TaxTMI 
TaxTMI 
2025 (7) TMI 1974
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....AC ["CIT(A)"] upholding the action of the Assessing Officer ("the AO") in not making the assessment u/s 143(3) of the Act in accordance with the procedure laid down u/s 144B of the Act read with the Instructions, Circulars, Notifications, FAQs issued. 2. The Appellant prays that the assessment made by the AO u/s 143(3) of the Act be held as non-est in the eyes of law. WITHOUT PREJUDICE TO THE ABOVE GROUND NO. II: DISALLOWANCE AMOUNTING TO RS. 65,03,040/- U/S 40(a) OF THE ACT: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Assessing Officer in disallowing the deduction claimed on account of expenses disallowed u/s 40(a) in the previous years. 2. The Ld. CIT(A) inter alia failed to appreciate and ought to have held that: a. The Appellant was never issued with notice u/s 142(1) giving opportunity to make submissions on the issue. b. The Appellant provided Rs. 2,16,76,799/- for year-end expenses on estimate basis in the books of account for the year ending March 31, 2019; c. The Appellant made suo-moto disallowance of Rs. 65,03,040/- in the return of in....
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.... a deduction of Rs. 65,03,040/- on account of expenses disallowed under section 40(a) in the previous year. Accordingly, the assessee was asked to show cause as to why the amount of Rs. 65,03,040/- should not be disallowed and added to the total income of the assessee in the year under consideration, as there is no provision in the Act for reversal of disallowance of the previous years. In response, the assessee submitted that it had disallowed this amount in the assessment year 2019-20, however, no tax was required to be deducted at source. 7. The Assessing Officer ("AO"), vide order dated 27.09.2022 passed under section 143(3) read with section 144B of the Act, disagreed with the submissions of the assessee and held that on one hand the assessee is claiming that it had disallowed the amount in the last year as it failed to deposit TDS within the due date. On the other hand, the assessee is claiming the amount in this year. Accordingly, the AO held that the amount of Rs. 65,03,040/- is not allowable as a deduction in the year under consideration. 8. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that once the amoun....
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.... Having considered the submissions and perused the material available on record, we find that in the preceding assessment year, after disallowing Rs. 65,03,040/- under section 40(a) of the Act, the assessee only claimed the deduction of Rs. 1,51,73,759/-. Therefore, we agree with the submission of the assessee that during the year under consideration, only an amount of Rs. 1,51,73,759/- was required to be reversed and offered to tax. Therefore, since the lower authorities have denied the deduction claimed by the assessee of Rs. 65,03,040/-, we direct the AO only to tax the amount of Rs. 1,51,73,759/- in the year under consideration instead of taxing the entire amount of Rs. 2,16,76,799/- which is offered to tax by the assessee. Accordingly, Ground No. II raised in assessee's appeal is allowed for statistical purposes. 12. In the result, the appeal by the assessee is partly allowed for statistical purposes. ITA No.792/Mum/2025 Revenue's Appeal - A.Y. 2020-21 13. In this appeal, the Revenue has raised the following grounds: - "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made on deduction c....
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....nder section 143(3) read with section 144B of the Act, disagreed with the submissions of the assessee and held that under section 80G of the Act, the sum paid needs to be a donation for the purpose of being eligible for deduction under the said section. It was further held that the amount paid by the assessee should be voluntary to become eligible for deduction under section 80G of the Act. However, in the present case, the said expenditure was incurred by the assessee as a mandatory requirement as per section 135 of the Companies Act, 2013. The AO further held that there should be an element of charity and voluntariness for any payment to be considered as a donation for the purpose of claiming a deduction under section 80G of the Act, which is missing in the present case. Accordingly, the AO disallowed a deduction of Rs. 4,22,50,000/- claimed by the assessee under section 80G of the Act on CSR expenditure. 17. The learned CIT(A), vide impugned order, allowed the ground raised by the assessee on this issue following the decision of the Mumbai Bench of the Tribunal in Synergia Lifesciences Private Limited vs. DCIT, in ITA No. 938/Mum/2023. Accordingly, the claim of deduction unde....
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....f Agilent Technologies (International) Pvt. Ltd (supra) is factually distinguishable. The DRP whose order was upheld in the said case, had placed reliance on the decision of the Hon'ble High Court in the case of DCIT v. Hindustan Darr Oliver Ltd. (1994) 45 TTJ Mumbai 552 where the payment made was held as not a donation since it was found that the intention behind making the donation was to get reserved seats in the college run by the institute to whom the payments are made as part of SR spending. As already mentioned, the revenue is not contending that the assessee in the present case has made payments to get something material in return." 21. From the perusal of the record, it is evident that in the present case also, the Revenue has not alleged that the payment towards CSR expenditure was made to get something material in return. Accordingly, respectfully following the decision of the coordinate bench in Sikka Ports and Terminals Ltd. (supra), we are of the considered view that the decision relied upon by the learned DR is factually distinguishable. 22. We find that a similar issue came up for consideration before various coordinate benches of the Tribunal. We find tha....
