ITAT sets aside revision order under section 263 for CSR donations eligible for 80G deduction

ITAT Mumbai set aside Pr.CIT's revision order u/s 263 regarding assessee's eligibility for deduction u/s 80G on CSR donations. The tribunal held that A.O. had applied mind during scrutiny assessment, conducted necessary inquiries, and adopted one possible view. Pr.CIT failed to establish twin conditions of order being erroneous and prejudicial to revenue. Since A.O. verified facts, didn't doubt genuineness of expenditure, and assessee was eligible for 80G deduction with no dispute on donee institutions' registration, the revision was unjustified. Appeal allowed in assessee's favor.

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Issues Involved:
1. Validity of proceedings u/s 263.
2. Allowability of deduction u/s 80G for CSR contributions.

Summary:

1. Validity of Proceedings u/s 263:
The assessee filed an appeal against the order of the Pr. Commissioner of Income Tax (Pr.CIT)-2, Mumbai, passed u/s 263 of the Income Tax Act, 1961. The Pr.CIT held that the assessment order dated 08.04.2021, passed u/s 143(3) read with sections 143(3A) & 143(3B), was erroneous and prejudicial to the interests of the revenue. The Pr.CIT found that the Assessing Officer (AO) did not conduct requisite inquiries regarding the allowability of deduction u/s 80G for donations made as part of CSR contributions. The Pr.CIT issued a revision notice and directed the AO to conduct further inquiries and frame a fresh assessment order.

2. Allowability of Deduction u/s 80G for CSR Contributions:
The assessee argued that the provisions relating to the disallowance of CSR expenditure apply only to deductions u/s 37(1) and not to deductions u/s 80G. The assessee claimed a deduction of Rs. 48,59,170 u/s 80G for donations made to eligible institutions, forming part of CSR contributions. The Pr.CIT, however, was not satisfied with the assessee's explanations and submissions, and directed the AO to verify the nature of the donations and the donee institutions.

Tribunal's Decision:
The Tribunal held that the AO had considered the facts and submissions during the assessment proceedings and had applied his mind to the genuineness of the claim. The Tribunal noted that the assessee had provided detailed submissions and evidence in support of the claim during the revision proceedings. The Tribunal also referred to various judicial decisions to support the validity of the assessee's claim for deduction u/s 80G, even if the donations formed part of CSR expenditure. The Tribunal concluded that the Pr.CIT's order did not satisfy the twin conditions of being erroneous and prejudicial to the interest of the revenue. Consequently, the Tribunal set aside the Pr.CIT's order and allowed the appeal in favor of the assessee.

Final Order:
The appeal filed by the assessee was allowed. The order was pronounced in the open court on 03.06.2024.

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