orders. Two limits must be stated. First, the appeal was dismissed on the footing that the Tribunal's finding of no connivance was a finding of fact not shown to be perverse — the Court did not hold that a donor is protected whatever the evidence. Second, the Mumbai Bench in Chromex has since declined to apply it, reasoning that the Supreme Court's decision in Batanagar was not cited before this Court. Outside West Bengal the Revenue will run that argument.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The Revenue appealed under s.260A against the order of the Income Tax Appellate Tribunal, 'B' Bench, Kolkata dated 13 April 2018 in I.T.A. No. 378/Kol/2017 for AY 2014-15. The assessee had debited Rs 2,50,00,000 as a donation to Herbicure Healthcare Bio-Herbal Research Foundation and claimed Rs 4,37,50,000, being 175 per cent of that sum, under s.35(1)(ii). The CBDT had withdrawn the approval notifications of that Foundation and of the School of Human Genetics and Population Health by Notification No. 79/2016 dated 6 September 2016 and Notification No. 82/2016 dated 15 September 2016, in each case with effect from 1 April 2007. The Tribunal had deleted the disallowance by following its own earlier order in the assessee's case for AY 2013-14 in ITA No. 16/Kol/2017 dated 14 March 2018, against which the Revenue's appeal, ITA/42/2020, was dismissed by judgment of the same date, 12 August 2022. The appeal was admitted on 1 December 2021 on five questions, of which the first three concerned s.35(1)(ii) and the fourth concerned s.14A. The CIT(A) had recorded as a fact that the connivance of the assessee in the arrangement between the concerns and the bogus billing parties was not established either by the DDIT (Investigation), Kolkata or by the Assessing Officer, and that the allegation of cash refund after deduction of commission remained in serious doubt.
The Revenue's appeal was dismissed and the substantial questions of law numbered 1 to 3 were answered against the Revenue. The fourth question, on s.14A, was held not to be a substantial question of law at all because the Tribunal had remanded that issue to the Assessing Officer. Following the companion judgment in ITA/42/2020, the Court held that in terms of the Explanation to s.35(1) the deduction to which an assessee is entitled in respect of a sum paid to a research organisation shall not be denied merely on the ground that the approval was withdrawn subsequent to the payment, that the reasoning of the Supreme Court in CIT v Chotatingrai Tea applies, and that the Tribunal's reasoning was just and proper and could not be held to be perverse.
The Court declined to decide the case on the wider ground the Tribunal had taken from Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. v CIT [2018] 403 ITR 1 (SC), that there was no power to cancel the approval at all, saying it need not travel that far because the case fell under s.35. It rested instead on the Explanation in s.35(1) and on CIT v Chotatingrai Tea (2002) 258 ITR 529 (SC), where donations had been made to an approved society under s.35CCA, the approval was later withdrawn with retrospective effect, and it was alleged that the donation had come back; the Supreme Court there approved the High Court's conclusion, following CIT v Bhartia Cutler Hammer Co. [1998] 232 ITR 785, that once the assessee had fulfilled the statutory conditions it was under no obligation to see that the amount was applied for the purpose donated, the deduction having been allowed on the certificate furnished. On the facts, the Court noted the Tribunal's finding that there was nothing on record to show that the assessee connived with the scheme of arrangement between the concerns, and the CIT(A)'s finding that suspicion however strong cannot form the basis of a disallowance.
Thus, following the above decision substantial questions of law nos. 1, 2 and 3 are answered against the revenue.
