TaxTMI 
TaxTMI 
2025 (7) TMI 438
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....see is a Government of Gujarat undertaking engaged in the business of taping major mineral resources and developing mineral based industrial products. The assessee filed its return of income for the assessment year 2020-21 on 30.03.2021 declaring total income of Rs. 1,90,01,26,570/-. The return was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny under the Computer Aided Scrutiny Selection (CASS) system for multiple parameters, inter alia, claim of deductions under Chapter VI-A, claim under section 80IA, compliance with TDS provisions, expenses incurred for earning exempt income, ICDS adjustments, and refund claims. Accordingly, notices under sections 143(2) and 142(1) were issued on 29.06.2021 and 15.12.2021 respectively, and the assessee furnished its responses thereunder. During the course of assessment proceedings, the Assessing Officer noted that the assessee had earned exempt income amounting to Rs. 8,28,12,464/- during the year under consideration. The Assessing Officer further observed that the assessee had made substantial investments, aggregating to Rs. 2,50,53,20,000/- as on 31.03.2020 and Rs. 4,13,73,16,000/- as on 31.03.2019, ....
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....served that the assessee had added back the entire CSR expenditure of Rs. 10,90,50,000/- in its computation of income but simultaneously claimed deduction under section 80G for Rs. 5,00,00,000/-, being 50% of the donation made to registered trusts. According to the PCIT, this amounted to an indirect claim of CSR expenditure, which is prohibited by Explanation 2 to section 37(1) inserted by the Finance Act, 2014. The PCIT noted that the nature and motive of CSR under the Companies Act is application of income, and such expenditure is not incurred wholly and exclusively for business purposes. Allowing deduction of such expenses, even in the form of donation under section 80G, would result in subsidising CSR outlay through tax expenditure, contrary to legislative intent. The PCIT further observed that the assessee did not comply with section 135(4)(b) of the Companies Act, 2013, as the CSR activities were routed through third-party trusts instead of being undertaken directly or through eligible implementing agencies. In the view of the PCIT, this treatment defeated the object of both the Companies Act and the Income-tax Act. The Assessing Officer had failed to examine whether the dona....
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....r U/s 263 of The Income Tax Act, 1961 dated 07/03/2025. 2. Your appellant craves leave to add, to alter or to amend the grounds of appeal if occasion arises. 7. The learned Authorised Representative (AR) vehemently opposed the assumption of jurisdiction by the PCIT under section 263 of the Act and submitted that the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. 8. With respect to the claim of deduction under section 80G amounting to Rs. 5,00,00,000/-, the learned AR submitted that the donations were made to institutions duly approved under section 80G(5), and the claim was restricted to the eligible portion (50%) in accordance with law. It was contended that such deduction is governed by section 80G, which operates independently of section 37(1), and cannot be denied merely because the amount forms part of the assessee's CSR expenditure. The AR further submitted that the assessee had suo motu disallowed the entire CSR expenditure of Rs. 10,90,50,000/- in its computation of income and had not claimed any deduction under section 37(1). The deduction under section 80G was claimed only in respect of voluntary donations to approved....
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....] 5. Principal Commissioner of Income-tax v. NYA International [2025] 173 taxmann.com 103 (SC) 10. The learned Departmental Representative (DR) relied upon the order of the PCIT and submitted that the claim of deduction under section 80G, in respect of donations forming part of CSR expenditure, was at best a debatable issue, and in such a situation, the PCIT was justified in invoking revisionary powers under section 263. 11. We have carefully considered the rival submissions and perused the assessment order, the impugned order passed by the PCIT and the material placed on record including the paper book and judicial precedents cited. The limited controversy in this appeal relates to the assumption of revisional jurisdiction by the PCIT under section 263 of the Act on two distinct issues: (i) allowability of deduction under section 80G in respect of donations forming part of the assessee's CSR expenditure, and (ii) allowability of deduction of Rs. 59,03,79,923/- claimed as "GST Credit Expenses Written Off". The PCIT held the assessment order dated 23.09.2022 passed under section 143(3) r.w.s. 144B to be erroneous in so far as it is prejudicial to the interest of t....
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....n cannot be denied merely because it coincides with or arises out of CSR obligations. Therefore, we find no infirmity in the assessment order on this issue, and the action of the PCIT in invoking section 263 is unsustainable in law. 15. The PCIT has also set aside the assessment order on the ground that the Assessing Officer allowed the claim of deduction of Rs. 59,03,79,923/- on account of "GST Credit Expenses Written Off" without conducting necessary verification. It was contended that the AO did not call for details of input tax credit accumulation, eligibility under the GST law, refund restrictions under section 54 of the CGST Act, and related accounting entries. 16. From the record, we observe that the assessee had furnished detailed replies dated 06.01.2022 and 07.02.2022 before the Assessing Officer in the course of assessment proceedings, explaining the nature of the unutilized GST input credit. The assessee clarified that due to an inverted duty structure-input GST on mining services being 18% and output GST on lignite sales being 5%-a substantial portion of ITC became unutilisable. It was further explained that refund of such ITC was not permissible under the extant....
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....l Bench of Gauhati High Court in case of CIT v. Jawahar Bhattacharjee [2012] 341 ITR 434/209Taxman 174/24 taxmann.com 215 held that not holding such inquiry as is normal and not applying mind to relevant material in making assessment by the Assessing Officer would be an erroneous assessment warranting exercise of revisional jurisdiction. It was held as under: "23. Accordingly, we hold that Daga Entrade P. Ltd [2010] 327 ITR 467 (Gauhati) lays down correct law and the same is not in conflict with the earlier order of this court in Rajendra Singh [1990] 79 STC 10(Gauhati). Jurisdiction under section 263 can be exercised whenever it is found that the order of assessment was erroneous and prejudicial to the interest of the Revenue. Cases of assessment order passed on wrong assumption of facts, or incorrect application of law, without due application of mind or without following the principles of natural justice are not beyond the scope of section 263 of the Act. " 18. In case of CIT v. Arvind Jewellers [2003] 259 ITR 502/[2002] 124 Taxman 615 (Guj.) Division Bench of this Court referring to the judgement of Supreme Court in case of Malabar Industrial Co. Ltd. v. CIT [....