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....er section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein." 13. From the above it is clear that under Income tax Act, certain provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, 'Income from Business and Profession" to those, who pursue corporate social responsibility projects under following sections. ● Section 30 provides deduction on repairs, municipal tax and insurance premiums. ● Section 31, provides deduction on repairs and insurance of plant, machinery and furniture. ● Section 32 provides for depreciation on tangible assets like building, machinery, plant, furniture and also on intangible assets like know-how, patents, trademarks, licenses. ● Section 33 allows development rebate on machinery, plants and ships. ● Section 34 states conditions for depreciation and development rebate. ● Section 35 grants deduction on expenditure for scientific resea....
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....the stage of computing "Total taxable income". Even if any payments under section 80G forms part of CSR payments keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, "Income form Business and Profession". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing "Total Taxable Income" cannot be denied to assessee, subject to fulfillment of necessary conditions therein. 17. We therefore do not agree with arguments advanced by Ld. Sr. DR. 18. In present facts of case, Ld. AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, "Income from Business and Profession". It has been submitted that some payments forming part of CSR were claimed as deduction under section80G of the Act, for computing "Total taxable income", which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing Total Taxable Income". If assessee is ....
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....ntries. irresistible conclusion that would flow from it is that it is not the legislative intention to bar the payments covered by section 80G(2) of the Act which were made pursuant to the CSR, and other than covered by section 80G(2)(iiihk) and (iiihl) of the Act. As stated above, clue can be had from the restrictions by way of section 80G (2) (iiihk) and (iiihl) of the Explanation 2 to section 37(1) of the Act which denies deduction for CSR expenses by way of business expenditure is applicable only to extent of computing 'business income' under Chapter IV-D of the Act and; it could not be extended or imported to CSR contributions which was otherwise eligible for deduction under Chapter VI-A of the Act. 7. Where the deduction under section 80G of the Act is also disallowed, since CSR qualifying donations are not 'voluntary contributions', it will be a double jeopardy in the case of assessee. Assessee cannot be denied the benefit of claim under Chapter VIA of the Act, which is considered for computing 'Total Taxable Income". If assessee is denied this benefit, merely because such payment forms part of CSR, it would lead to double disallowance, which is ....
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....ning 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 would not fall under the two exceptions specified above which clearly mandates that the assessee is ....
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....Rules not be made. In its reply, the assessee submitted that during the year under consideration, the company did not earn any exempt income, and therefore, no disallowance can be made under section 14A of the Act. The AO, vide order passed under section 143(3) read with section 144B of the Act, disagreed with the submissions of the assessee and held that in managing as well as for decision-making regarding the investment in the shares/mutual funds, the top executives as well as other administrative staff has to devote time and energy, and all these resources for financial cost associated with them. The AO further held that under section 14A of the Act, what is relevant is to work out the expenditure in relation to investments that could yield exempt income and not to examine whether the expenditure incurred by the assessee has resulted in exempt income or taxable income. The AO relied upon the CBDT Circular No.5 of 2014, which provides that the provisions of section 14A of the Act read with Rule 8D of the Rules shall be applicable for disallowance of expenditure even where the taxpayer, in a particular year, has not earned any exempt income. Accordingly, the AO computed the disall....
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....nn.com 209 (SC) and PCIT vs. Karnataka State Financial Corporation Ltd., reported in (2022) 137 taxmann.com 135 (SC). From the perusal of these orders, we find that the Hon'ble Supreme Court has merely issued notice in the Revenue's Special Leave Petition on a similar issue. Further, the learned DR also placed reliance upon the decision of Guwahati Bench of the Tribunal in ACIT vs. Williamson Financial Services Ltd., reported in (2022) 140 taxmann.com 164 (Guwahati - Trib), wherein the coordinate bench held that explanation inserted by Finance Act, 2022 to Section 14A of the Act w.e.f. 01.04.2022 shall be applicable retrospectively. We find that the Hon'ble Guwahati High Court allowing the appeal filed by the assessee in Williamson Financial Services Ltd. vs. CIT, reported in (2024) 166 taxmann.com 607 (Gauhati), against the afore-noted decision of the Guwahati Bench of the Tribunal held that explanation inserted to section 14A by Finance Act, 2022 is prospective in nature. Thus, we find that the Revenue has not placed on record any decision of the higher fora, wherein the decisions as noted in the foregoing paragraphs have been overruled. Therefore, we are of the consi....