TaxTMI 
TaxTMI 
2026 (6) TMI 864
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....19,231 to the total income of the Appellant in respect of notional interest on outstanding receivables from Associated Enterprises ('AEs'). 1.2. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in facts and circumstances of the case and in law, in not appreciating the fact that outstanding receivable is not an international transaction, per se, under section 92B of the Act but an integral part of the primary transaction of sale of goods to AEs and cannot be seen in isolation. 1.3. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in facts and circumstances of the case and in law, in re-characterizing outstanding receivable as loan / financing transaction. 1.4. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in facts and circumstances of the case and in law, in proposing to tax hypothetical income and not real income. 1.5. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in facts and circumstances of the case and in law....
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....n initiating the penalty proceedings under section 270A of the Act in respect of disallowance of education cess without appreciating the fact that the appellant had filed Form 69 within the prescribed time i.e. on 22 March 2023 and no penalty is leviable as per proviso to Section 115 (18) of the Act. 4. Ground No.4 - initiation of penalty proceedings u/s 271AA of the Act. 4.1 On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in initiating the penalty proceedings u/s 271AA of the Act without appreciating the fact that outstanding receivables / payables have been separately reported in Form 3CEB. 3. The assessee has also raised following additional grounds of appeal: - "On the facts and in the circumstances of the case and in law, the learned Assessing Officer has erred in not granting refund of excess Dividend Distribution Tax ('DDT') paid to the extent of 5.5553% as per the provisions contained in Section 115-O of the Act read with India-USA double taxation avoidance agreement ('DTAA' or 'the treaty')." 4. The brief facts of the case are that the assessee is a company engaged in to manufacturi....
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....fitability analysis and no separate adjustment on account of notional interest on receivables is warranted. The Tribunal further held that where the assessee follows uniform policy of not charging interest from AEs as well as non-AEs and no material is brought on record to establish existence of any independent financing arrangement, no separate TP adjustment survives. 6.2 We find that the facts of the year under consideration are materially identical. The outstanding receivables arise from the principal international transaction of sale of goods and do not constitute independent financing transactions. The international transactions have been benchmarked under TNMM as the Most Appropriate Method and working capital adjustment has already been granted while determining the arm's length margin, thereby subsuming the impact of receivables in the profitability analysis. Further, the Revenue has not brought any material on record to establish the existence of any separate financing arrangement warranting an independent adjustment. Therefore, respectfully following the decision of the Co-ordinate Bench in assessee's own case for AY 2021-22 in ITA No.2201/Ahd/2024 dated 21.05.2025, we....
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....ying the nature of contributions and observed that it is not a donation, and was not spent voluntarily for the eligibility of claim u/s. 80G of the Act but due to legal obligation prescribed u/s. 135 r.w. Schedule VII of Companies Act, 2013. We find that the A.O. has allowed deduction u/s. 80G of the Act in respect of contribution made to PM Relief Fund which is not disputed. We are of the opinion that the A.O. has not made his observations clear that no CSR expenses are eligible for deduction u/s. 80G of the Act. We consider it appropriate to refer to the Clauses (iiihk) & (iiihl) of subsection 2 of Section 8OG of the Act which are read as under: "(iiihk) the Swachh Bharat Kosh, set up by the Central Government, other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of Section 135 of the Companies Act, 2013 (18 of 2013); or (iiihl) the Clean Ganga Fund, set up by the Central Government, where such assessee is a resident and such sum is other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under subsection (5) of Section 135 of the Companies Act, 2013) (18 of 2013)." ....
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.... is NOT Donation: Se. 8OG deduction pertains to "donations" i.e. voluntary contributions. However, CSR outlays are mandatory payments and not at all "donations". The claim of the assessee is rejected. The CSR outlays are characterised as mandatory payments from capital account, instead of donations. Therefore, provisions of se. 80G would not apply at the threshold it being "Deduction in respect of donations to certain funds, charitable institutions, etc." These outlays are not eligible for 80G deduction. Mandatory Nature: ln this regard, Explanatory notes to Finance No. (2) Act, 2014 are being reproduced as under: Corporate Social Responsibility (CSR) Under the Companies Act, 2013 certain companies (which have net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or a net profit of Rs. 5 crore or more during any financial year) are required to spend certain percentage of their profit on activities relating to Corporate Social Responsibility (CSR). Under the existing provisions of the Income-tax Act, expenditure incurred wholly and exclusively for the purposes of the business is only allowed as a deduction for computi....
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....porate Social Responsibility (CSR) expenses. It explicitly conveyed that allowing such deductions would effectively finance CSR expenses through tax savings, a course of action the legislature was not inclined to pursue. In clear and unambiguous terms, the Legislature expressed negative intention to forego taxes in support of CSR expenditures. lf se. 80G deduction is allowed, the same scenario will emerge where there will be the "tax loss" to this extent and thus, the General Exchequer and People of India will bear 30% of the CSR expenditures in form of Revenue forgone. Such a side-effect is not permissible. Moreover, the objective of CSR is to share burden of the Government in providing social services by companies having net Worth/turnover/profit above a threshold. If such expenses are allowed as tax deduction, this would result in subsidization to the applicant of around one-third of such expenses by the People of India by way of tax expenditure. With utmost respect to various judicial authorities, it is laid down that the relied upon decisions of the Hon'ble ITAT does, not take the intention of legislature into account - where the intention has be....
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....er section 80G. (iv) Incorrect Interpretation of Section 80G. The assertion that section 80G does not impose any embargo on claiming deduction of donations made out of CSR funds except in case of Swachh Bharat Kosh and Clean Ganga Fund is not acceptable. There has been gross misinterpretation by the applicant. In fact, "Swachh Bharat Kosh" and "Clean Ganga Fund" even if allowable under section 80G, yet the legislature had had clearly demarcated that provisions of section 80G would be applicable to "sums paid as donations" as per sub-section 80G(2) "other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of section 13587 of the Companies Act, 2013 (18 of 2013)". In fact, only in these 2 Scheme, section 8OG is allowable if CSR spends are involved, and not in any other Scheme. These Scheme are special Schemes, and form an exception. In all other Schemes, the intention of Legislature is that no amount of CSR spends are to be considered as eligible contribution. So, even eligible donations are not allowable under section 80G, if made under Scheme of CSR activities. This proves that there is no cas....