TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1228
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.... amounting to Rs. 12,49,000/-) which was passed u/s 143(3) after due application of mind and proper inquiries. 2. The learned PCIT failed to appreciate that the issue regarding deduction under section 80G in respect of donations made by the appellant, including those forming part of CSR obligation, was specifically raised by the Assessing Officer during assessment proceedings and was duly responded to and examined before finalizing the assessment. 3. On the facts and circumstances of the case and in law the learned PCIT erred on facts and in law in exercising revisionary powers under section 263 of the Acton various issues in the impugned order, without satisfying the twin jurisdictional conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of the Revenue and consequently, the impugned order is illegal, bad in law and liable to be quashed. 4. The learned PCIT erred in facts and in law by enhancing/ setting aside the assessment order by exercising powers undersection 263 of the Act, without appreciating that: a. It was not a case of lack of enquiry as the assessing officer during the course of assessment proceedings has duly verified t....
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....ch deduction has been upheld, inter alia: a. Naik Seafoods Pvt. Ltd. (ITA No. 490/Mum/2021) b. Allegis Services India Pvt. Ltd. (ITA No. 1693/Bang/2019) c. Goldman Sachs Services Pvt. Ltd. (ITA No. 2355/Bang/2019) d. Ericsson India Global Services Pvt. Ltd. (160 taxmann.com 599 7. The learned PCIT erred in holding that the nature of the CSR obligation ipso facto disqualifies the assessee from claiming deduction under section 80G, despite absence of any express bar in the statutory text, other than the two exclusions under Section 80G(2)(a)(iiihk) and (iiihl). 8. On the facts and circumstances of the case and in law the learned PCIT erred in law by claiming that Circular issued by Central Board of Direct Tax is binding on taxpayer. 9. Your Appellant prays that the disallowance made in the impugned order is invalid and bad in law and facts and hence the same may please be deleted. 2. Briefly stated, facts of the case are that during the relevant year, the assessee company was engaged in the business of publishing, printing and reproduction of recorded media. The assessee filed its return of income for the year under consideration on 06.01.2021 declaring total income at....
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....ined in section 80G in respect of contributions to certain CSR-related funds such as the 'Swachh Bharat Kosh' and the 'Clean Ganga Fund', to bolster his conclusion that CSR expenses are not deductible under the said provision. Accordingly, the ld. PCIT, held the assessment order as erroneous insofar as prejudicial to the interest of the revenue observing as under: 6.5 The decision of the Assessing Officer in the instant case is erroneous on merits as well as the fact that he has not conducted further enquiries, when facts on record. per se justified and mandated further inquiry or investigation. Furthermore, the submissions of the assessee are not acceptable in view of the Finance Bill, 2014 vide which the concept of Corporate Social Responsibility was introduced. The intent of the legislature itself was that the Corporates share the burden of the Government in providing social services, the extract of which is reproduced here under; "Under the Companies Act, 2013 certain companies (which have net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or a net profit of Rs. 5 crore or more during any financial year) are required to spend certain percentage of th....
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....ssessee." 3. Before us, the Ld. counsel for the assessee placed reliance on the Paper Book comprising pages 1 to 82 drawing our attention to page No. 51 of the Paper Book. He submitted that the Assessing Officer had raised a specific query in respect of claim of deduction of CSR expenditure u/s 80G of the Act. The relevant query raised by the Assessing Officer is reproduced as under: "अनुलनक ANNEXURE 1. आयकर अधनयम, 1961 क धारा 142 (1) के तहत निम्नलिखित खाते या दतावेज या जानकार मांगी गई है: 1. The following accounts or documents or information is/are sought under section 142(1) of the Income-tax Act, 1961: 1. You have claimed donations given on a/c of CSR expenditure of Rs. 24,98,000/- in the P&L and the same is disallowed in the ITR. However, the same donations are claimed u/s 80G of I.T.Act ....
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....296H 10,00,000 Laxmiben Lalji Furia Charitable AAATL0063C 2,00,000 Total Donation 24,98,000 Qualifying Amount 24,98,000 Deductible amount under section 80 G @ 50% 12,49,000 Donation receipts issued by all the above charitable institutions along with 80G certificate and bank statement highlighting payments made by the assessee company is already submitted during the ongoing course of assessment proceedings. Contemporaneously, the above donations of Rs. 24,98,000/- also gets covered as a contribution made towards CSR activities and hence such expenditure was also classified as a CSR expenditure in the financial statements and hence the same was disallowed in accordance with the provisions of section 37{1) of the IT Act while computing income under the head Income from Business. While computing the total income of the assessee company for the year under consideration, deduction under section 80G of the IT Act is available for donations made by an assessee to institutions/funds/trusts registered under the Income Tax Act, 1961. During the year, the assessee company had made 14 donations (as stated above) and ail the entities were duly registered under the provisions of I....
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....this would result in subsidizing of around one-third of such expenses by the Government by way of tax expenditure. The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditures cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) 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 section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed as deduction under those sections subject to fu....
