The Central Board of Direct Taxes ( CBDT ) has issued an advisory in connection with information regarding the bogus donation racket under section 35(1)(ii) of Income Tax Act, 1961.
As per section 35(1)(ii) of the Income Tax Act,1961, a donor will get 150% weighted deduction for any sum paid to an approved ‘research association having as its sole object the undertaking of scientific research or to a ‘university, college or other institution’ for carrying out scientific research.
The field officers asked for a clarification on whether a Trust namely M/s Shri Arvindo Institute of Applied Scientific Research Trust having offices at Mumbai & Puducherry is an entity specified by the Central Government through a Notification for purposes of section 35(l)(ii} of the Act or not. Presently, the trust is assessed with CIT(Exemption), Mumbai.
In this regard, the Board found that the above Trust was earlier approved under section 35(1}(ii} of the Act which expired on 31.03.2006.
“Thereafter, this entity, is not recognized for purpose of section 35(1)(ii) of the Act, is not eligible to raise donations for undertaking scientific research however, the Trust has raised substantial donations over the last six years on the basis of a forged certificate while the donors have irregularly claimed weighted deduction u/s. 35(1)(ii) of the Act on donations made to the Trust,” the Board said.
Accordingly, the Board directed that the pending scrutiny assessment cases of donors who have claimed irregular weighted deduction u/s 35(1)(ii) should be handled in light of the above facts.
“In case of donors whose cases are presently not under scrutiny, the Board desires that a list of donors who had provided funds to the Trust u/s 35(1}(ii) of the Act should be drawn by CIT (Exemption}, Mumbai for the period from A.Y 2012-13 to 2018- 19 and circulated to the concerned field authorities expeditiously,” it said.
It was further directed that while handling investigations/ enquirers in these cases, the concerned Assessing Officer should examine the specific transactions related to the sum donated and cash trail should be clearly identified. Also, various provisions pertaining to enquirers and investigation under the Act should be effectively used and assessment orders should be passed under the monitoring of supervisory authorities.
