DEPUTY COMMISSIONER OF INCOMETAX, CIRCLE-1(1)(1), VADODARA, VADODARA vs. GUJARAT GREEN REVOLUTION COMPANY LTD, VADODARA

Briefly stated, the assessee is a public limited company functioning as a nodal agency of the Government of India and the Government of Gujarat for implementation of micro-irrigation schemes. The assessee receives Government grants for implementation of such schemes and the ultimate beneficiaries thereof are the farmers. For the year under consideration, the Assessing Officer treated the unspent Government grant of Rs.307,63,16,672/- as income of the assessee. The Assessing Officer proceeded on the basis that the assessee was covered by AS-12 and that the unutilised grant was carried forward and adjusted against grants allocated for subsequent years. Accordingly, the amount was treated as income and added to the total income.

Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee submitted that it was merely an nodal agency of the Government and that the grants were received for specified Government schemes and ultimately meant for the benefit of farmers. It was further submitted that the issue was recurring in nature and had already been decided in favour of the assessee by the Ahmedabad Bench of the Tribunal in its own case for earlier assessment years. The Ld. CIT(A), following the decision of the Ahmedabad Bench of the Tribunal in ITA Nos. 852 & 853/Ahd/2016 dated 13.05.2019, held that the assessee was merely an implementing agency of the Government and that the unspent amount was retained for utilisation in subsequent years for disbursement to the beneficiaries/farmers in accordance with the Government guidelines. Accordingly, the addition was deleted.

Before us, the Ld. DR relied upon the order of the Assessing Officer and submitted that the unspent grant was liable to be treated as income in view of the accounting treatment prescribed under AS-12 and the fact that the unutilised amount was carried forward and adjusted in subsequent years.

The Ld. AR, on the other hand, supported the order of the Ld. CIT(A) and submitted that the issue was squarely covered by the decision of the Coordinate Bench in the assessee’s own case.

We have heard the rival submissions and perused the material available on record. It is not in dispute that the assessee is functioning as a nodal/implementing agency of the Government for implementation of micro- irrigation schemes and that the grants are received for specified purposes. The issue regarding the treatment of unspent Government grants is admittedly a recurring issue in the assessee’s own case and has already been considered by the Coordinate Bench in assessee’s own case in ITA Nos. 852 & 853/Ahd/2016 and others, wherein vide order dated 13.05.2019, the Tribunal held as under:-

Whenever the assessee received grants from the State Government, they were credited in the accounts opened under the heads under which they were received, If any expenditure was incurred, it was not debited by the assessee to its profit and loss account but it was debited to the account of the grant. The . A.Y. 2014-15 grants 'had been given by the Government for certain specified purposes. The unspent amount of the grant was required to be returned to the Government. As mentioned above, the assessee had received grants under various heads amounting to Rs. 66,14,544. The assessee had spent by the end of the year only a sum of Rs. 2,60,015. Hence, in the various accounts, there were credit balances totalling to Rs. 63,84,529 in all. The assessee had taken these credit balances to the balance sheet and had shown them as amounts outstanding in the respective accounts of grants. The Department is of the view that these credit balances were instead required to be taken to the profit and loss account.' The simple yardstick is that if the credit balance of any account is payable, it is obviously a liability and hence it should appear in the balance sheet. On the other hand, if it is not payable, it is a gain and hence should be taken to the profit and loss account. As would be clear from the above discussion, these amounts being payable by the assessee to the State Government, had constituted the liability and hence the assessee had rightly taken these amounts to the balance sheet. These amounts could not be considered to be the gain of the assessee. We have already stated above as to how the various cases, on which the CIT(A) had relied to come to the conclusion that these amounts were taxable being the profit of the assessee, are irrelevant to the issue being considered here. The assessee had at no stage debited the expenditure which had been incurred by it on the specified projects for which the grants had been received to its profit and loss account. Hence, when the assessee had not debited the expenditure to its own profit and loss account, the question of crediting the amounts received by way of grants to its profit and loss account does not arise. We have been informed that in subsequent assessment years, when the expenditure was in fact incurred, no deduction for such expenditure had been allowed by the Department in the computation of the taxable income of the assessee for 'those years. Hence, if the enhancement made by the CIT(A) for the year under consideration was to be confirmed, the result would be that the assessee would be asked upon to pay tax on the amounts which had, in fact, never come to belong to the assessee and at the same time no deduction would be admissible to the assessee when the assessee incurs expenditure for the implementation of the schemes for which the grants had been received. The amounts of the grants had never become the property of the assessee; there was no increase in the net - 5– assets of the assessee on account of the receipt of the grants. Under the circumstances, we fail to understand as to how the amount of the grants can be considered to be the income of the assessee. These receipts are not of income nature. We hence set . A.Y. 2014-15 aside the order of the CIT(A) on this behalf. We vacate the enhancement of Rs. 63,84,529/- as made by the CIT(A)."

