TaxTMI 
TaxTMI 
2025 (9) TMI 1180
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....of the Act. The case was selected for scrutiny u/s 147 of the Act on the ground that assessee had debited an amount of Rs. 1,39,00,000/- towards Corporate Social Responsibility (CSR) and had claimed deduction of Rs. 50,86,981/-. It was stated that the expenditure has been incurred towards CSR which is not allowable expenditure u/s 37(1) of the Act. Notice u/s 148 of the Income tax Act, 1961 was issued on 30.03.2021. Subsequently notice u/s 142(1) of the Act was issued on 17.06.2021. Further, notice u/s 142(1) was issued on 25.11.2021 along with questionnaire seeking compliance on 02.12.2021. In response to the said notice assessee filed submission on 02.12.2021 wherein they have given details of expenditure incurred on CSR to the tune of Rs. 1,39,00,000/-. Assessee further submitted that he has not claimed deduction for CSR expenditure of Rs. 1,39,00,000/- from its business profit, but he has claimed deduction of Rs. 50,86,981/- u/s 80G of the Act. The same was Verified from the income computation given by the assessee and the return filed by the assessee wherein assessee has submitted donation receipt from Gondia Education Society and The Indian Council for Mental Health. The same....
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....% of the Total Income) should be disallowed, without appreciating the fact that the same was validly claimed u/s. 80G(2)(iv)(a) of the Act in respect of donations paid to eligible institutions approved u/s. 80G(5) of the Act. 5. The Pr. CIT, Mumbai-3 failed to consider the reply of the assessee company dated 3rd May 2019 during the original assessment proceedings wherein while replying to the query of large deduction under chapter VI-A, the assessee had informed that "To meet the requirement of sec. 135 of the Companies Act 2013 it has contributed Rs. 1,39,00,000/- towards education projects of the following institutes registered u/s. 80G of the Act: Name of the Party PAN Amount Gondia Education Society AAATG0564F 1,28,00,000/- The Indian Council of Mental Health AAATI1077R 11,00,000/-" 6. The Pr. CIT, Mumbai-3 failed to consider the reply of the assessee company dated 2nd December 2021 during the reopened assessment proceedings u/s. 148 of the Act wherein the assessee had informed that: "For CSR expenditure of Rs. 1,39,00,000/- incurred during the year assessee has not claimed any deduction from its business profits ho....
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....erpret Section 263(1) and elaborated the meaning of word erroneous and prejudicial to the interest of revenue. Para 13 of the said case is relevant and reproduced as under:- 13. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 there must be material before the Commissioner to consider that the order passed by the ITO was erroneous insofar as it is prejudicial to the interests of the revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the ITO without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the revenue. An order can be said to be prejudicial to the interests of the revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suomotu revision under such circumstances will....
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....ther this deduction claimed against donations made as part of CSR expenditure is allowable or not. In none of the asseessee's submission before the assessing officer also, the assessee made any reference to this issue and argued that the donations being part of CSR expenditure are still eligible for deduction u/s 80G. So, it cannot be inferred that the assessing officer has applied his mind on this aspect. In any case, the assessing officer's failure to consider this issue despite it being in contravention of the provisions of the Act in view of the Explanation 2 to section 37(1) read with Explanatory notes to the Finance Bill 2014, caused erroneous allowance of deduction u/s 80G and made the order prejudicial to the interests of revenue. 11. I find no merit in the submissions for the reasons discussed below:- 11.1 Firstly, it is important to note that CSR expenditure has to be mandatorily incurred by certain specified companies as per provisions of Section 135 of the Companies Act. It is a statutory obligation cast upon certain companies to share certain portion of profits to the activities towards social responsibilities. In other words, it is part of pr....
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....ial 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." As may be seen, it is made clear at the beginning itself that it is an application of income. Though called as expenditure, as it being an outflow for the company, it is strictly not an expenditure. Therefore, no deduction what so ever can be allowed for appropriation of profits. It is trite law that what cannot be allowed in view of specific provisions cannot be allowed indirectly unless specifically provided in the Act, thereby defeating the purpose of the section. The other argument that only two funds mentioned in section 80G to which donations given as part of CSR expenditure are not eligible, is also not tenable. It does not Imply that donations to other funds towards CSR are eligible for deduction. Further, it is to be noted that in the orders relied upon by the assessee there is no discussion on the Explanatory Notes to the Finance Bill 2014, wherein reference was made to the CSR expenditure as application of income and the same....
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....een incurred towards Corporate Social Responsibility (CSR) amounting to Rs. 1,39,00,000/-. Kindly furnish details of expenditure incurred towards CSR. Also fumish documentary evidence to substantiate that this is your business expenditure and allowable as per Act." In response to the said notice assessee filed submission on 02.12.2021. In his submission assessee has mentioned that he has incurred CSR expenditure of Rs. 1,39,00,000/- as under:- Sr.No. Donation given to the Trust PAN of the Trust Amount 1 Gondia Educton Societ, Gonda, Maharashtra AAATG0564F Rs. 1,28,00,000/- 2 The Indian Council for Mental Health Mumbai, Maharashtra AAAT110778 Rs. 11,00,000/- Assessee further submitted that he has expenditure of Rs. 1,39,00,000/- from Shot claimed any deduction for CSR its business profit Rather he has claimed deduction of Rs. 50,86,981/- u/s 80G. The same was Verified from the income computation given by the assessee and the return filed by the assessee. Assessee has also submitted donation receipt from Gondia Education Society and The Indian Council for Mental Health. The same was cross verified with the bank statement of the as....
