ITAT Rajkot Takes Practical View in Section 80GGC Case: Full Disallowance Dropped, Addition Restricted to 10%
In an interesting ruling on deduction for political donations, the Rajkot Bench of the Income Tax Appellate Tribunal has adopted a pragmatic approach in resolving a reassessment dispute under Section 80GGC.
While the Assessing Officer had disallowed the entire donation amount based on investigation inputs, the Tribunal noted the absence of direct evidence against the assessee and restricted the addition to 10% of the donation, observing that the order should not be treated as a precedent.
The decision reflects a practical attempt to balance revenue concerns with evidentiary shortcomings in small-value litigation.
Facts of the Case
The assessee had claimed deduction of ₹4,00,000 under Section 80GGC for donation made to a registered political party.
The payment was made through normal banking channels and supported by documentation. However, during reassessment proceedings, the department relied on investigation material suggesting irregularities involving the recipient entity and disallowed the entire deduction.
The assessee contested the addition on the ground that no direct evidence connected the donation to any accommodation entry or cash-back arrangement.
Issue Before the Tribunal
The central question was:
Whether the entire deduction under Section 80GGC can be disallowed solely on the basis of general investigation inputs when no specific evidence exists against the donor.
Instead of fully accepting either side’s position, the Tribunal chose a middle course.
Tribunal’s Observations
The ITAT noted that:
•Donation was made through banking channels
• There was no direct evidence of money returning to the assessee
• Investigation material did not specifically implicate the donor
• Sustaining a full disallowance would therefore be excessive
At the same time, the Tribunal appeared to consider the broader background of investigation inputs and the practical need to bring finality to the dispute.
Accordingly, it restricted the addition to 10% of the donation amount.
Importantly, the Bench clarified that the decision was based on the specific facts of the case and should not be treated as a binding precedent.
A Practical Approach to Small-Value Litigation
This ruling stands out because instead of adopting a purely legalistic stance, the Tribunal opted for a pragmatic resolution.
In many reassessment disputes involving relatively modest amounts, prolonged litigation can become disproportionate to the tax impact. Courts and tribunals sometimes adopt balanced approaches to bring closure while avoiding rigid outcomes unsupported by clear evidence.
The Rajkot Bench’s approach reflects this tendency.
Legal Position on Section 80GGC Still Remains Evidence-Based
Despite the pragmatic outcome, the underlying legal principle remains unchanged.
Deduction under Section 80GGC cannot ordinarily be denied unless:
•Payment is not genuine
• Donation is not to an eligible political party
• Evidence shows return of funds or accommodation entry
• Supporting documentation is absent
Where these factors are satisfied, disallowance typically requires strong evidence.
The present ruling therefore should be seen as fact-specific rather than a change in legal standards.
Practical Takeaways for Tax Professionals
This case highlights several points for professionals handling political donation disputes:
First, proper documentation of donations remains essential.
Second, investigation inputs alone may not justify full disallowance.
Third, tribunals may adopt practical solutions in small-value litigation.
Fourth, however, such orders often carry a disclaimer against precedent value.
Hence, each case must still be defended primarily on evidence.
Conclusion
The ITAT Rajkot ruling in the Section 80GGC matter illustrates that tax adjudication sometimes moves beyond rigid positions to arrive at practical resolutions.
By restricting the addition instead of sustaining full disallowance, the Tribunal sought to balance evidentiary gaps with revenue concerns while bringing closure to the dispute.
For taxpayers and professionals, the case serves as a reminder that while law is evidence-driven, litigation outcomes can occasionally reflect pragmatic judicial discretion.
The copy of the order is as under:
1768283850-tf89QR-1-TO
