TaxTMI 
TaxTMI 
2023 (10) TMI 1437
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....acts and circumstances of the case, impugned order passed by the NaFC is subversive of judicial discipline in as much as the same is contrary to the binding precedents that were cited before him and have been noted in the impugned order without distinguishing the same and assigning any reason for deviating from the precedents. 4. On the facts and circumstances of the case, Ld AO and NaFC failed in appreciating that under the Income Tax Act, no restriction has been imposed for claiming deduction under Section 80G of the Act when payment has been made to the eligible entities listed in Section 80G of the Act. 5. On the facts and circumstances of the case, LD AO and NaFC erred in law in applying the fetters of voluntary and involuntary nature of payments to section 80G of the income tax act when no such fetters have been imposed by the legislature. 6. On the facts and circumstances of the case, Ld AO and NaFC failed in appreciating that obligations to incur expenditure on CSR activities flows from the Companies Act, and has no linkage what so ever with Section 80G of the Act except to the extent provided in clause (a) (iiihk) and (a) (iiihl) of Sub Section 2 to Section 80G of....
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....ion of the company and not a voluntary donation In this regard, assessee vide letter dated 11.11.2021 has submitted its submission. Based on the detailed finding recorded in the order of the assessment the ld. AO rejected the claim of deduction u/s. 80G claimed by the assessee for an amount of Rs. 17,16,540/-. 4. Aggrieved from the said action of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A)/NFAC. Apropos to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below: " 6. I have considered the facts of the case and submissions of the appellant. I have also perused the Assessment Order passed by the AO u/s 143(3) rws 1448 of the Income-tax Act, 1961 dated 23.09.2022 6.1 As per the facts culled out from the record and reproduced earlier, the appellant is a closely held company. For AY 2020-21, the appellant filed the return of income on 09.10.2020 declaring total income at Rs. 22,43,54,110/- and income u/s 115JB of Rs.24,45,44,184/- The return was processed under section 143(1) of the Income-tax Act, 1961 and the case was subsequently selected for Complete Scrutiny. While assessing the case under consideration, the ....
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....f deduction for contribution to Swachh Bharat Kosh and Clean Ganga Fund set up by the Central Government which excludes expenditure by way of OSR and if there is anything above the required obligation under Companies Act, that alone is eligible for deduction u/s.80G. The other expenditures by way of specified activities constituting CSR are not eligible for claim under section 80G. The intention of the legislature was never to allow deduction for CSR expenditure, else it would result in subsidizing the expenditure by one third of such expenses by the Government by way of tax expenditure. Furthermore, CSR expenditure is not 'voluntary' but "mandatory" in nature. In the case on hand, the deduction is admissible in respect of any sums, which is paid by the assessee in the previous year as donations to various bodies/institutions indicated in that section. Thus, from a bare reading of the provision, it is clear that the primary requisite of admissibility of deduction under section 80G is that the sums paid must be a donation. This aspect of law came to be expounded, by the Hon'ble Andhra Pradesh High Court in PVG Raju, Raja of Vizianagaran v Commissioner of Expenditure-Tax ....
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....sessee, gave money to the, candidates-of his Party for them to meet their election expenses, he made donations. Even if the met their election expenditure, it was money gratuitously given on their behalf and therefore amounted to donation. Without straining language, we reach the natural conclusion that what the respondent expended for the other candidates during the elections was 'donation' in the language of the law. There is neither suggestion nor evidence that any material return was in contemplation when he spent these sums. Being a politically important man with plenty of money and vitally interested in boosting his Party's standing in the State, he donated liberally for candidates set up by the party. In this view s. 50) applies to these donations which earn exemption from the expenditure tax." From the foregoing discussion, it is observed that a payment to constitute a donation, it must satisfy the test of voluntariness. In the case on hand, the payment made as a part of legal compliance of Corporate Social Responsibility requirements under the Companies Act 2013, cannot be said to be payment on for the purpose of granting a voluntary payment so as to constit....
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....ntary and several times of its legal obligations under the Companies Act. In the circumstances, the valid claim of deduction u/s 80G of the Income Tax Act made by the appellant at Rs 17,16,540/ against the eligible donations made at Rs 7,50,00,000/ cannot be denied. Observations of lower authorities to the effect that the donations made under CSR are not eligible for deduction u/s 80G of the Income Tax Act suffer from gross perversity in law: The appellant submits that the orders of the lower authorities are erroneous for the following reasons; i. Impugned order passed by the NAFC is subversive of judicial discipline in as much as the same is contrary to the binding precedents that were cited before him and have been noted in the impugned order without distinguishing the same and assigning any reason for deviating from the precedents. ii. Ld AO and NAFC have not appreciated that under the Income Tax Act, no restriction has been imposed for claiming deduction under Section 80G of the Act when payment has been made to the eligible entities listed in Section 80G of the Act. iii. Fetters of voluntary and involuntary nature of payments to section 80G of the income tax Act....
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....l payments forming part of CSR does not form part of profit and loss account for computing Income under the head, "Income from Business and Profession". It has been submitted that some payments forming part of CSR were claimed as deduction under section 80G of the Act, for computing "Total taxable income", which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing 'Total Taxable Income". If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature. 20. on the basis of above discussion, in our view, authorities below have erred in denying claim of assessee under section 80G of the Act Bangalore Tribunal in the case of Goldman Sachs Services Pvt. Ltd. vs. JCIT in IT (TP) A No. 2355/Bang/2019 held as under: "16. The last ground of appeal argued by the learned Authorized Representative in respect of disallowance of deduction under Section 80G of the Act In the financial year 2014-15, the assessee has incurred expenditure of Rs.4,72,00,024/- to meet the CSR (Corporate Socia....
