TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 953
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....nvoking the jurisdiction under Section 263 of the Income-tax Act, 1961 ('the Act') and passing the order dated 20th March 2025 setting aside the assessment order passed u/s. 143(3) of the Act, without appreciating that the assessment order dated 24th September 2022 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-4, Mumbai erred in directing the Assessing Officer to disallow the claim of deduction to the extent of Rs. 96,83,474/- 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 Appellant is a company engaged in the business of broking, distribution of financial products and advisory services. During FY 2019- 20 relevant to AY 2020-21, the Appellant had made donation as under: Sr. No. Name of Donee Donation Amount (Rs.) % of Donation eligible for deduction u/s. 80G Amount of Deduction claimed u/s. 80G 1 Axi....
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....he details of deductions, exemptions and rebate claimed during the year along with supporting documents." 9. In response to the above-mentioned notice, the Appellant, vide letter dated 13th January 2022 (Page 78-86 of the Paper book), furnished details of donation made and furnished 80G Certificate of the donees and the receipts. Attention is invited to the Appellant's response at Page 81 of the Paper book wherein it was specifically stated that the donation claimed is out of "Expenses towards Corporate Social Responsibility". Based on the above, it is evident that details of donation and CSR expenditure were enquired by the AO and explanation was furnished by the Appellant which was accepted. The Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [243 ITR 83] has held that the phrase "prejudicial to the interest of revenue" occurring in section 263 of the Act has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Further every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. It is settled law that if the Assessing Of....
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.... is invalid and consequential order dated 20th March 2025 is bad in law and deserves to be quashed. Ground of Appeal No. 2: Deduction under Section 80G eligible in respect of donation classified as 'Corporate Social Responsibility' expenses "12. With respect to the issue of deduction under section 80G of the Act in respect of expenses classified as Corporate Social Responsibility, the Pr. Commissioner of Income-tax has held that since CSR expenditure is mandatory, the same cannot constitute a donation which is voluntary and hence not eligible for deduction under section 80G of the Act. It is an undisputed fact that donation made by the Appellant are to entities registered under section 80G and that the Appellant is otherwise eligible to claim deduction under section 80G of the Act. 13. It is submitted that though section 135 of the Companies Act, 2013 mandates the quantum of CSR expense, it does not mandate to whom and how the amount to be spent and the Appellant at its discretion can choose the mode of spending towards CSR. The donations made by the Appellant to Axis Foundation are made voluntarily as there is no reciprocal commitment from the donees. In any ....
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....eral Circular No. 01/2016 dated January 12, 2016 (FAQ No. 6) has clarified on the issue as follows: "Question No. 6: What tax benefits can be availed under CSR? Answer: No specific tax exemptions have been extended to CSR expenditure per se. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. What no specific tax exemptions have been extended to expenditure incurred on CSR, spending on several activities like Prime Minister's Relief Fund, scientific research, rural development projects, skill development projects, agriculture extension projects etc, which find place in Schedule VII, already enjoys exemptions under different sections of the Income-tax Act, 1961." This clarification being issued by the Ministry of Corporate Affairs, Government of India also confirms that donation covered under CSR Expenses are eligible for the deduction under section 80G of the Income tax Act, 1961. 16. Reliance is placed on the decision of Hon'ble Mumbai Tribunal in the case of ACIT v. Sharda Cropchem Limited (ITA No. 6163/Mum/2024) wherein it was held that donations which are classified as CSR expenditure a....