Apart from that ld. A.R. cited one more order of Ahmedabad Bench of ITAT in the case of Gujarat Handicraft & Handloom Development Corporation Ltd. 488 (Ahd.) In this case, Co-ordinate Bench has held as under:- "4, Being aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals). It was contended, on behalf of the assessee, that the entire share capital was fully owned by the Government of Gujarat which has set up the corporation with the primary object of development and encouragement of tribal handicrafts in the State of Gujarat, particularly its backward and undeveloped areas. As the main object of the corporation is to develop and encourage tribal handicrafts by dealing in such articles, the State Government had, during the years under consideration, provided funds to the corporation by way of loans and subsidies with a view that the main object of the corporation was not defeated for want of finance. The said loans and subsidies were granted by the Government for different objects and aims in various resolutions passed by the Government. In some cases the Government had converted subsidies granted earlier into loans. That apart there was a specific stipulation that the amounts of unspent subsidies have to be refunded to the Government in the following year. Various resolutions in this connection were produced. Thus, on the basis of the resolutions it was pointed out firstly, that the subsidies were granted by the Government for specific object or purpose. Secondly, the same were required to be utilised only for the said purpose and objects. Thirdly, the unspent subsidies were required to be refunded to the Government and lastly, the assessee received the amounts as subsidy as merely a trustee for the Government who was required to utilise the amount as per the directions of the Government from time to time. It was also pointed out that the assessee had no right over the funds at all. Relying on the decision in the case of Seaham Harbour Dock Co. v. Crook (Inspector of Taxes) 16 TC 333, it was pointed out that unemployment grant made by the Government department was not treated as income., Thus, on the principle laid down in this judgment, it was urged that the grants given by the Government for encouragement of handicrafts in tribal area, which did not relate to the assessee's own business activities, were not DCIT Vs. Gujarat Green Revolution Company Ltd - 6– exigible to tax as income. The Commissioner (Appeals) observed that for the assessment year 1977-78, the assessee had received a sum of Rs: 8,02,000 out of which a sum of Rs, 1,65,715 was spent and the balance amount of Rs. 6,36,285 was treated as the assessee's income even though a sum of Rs. 30,349 was spent for acquiring assets for the . A.Y. 2014-15 purpose of the scheme. Similarly, under different schemes, the "assessee had received grant totalling Rs. 19,09,250 for the assessment year 1977-78 against which the expenditure incurred worked out to Rs. 5,81,426. The ITO had considered the entire amount of subsidy as receipts without allowing any expenditure. He has, thus, treated the gross amount as income of the assessee for the year. The Commissioner (Appeals) accepted the submission made by the assessee that the assessee was only a medium through which the Government implemented its scheme of encouraging tribal handicrafts industry. The amounts granted by the Government, thus, was for encouraging capital project in form of setting up training centres, museum, etc. Thus, the assessee was only acting in a representative capacity or on behalf of the Government so to say as a trustee qua grants and subsidies granted by the was fully accountable to the Government and the utilisation of the funds was subject to checks applied by the Government. That, the Government had retained control over utilisation of the funds and in such circum- stances the said amount could not be treated as trading receipts in the hands of the assessee. After setting out, various reasons in detail, the Commissioner (Appeals) concluded thus:

Since assessee company is a merely implementing agency of the Government and giving subsidies to farmers and unspent amount is if any is kept for succeeding years for disbursal in favour of beneficiaries/farmers as per the guidelines of the Government and in parity with the above said orders of Co- ordinate Bench, we dismiss this ground of the Revenue.”

The Coordinate Bench, as noted above, has held that the assessee is merely an implementing agency of the Government and that the unspent amount, if any, is retained for the succeeding years for disbursement to the beneficiaries/farmers in accordance with the Government guidelines. The Ld. CIT(A), therefore, followed the aforesaid decision and held that the unspent grant continues to represent a liability of the assessee. Therefore, in the absence of any distinguishing facts or any contrary decision having been brought to our notice, we see no reason to take a different view. Accordingly, respectfully - 8– following the decision of the Coordinate Bench in the assessee’s own case, we uphold the order of the Ld. CIT(A) deleting the addition of Rs.307,63,16,672/-.

