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Facts
The assessee, engaged in manufacturing speciality chemicals, filed its return of income and claimed a deduction under Section 80G for donations which were also part of its CSR expenses. The Assessing Officer had examined this claim during assessment. The PCIT initiated revisionary proceedings under Section 263, holding that the assessment order allowing the deduction was erroneous and prejudicial to the revenue's interest.
Held
The Tribunal held that the PCIT's revisionary order was not justified. It noted that the issue of allowing 80G deduction for donations made as CSR expenses is a settled matter, with various judicial precedents supporting the assessee's claim. The Tribunal found that the Assessing Officer had made proper inquiries and taken a plausible view, fulfilling the requirement of examination.
Key Issues
Whether the PCIT was justified in invoking revisionary powers under Section 263 when the Assessing Officer had already examined the claim of 80G deduction for CSR expenses and there were judicial precedents supporting the assessee's claim.
Sections Cited
263, 143(3), 144B, 37(1), 80G, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH MUMBAI
Before: SHRI PAWAN SINGH & SHRI GIRISH AGRAWAL
Chembond Chemicals Ltd Principal Commissioner of B/23 2nd Floor, Todi Income Tax PCIT -6, Industrial Estate, Mumbai New Sunmill Compound, Vs. Lower Parel, Mumbai - 400013 (PAN: AAACC5467A) (Appellant) (Respondent) Present for: Assessee : Shri. Dhiren Talati, CA Revenue : Shri R.A Dhyani, CIT DR Date of Hearing : 09.10.2025 Date of Pronouncement : 31.10.2025 O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the revisionary order of PCIT, Mumbai-6, vide order dated 11.03.2025 passed u/s. 263 against the assessment order by Circle-6(1)(1), Mumbai, u/s. 143(3) r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 23.09.2022 for Assessment year 2020-21.
Grounds taken by assessee are reproduced as under: Looking to the Facts and Circumstances of the Case and in Law, The learned Principal Commissioner of Income Tax is not justified in: 1. Passing an order u/s 263 of the Income Tax Act 1961 as the provisions of the said section are not attracted.
Chembond Chemicals Ltd. AY 2020-21 2. Passing an order u/s 263 of the Income Tax Act 1961 as the provisions of explanation 2 to Sec 263 of the Income Tax Act, 1961 are not attracted.
Passing an order u/s 263 of the Income Tax Act, 1961 as the order passed by the AO u/s 143(3) rws Sec 144B of the IT Act, 1961 is neither erroneous nor prejudicial to the interest of the revenue.
Passing an order u/s 263 of the Income Tax Act, 1961 as the AO has passed his order u/s 143(3) rws Sec 144B of the IT Act, 1961 after making specific enquiries and by adoption of one of the plausible courses permissible under law.
Passing an order u/s 263 of the Income Tax Act 1961 as the deduction claimed u/s 80-G is clearly allowable since the same is neither towards Swachh Bharat Kosh nor Clean Ganga Fund but to Visan Trust to which there are no restrictions expressed in Section 80-G of the IT Act 1961.
2.1. Aforesaid grounds raised by the assessee in the present appeal relate to revisionary proceeding initiated u/s.263 and revisionary order passed thereunder. The issue raised in the revisionary proceedings relate to denial of deduction under Chapter-VIA u/s.80G vis-à-vis Corporate Social Responsibility (CSR) expenses.
3. Brief facts of the case are that assessee is engaged in the business of manufacturing of speciality chemicals. Assessee filed its return of income on 15.02.2021 reporting total income at Rs.1,53,53,330/-. Case of assessee was selected for scrutiny for the following reasons: i) Capital Gains/Loss ii) Expenditure of Personal Nature iii) Default in TDS and Disallowance for such Default iv) Default in TDS v) Refund Claim 3.1. In the course of assessment proceedings, ld. Assessing Officer amongst other things called for details relating to donation made by the assessee and claimed deduction u/s.80G. Ld. Assessing Officer notes that assessee had claimed deduction of Rs.5,01,228/- u/s.80G for Chembond Chemicals Ltd. AY 2020-21 which it produced receipts and bank statement showing payment of Rs.13,75,000/-. He also notes from the submissions made by the assessee that it voluntarily disallowed the amount of donation of Rs.14,01,901/-, while computing its business income. Assessment was completed by making certain disallowances and additions but not relating to the donation claimed u/s.80G and a contribution made towards CSR.
3.2. Subsequently, ld. PCIT in reference to objections raised by internal audit perused the assessment records. Having examined the assessment records, Ld. PCIT noted that assessee has disallowed CSR expenditure u/s.37(1) of Rs.13,75,000/-. However, against this expenditure, assessee claimed deduction u/s.80G of Rs.5,10,228/-. He called for explanation from assessee in this respect and in the ultimate analysis found the assessment order erroneous in so far prejudicial to the interest of Revenue on this aspect of claim made by the assessee. He thus, set aside the assessment order on this issue of claim of deduction u/s.80G vis-à-vis CSR expenses and directed the ld. Assessing Officer to make an enquiry and re-assess the income after giving opportunity of being heard to the assessee.
4. In order to take note of the factual matrix in the present case, we referred to the computation of total income and tax for the year under consideration placed in the paper book wherein assessee had made suo moto disallowance of CSR expenses. It had claimed a deduction u/s.80G for the donations made which actually pertains to CSR expenses. This factual position is undisputed. Further, ld. Assessing Officer has made specific queries in this aspect, while issuing notice u/s.142(1) and has examined the claim of the assessee which is evident from his own observation in the impugned assessment order, discussed by us in the Chembond Chemicals Ltd. AY 2020-21 above paragraphs. The issue raised by the ld. PCIT in the revisionary order is in respect of donation u/s.80G vis-à-vis CSR which according to him has been allowed without making proper examination of the facts and therefore, the same has been held to be erroneous in so far as prejudicial to the interest of Revenue.