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....er sub-clauses of section 80G [other than (iiihk) and (iiihl)] of the Act. 9.1 It may be stated here that the co-ordinate Bench of ITAT, Mumbai in the case Alubound Dacs India Private Limited vs. Dy. CIT in ITA No. 3663/Mum/2023 (A. Y. 2020-21)has duly considered similar contentious issue and decided the same in favour of the assessee. The relevant extracts are reproduced below for the sake of ready reference: 9.3 Respectfully following the decisions cited above, we hold that the assessee is entitled to deduction claimed u/s. 80G of the Act towards the CSR expenditure incurred by it. We, therefore, direct the ld. A.O. to allow the claim of the assessee subject to the condition that the assessee has satisfied the other requirements warranted u/s. 80G of the Act. We do not find any infirmity in the appellate order. Hence, ground no. 3 raised by the Revenue is dismissed. 17. Reliance is also placed on the decision of Hon'ble Mumbai Tribunal in the case of Inter Gold (India) Pvt. Ltd. v. Pr. CIT (ITA No. 400/Mum/2023) wherein it was held that the provisions of Section 263 of the Act cannot be invoked for denial of deduction claimed under Section 80G in respect of....
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....dent 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 80G(2)(a)(iihk) and (iiihl), i.e., contributions towards 'Swacha BharatKosh' 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-a-vis CSR can be restricted to contributions made to these Funds mentioned in Section 80G(2)(a)(iiihk) and (iiihl) only. It is an undisputed fact that the assessee has not claimed any deduction against the aforesaid clauses of 80G(2)(a) of the Act and as such entire donation claimed by the assessee is allowable u/s 80G. The Ministry of Corporate Affairs ("MCA") has issued "FAQs" through General circular no. 01/2016 dated January 12, 2016 (FAQ No. 6) and has clarified on the issue as follows: "Question No. 6: What tax benefits can be availed under CSR? Answer: No specific tax exemptions have been extended to CSR expen....
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....he 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 holding that deduction under section 80G of the Act was erroneously allowed, since donation was in nature of CSR expenditure which is not voluntary in nature and thus not eligible for deduction. It was further held that the issue of section 80G/CSR was not discussed in the assessment order and hence assessment order is erroneous in so far as it is prejudicial to the interest of the Revenue." Now, the question for determination before us is as to whether deduction claimed under section 80G of the Act is eligible in respect of donation classified as "Corporate Social Responsibility (CSR) and as to whether conditions for invoking section 263 of the Act are satisfied or not. 7. First for all, we take up the first issue/question and after hearing the parties at length on this issue, we noticed that Ld. PCIT has held that since CSR expenditure is mandatory therefore the same cannot constitute a don....
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....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 itself clarifies that CSR expenditure will be allowable under other sections under the same head of income. In view of CBDT Circular, it is clear that there is no express bar in claiming deduction in respect of CSR expenditure, other than under Section 37(1) of the Act. The Ministry of Corporate Affairs ("MCA") has issued Frequently Asked Questions ("FAQ") through General Circular No. 01/2016 dated January 12, 2016 (FAQ No. 6) has clarified on the issue as follows: "Question No. 6: What tax benefits can be availed under CSR? Answer: No specific tax exemptions have been extended to CSR expenditure per se. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. What no specific tax exemptions have been extended to expenditure incurred on CSR, spending on several activities like Prime Minister's Relief Fund, scientific ....
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....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 Officer is erroneous and therefore cannot be accepted. It can be safely inferred that when the Legislature in particular has provided for only the above referred tivo specific exceptions in section 80G, then it is the implied intent of the Legislature to permit deduction under section 80G in respect of CSR contributions made to funds/organizations referred to in all other sub-clauses of section 80G [other than (iiihk) and (iiihl)] of the Act. 9.1 It may be stated here that the co-ordinate Bench of ITAT, Mumbai in the case Alubound Dacs India Private Limited vs. Dy. CIT in ITA No. 3663/Mum/2023 (A.Y. 2020-21) has duly considered similar contentious issue and decided the same in favour of the assessee. The relevant extracts are reproduced below for the sake of ready reference: ............. 9.3 Respectfully following the decisions cited above, we hold that....
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....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 deduction u/s. 80G on a donation should be voluntary. It is independent of computation of business income as it is allowed from Gross Total Income. The assessee had disallowed the CSR expenses while computing business income. Further, there is no dispute that the assessee has filed complete details of donation and also filed the certificate u/s. 80G which was enclosed before the AO. Section 80G (1) of the Act provides 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 80....