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Facts
The Assessee claimed a deduction under Section 80G for CSR expenses. The Assessing Officer allowed this claim. However, the PCIT revised the order under Section 263, holding that CSR expenses are not eligible for deduction under Section 80G and set aside the assessment order for fresh inquiry.
Held
The Tribunal held that the Assessing Officer had conducted proper inquiry regarding the CSR expenses and the deduction claimed under Section 80G. Relying on co-ordinate bench decisions, the Tribunal found that the PCIT's order under Section 263 was erroneous.
Key Issues
Whether CSR expenses are eligible for deduction under Section 80G of the Income Tax Act, and whether the PCIT was justified in exercising revisionary powers under Section 263 based on an alleged incorrect assumption by the AO.
Sections Cited
263, 143(3), 144C(13), 80G, 143(2), 142(1), 135
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
order : 29.09.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member:
1.
By way of the present appeal for the Assessment Year 2018-2019, the Assessee has challenged the order, dated 21/03/2025, passed by the Learned Principal Commissioner of Income Tax, Mumbai - 4 [hereinafter referred to as ‘the PCIT’] under Section 263 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Assessment Order, dated 29/07/2022, passed under Section 143(3) read with Section 144C(13) of the Act was set aside as being erroneous in so far as prejudicial to the interest of Revenue.
2. The Assessee has raised following grounds of appeal : “Ground no.1: Proceedings initiated under section 263 of the Act are bad in law and invalid Assessment Year 2018-2019 1.1 erred in initiating proceedings under section 263 of the Act vide notice dated 20 February 2025; 1.2 erred in holding that the order passed by the Assessing Officer (hereinafter referred to as the ‘learned AO') under section 143(3) read with section 144C(13) of the Act dated 29 July 2022 (hereinafter referred to as the Assessment Order) is erroneous as well as prejudicial to the interest of the Revenue; 1.3 erred in initiating proceedings under section 263 of the Act when the original assessment order has been passed under section 143(3) read with section 144C(13) of the Act, pursuant to the direction of the Dispute Resolution Panel (DRP); 1.4 erred on facts in concluding that the learned AO has made no inquiry regarding the deduction claimed under section 80G of the Act with respect to Corporate Social Responsibility (CSR) payments and in not considering and appreciating the fact that the learned AO had called for the details of the CSR expenditure and the same was submitted by the Appellant along with the details of deduction under section 80G of the Act; 1.5 erred in partly setting aside the assessment order with directions to the learned AO to enquire the claim of deduction under section 80G of the Act amounting to INR.3,62,60,944/- in respect of CSR expenses. “Ground no.2: Non-granting of deduction under section 80G of the Act Without prejudice to Ground No.1, in the fact and in circumstances of the case and in law, the learned PCIT has: 2.1. erred in holding that deduction under section 80G of the Act cannot be claimed with respect to CSR expenses; 2.2 erred in not following the binding decisions of the higher appellate authorities with respect to allowance of deduction under section 80G of the Act with respect of CSR expenses.”
3. The relevant facts in brief are that the Assessee had filed return of income for the Assessment Year 2018-2018 on 19/11/2018 declaring total income of INR.534,74,16,160/-. The return of income was duly 2 Assessment Year 2018-2019 processed under Section 143(1) of the Act. Subsequently, the case of the Assessee was selected from scrutiny and accordingly, assessment under Section 143(3) read with Section 144C(13) of the Act was completed on 29/07/2022 determining total income at INR.538,70,89,730/-. Subsequently, Ld. PCIT passed Order, dated 21/03/2025, under Section 263 of the Act setting aside Assessment Order, dated 29/07/2022, directing the Assessing Officer to enquire into the claim of deduction under Section 80G of the Act in respect of CSR Expenses and to modify the Assessment Order as per the findings in the said order.
Being aggrieved, the Assessee has preferred the present appeal before the Tribunal contending that Ld. PCIT erred in exercise and revisional jurisdiction under Section 263 of the Act on the ground that the Assessing Officer had allowed Assessee’s claim under Section 80G of the Act after making thorough enquiry in relation to deduction claimed under Section 80G of the Act and CSR Expenses incurred by the Assessee during the relevant previous year. It was submitted by the Learned Authorized Representative for the Assessee that Co- ordinate benches of the Tribunal have held that deduction under Section 80G of the Act can be claimed in respect of CSR Expenses and had quashed revisional orders passed under Section 263 of the Act in identical facts and circumstances. In this regard reliance was placed on the following decisions – (a) decision of Mumbai Tribunal in the case of Mahansaria Enterprises (P.) Ltd. Vs. Principal Commissioner of Income Tax [2025] 175 taxmann.com 885 (Mumbai – Trib), [ITA No.2158/Mum/2025, dated 11/06/2025, and (b) decision of Mumbai Tribunal in the case of Chandan Steel Limited Vs. Principal Commissioner of Income Tax [ITA No.3444/Mum/2025, dated 15/09/2025].