5. The issue for which the impugned revisionary proceedings were invoked is no longer res integra and is settled by long line of decisions of Coordinate Benches of ITAT. We refer to the decision of Coordinate Bench of ITAT, Mumbai in the case of DCIT vs. Gabriel India Ltd. [2025] 173 taxmann.com 219 (Mum) wherein this issue has been elaborately dealt with. The Coordinate Bench while giving relief to the assessee followed various other decisions of difference benches of the Tribunal. Relevant parts of the decision are extracted below for ready reference: "7.After giving a thoughtful consideration to the orders of the authorities below, we are of the considered view that the Coordinate Benches have been consistently taking the stand that 80G deduction cannot be denied. The relevant findings in the case of Ericsson India Global Services (P) Ltd. (supra), read as under:- "7. We have considered rival submissions and perused the material on record. We have also applied our mind to case laws cited before us. Undisputedly, expenditure incurred towards CSR is specifically prohibited from being allowed as deduction towards business expenditure by insertion of Explanation 2 to Section 37(1) of the Act by Finance Act, 2014 w.e.f01.04.2015. However, there is no such Ericsson India Global Services Pvt. Ltd. v. DCIT corresponding amendment to section 80G of the Act. Only condition for claiming deduction under section 80G of the Act as per the existing provision is the institute to which donation is made must have been registered under section 80G of the Act. Once the aforesaid condition is fulfilled, the donor is entitled to avail the deduction. This is also the view expressed by the Coordinate Bench in case of Honda Motorcycle and Scooter India Pvt. Ltd. (supra). The relevant observation are as under: "17. Apropos the issue of disallowance u/s 80G of the Income-tax Act, 1961 (for short 'the Act'): The assessee made certain donation to approved institutions or funds and claimed 50% of the total donation made as deduction u/s 80G. This amount also formed part of the CSR initiative of the assessee company which amounts to INR 22,81,29,964/-. It is observed that the assessee has duly disallowed CSR expenditure of INR 22,81,29,964/-debited to the statement of profit and loss under section 37 of the Act. DRP rejected the claim of the assessee by saying that the Chembond Chemicals Ltd. AY 2020-21 donation is pursuant to the CSR policy of the company and lacks the test of voluntariness as required under section 80G. The AO has disallowed the claim on the ground that anything donation over and above the CSR u/s 80G will be only allowed as the CSR expense is not an allowable expense u/s 37 of the Act. Ld. Counsel of the assessee placed reliance on the following decisions:- JMS Mining (P) Ltd. v. PCIT (2021] 130 taxmann.com 118/190 ITD 702/91 ITR(T) 80 (Kolkata - Trib.) Goldman Sachs Services (P) Ltd. v. JCIT (2020) ([2020] 117 taxmann.com 535 (Bangalore Trib.)) (ITAT Bangalore) (iii) First American (India) Pvt. Ltd. (ITA No. 1762/Bang/2019) Allegis Services (India) Pvt. Ltd. (ITA No. 1693/Bang/2019) Ld. Counsel further submitted that if the intention was to deny deduction of CSR expenses under section 80G, appropriate amendments on lines of section 37(1) should also have been made under section 80G of the Act. In the absence of any such amendment, CSR expenses should not be disallowed under section 80G of the Act.
We have heard both the parties and perused the records. We find that ITAT, Bangalore Bench in the case of Goldman Sachs Services (P.) Ltd. (supra) has held that the other contributions made under section 135 (5) of the Companies Act are also eligible for deduction/s 80G of Ericsson India Global Services Pvt. Ltd. v. DCIT the Act subject to satisfying the requisite conditions prescribed for deduction u/s 80G of the Act. For this purpose, the issue is remanded to the file of AO to examine the same whether the payments satisfy the claim of donation u/s 80G of the Act. We find that the case law is fully applicable to the facts of the case. There is no restriction in the Act that expenditure when disallowed for CSR cannot be considered u/s 80G of the Act. Hence, we remit the issue to the file of AO to verify whether these payments were qualified as donations u/s 80G of the Act or not, if they qualify as donation u/s 80G of the Act then the requisite amount deserves to be allowed."
5.1. Issue raised by the ld. PCIT in respect of claim of deduction u/s.80G vis-à-vis CSR expenses is an allowable claim which ld. Assessing Officer has considered through his proper verification and examination for its allowability. Accordingly, in the given set of facts and considering the judicial precedents which squarely covers the case of the assessee, there was no occasion for the ld. PCIT to invoke revisionary proceedings u/s.263 and pass the impugned revisionary order thereon. Claim of the assessee is a lawful claim as held in the judicial precedent referred above for which ld. Assessing Officer has Chembond Chemicals Ltd. AY 2020-21 taken a plausible view. Accordingly, the view taken by the ld. Assessing Officer cannot be said to be erroneous and hence the assessment order so passed cannot be termed as prejudicial to the interest of Revenue. Thus, the pre-requisite of twin conditions required to be met for exercising jurisdiction u/s.263 remained unfilled, leaving the impugned revisionary order liable to be quashed. We thus, quash the revisionary order passed by ld. PCIT. Accordingly, grounds raised by the assessee in this respect are allowed.
In the result, appeal of the assessee is allowed.