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Facts
The assessee company claimed deduction under section 80G for Corporate Social Responsibility (CSR) expenditure. The AO allowed the deduction, but the PCIT issued a notice under Section 263 proposing to withdraw it, stating CSR expenditure is mandatory while 80G deduction is voluntary.
Held
The Tribunal held that the PCIT's order under Section 263 was invalid as there was no 'error' that was 'prejudicial to the interest of the Revenue'. The Tribunal relied on several decisions of coordinate benches which held that deduction under Section 80G is allowable even if it forms part of CSR expenditure.
Key Issues
Whether CSR expenditure is eligible for deduction under Section 80G of the Income Tax Act, and whether the PCIT's order under Section 263 was justified.
Sections Cited
80G, 263, 143(3)
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Income Tax Appellate Tribunal, Mumbai “B” Bench, Mumbai.
Before: Shri Narender Kumar Choudhry (JM) & Shri Omkareshwar Chidara (AM)
The only issue to be adjudicated in this case is whether the appellant company is eligible to claim deduction under section 80G which was part of Corporate Social Responsibility (CSR) expenditure claimed in the books of account. The Ld. AO has allowed the 80G deduction. The Ld. PCIT has issued a notice under section 263 of the Income Tax Act to the appellant company stating that why the deduction allowed by Ld. AO in this regard cannot be withdrawn as the appellant had to mandatorily spend the amount of CSR, whereas the deduction under section 80G is voluntary.
The Ld. AR of the appellant gave detailed written submissions before Ld. PCIT stating that there is no bar in claiming deduction under section 80G, under any provisions of I.T. Act and reliance was placed on several decisions of ITAT. The Ld. PCIT did not controvert these decisions as to why the same were not applicable to the facts of the case, but held that the appellant is not eligible to claim the deduction and accordingly set aside the 2 Netscribes Data & Insights P.L. assessment to the file of Ld. AO to examine the issue by exercising powers under section 263 of the Act.
Aggrieved by the order of Ld. PCIT, the appellant raised two grounds, first one being the order under section 263 was passed by Ld. PCIT on the PAN of non-existing entity and hence the order is invalid. The second ground raised by the Ld. AR of the appellant is that this issue is covered in favour of appellant by the decisions of the Coordinate Benches of the ITAT.
The Ld. DR relied on the order of Ld. PCIT.
Heard both sides. The first contention is that the order under section 263 was passed by Ld. PCIT on a non-existing PAN which was allotted to the merged entity and hence invalid. The order of Ld. PCIT is perused and found that the PAN was quoted wrongly, but name and address of company was mentioned correctly. Secondly, the Ld. AR of the appellant never brought the same to the notice of Ld. PCIT before passing the order. Hence, this objection is not tenable. The cases-law quoted/relied on by appellant relates where the information was given to AO and still AO passed an assessment order in the name of merged entity whereas here in our case, only PAN was wrongly quoted by mistake, but otherwise it is valid order as the cases relied on appellant are distinguishable on facts.
The second argument is that the issue in question, whether the appellant is eligible for deduction under section 80G which was part of CSR expenditure of company. This issue was dealt with and decided in favour of the appellant company in several decisions of the Coordinate Benches of the ITAT Mumbai and other Benches mentioned below:- • ACG Pam Pharma Technologies Private Limited vs. PCIT-4 (01/07/2025)(Mumbai- Trib) • The Ruby Mills Limited vs. PCIT-5 (27/06/2025) (Mumbai- Trib) • Blue Dart Express Limited vs. PCIT-1 (03/09/2024) (Mumbai- Trib) • Alubound Dacs India (P.) Ltd v. DCIT [2024] 163 taxmann.com 536 (Mumbai - Trib.)
3 Netscribes Data & Insights P.L. • Interglobe Technology Quotient (P.) Ltd. v. ACIT [2024] 163 taxmann.com 542 (Delhi - Trib.) • Allegis Services (India) Pvt. Ltd. (ITA No.1693/Bang/2019) (Bangalore tribunal) • Marsh Mclennan Global Services India Private Limited (ITA No. 2452/MUM/2022) (Mum-Trib.)
It was submitted that in all the above decisions, it was held that the appellant is entitled to claim deduction under section 80G of the Act, even though the same is part of CSR expenditure because there is no bar in claiming the expenditure under section 80G of the Act.
Heard both sides. The first condition to assume jurisdiction under section 263 of the Act is that there should be an ‘error’ and the second condition is the same should cause ‘prejudicial to the interest of Revenue’. It is a settled law that both the conditions should be satisfied to assume the jurisdiction under section 263 of the Act Malabar Industrial Co. (supra). In the impugned case, there are several decisions in favour of the appellant, as mentioned above and hence, it cannot be said that there is an ‘error’. Hence, the order under section 263 of Ld. PCIT is incorrect and invalid in the eyes of law.
The appeal of appellant is allowed.
Order pronounced in the open Court on 06/10/2025.