TaxTMI 
TaxTMI 
2026 (7) TMI 1486
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....(Appeals) erred in disallowing a sum of Rs. 14,06,904/- under section 14A of the Income Tax Act, 1961. 1.2. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in not appreciating the fact that the amount of Rs. 14,06,904 had already been disallowed in the computation of total income under the head Any other item or items of addition under section 28 to 44DA and further disallowance in this regard has resulted in double disallowance. 2. Disallowance under section 35(2AB) should be restricted to Rs. 20,36,890/- and not Rs. 61,10,670/- 2.1. On the facts and circumstances of the case the learned Commissioner of Income tax (Appeals) erred in disallowing the research and development expenditure claimed of Rs. 40,73,780/- under section 35(2AB). 2.2. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals), erred in not appreciating the fact that the expenditure incurred towards scientific research for which deduction under section 35(2AB) was not allowed does not tantamount expenditure not allowable. The amount of expenditure which was not eligible under section 35(2AB) ....
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....4, the AO considered the total income computed under section 143(1) at INR 34,05,96,804 as against INR 33,91,89,900, which is due to the adjustment of INR 14,06,904 proposed under section 143(1)(a)(iv) on account of disallowance under section 14A of the Act. During the hearing, the learned Authorised Representative ("learned AR") submitted that the said adjustment was not ultimately made and vide intimation dated 24/11/2021 issued under section 143(1) of the Act, the returned income of the assessee at INR 33,91,89,900 was accepted. 5. Having considered the submissions and perused the material available on record, we find merit in the contentions of the learned AR, as vide intimation issued under section 143(1) of the Act, the total income of the assessee was computed at the returned income, and the adjustment proposed on account of disallowance under section 14A of the Act was not made. Therefore, we direct the AO to compute the total income of the assessee, considering the returned income at INR 33,91,89,900 as the base amount. As a result, Ground No.1 raised in assessee's appeal is allowed. 6. Ground No.2, raised in assessee's appeal, pertains to the disallowance of weighte....
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.... DSIR vide Form No. 3CL dated 24/11/2021, approved a revenue expenditure of only INR 7,13,36,000. Thereby, a weighted deduction amounting to INR 61,10,670 was disallowed by the AO under section 35(2AB) of the Act. 10. Before proceeding further, it is pertinent to analyse certain provisions of the Act and the Rules, which are relevant for the adjudication of the issue raised in this appeal. Section 35(2AB)(1) of the Act, as it stood in the relevant year, reads as follows:- "(2AB)(1) Where a company engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to one and one-half times of the expenditure so incurred: Provided that where such expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development ....
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....ses of this sub-rule the expression "audited" means the audit of accounts by an accountant, as defined in the Explanation below sub-section (2) of section 288 of the Income-tax Act, 1961. (d) Assets acquired in respect of development of scientific research and development facility shall not be disposed off without the approval of the Secretary, Department of Scientific and Industrial Research" 12. In the present case, the deduction under section 35(2AB) of the Act was restricted on the basis that the said expenditure was not approved by the DSIR for weighted deduction under section 35(2AB) of the Act. It is pertinent to note that there was an amendment with effect from 01/07/2016 to Rule 6(7A)(b) of the Rules, whereby it has been laid down that the prescribed authority, i.e., DSIR shall quantify the expenditure incurred on in-house research and development facility by the company during the previous year and eligible for weighted deduction under section 35(2AB) of the Act in Part-B of Form No. 3CL. 13. Therefore, we are of the considered view that the said amendment is clearly applicable to the year under consideration, being post 01/07/2016. Thus, the assessee is on....
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....ced before us. 10. Section 135 of Companies Act, 2013 requires companies with CSR obligations, with effect from 01/04/2014. Finance (No.2) Act, 2014 inserted new Explanation 2 to sub- section (1) of section 37, so as to clarify that for 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 be an expenditure incurred by the assessee for the purposes of the business or profession. 11. This amendment will take effect from 1/04/2015 and will, accordingly, apply to assessment year 2015-16 and subsequent years. 12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head Income form Business and Profession'. Further, clarification regarding impact of Explanation 2 to section 37(1) of the Income Tax Act in Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as under: "The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in sectio....
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....ides deduction regarding insurance premium on stock, health of employees, loans or commission for employees, interest on borrowed capital, employer contribution to provident fund, gratuity and payment of security transaction tax. Income Tax Act, under section 80G, forming part of Chapter VIA, provides for deductions for computing taxable income as under: • Section 80G(2) provides for sums expended by an assessee as donations against which deduction is available. a) Certain donations, give 100% deduction, without any qualifying limit like Prime Minister's National Relief Fund, National Defence Fund, National Illness Assistance Fund etc., specified under section 80G(1)(i). b) Donations with 50% deduction are also available under Section 80G for all those sums that do not fall under section 80G(1)(i). Under Section 80G(2) (iiihk) and (iiihl) there are specific exclusion of certain payments, that are part of CSR responsibility, not eligible for deduction u/s. 80G. 14. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession", whereas ....
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....(1) of the Act. 20. Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate its calim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility." 17. We further find that the coordinate bench of the Tribunal in Societe Generale Securities India (P.) Ltd. vs. Principal Commissioner of Income-tax, reported in [2023] 157 taxmann.com 533 (Mumbai - Trib), while affirming the claim of deduction under section 80G of the Act in respect of CSR expenditure, observed as follows: - "6. After computing the business income, while computing the total income of the assessee, the assessee is invoking the benefit under Chapter VIA by claiming deduction of the sums under section 80G of the Act. According to the revenue, when once such sum went to satisfy the requirement of section 135 of the Companies Act, the benefit gets exhausted and such an amount is no more available for the purpose of claiming deduction under section 80G of the Act. There is no express provision to support the co....
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....e payments were made through proper banking channel and appropriate donation receipts were also produced before the lower authorities and before us also." 18. Further, the coordinate bench of the Tribunal in Alubound Dacs India (P.) Ltd. vs. Deputy Commissioner of Income-tax, reported in [2024] 163 taxmann.com 536 (Mumbai - Trib), held that the expenditure towards CSR activities is an allowable deduction under section 80G of the Act. The relevant findings of the coordinate bench, in the decision, are reproduced as follows:- "11. We have heard the rival submissions and perused the materials available on record. The only moot question to be decided here is whether the expenditure towards CSR activities are an allowable deduction u/s. 80G of the Act. The CSR expenses are governed by section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies (CSR) Policy Rules, 2014 where companies having net worth of Rs.500 crores or more or turnover of Rs.1000 crores or more or net profit of Rs.5 crores or more have to mandatorily comply with the CSR provisions specified u/s. 135(1) of the Companies Act, 2013. The above mentioned companies are liable to spend atleast 2%....