Per contra the Learned Departmental Representative supported the order passed by the Ld. PCIT and submitted that no enquiry regarding 3 Assessment Year 2018-2019 CSR Expenses being eligible for deduction under Section 80G of the Act was specifically raised during the assessment proceedings. The Assessment Order was silent upon the judicial precedence cited by the Learned Authorized Representative for the Assessee during the course of hearing. Since, the Assessing Officer had proceeded on an incorrect assumption of fact that CSR Expenses were eligible for deduction under Section 80G of the Act, the Ld. PCIT was correct exercising revisionary power under Section 263 of the Act.
We have considered the rival submissions and have perused the material on record.
The relevant extract of the impugned order above under Section 263 of the Act reads as under:
4.1 After going through the findings in the assessment order, the issue raised in the audit objection and reply of the assessee in response to show cause notice u/s 263 of the Act, following facts are noted: 4.2 The assessment order was passed on 29/07/2022 and it was observed by the audit that Section 80G deduction claimed to the tune of Rs.3,62,60,944/- was not allowable in view of the fact that the assessee had claimed CSR expenses of Rs.7,34,20,341/- and out of the same expenses under CSR heads, Rs.3,62,60,944/- was claimed as deduction u/s 80G of the Act. 4.3 xx xx 4.4 xx xx 4.5 xx xx 4.6 The Appellant has referred to the query raised by the A.O for CSR expenses during the assessment proceedings and reply filed before the A.O to stress upon the point that the A.O had already examined this issue and the assessment order cannot be held erroneous as A.O had passed order after considering the submission. The assessee has referred to several Courts decisions to support its contention. In the current case, it is 4 Assessment Year 2018-2019 important to note from the assessment order that the A.O has, nowhere in the assessment order, mentioned or discussed anything about the claim of expenses under CSR head vis-à-vis donations u/s. 80G. On this contention, I must reiterate that S. 263 can be resorted to in the case of incorrect assumption of facts as well as incorrect interpretation of law. There is no query regards CSR expenses eligible for Section 80G of the Act and hence, there is incorrect assumption of facts on the part of the A.O as regards CSR expenses eligible for Section 80G deductions. Further, incorrect assumption of facts led to incorrect application of law. Therefore, revisionary power u/s 263 lies with the PCIT in the current facts of the case. 4.7 In common parlance, donations are made without any expectation of reciprocal return or benefits in lieu of the same whereas the expenses made under CSR head are for the benefits in the form of mandatory compliance as per section 135 of the Companies Act. Thus, voluntariness is lacking in the expenses made under CSR head. In the decision by Supreme Court in the case of Commissioner of Expenditure Tax vs. PVG Raju Raja of Vizianagaram (supra), the Hon'ble Apex Court held that for any payment to constitute as donation, it must satisfy the test of voluntariness. The assessee, in the current case incurred expenses under CSR head as part of mandatory compliance of the provisions of Companies Act and this certainly lacked voluntariness character. Thus, it is apparent that the A.O had no occasion to examine the issue of CSR expenses vis-a-vis section 80G donations and to this extent, it can be held that the assessment order suffers from infirmity being erroneous and also prejudicial to the interest of revenue for allowing ineligible claim of deduction of Rs.3,62,60,944/- u/s. 80G of the Act. Hence, the assessment order dated 29/07/2022 is hereby partly set aside to the file of the AO to enquire the claim of Section 80G deduction out of CSR expenses and modify the assessment order as per findings in this order.
5. Order u/s. 263 of the Act, 1961 is passed accordingly.”
On perusal of above, it is clear that it is undisputed position that Assessing Officer had raised inquiries in relation to deduction claimed by the Assessee under Section 80G of the Act as well as CSR Expenses during the assessment proceedings. The stand taken by the Revenue is that the Assessing Officer had failed to appreciate that the Assessee had claimed deduction under Section 80G of the Act in 5 Assessment Year 2018-2019 respect of CSR Expenses and/or the Assessing Officer had moved on incorrect assumption that CSR Expenses were eligible for deduction under Section 80G of the Act.
