TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1602
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.... lack of demonstrate inquiry would not clothe the authority with the jurisdiction u/s. 263, as otherwise, any & evert assessment order which is otherwise a valid one, would be susceptible to being set aside. 4. The Ld. PCIT misdirected himself in not appreciating that when the order was in accordance with the legal position settled by the Hon'ble Tribunal the same cannot be said to be prejudicial to the Revenue. 5. The Ld. PCIT was not justified in ignoring the position laid down by the Hon'ble Tribunal by observing that the issue was not settled by the High Courts and the Supreme court. 6. The Ld. PCIT failed to note that Expln. 2 to Section 37(1) which denies deduction of CSR expenses, is applicable only for computing business income and cannot be extended for deductions u/s. 80G. 7. The Ld. PCIT misdirected himself in not appreciating that where the Legislature intended to prohibit deduction u/s. 80G to those CSR expenditures which are covered u/s. 135 of the Companies Act, the Legislature has specifically provided so, by inserting clauses (iiihk) and (iiihl) in sec. 80G(2), thereby implying that CSR contributions made to funds/organizations r....
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....e intent of the legislature. 2.2. After considering the donations and CSR expenses, it is noted that the main characteristic of donation/charity is that it is purely voluntary and without any expectation benefits/return by the donor and there is no legal obligation to make that contribution/donation. The amounts spent on CSR activities even though is contributed to the areas where 80G deduction is available but the same lacks voluntary character and partakes the nature of an obligation to be fulfilled, a necessary requirement imposed by law in accordance with Section 135 of the companies Act, 2013. To this extent, the current assessment order passed by the Assessing Officer suffers from infirmity and is erroneous in so far as it is prejudicial to the interests of the revenue. Accordingly, a notice u/s. 263 of the Act, dated 14.02.2025 has been issued online through ITBA fixing the case on 21.02.2025 to the assessee to provide an opportunity of being heard." 4. In response to aforesaid query, the assessee filed a submission before the Ld. Pr. CIT, stating that the amount for CSR expenses can be utilized towards payment for charity and donation and also the assessee is en....
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....here would be no bar for assessee to claim benefit u/s. 80G falling in chapter VIA. To fortify such averment, reliance placed by the assessee on the following judicial pronouncement: a) Societe Generate Securities India (P) Ltd. Vs. Principal Commissioner of Income Tax 157 taxmann.com 533 (Mumbai-Trib) 6. The assessee further explained the mandatory pre-requisites of Section 263 of the Act, which has to be followed before assuming revisionary jurisdiction by the Pr.CIT. It was submitted by the assessee that twin conditions i.e. (i) the order of the A.O should be erroneous, and (ii) it should be prejudicial to the interest of the revenue, both has to be satisfied for enforcing the provisions of Section 263 of the Act. Reliance was placed by the assessee in the case of CIT Vs. Green World Corporation (2009) 181 Taxman 111/314 ITR 81 (SC). 7. It is further clarified by the assessee that when the A.O has taken a view which is in tune with other decisions which is a possible view then merely because the Commissioner does not agree with the view of A.O the action of Commission u/s. 263 would be unjustified. Reliance was placed by the assessee on the decision in the case of....
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....r Capital & Credit Services Pvt. Ltd., ITA No. 2034/MUM/2025, dated 25.07.2025. The Ld. Counsel prayed that since the issue is squarely covered by decision of the jurisdictional Tribunal and there is no contrary decisions of the Hon'ble High Courts or of Hon'ble Apex Court, therefore, the issue being covered in favour of the assessee has to be decided in favour of the assessee. The revisionary proceedings u/s. 263 of the Act, therefore, in contravention to the decision of Jurisdictional Tribunal i.e., ITAT, Mumbai was devoid of merits, without the mandate of law, deserves to be quashed. 13. The Ld. Sr. DR on behalf revenue on the other hand vehemently supported the order of the Ld. Pr. CIT and reiterated the findings of the Pr. CIT from its order u/s. 263 of the Act. 14. We have considered the rival contentions and perused the material available on record and case laws relied upon by the parties. The issue in hand regarding allowability of 80G deduction, if the eligible donation are made from the funds allocated for CSR is the short controversy which has already been deliberated upon and decided by the Tribunal (in citations referred to supra) in favour of the assessee, ....
