TaxTMI 
TaxTMI 
2026 (1) TMI 1036
X X X X Extracts X X X X
X X X X Extracts X X X X
....y Ld. PCIT, the assessee claimed higher rate of depreciation on motor car purchased during the year and the assessee company has debited Rs. 40,47,714/- in the Profit & Loss account towards Corporate Social Responsibility (CSR) expenses and also claimed deduction u/s.80G of Rs. 10,78,804/- against the same donation to M/s Tornascent Care Institute, whereas the amount of donation which included in the CSR expenses was not allowable. Thus the Ld. A.O. during assessment proceedings allowed the same which has resulted in under assessment of income resulting in erroneous order and is prejudicial to the interest of Revenue. Therefore, a show cause notice dated 22-01-2025 was issued to the assessee as to why not to revise u/s. 263, the assessment order passed by the Assessing Officer. The assessee made a detailed reply, after considering the same Ld. PCIT set-aside the assessment order with a direction to pass fresh assessment order by giving proper opportunity of hearing to the assessee. 3. Aggrieved against the Revision order, assessee is in appeal before us raising the following Grounds of Appeal: 1. In law and in the facts and in the circumstances of the case, the order pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Counsel relied upon Co-ordinate Benches of this Tribunal in the case of M/s. Sequel Logistics Pvt. Ltd. in ITA No. 1114/Ahd/2024, M/s. TTEC India Customer Solutions Pvt. Ltd. in ITA No.1026/Ahd/2025 and M/s. Gujarat Mineral Development Corporation Ltd. in ITA No. 651/Ahd/2025 wherein the issue of claim of CSR expenses u/s.80G have been dealt with and held that where an enquiry was made by the A.O. during assessment proceedings on the same subject, Revision proceedings cannot be instituted. Thus Ld. Counsel pleaded that the Revision order is liable to be quashed. 6. Per contra, Ld. CIT-DR appearing for the Revenue fairly conceded on the first issue namely claim of higher rate of depreciation is well within the provisions of law, however the claim of donation u/s 80G on CSR expenses, the same is to be upheld and in support of the same relied on the decision of Delhi Bench ITAT in the case of M/s. Agilant Technologies (International) Pvt. Ltd. -Vs- ACIT, NFAC Delhi reported in (2024) 140 Taxmann.com 238 (Del. Trib.) and sustain the revision order. 7. We have given our thoughtful consideration and perused the materials available on record including the Paper Book and Case Laws ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to be remembered that every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interest of the revenue. When the AO adopted one of the courses permissible in law and it has resulted in loss to the Revenue or where two views are possible and the AO has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue "unless the view taken by the Assessing Officer is unsustainable in law". Thus, in our considered view following Apex Court ruling the Revision order passed by Ld. PCIT is not sustainable in law. 8. On merits of the case, the intention of the Legislature was clear when the same was clarified by the Finance (No.2) Act, 2014 that CSR expenses will not fall under the business expenditure and also there has been an express bar specified in sub clause (iii hk) and (iii hl) of section 80G(2)(a) of the Act that any sum paid by the assessee as donation to Swatch Bharat Kosh and Clean Ganga Fund will not come under the purview of deduction u/s.80G of the Act subject to certain conditions. This justifies the fact that the other donations specified u/s.80G of the Act w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 7.4. The aforesaid explanatory memorandum categorically expresses the legislative intent and the rationale of disallowance of CSR expenditure referred to in section 135 of the Companies Act, that such expenditure is application of income and not incurred for the purposes of business. We are of considered view that this in itself justifies the grant of deduction u/s 80G. As CSR expenditure is application of income of the assessee under the Income Tax Act, that means it continues to form part of the Total income of the assessee. Section 80G(1) of the Act provides that in computing the total income of an assessee, there shall be deducted, in accordance with the provisions of this section, such sum paid by the assessee in the previous year as a donation. Further, section 80G(2) lists down the sums on which deduction shall be allowed to the assessee. Section 80G falls in Chapter VIA, which comes into play only after the gross total income has been computed by applying the computation provisions under various heads of income, including the Explanation 2 to section 37(1) of the Act. Thus, there is no correlation between suomoto disallowance in section 37(1) and claim of deduction under s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee for the purpose of business or profession. It is observed that the said expenses pertaining to CSR has been claimed as deduction u/s. 80G of the Act which claim was perennially rejected by the Revenue for the reason that only donations which are voluntary in nature will come under the purview of section 80G of the Act and donation towards CSR was merely a statutory obligation on companies as per section 135 of the Companies Act, 2013. It is pertinent to point out that the intention of the legislature was clear when the same was clarified by the Finance (No.2) Act, 2014 that CSR expenses will not fall under the business expenditure and also there has been an express bar specified in sub clause (iiihk) and (iiihl) of section 80G(2)(a) of the Act that any sum paid by the assessee as donation to Swatch Bharat Kosh and Clean Ganga Fund will not come under the purview of deduction u's 80G of the Act subject to certain conditions. This justifies the fact that the other donations specified u/s. 80G of the Act would be entitled to deduction provided the conditions stipulated u/s. 80G of the Act are satisfied. In the present case in hand, the contributions made by the assessee wo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 2 of section 37(1). Whether Explanation 2 to section 37(1) which denies deduction for CSR expenses by way of business expenditure is applicable only to extent of computing 'business income' under Chapter IV-D and; it could not be extended or imported to CSR contributions which was otherwise eligible for deduction under Chapter VI, to say, donations made to charitable trusts registered under section 80G-Held, yes Whether, therefore, since said donation on account of CSR was made by assessee to charitable trusts which were duly registered under section 80G(5)(vi), assessee was entitled to claim deduction under section 80G in respect of such contribution - Held, yes - Whether since action of Assessing Officer in allowing claim under section 80G was a plausible view, impugned invocation of revision jurisdiction under section 263 was unjustified-Held, yes [Para 23] [In favour of assessee) Section 37(1), of the Income-tax Act, 1961 Business expenditure Allowability of (Explanation 2) - Assessment year 2016-17 - Whether corporate social responsibility (CSR) expenses which are required to be mandatorily incurred by assessee-company as per section 135 of Companies Act are....