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....mputing the total income of the assessee, there shall be deducted, in accordance with the provisions of this section, such sum paid by the assessee in the previous year as a donation. Further, section 80G(2) list down the sums on which deduction shall be allowed to the assessee. Section 80G falls in Chapter VIA, which comes into play only after the gross total income has been computed by applying the computation provisions under various heads of income, including the Explanation 2 to section 37(1). Thus, there is no correlation between section 37(1) and section 80G. Principles governing what is not allowable under section 37(1) have been explained in the section itself (i.e. what is allowable, the conditions subject to which it is allowable, the extent to which it is allowable) and also what is not allowable under section 80G. * Section 80G specifically mentions two instances (viz, section 80G(2)(a)(iiihk) and (iiihl), i.e., contributions towards Swacha Bharat Kosh and Clean Ganga Fund), where CSR expenditure is not allowable as deduction under section 80G. * Section 80G(2)(a) allows deduction for 'any sums paid by the assessee in the previous year as donations'. Thus....
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....tions of the Income-tax Act, 1961." This clarification issued by one arm of the Government, supports the view that deduction under section 80G is allowable on such contributions. Jurisprudence on allowability of donations (forming part of CSR expenditure) under section 80G of the IT Act * In Goldman Sachs Services Pvt. Ltd. v. JCIT [IT(TP)A No.2355/Bang/2019-Banglore ITAT ), the Assessing Officer ('AO'), disallowed deduction under section 80G on the basis that the donations were in the nature of CSR expenditure and not in the nature of 'voluntary contribution'. The Bangalore Tribunal observed that the CSR expenditure was required to be incurred as per the Companies Act 2013 and as per the amendment introduced to section 37 of the IT Act, a deduction for the same was not available under section 37 of the IT Act. However, the assessee had claimed deduction of donation under section 80G. The Tribunal noted that CSR contributions to Swachh Bharat Kosh and Clean Ganga Fund, were specifically excluded from the ambit of section 80G of the IT Act. In view of this, the Tribunal inferred that other CSR qualifying donations are eligible for deduction under section 80G, s....
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....the above claim, then a virtual hearing may please be fixed. Thanking you. Yours truly, For GBCA & Associates LLP Chartered Accountants" 3.2 The Assessing Officer has already referred to the said reply of the assessee in the assessment order. In light of the above, the learned counsel contended that a full-fledged enquiry was conducted by the Assessing Officer on the very issue now sought to be revised, and hence, the invocation of Explanation 2 to section 263 of the Act-on the ground of lack of enquiry or inadequate enquiry-was unwarranted. It was further submitted that the issue under consideration is one on which two views are reasonably possible, and the Assessing Officer had taken a view which is legally tenable. In such circumstances, it was urged that the assessment order cannot be termed as erroneous insofar as it is prejudicial to the interest of the Revenue." 4. The Ld. Departmental Representative (DR) on the other hand submitted the Assessing Officer has not made any discussion in the assessment order regarding the issue of deduction u/s 80G of the Act which amounts to non-application of the mind of the Assessing Officer. He accordingly relied on the order of the ....
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.... reply, setting out the names of the donee institutions, the amount of donation, the nature of their registration under the Act, and further relied upon judicial precedents in support of its claim. These facts, in our considered view, clearly establish that the Assessing Officer had applied his mind and examined the issue in depth. he Coordinate Bench of the Tribunal in NTT Global Networks Pvt. Ltd. v. PCIT [supra] has categorically held that where the Assessing Officer has taken one of the plausible views in law after considering the material before him, the revisional jurisdiction under Section 263 cannot be validly exercised. The relevant finding of the Tribunal(supra) is reproduced as under: "12. Considering the second aspect of the Id. PCIT's order which is on CSR expenditure which according to the Id. PCIT was mandatory in nature as per the provisions of Section 135 of the Companies Act and does not tantamount to an expenditure incurred, wholly and exclusively for the purpose of business as per Explanation 2 to Section 37(1) of the Act and the same would not amount to the voluntary donation u/s. 80G of the Act. Admittedly, the Id. PCIT in his order has categorically sta....
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...., the view taken by Ld PCIT on this issue is a debatable one, meaning thereby, the action of the AO in allowing deduction u/s 80G results in a possible view. Accordingly, the Ld PCIT was not justified in initiating revision proceedings on this issue. Accordingly, we set aside his order on this issue." 5.4 In light of the foregoing discussion, it is evident that the Assessing Officer had undertaken the requisite enquiries and verification warranted in the facts and circumstances of the case and it is not necessary to reproduce his discussion wherever he has accepted the view of the Assessing Officer and the claim of Ld. DR of non-application of the mind of the Assessing Officer was unwarranted. It is well-established that the mere absence of elaborate discussion in the assessment order does not imply lack of enquiry or non-application of mind, where the record reveals that the issue was specifically raised and replied to. The submission of the Department that the order is vitiated by non-application of mind stands negated in the face of documentary evidence to the contrary. 5.5 It further emerges from the record that divergent views exist on the allowability of deduction under Sec....