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Facts
The assessee, a corporate entity, filed its return of income which was picked up for scrutiny. The Assessing Officer (AO) completed the assessment order accepting the returned income. The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under Section 263, noting that CSR expenses, though added back, had a 50% deduction claimed under Section 80G. PCIT also noted an unaddressed issue regarding a sundry balance.
Held
The Tribunal held that the PCIT erred in exercising powers under Section 263. It found that there is no bar under Section 80G for claiming deduction on donations made towards CSR expenses to an entity with a valid Section 80G approval. The AO's decision was found to be correct, and the issue was considered debatable but settled by coordinate benches.
Key Issues
Whether the PCIT rightly exercised powers under Section 263 of the Act to revise an assessment order allowing deduction under Section 80G on CSR expenses when the donee entity had valid Section 80G approval.
Sections Cited
263, 143(3), 144B, 80G, 37(1), 41(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
(Assessment Year:2020-21) Hapag Lloyd India Private Limited Pr. CIT Room No. 515, 5th Floor, 501, Satellite Gazebo, B-Wing, 5th Floor, Guru Hargovindaji Marg, Aayakar Bhawan, M.K. Road, Vs. Andheri (E), Chakala Mide S.O., Mumbai-400 020 Mumbai-400 093 PAN/GIR No. AABCH 7319 B (Appellant) : (Respondent) : Shri Paras Savla, Adv. a/w Appellant by Shri Pratik Poddar, Adv. & Shri Shreyas Sardesai Respondent by : Shri Ritesh Misra, CIT DR Date of Hearing : 23.09.2025 Date of Pronouncement : 25.09.2025 O R D E R
Per Saktijit Dey, Vice President:
The captioned appeal has been filed by the assessee, assailing the order dated 11.03.2025 passed by learned Principal Commissioner of Income Tax (‘ld. PCIT’ for short), Mumbai u/s. 263 of the Income Tax Act, 1961 (‘the Act’ for short), pertaining to the assessment year (A.Y.) 2020-21.
The grounds raised
by the assessee are as under: Validity of revision proceedings under section 263 of the Act
1. On facts and circumstances of the case and in law, the leamed PCIT erred in passing an order under section 263 of the Act without appreciating that the assessment order dated 5 September 2022 passed by the learned Assessing Officer ('AO') under section 143(3) read with section 144B of the Act was neither erroneous nor prejudicial to the interest of the revenue and thus, the order under section 263 of the Act is without jurisdiction and bad-in-law.
(A.Y. 2020-21) Hapag Lloyd India Private Limited vs. Pr. CIT Deduction under section 80G of the Act 2 On facts and circumstances of the case and in law, the learned PCIT erred in holding that amount of Rs 17.69,201 claimed by the Appellant as deduction under section 80G of the Act is not eligible for deduction on the ground that the same were contributions towards Corporate Social Responsibility ("CSR") Initiation of penalty proceedings 3. On facts and circumstances of the case and in law, the learned PCIT erred in directing the learned AO to initiate penalty proceedings 3. Briefly the facts are, the assessee is a resident corporate entity. For the assessment under dispute, the assessee filed its return of income on 13.02.2021, declaring income of Rs.10,73,72,390/-. The return of income so filed by the assessee was picked up for scrutiny. In course of assessment proceeding, the Assessing Officer (‘A.O.’ for short) called upon the assessee to furnish various details. After verifying the details called for, the A.O. ultimately completed the assessment u/s. 143(3) r.w.s. 144B of the Act, vide order dated 05.09.2022, accepting the income returned by the assessee.
After completion of assessment, as aforesaid, ld. PCIT called for and examined the assessment records. While doing so, he noticed that an amount of Rs.35,58,401/-, representing expenses on Corporate Social Responsibility (CSR) though debited to the profit and loss account, however, was added back in the computation of income. Nevertheless, out of the said amount, the assessee had claimed 50% deduction, amounting to Rs.17,69,201/- u/s. 80G of the Act. According to ld. PCIT, CSR expenses not being admissible as expenditure u/s. 37(1) of the Act, the A.O. should not have allowed the claim of deduction u/s. 80G of the Act out of such expenses. He further noticed that as per audit report, sundry balance amounting to Rs.84,742/- though has been written back, but it is required to be added to the income u/s. 41(1) of the Act, which has not been done. He observed, while completing the assessment, the A.O. having not verified these issues, the (A.Y. 2020-21) Hapag Lloyd India Private Limited vs. Pr. CIT assessment order is erroneous and prejudicial to the interest of the Revenue. Accordingly, he issued a show cause notice to the assessee to explain why the assessment order should not be revised. In response to the said show cause notice, the assessee furnished its reply objecting to the exercise of jurisdiction u/s. 263 of the Act. While considering the objection of the assessee, ld. PCIT being satisfied that the sundry balances of Rs.84,742/- was added back to the income by the assessee itself, dropped the proceedings u/s. 263 of the Act qua that issue. However, insofar as the issue of deduction allowed u/s. 80G of the Act, he held that the assessment order is erroneous and prejudicial to the interest of the Revenue. Accordingly, he set aside the assessment order with a direction to the A.O. to modify it through a speaking order in terms with the observations made in the revision order and also initiate penalty proceedings as per the provisions of the Act.
We have considered rival submissions and perused the materials available on record. The short issue arising for consideration is, whether there is any bar under the provisions of section 80G of the Act for claiming deduction in respect of donation made towards CSR expenses to an entity which has a valid approval u/s. 80G of the Act. The fact that the donee has a valid approval u/s. 80G of the Act, is not disputed. There is also no bar u/s. 80G of the Act for claiming deduction in respect of donation made of CSR expenses to an approved entity. In such a scenario, there cannot be any error in the decision of the A.O. in allowing assessee’s claim of deduction u/s. 80G of the Act. At best, it is debatable issue where more than one view is possible. Moreover, the issue is now fairly well settled by virtue of a number of decisions of the co-ordinate benches. A few of them are referred to herein under:
(A.Y. 2020-21) Hapag Lloyd India Private Limited vs. Pr. CIT Sr. No. Particulars Citation/Case number 1 RPG Life Sciences Limited 2 Elan Pharma (India) Private Limited 3 Stulz-CHSPL (India) Private Limited 4 Vistex Asia Pacific Private Limited ITA No. 2849/Mum/2025 6. In view of the aforesaid, we hold that the exercise of power u/s. 263 of the Act in the present case is invalid. Accordingly, the impugned order u/s. 263 of the Act is quashed. As a natural corollary, the assessment order is restored.
In the result, the appeal is allowed. Order pronounced in the open court on 25.09.2025 Sd/- Sd/- (Arun Khodpia) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 25.09.2025 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,