2021 (1) TMI 205 - AT - Income Tax

Appeal partly allowed, issues remitted for verification.

The Tribunal partly allowed the appeal, remitting both issues back to the Assessing Officer for further verification and appropriate action. The first ... Deduction made to charitable institutions u/s. 80G - Denial of deduction u/s. 80G as not available to the assessee since donations are made as part of the Corporate Social Responsibility (CSR) - HELD THAT:- As decided in ALLEGIS SERVICES (INDIA) PVT. LTD [2020 (5) TMI 378 - ITAT BANGALORE] submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, “Income from Business and Profession” - some payments forming part of CSR were claimed as deduction under section 80G of the Act, for computing “Total taxable income”, which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing ‘Total Taxable Income”. If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature. Authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) - we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate its claim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility. Considering new claim of the assessee without any revised return by FAA - Non-grant of deduction for gratuity - assessee submitted before the CIT(Appeals) that it had created a provision for gratuity - HELD THAT:- As rightly pointed out by the ld. AR, the first appellate authority has powers to entertain additional claims, even if the same was not made in the return of income. This was fortified by the judgment of the Hon’ble Bombay High Court in of Pruthvi Brokers & Shareholders [2012 (7) TMI 158 - BOMBAY HIGH COURT] - Being so, in our opinion, the assessee in principle is entitled to claim deduction of gratuity paid before the appellate authorities. Accordingly, we remit this issue to the file of AO to quantify the amount of deduction towards gratuity and decide accordingly. Issues Involved:1. Rejection of claim of deduction under Section 80G of the Income-tax Act, 1961 for donations made as part of Corporate Social Responsibility (CSR).2. Non-grant of deduction for gratuity amounting to Rs. 17,87,315.Detailed Analysis:1. Rejection of Claim of Deduction under Section 80G for CSR Donations:The first issue pertains to the rejection of the assessee's claim for a deduction of Rs. 11,87,500 under Section 80G of the Income-tax Act, 1961, for donations made to charitable institutions as part of CSR activities. The Assessing Officer (AO) disallowed the deduction, referencing an explanatory circular to the Finance (No.2) Act, 2014, and Section 198 of the Companies Act, 2013, which state that deductions under Section 80G are not available for CSR-related donations.The assessee argued before the CIT(Appeals) that there is no restriction in the Income-tax Act regarding claiming deductions under Section 80G for CSR activities, provided the donations are made to eligible entities. However, the CIT(Appeals) upheld the AO's decision, stating that the donations were not voluntary but mandatory under Section 135 of the Companies Act, 2013. The CIT(Appeals) emphasized that for a payment to qualify as a 'donation' under Section 80G, it must be voluntary and without consideration, which was not the case here as the payments were mandated by law.The Tribunal referred to a similar case, Allegis Services (India) Pvt. Ltd. v. ACIT, where it was held that CSR expenditure, though disallowed under Section 37(1), could still be claimed under Section 80G if it met the necessary conditions. The Tribunal concluded that denying the deduction under Section 80G for CSR payments would lead to double disallowance, which is not the intention of the Legislature. Therefore, the Tribunal remitted the issue back to the AO for verification of the conditions necessary for claiming the deduction under Section 80G and directed the AO to grant the deduction to the extent of eligibility.2. Non-Grant of Deduction for Gratuity Amounting to Rs. 17,87,315:The second issue relates to the non-grant of deduction for gratuity amounting to Rs. 17,87,315. The AO denied the deduction as the claim was not made in the return of income or by way of a revised return. The CIT(Appeals) upheld this decision, citing the Supreme Court's ruling in Goetze (India) Ltd. v. CIT, which restricts the AO from entertaining any fresh deduction claims not made through a revised return.The assessee contended that the first appellate authority has the power to entertain additional claims even if not made in the return of income, relying on the Bombay High Court's decision in CIT v. Pruthvi Brokers & Shareholders. The Tribunal agreed with the assessee, stating that the first appellate authority could consider new claims without a revised return, as supported by various judicial precedents. Consequently, the Tribunal remitted the issue back to the AO to quantify the amount of deduction towards gratuity and decide accordingly.Conclusion:The appeal by the assessee was partly allowed for statistical purposes, with the Tribunal remitting both issues back to the AO for further verification and appropriate action.