TaxTMI 
TaxTMI 
2024 (8) TMI 1585
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....assessment order. 1.2 The assessment order dated 22nd April 2021 passed under Section 143(3) r.w.s. 144B of the Act is not erroneous in so far as it is prejudicial to the interest of the Revenue and thus the order passed u/s. 263 of the Act is without jurisdiction. 2. The Ld. Principal Commissioner of Income-tax-2, Mumbai erred in directing the Assessing Officer to re-examine the claim of deduction of Rs. 25,47,175/- under Section 80G of the Act on the ground that the donation classified as 'Corporate Social Responsibility expenditure is not eligible for deduction under Section 80G of the Act. 3. The Ld. Principal Commissioner of Income-tax-2, Mumbai erred in directing the Assessing Officer to re-examine the claim of bank charges amounting to Rs. 1,13,95,084/- The expenses were incurred wholly and exclusively for the purpose of business and there is no reason for the Ld. Principal Commissioner of Incometax- 2, Mumbai to intervene in the matter and issue directions to the Assessing Officer to re-verify the same. 4. The Ld. Principal Commissioner of Income-tax-2, Mumbai erred in directing the Assessing Officer to re-examine the Provisions aggre....
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.... of corporate affairs vide Circular No.01/2016 dated 12/01/2016 and also various decisions of the Tribunal that out of CSR funds if assessee pays donation to an institution recognized u/s.80G, same is allowable as deduction. 6. In so far as bank charges are concerned, it was submitted that ld. AO has called for all the bank statements and specifically asked about the bank charges. Assessee had filed the entire details of the bank charges incurred and proved that it was wholly and exclusively for the purpose of business. Lastly, with regard to provision for gratuity, leave salary and provision for tax aggregating to Rs.3,37,39,599/- it was submitted that the provision made during the year had been disallowed in the return of income and provision for tax has not been claimed, therefore, there is no question of any disallowance. 7. Ld. PCIT despite noting these submissions had set aside the assessment order after observing as under:- 5. I have gone through the records and the submissions of the assessee carefully. During the proceedings u/s 263, the assessment case records has been perused and it has been noticed that following issues were not duly addressed and conside....
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.... 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 explaining the very basis of bring....
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.... as material referred to before us. The ld. PCIT has cancelled the assessment mainly on three points:- 1. Donation under Section 80G of Rs.25,47,175/-. Amount spent as 'Corporate Social Responsibility (CSR). 2. Bank charges of Rs.1,13,95,084/- 3. Provision for gratuity, leave salary and provision for tax all aggregating to Rs.3,37,39,599/- 9. First of all, it has been pointed out by the ld. Counsel before us that ld. AO has specifically raised the queries on all the three issues vide notice dated 16/03/2020 and further notice dated 25/11/2020. In response assessee had filed detailed submissions on all these three issues alongwith detailed notes and the copy of all the documents furnished before the AO had also been placed before us in the paper book. He further pointed out that assessee had debited CSR expenses of Rs.50,94,350/- but assessee has not made any claim for CSR expenses as revenue expenditure u/s.37(1). The said amount was given as a donation to Rosy Blue Foundation which was carrying out CSR activities and also recognised as 80G. Thus, the donation per se does not fall in the category of CSR nor it has been claimed as Revenue expenditure, a....
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....ides that in computing total income of the assessee, they shall be deducted in accordance with the provision of Section, such sum paid by the assessee in the previous year as a donation. Deduction under Chapter VIA provides deduction from the gross total income which is computed after making necessary allowances / disallowances in accordance with Section 28-44BB of the Act including Explanation to Section 37(1). Thus, Section 37(1) and Section 80G of the Act are independent and the principles governing what is not allowable u/s. 37(1) have been provided in the section itself. Even in section 80G also, what is not allowable has also been provided under the Act. For instance, Section 80G specifically mentions two clauses, viz., section 800(2)(a)(iihk) and (iiihl), i.e., contributions towards 'Swacha Bharat Kosh' and 'Clean Ganga Fund', where donation in the nature of CSR Expenditure is not allowable as deduction under section 80G of the Act. Therefore, the disallowances for deduction under section 80G vis-à-vis CSR can be restricted to contributions made to these Funds mentioned in Section 800(2)(a)(iiihk) and (iiihl) only. It is an undisputed fact that the assessee has not cl....
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....s that ld. AO has not examined this issue. Once the entire details have been furnished before the Assessing Officer alongwith justification for allowability in response to specific notice u/s. 142(1) in its reply dated 16/04/2023, we do not find any reason as to why such an allegation has been made by the ld. PCIT. For the sake of ready reference, the relevant extract of the reply filed before the ld. AO reads as under:- "2. In regard to Bank charges aggregating to Rs.1,13,95,084/-, We are enclosing herewith the details of bank charges, Extract of ledger account of bank charges and Specimen bank advices. It would be appreciated from the ledger that bank charges mainly consist of Export realization charges, Import payment charges, Processing fees etc levied by banks. Entire bank charges are revenue in nature and incurred wholly and exclusively for the purpose of business of the Company." 14. Apart from that, the entire bank charges debited pertains to export realization paid to the Bank of India and State Bank of India and for Import payment charges and processing fees levied by the banks. If these expenses are directly connected to assessee's business, then how same is ....
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.... 92,09,485 92,09,485 Total 2,32,13,947 1,05,25,652 3,37,39,599 A: Provision for Gratuity: Particulars Amount (Rs.) Closing Balance as on 31st March 2018 2,13,90,229 Less: Opening Balance as on 1st April 2017 1,59,19,606 Provision during the year under consideration and disallowed in the return 54,70,623 B: Provision for Leave Encashment: Particulars Amount (Rs.) Closing Balance as on 31st March 2018 31,39,885 Less: Opening Balance as on 1st April 2017 30,30,197 Provision during the year under consideration and disallowed in the return 1,09,688 The provisions for Gratuity of Rs 54,70,623 and Leave Encashment of Rs. 1,09,688/- were disallowed in the return of income (Refer Computation of income at Page 83) These disallowances have also been disclosed in the Tax Audit Report at Page 90 and 92 Provision for Tax of Rs. 92,09,485/- is accounted below the line. The Computation of Total Income starts from 'Profit Before Tax' which does not include the Provision for Tax of Rs. 92,09,485/- The same is evident from the Statement of Profit and Loss (Page 102) ....