Are donations inadmissible against the exempt income from a partnership firm?

Last updated: 17 September 2021

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This Income Tax Appellate Tribunal ruling addresses whether donations can be offset against exempt income from a partnership firm. The tribunal has remanded the issue back to the Assessing Officer to consider an alternative claim under Section 80GGA(2)(bb) of the Act. It also questions the confirmation of a disallowance under Section 35AC, suggesting that such deductions should be reflected in the ITR 3 Schedule BP and that alternative claims should not be rejected.

Court :
ITAT Mumbai

Brief :
The assessee has filed the present appeal against the order dated 08.05.2019 passed by the Commissioner of Income Tax (Appeals)-24, Mumbai (hereinafter referred to as the “CIT(A)”) relevant to the A.Y.2016-17. 2.

Citation :
I.T.A. No.5375/Mum/2019

THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI
BEFORE SHRI AMARJIT SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM

I.T.A. No.5375/Mum/2019

Assessment Year: 2016-17

Jalaj Ashwin Dani Home Villa, 48, Krishna Sanghi Path, Gamdevi, Mumbai-400007.

ACIT,Cir-15(1)(1) Aayakar Bhavan, Maharshi Karve Road, Mumbai-400020

Assessee by: Shri Dalpat Shah (AR)
Revenue by: Ms. Usha Gaikwad (DR)

Date of Hearing: 22/07/2021

Date of Pronouncement: 03/09/2021

O R D E R

On appraisal of the finding of the AO as well as CIT(A), we find that the alternative claim of the assesse in view of provisions u/s 80GGA(2)(bb) of the Act has not been considered and decided, therefore, without going into the merits of the case, we remand the issue before the AO to consider the alternative claim in view of the provisions u/s 80GGA(2)(bb) of the Act in accordance with law by giving an opportunity of being heard to the assessee. Accordingly, this issue is decided in favour of the assessee against the revenue.

2. “On the facts and circumstances of the case, the CIT(A)-24, Mumbai, erred in confirming the disallowance of Rs.15,00,000 claimed u/s 35AC on the ground that such donations are inadmissible against the exempt income from partnership firm ignoring the fact that the said deduction u/s 35AC is to be shown in the Schedule BP of ITR 3.

3. Without Prejudice, the said CIT(A) erred in not appreciating the fact that if a deduction for an expenditure is allowable under different section the claim for such deduction cannot be rejected in the appeal proceedings. The appellant submits that the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT 284 ITR 323 does not debar the appellant authorities in admitting alternate legal claim as held in the case of CIT Vs. Pruthvi Brokers & Shareholders Pvt. Ltd. 349 ITR 336 (Bom).

4. In the result, the appeal filed by the assessee is hereby partly allowed. Order pronounced in the open court on 03/09/2021.

Please find attached the enclosed file for the full judgement

FAQ :

The tribunal has remanded this issue to the Assessing Officer to consider an alternative claim under Section 80GGA(2)(bb) of the Act. The specific admissibility against exempt income from a partnership firm requires further consideration by the AO.

Section 80GGA(2)(bb) relates to deductions for certain donations, and the tribunal has instructed the Assessing Officer to consider the assessee's alternative claim under this provision.

Section 35AC allows for deductions for certain eligible expenditures. The tribunal noted that a disallowance under this section was made on the grounds that it was inadmissible against exempt income from a partnership firm, which is being reviewed.

The judgement mentions that deductions under Section 35AC are to be shown in the Schedule BP of ITR 3.

Yes, the judgement suggests that if a deduction is allowable under a different section, the claim cannot be rejected solely on that basis, referencing decisions that allow for admitting alternate legal claims.