TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 373
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.... counsels of both the parties, perused the material placed on record, Judgements cited before us and also orders passed by Revenue Authorities. From the record, we noticed that as per the facts of the present case the assessee is a company engaged in the business of broking, distribution of financial products etc. During the year under consideration, the assessee had made donation to Axis Foundation of Rs. 24,20,000/- and had claimed deduction under section 80G of the Act. Although the assessee had classified the amount of donation as "Corporate Social Responsibility" (CSR) expenses under section 135 of the Companies Act, 2013 in his books of account and suo moto disallowed the same in computation of income in accordance Explanation 2 of section 37 of the Act. However, in his return of income, the assessee claimed deduction under section 80G of the Act. The said claim was duly disclosed in the computation of income and tax audit report, which was examined and allowed by the Ld. AO while passing the order of assessment under section 143(3) of the Act dated 24.9.2022. 6. Later on, Ld. PCIT invoked revision jurisdiction under section 263 of the Act and passed the impugned order by ho....
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.... CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditures cannot be allowed under the provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, said section 37 has been amended to clarify that for the purposes of sub-section (1) of section 37 any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under said section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Income-tax Act shall be allowed as deduction under those sections subject to fulfillment of conditions, if any, specified therein." 9. The CBDT Circular clearly states that the restriction on claiming deduction of CSR expense is only with respect to Section 37(1) of the Act wherein it will not be deemed to be a business expenditure for the purpose computing income under the head 'Profits and Gains from Business or Profession'. The Circular ....
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.... for purpose of business. The embargo created by Explanation 2 inserted in section 37 by Finance (No. 2) Act, 2014 was to deny deduction for (3SR expenses incurred by companies, as and by way of regular business expenditure while computing 'income under the head business'. So, it can be clearly seen that this Explanation 2 to section 37(1) which denies deduction for CSR expenses by way of business expenditure is applicable only to the extent of computing 'business income' under Chapter IV-D. The said Explanation cannot be extended or imported to CSR contributions which are otherwise eligible for deduction under any other provision or Chapter, so as to say donations made by charitable trust registered under section 80G.Parliament has expressed its intention clearly by bringing in restriction in respect of expenditure classified by an assessee company while claiming deduction under section 80G i.e. CSR expenditure related to Swachh Bharat Kosh and Clean Ganga Fund. And if the Parliament desired, it could have been made such kind of restriction or any restriction like in the case of donation to Swachh Bharat Kosh& Clean Ganga Fund. So the assertion of the Assessing Off....
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....y the Id. AO during the course of assessment proceedings and without finding any defect in such order or how the claim allowed by the Id. AO u/s. 80G is unsustainable in law, he cannot cancel the assessment order. Assessee has also relied upon various Tribunal decisions directly on this issue which has also been incorporated in the impugned order, wherein it has been held that even if the money spent for CSR is disallowable but if the same has been paid to charitable organisation and donation is claimed u/s. 80G, the same is allowable, because both operate separately. Thus, taking a contrary opinion does not mean that order of the Id. AO erroneous and prejudicial to the interest of the Revenue. 12. Claiming a deduction from computation of business income as provided from sections 28 to 44DB is different from claiming a deduction under chapter VIA of the Act which is allowed from Total Income. As per Explanation 2 to Section 37, CSR expenditure is not allowable as deduction while computing the business income under the provision of Section 28-44DB, whereas deduction u/s. 80G is allowed while computing the total income under Chapter VIA. There is no pre-condition that claim for ded....