Section 35ac of income tax act

I have the following query from a fellow CA Mr.Ramani of Bangalore. He has put together a note on the applicability of 35AC for individuals after the amendment. He  asked me to elicit views of other experts in order to verify whether his reading of the law is correct; or if he has missed anything.

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Sec 35AC and 100% tax deduction U/S 80GGA

There is a lack of clarity regarding the applicability of 100% tax exemption for donations for projects approved u/s 35AC with effect from FY 2017-2018.  This has arisen due to the below amendment:

Amendment to Sec 35AC as per the Finance Bill of 2016

In section 35AC of the Income-tax Act, after sub-section (6) and before the Explanation, the following sub-section shall be inserted with effect from the 1st day of April, 2017, namely:—

"(7) No deduction under this section shall be allowed in respect of any assessment year commencing on or after the 1st day of April, 2018.".

I would like to share my thoughts and would be grateful for your expert advice:

1. Deduction u/s 35AC is applicable to all assessee’s.
2. Deduction u/s 80GGA is applicable to assesses who dont have income from “business or profession”.
3. If the Assessee has income under the head “business and profession” then the deduction from income, for payments made to eligible projects notified by the National Committee, is to be claimed u/s 35AC as a legitimate “business expenditure” subject to production of the certificate etc as provided in the said section.
4. If the assessee has income which does not include income from “business or profession” then the deduction is to be claimed us/ 80GGA by producing certificate in form 58D.
5. The amendment to Sec 35AC made in the finance bill of 2016 by insertion of sub sec (7) mentions very clearly that “no deduction under this section shall be allowed....”
6. An individual assessee who has no income from business or profession is claiming deduction u/s80GGA and not u/s 35AC.
7. Hence if an above referred assesse makes payments by way of donations to organisations who are delivering projects approved by the National committee then their eligibility u/s 80GGA should continue till such time such notification/approval is withdrawn.
8. Deduction u/s 80GGA is not connected with deduction u/s 35AC except that for the same payment deduction can be claimed only under any one Section.

Hence my opinion is that individual donors who do not have income under the Head ‘business or profession” can continue to claim deduction u/s 80GGA for donation made to projects/programs which are having valid approvals as on the date of donation.

Eg., if a program has been approved u/s 35AC and the approval is valid till 31-March 2018 ( the following FY), then donations from 01 April 2017 to 31 march 2018 can be issued with 58D receipt and the donor can claim 100% deduction as per 80GGA in the AY 2018-2019.

Is my opinion correct? If not where is the misunderstanding?