TaxTMI 
TaxTMI 
2024 (6) TMI 329
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.... Allowability of deduction under section 80G of the Act in respect of contributions towards Corporate Social Responsibility ('CSR') of Rs. 48,59,170: 2. erred in directing the Assessing Officer to conduct requisite enquiries in relation to allowability of deduction under section 80G in respect of donations made to eligible institutions and forming part of CSR contributions, and to frame a fresh assessment order accodingly. 3. erred in not appreciating the fact that the provisions relating to disallowance of CSR expenditure have been introduced only in connection with allowability of deduction under section 37(1), and do not apply to allowability of deduction under section 80G of the Act 4. erred in not appreciating the fact that the provisions of section 80G [in clauses (iiihk) and (iiihl)] specifically provide for disallowance of deduction only in respect of certain specific CSR contributions, viz. Swachh Bharat Kosh and Clean Ganga Fund, and thereby deduction is allowable under section 80G of the Act in respect of other eligible CSR contributions.. 2. The Brief facts of the case are that, the assessee company is engaged in the business of ren....
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....vision proceedings u/s 263 of the THE INCOME TAX ACT, 1961-Assessment Year 2018-19 In this regard, a hearing in the matter is fixed on 11/12/2023 at 11:00 AM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in 1. In your case, the relevant case records were called for the AY 2018-19 and examined. It is seen from the examination of the said records that the Return of Income was filed for the year on on 30.11.2018 declaring total income of Rs. 129,92,74,400/-. The assessment was completed u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act on 08.04.2021 assessing the total income at Rs. 147,17,46,060/-. 2. On perusal of the case records, it is noticed that an amount of Rs. 48,....
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...., any sum spent in pursuance of Corporate Social Responsibility under subsection (5) of Section 135 of the Companies Act, 2013 will not be eligible for deduction from the total income of the donor." 2.31 Hence, it would not be out of case to mention that if the intent of legislature was that any expenditure towards CSR is not eligible for deduction u/s. 80G of the Act, then restriction would not have been made specifically for donation to SwachhKosh and Clean Ganga Fund only. Consequently, where the donation (other than contribution made to Swachh Bharat Kosh and Clean Ganga Fund) is made to the trust/institution covered u/s. 80G(5) of the Act, deduction for such donation is allowable to the assessee even if such donation also qualifies as CSR payments u/s. 135(5) of the Companies Act, 2013. 2.50 It is submitted that expenditure incurred towards CSR is not allowable as deduction u/s. 37 of the Act while computing the income chargeable under the head income from business and profession. However, where such CSR expenses is covered by any other specific section of the Act (i.e. other than section 37 of the Act), the same is allowable as deductible item to the assesse....
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....urred for the purposes of business. In the said Memorandum to the Finance Act, it has been clearly stated that these expenses, if allowed as tax deduction would result in an anomalous situation of Government subsidising the said expenditure incurred by the tax payers. The relevant extract of the Memorandum is as follows:- "13.2 CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing the taxable income of the company. Moreover, the objective of CSR is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold. If such expenses are allowed as tax deduction, this would result in subsidising of around one-third of such expenses by the Government by way of tax expenditure". This is, both, a case of no enquiry on the issue and also non application of mind on the issue with respect to the clarifications given in the Memorandum to the Finance Act explaini....
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....dicial to the interest of the revenue. When an order is erroneous, then the order is also deficient and in order to remedy the situation, power under section 263 of the Act has been given. Therefore, the view that the power could not have been exercised to allow the Assessing Officer to make up the deficiency is altogether an incorrect impression of the law. Further, incorrect impression of law of the Ld. Tribunal is to be found from the following sentence." "If there is an enquiry, even inadequate, that would not by itself give occasion to the Ld. CIT to pass order u/s. 263 of the Act." From the above, it can be inferred that inadequate enquiry by the Assessing Officer would make the order erroneous and prejudicial to the interest of Revenue. Incorrect assumption of facts and improper application of mind would also make the order erroneous and prejudicial to the interest of revenue. 10. Thus, it is observed that in the above highlighted issue has not been examined by the assessing officer at all and the assessment order has been passed without making requisite inquiries or verification which should have been made under the facts and circumstances of the ....
