TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1801
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the other grounds each of which are independent of and without prejudice to, one another: 1. That on the facts and in the circumstances of the case and in law, the Ld. PCIT erred in invoking jurisdiction under Section 263 of the Act and passing an order dated 12.03.2025, holding that the assessment order dated 14.07.2022 passed under Section 143(3) r.w.s. 144B of the Act is erroneous and prejudicial to the interest of the Revenue. 2. That the Ld. PCIT erred in holding that the deduction claimed under Section 80G for donations made to eligible charitable institutions out of Corporate Social Responsibility (CSR) expenditure is not allowable. The PCIT in coming to this conclusion has ignored the fact that it is only under Explanation 2 to section 37(1) which denies deduction for CSR expenses while computing 'business income' under Chapter IVD and; that there is no bar from claiming the given benefit under section 80G, which falls under Chapter VI-A. 3. That Ld. PCIT erred in holding that since CSR donations are not voluntary, benefit of section 80G is not available. The PCIT has ignored the fact that there is no provision under Chapter VI-A which states that just becau....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... PCIT called for the assessment records and, upon examination, formed the view that the order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interests of the Revenue. The basis for such a conclusion was that the Assessing Officer had allowed a deduction of Rs.11,62,500/- under Section 80G of the Act, which formed part of the assessee's corporate social responsibility (CSR) expenditure. A show cause notice under Section 263 was issued on 14.03.2025. 2.1 After considering the submissions of the assessee, the PCIT held that the nature of CSR expenditure being statutorily mandated, lacked the element of voluntariness and, therefore, could not qualify for deduction under Section 80G. It was further observed that only voluntary donations, and not statutory obligations, could qualify under Section 80G. In support, the PCIT relied upon the CBDT Circular No. 01/2015 dated 21.01.2015 and various judicial precedents. The PCIT further noted that the assessee had suo motu disallowed Rs.18,20,000/- out of the total CSR expenditure of Rs.23,25,000/-, and therefore the remaining Rs.5,05,000/- ought also to have been disallowed under Explanation 2 to Section 3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....SR 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 subsidizing of around one-third of such expenses by the Government by way of tax expenditure." From the above, it is clear that the CSR expenditure is CSR in any form to avoid subsidizing of CSR expenditure by government and therefore re is not to be allowed as deduction claim of the assessee and the contention of the assessee regarding allowability of CSR expenditure under section 80G is against the basic intent of the provision. It is trite law that what cannot be allowed in view of specific provisions cannot be allowed indirectly unless specifically provided in the Act. 5.2 Section 80G of the Act provides tax deductions for voluntary donations made to specified charitable institutions or funds. The core purpose of this section is to encourage philanthropy and voluntary social contributions. The issue at hand is whether mandatory CSR contributions can be reclassified a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated by the Parliament. The principle of harmonious construction requires that statutes be interpreted in a manner that gives effect to all provisions without rendering any part redundant. The Hon'ble Supreme Court in the case of South India Corporation (Pvt.) Ltd. V/s. Secretary, Board of Revenue, Trivandrum &Anr. [AIR 1964 SC 207] has laid down the principle that statutes must be read as a whole and construction must be adopted that gives effect to all parts of the statute. The principle of harmonious construction mandates that provisions must be interpreted to avoid conflicts and each part of the statute should be given meaningful effect. Accordingly, allowing CSR expenditures to be claimed under Section 80G would negate the specific statutory disallowance under Section 37(1) and result in unintended tax benefits which would be inconsistent with the legislative framework governing CSR and tax deductions. The intention of the legislature was never to allow deduction u/s 80G for CSR expenditure carried out, else it would result in subsidizing the CSR expenditure. 5.4 CSR expenditure has to be mandatorily incurred by certain specified companies as per provisions of Section 13....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry in nature. A bare reading of Section 263 of the Act of the Act also makes it clear that the Commissioner has to be satisfied of twin conditions namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. It has also been held in many cases that the Commissioner is not necessarily required to record a final conclusion on the issue at hand. 10. Considering the above facts and circumstances, it is held that the assessment order dated 14.07.2022 passed u/s.143(3) r.w.s. 144Bof the Act is erroneous in so far as it is prejudicial to the interests of the revenue within the meaning of Section 263 of the Act. Accordingly, Assessing Officer is directed to modify the assessment by passing a speaking order and also initiate penalty proceedings as per provisions of the Act." 3. Before us, learned counsel appearing for the assessee filed a Paper Book containing pages 1 to 265 and submitted that the issue regarding allowability of deduction under Section 80G in respect of CSR expenditure is a debatable one, with conflicting views taken by various Benches of the Income Tax Appellate Tribunal (ITAT). He further ....