Appellate claim for CSR-linked deduction and non-taxation of depreciable asset sale profit succeeded where statutory conditions were not met.

Deduction under section 80G for CSR expenditure was allowed because a claim may be raised at the appellate stage if the underlying legal entitlement exists, and denial merely because it was not made during assessment was not a valid basis. Profit on sale of depreciable fixed assets was also not separately taxable as business income, because the block of assets retained a positive value after the sale and the statutory mechanism under section 50 was not attracted. On both issues, the additions were deleted and the assessee succeeded.

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Issues: (i) Whether disallowance of deduction claimed under section 80G on account of CSR expenditure could be sustained merely because the claim was not made during the assessment stage; and (ii) whether the profit on sale of depreciable fixed assets could be brought to tax as business income when the block of assets did not become negative and section 50 was inapplicable.

Issue (i): Whether disallowance of deduction claimed under section 80G on account of CSR expenditure could be sustained merely because the claim was not made during the assessment stage.

Analysis: The return had been processed under section 143(1), and the deduction claim was raised before the first appellate authority as an additional claim. The claim was considered legally entertainable at the appellate stage. The disallowance was sustained below only on the ground that the deduction had not been sought during assessment, which was not accepted as a valid basis to deny the claim.

Conclusion: The disallowance under section 80G was not sustainable and the issue was decided in favour of the assessee.

Issue (ii): Whether the profit on sale of depreciable fixed assets could be brought to tax as business income when the block of assets did not become negative and section 50 was inapplicable.

Analysis: The asset sold formed part of a depreciable block, and after the sale the block still retained a positive value. The sale consideration had already been adjusted in the block for depreciation computation under the Act. On those facts, the profit on sale of the fixed asset was not exigible to separate taxation under section 50 or as ordinary business income.

Conclusion: The addition of profit on sale of fixed assets was unsustainable and the issue was decided in favour of the assessee.

Final Conclusion: Both disputed additions were deleted, and the assessee succeeded on all substantive grounds decided in the appeals.

Ratio Decidendi: A claim raised for the first time at the appellate stage may be entertained where the legal entitlement is otherwise available, and profit arising from sale of depreciable assets is not separately taxable when the block of assets continues to exist with a positive value and the statutory mechanism under section 50 is not attracted.

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