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....80G of the Act in respect of contribution made to PM Relief Fund which is not disputed. We are of the opinion that the A.O. has not made his observations clear that no CSR expenses are eligible for deduction u/s. 80G of the IT (TP) A No.2355/Bang/2019 Act. We consider it appropriate to refer to the Clauses (iiihk) & (iiihl) of sub- section 2 of Section 80G of the Act which are read as under : "(iiihk) the Swachh Bharat Kosh, set up by the Central Government, other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of Section 135 of the Companies Act, 2013 (18 of 2013); or (iiihl) the Clean Ganga Fund, set up by the Central Government, where such assessee is a resident and such sum is other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of Section 135 of the Companies Act, 2013) (18 of 2013)." Where these two exceptions are provided in Section 80G of the Act, it can be inferred that the other contributions made u/s. 135(5) of the Companies Act are also eligible for deduction u/s. 80G of Income Tax Act subject to assessee satisfying the requisite conditions prescribed for d....
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....ered at the stage of computing "Total Taxable income". Even if any payments under Section 80G forms part of CSR payments (keeping in mind ineligible deduction expressly provided u/s 80G), the same would already stand excluded while computing, income under the held "income from Business and Profession". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing "Total Taxable income" cannot be denied to assessee, subject to fulfilment of necessary conditions therein............ authorities below have erred in denying claim of assessee under section 80G of the Act......." Mumbai Bench of the Hon'ble Tribunal in Synergia Lifesciences Pvt. Ltd.Vs DCIT Assessment Unit ITA no.938/Mum./2023 Dated 20.06.2023 held as under; "9. We have considered the submissions of both sides and perused the material available on record. The only grievance of the assessee is against the denial of deduction under section 80G of the Act in respect of CSR expenditure. In the present case, it is undisputed that the assessee has not claimed the CSR expenditure under section 37(1) of the Act, and its claim is only ....
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.... Act, 2013 shall not be deemed to have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein." 13. From the above it is clear that under Income tax Act, certain provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, 'Income from Business and Profession" to those, who pursue corporate social responsibility projects under following sections. Section 30 provides deduction on repairs, municipal tax and insurance premiums. Section 31, provides deduction on repairs and insurance of plant, machinery and furniture. Section 32 provides for depreciation on tangible assets like building machinery, plant, and furniture and also on intangible assets like knowhow, patents, trademarks, licenses. Section 33 allows development rebate on machinery, plants and ships. Section 34 states conditions for depreciation and development rebate. ....
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....ing "Total taxable income". Even if any payments under section 80G forms part of CSR payments (keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, "Income from Business and Profession". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing "Total Taxable Income" cannot be denied to assessee, subject to fulfilment of necessary conditions therein. 17. We therefore do not agree with arguments advanced by Ld. Sr.DR. 18. In present facts of case, Ld. AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, "Income from Business and Profession". It has been submitted that some payments forming part of CSR were claimed as deduction under section 80G of the Act, for computing "Total taxable income", which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing Total Taxable Income". If assessee is denied this benefit, merely bec....
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..... * M/s FNF India Private Ltd. vs. ACIT in ITA No. 1565/Bang/2019 dated 05.01.2021. * Synergia Lifesciences Pvt. Ltd. vs. DCIT in ITA No. 938/Mum/2023 dated 20.06.2023. 6. Per contra, the ld DR relied upon the order of the ld. CIT(A). He also relied on the order of Hon'ble Supreme Court in the case of Securities and Exchange Board of India vs. Kishore R. Ajmera [2016 66 taxmann.com 288 (SC) ] and submitted that the deduction is not allowable. The ld. DR also submitted that Finance Bill, 2014 inserted Explanation 2 in section 37(1) to clarify that any expenditure incurred by the assessee on CSR as referred to in the section 135 of the Companies Act, 2013. Thus, once the expenditure incurred is prohibited u/s. 37(1) cannot be considered for further deduction u/s. 80G of the Act. 7. We have heard the rival contentions, perused the material placed on record and gone through the judicial precedent cited by both the parties to drive home their respective contentions. Admittedly the assessee has made donation of Rs. 7,50,00,000/- to Shri Ratan Lal Kanwar Lal Patni Foundation. Since the said trust is registered with the Income Tax Department donation made to the said trust was consid....
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....estricted u/s. 80G of the Act. Under the Income Tax once the Gross total income is computed the assessee is allowed deduction under chapter VIA of the Act of the certain payments and section 80G comes under that Chapter. Thus, the deduction is allowed after the income is computed under chapter VIA. Thus, the point of disallowance u/s. 37(1) and donation is considered as deduction even if the same is disallowed while computing the total income of the assessee and the same is the case here. Thus, the point of disallowance and deduction are different. Thus, for claiming deduction u/s. 80G of the Act even if the payment is not considering while computing the income of the as per provision of section 37(1) of the Act in this case. The bench notes that section 80G(2)(iiihk) and (iiihl) specific excluded as it is evident from the extract of section 80G of the Act; Deduction in respect of donations to certain funds, charitable institutions, etc. 6580G. (1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section,- (i) in a case where the aggregate of the sums specified in sub-section (2) includes a....