Section 263 Revisited: Jurisdictional Boundaries Where AO Takes a Plausible View on 80G Claims

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....revisionary powers u/s 263 to set aside an assessing officer's order that allowed such deductions. In this commentary we discuss the judgments-two from the Mumbai Benches and one from the Delhi Bench deal with the intersection of Explanation 2 to section 37(1), Chapter VI-A (section 80G) and the limits of revisional jurisdiction u/s 263. Collectively they form a persuasive line of authority that construes section 37 and section 80G as operating independently, and that cautions against invoking section 263 where the assessing officer has taken a legally tenable view and conducted enquiries. Key Legal Issues * Whether CSR expenditure-mandated by section 135 of the Companies Act, 2013 and excluded from deduction under Explanation 2 to s....

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.... of other prohibitions), and the separate operation of chapters dealing with business income (sections 28-44DB) and deductions from gross total income (Chapter VI-A). 2. Voluntariness and nature of "donation" A recurring revenue contention is that CSR payments lack the requisite voluntary character and therefore cannot be donations for section 80G purposes. The tribunals applied settled authorities on "donation" (payment without material return or quid pro quo) and held that statutory obligation to spend does not ipso facto convert a transfer into a quid pro quo transaction. Absent material return or an arrangement showing reciprocal benefit, the substance of the payment may still be a donation eligible u/s 80G if statutory conditions are....

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....evenue argument (as recorded): "CSR expenditure...is mandatory...lacks voluntary character...and allowing deduction u/s 80G would result in subsidizing these expenses by the Government." * Tribunal reasoning (representative quoted reasoning): "The provisions of section 80G do not impose any condition that the contribution should be voluntary...Section 37(1) and section 80G are independent...Denial cannot be extended unless explicitly provided." * On revisional power: tribunals emphasized that "merely because the Commissioner does not agree with the view of A.O the action of Commissioner u/s.263 would be unjustified." Key Holdings and Reasoning * Allowability u/s 80G: The tribunals held that donations eligible u/s 80G remain claimable....

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....tions rather than necessary ratio in every factual matrix. Implications * For taxpayers: These decisions provide persuasive support for claiming section 80G deductions on eligible donations made from CSR allocations, subject to meeting statutory conditions (donee approval, receipts, no quid pro quo), and documenting the voluntary character or absence of material return. * For revenue authorities: They caution against routine use of section 263 where AOs have properly inquired and adopted a defensible position; PCITs should record clear legal unsustainability or lack of inquiry before invoking revisionary powers. * For litigation strategy: Reliance on documentary proof (bank transfers, 80G certificates), AO's contemporaneous enqui....