2023 (11) TMI 1257 - AT - Income Tax

CSR expenditure eligible for section 80G deduction despite being non-deductible business expense under section 37(1) Explanation 2

Societe Generale Securities India Pvt. Ltd. Versus PCIT

Societe Generale Securities India Pvt. Ltd. Versus PCIT - TMI Issues Involved:1. Validity of order passed under section 263 of the Income-tax Act, 19612. Non-granting of deduction under section 80G of the Act3. Other IssuesSummary:The appeal was filed against the order of the Principal Commissioner of Income Tax, Mumbai-4 under section 263 of the Income Tax Act, 1961 for the assessment year 2018-19. The appellant challenged the order on the grounds of legality and validity. The appellant specifically contested the disallowance of deduction under section 80G of the Act related to CSR expenses amounting to INR 1,88,69,677. The appellant argued that the assessment order was erroneous and prejudicial to the revenue's interest without proper inquiries. The appellant sought to quash the impugned order as being bad in law.The Principal Commissioner relied on clause (a) to Explanation 2 of section 263(1) of the Act and various decisions including the case of Malabar Industrial Co. Limited v. CIT. The appellant contended that the Principal Commissioner erred in exercising revision powers without demonstrating how the claims regarding deduction under section 80G of the Act were not maintainable. Additionally, the appellant argued that the Principal Commissioner failed to follow binding decisions of higher appellate authorities.The case involved the assessment of the appellant's income, with a focus on deductions under Chapter VI-A. The Principal Commissioner issued a notice under section 263 to examine the allowability of CSR expenditure under section 80G. The Principal Commissioner set aside the assessment order, directing the AO to disallow the claim of the appellant under section 80G. The appellant challenged this decision, leading to the present appeal.Upon review, the Appellate Tribunal found that the appellant had complied with the requirements regarding CSR expenditure and disallowed the amount while computing business income. The Tribunal also noted that there was no legislative intention to bar payments covered by section 80G made as part of CSR. The Tribunal concluded that the Principal Commissioner's observations were untenable in law, allowing the grounds raised by the appellant and setting aside the order passed under section 263 of the Act.In conclusion, the appeal of the appellant was allowed, and the order was set aside.