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....is significantly lower as compared to investments made to earn exempt income. 14. In reply dated 3rd May 2019, assessee in para no. 16(ii) has given the explanation to the notice issued u/s 142(1) of the Act and the same are reproduced below:- (ii) Large Deduction under Chapter VI-A Assessee is required to spend 2% of the average pre-tax profits of the preceding three years towards its corporate social responsibility (CSR) as specified u/s 135 of the Companies Act, 2013. To meet this regulatory requirement, assessee contributed a sum of Rs. 1,39,00,000/- towards education projects of following institutes registered for the purposes of section 80G of the Act. Name of the Party PAN Amount Gondia Education Society AAATG0564F 1,28,00,000 The Indian Council of Mental Health AAATI1077R 11,00,000 Total 1,39,00,000 Scanned copy of donation receipts and assessee's bank statement, highlighting these payments are attached herewith. Deduction of Rs. 50,86,981/-, computed in accordance with provisions of section 80G has been claimed in the ITR filed. No other deductions under Chapter VI-A of the Act have been claimed. 15. Sim....
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....dia Pvt. Ltd.) vs. Pr.CIT-2 in ITA No. 554/MUM/2024 for A.Y. 2018-19 dated 3rd June, 2024. 3. Naik Seafoods Pvt. Ltd. vs. Pr.CIT2 in ITA No. 490/MUM/2021 for Α.Υ. 2016-17 dated 22.07.2021 4. SBI DFHI Ltd. vs. ACIT, Circle 2(2)(1) in ITA No. 1431/Mum/2023 for A.Υ. 2018-19 dated 27.06.2023. 5. JMS Mining (P.) Ltd. Vs. Pr.CIT, Kolkata-2 in ITA No. 146/Kol/2021for A.Y. 2016-17 dated 22.07.2021 6. Reliance Home Finance Ltd. Vs. Pr.CIT -8, in ITA Nos. 815 & 814/Mum/2021 for A.Ys. 2015-16 & 2016-17 dated 24.11.2021. 7. Societe Generale Securities India Pvt Ltd v. PCIT in ITA No. 1921/Mum/2023 for A.Y. 2018-19 dated 20.11.2023. Deduction u/s.80G in respect of CSR expenditure in the regular assessment. 8. First Abu Dhabi Bank vs. DCIT(IT), Circle 2(3)(1) in ITA No. 3279/Mum/2023 for A.Y. 2020-21 dated 27th February, 2024. 9. DCIT-1(2)(1) v. Indian Rare Earth Ltd. in ITA No. 5676 & 5677/Mum/2019 for A.Ys. 2013-14 & 2014-15 dated 02.09.2021 20. It is to be noticed that the Coordinate Bench of ITAT in ITAT No. 1806/Mum/2023 dated 30.08.2023 has decided the similar issue and the operative portion of....
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....proceedings before us, the Ld. Counsel vehemently contented that during the course of assessment proceedings the AO has examined the issue of CSR expenditure and deduction u/s 80G claimed with respect to donations forming part of CSR expenditure and only thereafter deduction was allowed. The Ld. Counsel also submitted that the assessee is otherwise entitled for deduction u/s 80G in respect of donation made to eligible institutions/trusts when supported by the donation receipts. In this regard, the Ld. Counsel has filed paper book comprising details and copies of documents furnished before the AO during the course of assessment proceedings pertaining to claim of deduction u/s 80G of the IT Act and detail of CSR expenditure which was not claimed as deduction out of the income of the assessee. 8. On the other hand the Learned Departmental Representative (hereinafter „the Ld. DR‟) supported the order passed u/s 263 of the Act by the Ld. PCIT. 9. Heard both the sides and perused the materials on record. In the income tax return the assessee claimed deduction u/s 80G of the Act amounting to Rs. 1,51,88,545/- being 50% of Rs. 3,03,77,089/- which was part of C....
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....s of Hon‟ble High Courts in case of CIT v/s Gabriel India Ltd. (203 ITR 108) (Bom. HC), CIT v/s Mr. Jayeek Nag (ITA No. 408 of 2014), Moil v/s CIT (396 ITR 244) (Bom HC), CIT v/s Krishna Capbox Pvt. Ltd. (372 ITR 310) (All. HC) 10. The Ld. Counsel has also referred decision of ITAT Mumbai In the case of (B) Naik Sea Food Pvt. Ltd. v/s PCIT [ITA No. 490/Mum/2020] on the proposition that expenditure incurred on CSR is claimed as deduction for the purpose of section 80G and allowed by the AO then section 263 cannot be invoked. 11. The various submission filed by the assessee during the course of assessment proceedings in response to the notices issued by the AO particularly on the issue on which provisions of section 263 of the Act invoked by the Ld. PCIT as discussed supra demonstrate that the AO has considered the claim of deduction u/s 80G on the expenditure which was part of CSR expenditure and also examined the issue that the assessee has added back the CSR expenditure in its return of income. Therefore, we consider that the order passed by the Ld. PCIT u/s 263 is not justified. Therefore, we set aside the order passed u/s 263 of the Act and allow the grou....