TaxTMI 
TaxTMI 
2025 (4) TMI 1801
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.... Appellant. Corporate Tax Grounds 2. That on the facts and circumstances of the case and in law, the Ld. AO/ DRP erred in facts and in law, in disallowing the deduction claimed amounting to INR 1,19,00,000 under Section 80G of the Act. 3. That while doing so, the Ld. AO/DRP, erred in holding that the donations have been made to meet the statutory requirement of the provisions of Companies Act 2013 and were not 'voluntary donation' to be allowable under Section 80G(1) of the Act. 4. That on the facts and circumstances of the case and in law, the Ld. AO/ DRP erred in not appreciating that there is no correlation between deduction claimed under Section 80G(1) of the Act and expenditure incurred towards Corporate Social responsibility ('CSR') disallowed in terms of Explanation 2 to Section 37(1) of the Act. 5. That on the facts and circumstances of the case and in law, the Ld. AO/ DRP failed to appreciate that the eligibility to claim deduction under Section 80G(1), is to be considered only as per the conditions stipulated under sub-sections (2) and (5) of Section 80G of the Act. 6. That while doing so the Ld. AO/DRP erred in di....
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....ng receivables pertaining to sales made to AEs as unsecured loan. 14. That the Ld. AO/ld. TPO/Ld. DRP erred on facts and in law in failing to appreciate that the Appellant did not charge interest on receivables outstanding in relation to sales made to independent unrelated customers and was therefore not required to charge interest on receivables outstanding in the account of the AEs. 15. That, without prejudice to the above grounds, the Ld. AO/ld, TPO/Ld, DRP erred on facts and in law in not appreciating that even considering the excess credit period no adjustment is warranted in as much as the operating margin of the Appellant is higher than the operating margins of the comparable companies adjusted for differences in the level of working capital. 16. Without prejudice to above, the Ld. AO/Ld. TPO/Ld. DRP erred on facts and in law in not appreciating that even if the interest on outstanding receivables is to be considered as part of sale price of goods, it stands benchmarked along with such transaction of sale of goods. 17. Without prejudice, the Ld, AO/ Ld. TPO/ Ld, DRP erred on facts and in law in incorrect application of Transfer Pricing Met....
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....6/-. However, there was additional claim of the assessee for treating duty rewarded as capital receipt which was not considered by the ld. tax authorities below and, further, the Ld. AR has pointed out that ground no. 8 is in fact an additional ground as the same is consequential to a subsequent decision of Hon'ble Supreme Court and for which additional evidences are also filed. 4. Ground No. 2-6: These grounds relate to disallowance of deduction u/s 80G amounting to Rs. 1,19,00,000/- on the ground that the donation was made to meet statutory requirement of CSR and was thus not voluntary which is the prerequisite for any sum to be called 'donation'. At PB 1120-1122 contain application and approval u/s 80G of Cosmo Foundation. Appellant made donations to two institutions, - (i) M/s Cosmo Foundation- Rs. 2,37,53,585/- (ii) Charutar Aarogya Mandal- Rs. 1,00,000/-. Thus, aggregating to Rs. 2.38 crore. The said amount being CSR expenditure was disallowed by the assessee in the computation of income but since these donations qualified for deduction u/s 80G, & hence 50% of Rs. 2,38 crore i.e. Rs. 1.19 crore was claimed u/s 80G. At PB 851-853 is the copy of computation of income showing....
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....provisions of the Finance (No.2) Act, 2014" to hold that donations made as part of CSR expenditure are not allowable as deduction. The foundation of their reasoning being that the donation is voluntary in nature, while CSR expenditures are under statutory obligations. 7.3 As we take notice of the fact that Parliament legislated that CSR expenses would not be eligible for deduction as business expenditure under section 37 of the Act by inserting Explanation 2 to section 37(1) vide the Finance (No.2) Act, 2014 (applicable from the assessment year 2015-16), which provided that any ITA no. 95/Del/2024 expenditure incurred by an assessee on the activities relating to CSR referred to in section 135 of the CA 2013, shall not be deemed to be an expenditure incurred by an assessee for the purpose of business or profession and shall not be allowed as deduction under section 37(1) of the IT Act. The intent of Parliament in bringing the aforesaid provision is given in the Explanatory Memorandum to the Finance (No.2) Bill, 2014 and is reproduced as under ; "CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on b....
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....SR expenditure. Thus the reasoning of learned Tax Authority, the CSR expenditure is mandatory, does not justify disallowance of these expenditures u/s 80G, if other conditions of section 80G are fulfilled. There is no allegation of Revenue that other conditions of Section 80G are not fulfilled. We, thus sustain the ground." 5. Ground No.7: The ground relates to not treating the receipts from Merchandise export from India Scheme (MEIS) duty reward scripts of Rs. 15,42,57,286/- as capital receipt not liable to tax, & such claim was made during the course of assessment proceedings, it was denied by AO. The case of assessee is that such receipt is capital receipt and is not taxable even in the face of the definition of 'income' given u/s 2(24)(xviii) of the Act. Now as settled proposition of law there can be no estoppel against the law and assessee can make a claim of exemption even if originally assessee itself offered the income to tax. Reliance can be placed on CIT vs. Bharat General Reinsurance Company Ltd. (1971) 81 ITR 303 (Delhi). Further it also settled now that even if claim was not made in the return, appellate authority is not precluded from entertaining the said claim. R....
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....tatistical purpose and ld. AO is directed to take cognizance of same and determine the computation afresh. 8. Ground No. 10-20: These grounds related to Transfer Pricing of Rs. 20,62,216/- on account of notional interest relating to alleged delay in recovery of outstanding receivable pertaining to sales made to its associate enterprises. In the draft assessment order (Page no. 482-489), Ld. AO proposed an addition of Rs. 98,28,820/- in respect of notional interest on receivables in respect of sales made to AEs. Ld. TPO has mentioned that as per Clause (i) (c) of Explanation to Section 92, 'International Transaction' includes capital financing, including any type of long term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payments or receivable or any other debt arising during the course of business. In view of this clause, he was of the view that the assessee was obliged to benchmark interest on outstanding receivables. However, the assessee had not provided any benchmarking for this purpose. Therefore, he proceeded to benchmark the same. In this connection, he listed 321 invoices where receip....