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....s the AO having considered these facts reflected in the Return of Income has applied his mind and was satisfied with the genuineness of claim and accepted in compliance with the scrutiny guidelines. Further the assessee has submitted the evidences/donation receipts in support of claim of deduction u/sec. 80G of the Act in the detailed submissions filed vide letter dated 22.12.2023 in the revision proceedings U/sec. 263 of the Act. The Pr.CIT has overlooked these factual aspects and evidences and dealt on the provisions of section 37(1) of the Act and without considering the merits of claim has issued directions to the Assessing officer to conduct enquiries. Further Ld. AR has substantiated the submissions with the factual paper book and judicial decisions and prayed for allowing the assessee appeal. 8. Per Contra, the Ld. DR submitted that the AO has not dealt on the facts that the assessee has made donations and no enquiry was conducted and the Ld.DR relied on the order of the Pr.CIT. 9. We heard the rival submissions and perused the material on record. The Ld.AR envisaged that the order passed by the Pr.CIT is bad in law as the order revised under revision proceedings passe....
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....o submitted that explanation (2) to Sec. 263 of the Act are to be considered only when the AO has not applied his mind and no facts are verified and no enquiry was conducted. The Ld. AR contended that the assessee has complied with the statutory notices and filed reply online through ITBA. The Ld.AR relied on the judicial decisions on the validity of revision proceedings U/sec. 263 of the Act and the donations though forming part of CSR Expenditure are eligible for claim of deduction u/sec. 80G of the Act as under: 1. Malbar Industrial Co. Ltd Vs. CIT, (SC), 109 taxman 66 2. CIT Vs. Jain Construction Co., 34 taxmann.com 84 (Raj HC) 3. Bajaj Electricals Ltd Vs. Pr. CIT, ITA No. 1302/Mum/2021 4. FDC Ltd Vs. PCIT, 157 taxmann.com 387 (Mum Trib) 5. JMS Mining (P.) Ltd Vs. Pr. CIT, 130 taxmann.com 118 (Kol Trib) 6. Naik Seafoods Pvt Ltd Vs. PCIT, ITA No. 490/Mum/2021 7. Synergia Lifesciences Pvt Ltd Vs. DCIT, ITA No. 938/Mum/2023 8. ACIT Vs. M/s Rustomjee Realty Pvt Ltd., ITA No. 1585/Mum/2023 9. Societe Generale Securities Ind Pvt Ltd Vs. Pr. CIT, ITA No. 1921/Mum/2023. 10. National Seeds Corp Ltd....
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....tural justice or without application of mind, would be an order falling in that category. The expression "prejudicial to the interests of the Revenue", the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) "The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law." The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subseque....
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....nsidering the ratio of decisions of the Hon'ble High courts, find that the Pr.CIT before holding the order of the A.O. is erroneous should conduct necessary inquiries. The Ld.AR submitted that the Pr.CIT has not considered the facts that the A.O has called for the information in the scrutiny assessement and hence there cannot be any non application of mind by the A.O. Further if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt with by the A.O. in the order cannot implied that there is no application of mind. We find that the A.O has considered one of the possible views based on the information and it is not necessary that the A.O should put all the discussions/observations in the assessment order, as per explanation (2) to sec 263 of the Act the authority has to invoke provisions only when there is no verification and enquiry conducted by the A.O. Whereas the A.O has applied his mind and verified the facts and has not doubted the genuineness of expenditure. The Ld. AR referred to the submissions, financial statements, judicial decisions and explanations filed before the A.O. We find the Hon'ble High Court of Bomb....