2022 (12) TMI 1015 - AT - Income Tax

Tribunal rules in favor of assessee, overturns revision order under Section 263.

The Tribunal held that the Principal Commissioner of Income-tax (Pr. CIT) did not demonstrate that the Assessing Officer's order was erroneous and ... Revision u/s 263 - Eligibility of deduction u/s 80G - Deduction u/s 80G for which no evidence in support of payment of donation is produced to ascertain its veracity AND Deduction u/s 80G on account of CSR expenses which is not allowable in terms of Explanation to section 37 of the Act and is required to be added back in the computation of income - HELD THAT:- We note that assessee has rightly claimed deduction of CSR expenses u/s 80G of the Act, more importantly, in the light of the fact that it has suo moto added back the amount of CSR expenditure while computing the income under the head income from business. There is no express provision u/s 80G which prohibits allowance of CSR expenses in the form of donation to approved trust except under two instances referred in section 80G(2)(iiihk) and (iiihl) for contribution to Swacha Bharat Kosh and Clean Ganga Fund respectively. Explanation 2 to section 37(1) which denies deduction for CSR expenses by way of business expenditure is applicable only to the extent of computing business income under Chapter IV-D and it cannot be extended or imported to CSR contribution which was eligible for deduction under Chapter VI. Thus in our considered understanding, donation made by the assessee on account of CSR expenses to a trust which is duly registered u/s 80G(5)(vi) is allowable as deduction u/s 80G - Having so held, which is also fortified by the decision of JMS Mining Pvt. Ltd [2021 (7) TMI 907 - ITAT KOLKATA] we find that ld. PCIT has not been able to make out a case on the issue raised by him that the order of ld. AO is erroneous in so far as prejudicial to the interest of the revenue. Deduction u/s 80G for donation made to Ramkrishna Mission Ashram, ld. PCIT took an adverse view for want of donation receipts and certificate of registration of the donee. Assessee has furnished all the relevant documentary evidences to substantiate its claim which ld. PCIT has failed to consider himself. As already noted above, we do not ascribe to the action taken by the ld. PCIT on this issue also. As in the case of DG Housing Projects Ltd [2012 (3) TMI 227 - DELHI HIGH COURT] held that in cases of wrong opinion for finding on merit, the CIT has to come to the conclusion and himself decide that order is erroneous, by conducting necessary enquiry, if required and necessary before the order u/s 263 of the Act is passed. In such cases, the order of the AO will be erroneous because the order passed is not sustainable in law and the said finding must be recorded by CIT who cannot remand the matter to the assessing officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/enquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the AO, making the order unsustainable in law. Both on facts and applicable law along with documentary evidences placed on record and judicial precedents relating to the issues raised by the ld. Pr. CIT in invoking the revisionary proceedings, we have no hesitation in quashing the revision order passed by the ld. Pr. CIT u/s 263 of the Act. Accordingly, grounds raised by the assessee are allowed. Issues Involved:1. Assumption of jurisdiction by the Principal Commissioner of Income-tax (Pr. CIT) under Section 263 of the Income-tax Act, 1961.2. Deduction under Section 80G of the Income-tax Act for donations amounting to Rs. 20,000.3. Deduction under Section 80G of the Income-tax Act for Corporate Social Responsibility (CSR) expenses amounting to Rs. 15,37,987.Detailed Analysis:1. Assumption of Jurisdiction by Pr. CIT under Section 263:The assessee challenged the jurisdictional assumption by the Pr. CIT for invoking revisionary proceedings under Section 263. The Pr. CIT initiated the proceedings based on perceived errors in the assessment order related to deductions under Section 80G. The Tribunal examined whether the Pr. CIT rightly exercised his revisional powers by assessing if the order of the Assessing Officer (AO) was erroneous and prejudicial to the interest of the Revenue. The Tribunal relied on the Supreme Court's judgment in Malabar Industries Ltd. vs. CIT, which states that both conditions must be satisfied for invoking Section 263.2. Deduction under Section 80G for Donations of Rs. 20,000:The Pr. CIT questioned the deduction claimed for a donation of Rs. 20,000 to Ramakrishna Mission, citing a lack of evidence. The assessee provided various documents, including payment vouchers, acknowledgment receipts, and exemption certificates, to substantiate the claim. The Tribunal found that the Pr. CIT failed to consider these documents and held that the AO's order was neither erroneous nor prejudicial to the interest of the Revenue based on the provided evidence.3. Deduction under Section 80G for CSR Expenses of Rs. 15,37,987:The Pr. CIT contended that the deduction for CSR expenses was not allowable under Section 80G due to Explanation 2 to Section 37, which disallows CSR expenses as business expenditure. The assessee argued that the CSR expenses were added back to the business income and claimed as a deduction under Section 80G, which does not explicitly prohibit such deductions except for contributions to Swachh Bharat Kosh and Clean Ganga Fund. The Tribunal agreed with the assessee, noting that the AO had conducted adequate enquiry and that the Pr. CIT's interpretation of Explanation 2 to Section 37 was incorrect. The Tribunal also referenced the ITAT Kolkata decision in JMS Mining (P) Ltd. vs. Pr. CIT, supporting the allowance of CSR expenses under Section 80G.Conclusion:The Tribunal concluded that the Pr. CIT did not establish that the AO's order was erroneous and prejudicial to the interest of the Revenue. The Tribunal quashed the revision order passed by the Pr. CIT under Section 263, allowing the appeal of the assessee. The Tribunal emphasized that the AO had conducted a proper enquiry and that the Pr. CIT's actions were based on an incorrect interpretation of the law. The Tribunal's decision was pronounced in the open court on 21.12.2022.