CSR expense deductibility under charitable donation rules affirmed after legislative clarification; eligible donations allowable when statutory conditions are met.

Revision jurisdiction under review: the document analyses when an assessing officer's order may be treated as erroneous incorrect assumption of fact, incorrect application of law, violation of natural justice, lack of application of mind, or failure to investigate and notes that adopting a legally permissible view does not render an order prejudicial to revenue unless that view is unsustainable in law. It explains legislative clarification that CSR outlays are not business expenditure and that specific donations to certain funds are excluded from charitable-deduction treatment; consequently, donations otherwise meeting statutory conditions qualify for deduction, and challenge to allowance of such CSR deductions was allowed.

---

---

Issues: (i) Whether the Principal Commissioner of Income Tax was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961 to set aside the assessment dated 09-09-2022 on grounds of higher depreciation claim and deduction under section 80G; (ii) Whether CSR-related donations claimed by the assessee are eligible for deduction under section 80G of the Income-tax Act, 1961.

Issue (i): Whether the revision under section 263 was valid in respect of the Assessing Officer's allowance of higher rate of depreciation and the deduction claimed under section 80G.

Analysis: The Tribunal examined whether the Assessing Officer's order was erroneous and prejudicial to revenue as required by Malabar Industries (twin conditions). It noted that the AO had made specific enquiries under section 143(2), received evidence (including purchase date for the motor car and 80G documentation), and took a plausible view in allowing the claims. Where the AO adopts a view permissible in law after inquiry, mere disagreement by PCIT does not render the order erroneous or prejudicial unless the AO's view is unsustainable in law.

Conclusion: The invocation of revisionary jurisdiction under section 263 is not sustainable; the revision order setting aside the assessment is quashed. This conclusion is in favour of the assessee.

Issue (ii): Whether CSR-related donations made by the assessee qualify for deduction under section 80G despite Explanation 2 to section 37(1) denying CSR as business expenditure.

Analysis: The Tribunal considered statutory scheme and precedents holding that Explanation 2 to section 37(1) disallows CSR as business expenditure but does not preclude claims under Chapter VIA (section 80G). Where donations satisfy conditions of section 80G and the donee is eligible, CSR contributions may qualify for deduction. The AO had verified documents and allowed the deduction as a plausible view; several Coordinate Bench decisions support allowing section 80G deduction for CSR donations when conditions are met.

Conclusion: CSR-related donations that satisfy the conditions of section 80G are allowable as deduction under section 80G. This conclusion is in favour of the assessee.

Final Conclusion: The Tribunal allows the appeal, quashes the revision order passed under section 263, and upholds the Assessing Officer's allowance of depreciation and section 80G deduction where the AO had made inquiries and taken a plausible view consistent with law.

Ratio Decidendi: Where the Assessing Officer, after making enquiries and receiving relevant evidence, adopts a view permissible in law, such view is a plausible view and cannot be revisited under section 263 as erroneous and prejudicial to revenue; Explanation 2 to section 37(1) excluding CSR from business expenditure does not preclude a separate deduction under section 80G if statutory conditions for section 80G are satisfied.

---