Section 35AC provides tax benefits to taxpayers who make donations or contributions towards projects or schemes approved by the government for promoting social and economic welfare. These projects or schemes typically focus on areas such as education, healthcare, rural development, environmental conservation, and infrastructure development. 

When an organization undertakes a project or scheme approved under Section 35AC and receives donations for the same, it needs to comply with certain reporting and auditing requirements. The 35AC audit refers to the audit conducted to ensure that the organization has utilized the donations received in accordance with the provisions of Section 35AC and the guidelines laid down by the government The audit ensures transparency and accountability in the utilization of funds received under Section 35AC and helps in maintaining the integrity of the tax benefit scheme. It also helps in preventing misuse or misappropriation of funds meant for social and economic welfare projects.