The brief facts are that the assessee incurred CSR expenditure of Rs.5,84,500/- and claimed deduction of Rs.2,92,250/-, being 50% thereof, under Section 80G of the Act. The Assessing Officer disallowed the claim on the ground that CSR expenditure is mandatory in nature and, in view of Explanation 2 to Section 37(1), the same could not be allowed as deduction. The Ld. CIT(A), however, deleted the disallowance.

Before us, the Ld. DR relied upon the assessment order and submitted that CSR expenditure is mandatory and, therefore, allowing deduction under Section 80G would defeat the purpose of Explanation 2 to Section 37(1).

The Ld. AR, on the other hand, supported the order of the Ld. CIT(A). He relied upon the decisions of the Tribunal in DCIT v. Adani Logistics Ltd. [2026] 183 taxmann.com 391 (Ahmedabad–Trib.), Sling Media (P.) Ltd. v. DCIT [2022] 135 taxmann.com 164 (Bangalore–Trib.), DCIT v. Hinduja Global Solutions Ltd. [2025] 175 taxmann.com 411 (Mumbai–Trib.) and SREI Equipment Finance Ltd. v. CIT(A) [2025] 178 taxmann.com 427 (Kolkata–Trib.).

We have heard the rival submissions and perused the material available on record. We find that the issue is squarely covered by the decision of the Coordinate Bench in DCIT v. Adani Logistics Ltd. (supra), wherein it was held that CSR expenditure and business expenditure under Section 37 operate in different fields and that there is no bar on claiming deduction under Section 80G in respect of CSR contribution, provided the donation is otherwise eligible under DCIT Vs. Gujarat Green Revolution Company Ltd - 9– Section 80G. The aforesaid view has also been followed by the Coordinate Bench in the case of Shalby Limited Vs. DCIT in ITA Nos.1492 & 1474/Ahd/2026, wherein vide order dated 21.072026, the Tribunal has held as under:-

In the case of DCIT v. Adani Logistics Ltd. (supra), the Coordinate Bench, while considering an identical issue, observed that CSR expenditure and business expenditure u/s 37 operate in different fields and that there is no bar on claiming deduction u/s 80G in respect of CSR contributions, provided the donation is otherwise eligible for deduction u/s 80G of the Act. The Co-ordinate Bench in the aforesaid judgment further observed that the restrictions specifically provided u/s 80G in respect of donations made to the Swachh Bharat Kosh and Clean Ganga Fund could not be extended to other eligible donations in the absence of any express statutory prohibition.

In the present case, the assessee has claimed deduction under section 80G in respect of donations made to eligible institutions. The mere fact that the said donations were also considered towards discharge of the assessee's CSR obligation under section 135 of the Companies Act, 2013, cannot, by itself, constitute a valid ground for denying deduction under section 80G of the Act.

In view of the above discussion and respectfully following the consistent judicial view of the Coordinate Benches, we hold that the assessee is entitled to claim deduction u/s 80G of the Act in respect of the eligible donations made by it, notwithstanding the fact that the same were also considered as CSR expenditure under section 135 of the Companies Act, 2013. Accordingly, we hold that the donation given by the assessee of Rs. Rs.50,00,000/- to High On Life Foundation approved by CIT(E), vide 80G/2019-20/A/10520 and Rs.60,00,000/-, donated to Shri Hiraba Charitable Trust approved by CIT(E), vide 286/15-16/T-673/80G(5) dtd. 08.02.2016, are eligible for deduction subjected to the ceiling prescribed by the Act.

5 In the result, the appeal of the assessee bearing ITA No. 1492/Ahd/2026 for AY 2022-23 is allowed.”

In the present case, the assessee has claimed deduction in respect of donation made to an eligible institution. The Revenue has not disputed the eligibility of the recipient u/s 80G or pointed out any violation of the conditions prescribed under the said provision. Therefore, merely because the donation was also considered towards discharge of the assessee's CSR obligation, the deduction u/s 80G cannot be denied.

Respectfully following the aforesaid decisions of the Coordinate Benches, we uphold the order of the Ld. CIT(A) deleting the disallowance of Rs.2,92,250/-.

In the result, the appeal of the Revenue is dismissed.