In this regard, we find that during the assessment proceedings notice, dated 22/09/2019, was issued under Section 143(2) of the Act to the Assessee stating therein that the case of the Assessee was selected for scrutiny in relation to, inter-alia deduction from total income under ‘vi. Deduction from Total Income under Chapter VI-A’. Vide reply, dated 07/10/2019, Assessee had replied as under:
“1. Deduction from Total Income under Chapter VI-A of the Act We wish to submit that during the financial year ended 31 March 2018, donations amounting to Rs 73,484,728 have been debited to the profit and loss account. The same Mas been disallowed in the return of income filed for AY 2018-19-Further, out of the total donations made, donations amounting to Rs 1,000,000 was contributed to Prime Minister's National Relief Fund, which is eligible for deduction of 100% of the sum contributed. Further, donations aggregating to Rs 70,521,887 are made to charitable institutions/funds [covered under section 80G(2Xa)(iv)] that fulfill the conditions specified in section 80G(5) of the Act and are eligible for deduction of upto 50 percent of the donation or 10 percent of the Adjusted Total Income, whichever is lower. In light of the above, the various parties to whom donations have been made during the financial year ended 31 March 2018 and the amount of deduction claimed under section 80G of the Act is tabulated as under:
Sr. Name of the party Donation amount Eligible Amount claimed No. amount (in as deduction %) under chapter VIA of the Act 1. Prime Minister's National Relief 10,00,000 100% 10,00,000 Fund 2 Tata Memorial Centre: Actrec 2,41,50,000 50% 1,20,75,000 3 Akshaya Patra Foundation 1,38,45,000 50% 69,22,500 4 Americares India Foundation 13,10,500 50% 65,51,250 5 The/Nudge – End Poverty 75,00,000 50% 37,50,000 6 Goonj 51,00,000 50% 25,50,000 7 Agastya International 15,00,000 50% 7,50,000 8 The Opentree Foundation 13,00,000 50% 6,50,000 6 Assessment Year 2018-2019 9 Room To Read India 37,00,000 50% 18,50,000 10 Victoria Memorial School For The 2,60,000 50% 1,30,000 Blind 11 Pragatee Foundation 64,387 50% 32,194 Total 7,15,21,887 - 3,62,60,944 We have enclosed as Annexure-2, a copy of the receipt of the donations made by MSICPL.” Perusal of above reply shows that receipts of donations made during the relevant previous year were placed on the assessment record by the Assessee as Annexure – 2 to the said reply, dated 07/10/2019.
Thereafter, another notice dated, 28/08/2021 were issued to the Assessee under Section 142(1) of the Act raising specific query in relation to CSR Expenses of INR.7,34,20,341/- and in response to the same the Assessee filed reply, dated 25/08/2021, stating as under:
“2. It is observed that during the year you have incurred expenditure Rs.7,34,20,341/- for CSR activities which was later disallowed in the computation. Please provide the details of CSR expenditure We wish to submit that during the year under consideration, MSICPL has incurred an expenditure of INR.7,34,20,341/- towards corporate social responsibility expenses which was disallowed in the return of income for AY 2018-19. Further, a deduction of INR.3,62,60,944/- has been claimed under section 80G of the Act. We have provided the details of various parties to whom donation have been and the amount of donation claimed thereof under section 80G of the Act alongwith the copy of donation receipts vide our submission dated 7 October 2019 (copy of the submission is enclosed as Annexure 2 above). On perusal of the query raised vide notice dated 20/08/2021 issued under Section 142(1) of the Act and the reply furnished by the Assessee to that query vide letter dated 25/08/2025 it becomes clear that query pertained to the CSR Expenses only and in response to the same, the Assessee had stated the details of CSR Expenses and had 7 Assessment Year 2018-2019 disclosed that deduction of INR.3,62,60,944/- was claimed by the Assessee under Section 80G of the Act.
Thus, in the case before us inquiry was carried out by the Assessing Officer raising specific queries regarding CSR Expenses and deduction under Section 80G of the Act. In response to which the Assessee had made relevant disclosures and furnished supporting documents. After taking into consideration the Assessing Officer allowed Assessee’s claim for deduction under Section 80G of the Act in respect of CSR Expenses. During the course of hearing the Learned Departmental Representative could not controvert the submission made by the Ld. Authorised Representative for the Assessee that the view taken by the Assessing Officer is supported by the decision of the Tribunal wherein deduction claimed under Section 80G of the Act had been allowed in respect of CSR Expenses. Therefore, we reject the contention of the Revenue that the Assessing Officer had moved on incorrect assumption of fact that CSR expenses were eligible for deduction under Section 80G of the Act. Further, we find that in identical facts and circumstances the Tribunal had set aside the order passed under Section 263 of the Act and had sustained the action of the Assessing Officer and allowed the deduction claimed by the Assessee under Section 80G of the Act in respect of CSR Expenses in the case of (a) Mahansaria Enterprises (P.) Ltd. Vs. Principal Commissioner of Income Tax [2025] 175 taxmann.com 885 (Mumbai – Trib), [ITA No.2158/Mum/2025, dated 11/06/2025 and (b) Chandan Steel Limited Vs. Principal Commissioner of Income Tax [ITA No.3444/Mum/2025, dated 15/09/2025]. Respectfully following the aforesaid decisions of the Tribunal we set aside the impugned Order, dated 21/03/2025, passed by the Ld. PCIT under Section 263 of the Act and restore the Assessment Order, dated 29/07/2022, passed by the Assessing Officer. In terms of the aforesaid, all the grounds raised
by the Assessee are allowed.
8. Assessment Year 2018-2019
In result, the present appeal preferred by the Assessee is allowed.