TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1148
X X X X Extracts X X X X
X X X X Extracts X X X X
....ITA No. 2838/Mum/2024 dated 6.1.2025 in the case of Maharashtra Industrial Development Corporation. 4. On the contrary, Ld. DR relied upon the orders passed by Ld. PCIT. 5. We have heard the counsels of both the parties, perused the material placed on record, Judgements cited before us and also orders passed by Revenue Authorities. From the record, we noticed that during the year under consideration, the assessee had made donation to various entities of Rs. 21,07,500/- and had claimed deduction amounting to Rs. 10,53,750/- under section 80G of the Act. Although the assessee had classified the amount of donation as "Corporate Social Responsibility" (CSR) expenses under section 135 of the Companies Act, 2013 in his books of account and suo moto disallowed the same in computation of income in accordance Explanation 2 of section 37 of the Act. However, in his return of income, the assessee claimed deduction under section 80G of the Act. The said claim was duly disclosed in the computation of income and tax audit report, which was examined in detail and allowed by the Ld. AO while passing the order of assessment under section 143(3) r.w.s 144B of the Act dated 26.09.2022. In this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that expenditure incurred which is eligible for CSR and allowable under other sections, shall be allowed as a deduction while computing income. The relevant extract of CBDT Circular is reproduced as under: "13.3 The provisions of section 37(1) of the Income-tax Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Income- tax 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 provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, said section 37 has been amended to clarify that for the purposes of sub-section (1) of section 37 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 said section 37. However, the CSR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e mandatorily incurred by the assessee-company as per section 135 of the Companies Act are not entitled to deduction under section 37(1) for assessment year 2015-16 by virtue of the fetter placed by Explanation 2 to section 37(1), which was inserted by the Finance (No. 2) Act, 2014. A plain reading of Explanation 2 to section 37(1) shows that any expenditure incurred towards CSR activities as referred to in section 135 of the Companies Act, 2013 shall not be allowed as ' business expenditure' and shall be deemed to have not been incurred for purpose of business. The embargo created by Explanation 2 inserted in section 37 by Finance (No. 2) Act, 2014 was to deny deduction for (3SR expenses incurred by companies, as and by way of regular business expenditure while computing 'income under the head business'. So, it can be clearly seen that this Explanation 2 to section 37(1) which denies deduction for CSR expenses by way of business expenditure is applicable only to the extent of computing 'business income' under Chapter IV-D. The said Explanation cannot be extended or imported to CSR contributions which are otherwise eligible for deduction under any other prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Hon'ble Mumbai Tribunal in the case of Inter Gold (India) Pvt. Ltd. v. Pr. CIT (ITA No. 4400/Mum/2023) wherein it was held that the provisions of Section 263 of the Act cannot be invoked for denial of deduction claimed under Section 80G in respect of donations classified as CSR. The relevant extract of the order is reproduced below: "11. After considering the aforesaid submissions and the reasons given by the Id. PCIT, we are unable to sustain the impugned order u/s.263 on this issue for the reason that, this issue has been duly enquired and examined by the Id. AO during the course of assessment proceedings and without finding any defect in such order or how the claim allowed by the Id. AO u/s.80G is unsustainable in law, he cannot cancel the assessment order. Assessee has also relied upon various Tribunal decisions directly on this issue which has also been incorporated in the impugned order, wherein it has been held that even if the money spent for CSR is disallowable but if the same has been paid to charitable organisation and donation is claimed u/s.80G, the same is allowable, because both operate separately. Thus, taking a contrary opinion does not mean that o....