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Handle my notice → Ask a CA on WhatsAppYes. The Calcutta High Court dismissed the Revenue's appeal and answered the questions on s.35(1)(ii) against it, holding that under the Explanation in s.35(1) a deduction shall not be denied merely because the approval granted to the research organisation has been withdrawn after the payment, and applying the Supreme Court's decision in CIT v Chotatingrai Tea. The Tribunal's finding that nothing on record showed the assessee had connived in the arrangement was held not to be perverse. This was decided by the High Court (T.S. Sivagnanam J and Hiranmay Bhattacharyya J) and bears on section 35(1)(ii), section 35(1), section 35(1)(iii), section 35CCA, section 14A, section 260A of the Income Tax Act 1961. It is reported as ITA/35/2021, High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side; cited in later orders as (2022) 144 taxmann.com 39 (Calcutta); Assessment Year 2014-15. This is the only High Court decision on the point that this pass could retrieve, and it is what makes the taxpayer line more than a run of Tribunal orders. Two limits must be stated. First, the appeal was dismissed on the footing that the Tribunal's finding of no connivance was a finding of fact not shown to be perverse — the Court did not hold that a donor is protected whatever the evidence. Second, the Mumbai Bench in Chromex has since declined to apply it, reasoning that the Supreme Court's decision in Batanagar was not cited before this Court. Outside West Bengal the Revenue will run that argument. If it applies to you, the first step is this: Cite this as the appellate authority for the Explanation in s.35(1) rather than relying only on Tribunal orders.
The Revenue appealed under s.260A against the order of the Income Tax Appellate Tribunal, 'B' Bench, Kolkata dated 13 April 2018 in I.T.A. No. 378/Kol/2017 for AY 2014-15. The assessee had debited Rs 2,50,00,000 as a donation to Herbicure Healthcare Bio-Herbal Research Foundation and claimed Rs 4,37,50,000, being 175 per cent of that sum, under s.35(1)(ii). The CBDT had withdrawn the approval notifications of that Foundation and of the School of Human Genetics and Population Health by Notification No. 79/2016 dated 6 September 2016 and Notification No. 82/2016 dated 15 September 2016, in each case with effect from 1 April 2007. The Tribunal had deleted the disallowance by following its own earlier order in the assessee's case for AY 2013-14 in ITA No. 16/Kol/2017 dated 14 March 2018, against which the Revenue's appeal, ITA/42/2020, was dismissed by judgment of the same date, 12 August 2022. The appeal was admitted on 1 December 2021 on five questions, of which the first three concerned s.35(1)(ii) and the fourth concerned s.14A. The CIT(A) had recorded as a fact that the connivance of the assessee in the arrangement between the concerns and the bogus billing parties was not established either by the DDIT (Investigation), Kolkata or by the Assessing Officer, and that the allegation of cash refund after deduction of commission remained in serious doubt. The matter was decided on 2022-08-12 by the High Court (T.S. Sivagnanam J and Hiranmay Bhattacharyya J). On those facts the High Court held as follows. The Revenue's appeal was dismissed and the substantial questions of law numbered 1 to 3 were answered against the Revenue. The fourth question, on s.14A, was held not to be a substantial question of law at all because the Tribunal had remanded that issue to the Assessing Officer. Following the companion judgment in ITA/42/2020, the Court held that in terms of the Explanation to s.35(1) the deduction to which an assessee is entitled in respect of a sum paid to a research organisation shall not be denied merely on the ground that the approval was withdrawn subsequent to the payment, that the reasoning of the Supreme Court in CIT v Chotatingrai Tea applies, and that the Tribunal's reasoning was just and proper and could not be held to be perverse.
The Court declined to decide the case on the wider ground the Tribunal had taken from Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. v CIT [2018] 403 ITR 1 (SC), that there was no power to cancel the approval at all, saying it need not travel that far because the case fell under s.35. It rested instead on the Explanation in s.35(1) and on CIT v Chotatingrai Tea (2002) 258 ITR 529 (SC), where donations had been made to an approved society under s.35CCA, the approval was later withdrawn with retrospective effect, and it was alleged that the donation had come back; the Supreme Court there approved the High Court's conclusion, following CIT v Bhartia Cutler Hammer Co. [1998] 232 ITR 785, that once the assessee had fulfilled the statutory conditions it was under no obligation to see that the amount was applied for the purpose donated, the deduction having been allowed on the certificate furnished. On the facts, the Court noted the Tribunal's finding that there was nothing on record to show that the assessee connived with the scheme of arrangement between the concerns, and the CIT(A)'s finding that suspicion however strong cannot form the basis of a disallowance. In the words reproduced by the source cited on this page: "Thus, following the above decision substantial questions of law nos. 1, 2 and 3 are answered against the revenue." The decision followed or applied CIT v. Chotatingrai Tea & Ors. (2002) 258 ITR 529 (SC) — applied; CIT v. Bhartia Cutler Hammer Co. [1998] 232 ITR 785 — relied on through Chotatingrai Tea; Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. v. CIT [2018] 403 ITR 1 (SC) — noted but expressly not relied on.