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....ies. The hope of spiritual benefit or political goodwill, the spontaneous affection that benefaction brings, the popularization of a good cause or the prestige that publicized bounty fetches -these and other myriad consequences or feelings may not mar a donation to make it a grant for a quid pro quo. Wholly motiveless donation is rare, but material return alone negates a gift or donation.' 7. Therefore to examine if CSR spending of the assessee would be a donation it is essential to examine whether the donations given by the assessee to M/s. Reliance Foundation and M/s Shyam Kothari Foundation without any material return and without any consideration and whether it was a grant for quid pro quo. It is not the case of the revenue that the assessee has made contributions to these institutions with an intention get something in return. The only contention of the revenue is that the contributions are made as part of a mandate and not voluntary. However, the Hon'ble Supreme Court in the above case has laid down the basic principle that a payment made without any material return and without any consideration and not for quid pro quo is a donation. Therefore in our conside....
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....t, 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 their profit on activities relating to Corporate Social Responsibility (CSR). Under the existing provisions of the Act expenditure incurred wholly and exclusively for the purposes of the business is only allowed as a deduction for computing taxable business income. 13.2 CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR 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. 13.....
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....tion can be allowed subject to the fulfillment of conditions prescribed under section 35 of the Act. This explanatory note though self contradictary i.e. denying deduction under section 37 but allowing the assessee to claim deduction under section 30 to 36, also makes it clear that there is no bar regarding the admissibility of CSR expenditure under any other provision of the Act, except under section 37(1) of the Act. In other words, the intention of the legislature is not to restrict the right of the assessee to claim deduction towards the CSR spend if the payment is otherwise allowable under a specific provision of the Act. Further wherever the intention is to restrict the claim of deduction under any other provisions of the Act the same is explicitly provided for to that effect by the legislature. This view is supported by the Explanatory Memorandum Finance Bill 2015 which brought in the specific restriction for claiming deduction under section 80G of the Act towards the CSR spend towards donation to Swachh Bharat Kosh and Clean Ganga Fund. Therefore we are unable to appreciate the contention that the CSR spend being claimed as a deduction under section 80G of the Act is agains....
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.... of CSR spend by the donor i.e. assessee - 12.2. The contribution made by a company toward the discharge of it's CSR to a registered charitable institution, in our view, is akin to corpus donations. Section 11(1)(d) of the Income Tax Act speaks of the specific or corpus, donations, although it has not been defined under Income Tax Act, 1961. Corpus donations are donations wherein, the donor makes the donations to the donee for a specific purpose or object. Prior to the amendment made by amended CSR Rules of 2021, Rule 7 of the erstwhile CSR Rules permitted corpus contributions to charitable institutions as eligible CSR expenditure. Further, the Ministry of Corporate Affairs vide Circular No. 21/2014 dated 18th June 2014 had also clarified that contribution to Corpus of a Trust/ society/ section 8 companies etc. will qualify as CSR expenditure, if such a donee institution or the said corpus has been created exclusively for a purpose related to the activities provided under the CSR framework. However, under the old rules, the mechanism to monitor and ensure that such donation has been actually spent on CSR activity was missing. The donor company would get absolved o....
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....nless there is an explicit provision for e.g. contributions towards 'Swacha Bharat Kosh' and 'Clean Ganga Fund'. This view of ours is supported by the decision of the coordinate bench of the Tribunal in the case of Blue Dart Express Limited vs PCIT (ITA No. 1101/Mum/2024 dated 03.09.2024) where in the context of revision under section 263 of the Act, the bench has considered the issue of allowing deduction under section 80G towards CSR spend and held that - 10. On merits also, we find that view of ld. AO is correct in law. 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 precondition 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 disall....
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...., 1961." 11. This clarification being issued by the Ministry of Corporate Affairs, Government of India clarifies that donation covered under CSR Expenses which not are eligible for the deduction under section 80G of the Income-tax Act, 1961, but are allowed under different sections. Ergo, there is nothing that if any expenditure is disallowable u/s 37 the same cannot be allowed under other provisions of Act, if the conditions of allowability are satisfied. Thus, allowing the claim of deduction u/s. 80G by the ld. AO cannot be held to be unsustainable in law or amounts to erroneous and prejudicial to the interest of the Revenue. Thus order of the Ld. PCIT is reversed on this point. 12. Thus, we hold that ld. PCIT is not correct in law in cancelling the assessment order by the ld. AO on this issue. Accordingly, the order of the ld. PCIT is quashed. Consequently, the appeal of the assessee is allowed. 13. In view these discussions and considering the judicial precedence in this regard, we are of the view that there is no infirmity in the order of the CIT (A) in allowing the deduction under section 80G to the assessee towards donations made to M/s. Reliance F....