It was decided by the High Court on 2022-08-12 and is reported as ITA/35/2021, High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side; cited in later orders as (2022) 144 taxmann.com 39 (Calcutta); Assessment Year 2014-15. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 35(1)(ii), section 35(1), section 35(1)(iii), section 35CCA, section 14A, section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Revenue's appeal was dismissed and the substantial questions of law numbered 1 to 3 were answered against the Revenue. The fourth question, on s.14A, was held not to be a substantial question of law at all because the Tribunal had remanded that issue to the Assessing Officer. Following the companion judgment in ITA/42/2020, the Court held that in terms of the Explanation to s.35(1) the deduction to which an assessee is entitled in respect of a sum paid to a research organisation shall not be denied merely on the ground that the approval was withdrawn subsequent to the payment, that the reasoning of the Supreme Court in CIT v Chotatingrai Tea applies, and that the Tribunal's reasoning was just and proper and could not be held to be perverse. It arises in Deductions & Disallowances, Appeals and Evidence & Burden of Proof matters, on section 35(1)(ii), section 35(1), section 35(1)(iii), section 35CCA, section 14A, section 260A of the Income Tax Act 1961, and was decided by T.S. Sivagnanam J and Hiranmay Bhattacharyya J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Anchor your case on the same factual footing the Court did — an express finding that the donor's connivance in the arrangement was not established by the investigation wing or the Assessing Officer. Be ready for the Batanagar answer: have a reply on why the Supreme Court's decision on the cancellation of a conduit trust's own registration does not decide the donor's entitlement. Note that the companion judgment carrying the reasoning is ITA/42/2020, decided the same day; ask for both when you file.
Validity check could not be completed. No Special Leave Petition or subsequent Supreme Court order was traced on this pass. The judgment has been followed by Tribunal benches, including the Nagpur Bench in C-DET Explosive Industries and in Ashokkumar Gokulchand Sananda. The Mumbai Bench in Chromex v DCIT-17(1), decided 28 August 2025, declined to apply it on the reasoning, taken from Tarasafe International, that CIT (Exemption) v Batanagar Education and Research Trust was not cited before the Calcutta High Court. A Tribunal cannot overrule a High Court, but outside West Bengal this judgment is persuasive only, and the Batanagar point is untested. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read in full from the plain /doc/ URL. The judgment has NO numbered paragraphs at all; it is a short unnumbered order in which the only numbering is the five lettered questions of law, (a) to (e). The operative reasoning is not this judgment's own writing — it is a block quotation of the Division Bench's judgment of the same date in ITA/42/2020 (the Revenue's appeal against the Tribunal's order of 14 March 2018 in the assessee's own case for AY 2013-14). Any citation of a paragraph number in this judgment would be fabricated. Within that quotation the Court refers to the saving provision as the 'Explanation to Section 35(1)(iii)'; the Explanation in fact sits below clause (iii) and applies to both clause (ii) and clause (iii), which is how every other report reproduces it. The judgment also records the appeal as directed against the Tribunal order of 13 April 2018 in ITA No. 378/Kol/2017 for AY 2014-15, and states that the appeal was admitted on 1 December 2021; the questions of law reproduced number five while the Court's closing paragraph refers to questions 1 to 4, which is a slip in the report. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeal was dismissed and the substantial questions of law numbered 1 to 3 were answered against the Revenue. The fourth question, on s.14A, was held not to be a substantial question of law at all because the Tribunal had remanded that issue to the Assessing Officer. Following the companion judgment in ITA/42/2020, the Court held that in terms of the Explanation to s.35(1) the deduction to which an assessee is entitled in respect of a sum paid to a research organisation shall not be denied merely on the ground that the approval was withdrawn subsequent to the payment, that the reasoning of the Supreme Court in CIT v Chotatingrai Tea applies, and that the Tribunal's reasoning was just and proper and could not be held to be perverse.
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