AUGMONT ENTERPRISES PRIVATE LIMITED,MUMBAI vs. ACIT - CIRCLE 6(1)(2), MUMBAI

“1. On the facts and in circumstances of the case and in law, the Hon'ble PCIT erred in issuing notice u/s 263 of the Act and the reasons assigned for doing so are wrong and contrary to the provisions of Income Tax Act and Rules made there under.

2. On the facts and in circumstances of the case and in law, the Hon'ble PCIT erred in upholding that the assessment order dated 26/09/2022 passed u/s 143(3) of the Act was erroneous and prejudicial to the interest of the revenue on the alleged ground that claim for deduction under section 80G in respect of CSR expenses of Rs. 10,27,000/- was incorrectly allowed by the Ld. AO and the reasons assigned for doing so are wrong and contrary to the provisions of Income Tax Act and Rules made there under.

3. Your Appellant crave, leave to add, alter, amend or modify any or all grounds of appeal on or before the date of hearing.”

Therefore, Ld. AR argued that the impugned order is not legally sustainable and needs to be set aside.

18. In view of above findings of Hon‟ble Allahabad High Court, we notice that once the issue of CSR expenditure as eligible deduction u/s 80G of the Act has already been settled by various Tribunal including Jurisdictional Tribunal, the AO was bound by the said settled legal proposition and for that reason the Ld. AO has not put any query in the complete scrutiny assessment under CASS with regard to CSR expenditure claimed as deduction u/s 80G of the Act by the assessee.

order dated 27.05.2024 “11. We have heard the rival submissions and perused the materials available on record. The only moot question to be decided here is whether the expenditure towards CSR activities are an allowable deduction u/s. 80G of the Act. The CSR expenses are governed by section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies (CSR) Policy Rules, 2014 where companies having net worth of Rs.500 crores or more or turnover of Rs.1000 crores or more or net profit of Rs.5 crores or more have to mandatorily comply with the CSR provisions specified u/s. 135(1) of the Companies Act, 2013. The above mentioned companies are liable to spend atleast 2% of its average net profit for the immediately preceding three financial years on CSR activities. In the present case, the assessee has contributed Rs.30 lacs to various educational and charitable trust for which the assessee has claimed 50% of the total donation paid as deduction u/s. 80G of the Act. Prior to the Finance (No.2) Act, 2014, the said expenditure was claimed as „business expenditure‟ u/s. 37(1) of the Act where after the insertion of Explanation 2 to section 37(1) of the Act, the CSR expenses referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purpose of business or profession. It is observed that the said expenses pertaining to CSR has been claimed as deduction u/s. 80G of the Act which claim was perennially rejected by the Revenue for the reason that only donations which are voluntary in nature will come under the purview of section 80G of the Act and donation towards CSR was merely a statutory obligation on companies as per section 135 of the Companies Act, 2013. It is pertinent to point out that the intention of the legislature was clear when the same was clarified by the Finance (No.2) Act, 2014 that CSR expenses will not fall under the business expenditure and also there has been an express bar specified in sub clause (iiihk) and (iiihl) of section 80G(2)(a) of the Act that any sum paid by the assessee as donation to Swatch Bharat Kosh and Clean Ganga Fund will not come under the purview of deduction u/s. 80G of the Act subject to certain conditions. This justifies the fact that the other donations specified u/s. 80G of the Act would be entitled to deduction provided the conditions stipulated u/s. 80G of the Act are satisfied. In the present case in hand, the contributions made by the assessee would not fall under the two exceptions specified above which clearly mandates that the assessee is entitled to claim deduction for the donations contributed during the year under consideration u/s.80G of the Act. The decision relied upon by the ld. A.O. in the case of PVG Raju (supra) is distinguishable on the facts of the present case where there is no requirement of proving the voluntariness of the donation contributed by the assessee for claiming deduction u/s. 80G of the Act. The amendment brought about by Finance Act, 2015 to section 80G of the Act which had inserted the sub clauses (iiihk) and (iiihl) to be the exception for qualifying a donation for claiming u/s. 80G of the Act could also be an evidencing factor to substantiate that CSR expenditures which falls under the nature specified in section 30 to 36 of the Act are an allowable deduction u/s. 80G of the Act.” Page | 8 order dated 27.06.2025 “6. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by both the parties. We find that assessment in the present case was completed on 19.02.2022. The assessing officer while passing the assessment order made various disallowanc. However, there is no discussion about the issue identified by ld. Pr. CIT while exercising his jurisdiction under section 263. However, on perusal of notices under section 142(1) dated 8.06.2022, we find that assessing officer sought explanation on various issues including on the deduction under section 80G along with supporting documents. The assesseevide its reply dated 09.08.2022 furnished various details including the detail of examination claimed under section 80G. The assessee also furnished receipt of donations and per Annexure-XII of the reply. The assessee explained that they have claimed deduction of 50% of total donation. As noted above, the assessing officer has not made such references in the assessment order. Thus, assessing officer impliedly accepted the explanation offered by assessee. We find that co-ordinate bench of Mumbai Tribunal in DCIT Vs Gabriel India Ltd. (supra), Vistex Asia Pacific Private Limited (supra) and Axis Securities Limited (supra) consistently allowed deduction under section 80G @ 50% of CSR expenses. We, further, find that this combination in Dalal and Broacha Stock Broking Pvt. Ltd. in ITA No. No. 2718/Mum/2025 dated 19.06.2025 by considering other decision of Tribunal passed the following order: “6. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. On careful perusal of assessment order, we find that case was selected for scrutiny on the issue of large amount of donation. No doubt that the assessing officer during the assessment examined the issue and disallowed donation under section 80G to Urvashi Foundations. Though, there is no discussion about the donation to other charitable trust or institution, however the assessing officer has sought detailsof donations to all about such charitable trust and institution. We find that the assessee also furnished all required details to the assessing officer. Thus, the assessing officer impliedly accepted the donation to such charitable trust or institution. We find that recently Co-ordinate Bench of Mumbai Tribunal in DCIT Vs Gabriel India (2025) 173 taxmann.com 219 (Mum) on similar issue where the assessee–company claimed deduction under section 80G at the rate of 50% of CSR expenses and furnished receipts of donees evidencing eligibility of deduction under section 80G allowed claim of such assessee. The tribunal while allowing relief to the assessee followed various other decisions of the different benches of the Tribunal. The relevant part of the decision if extracted below “7.After giving a thoughtful consideration to the orders of the authorities below, we are of the considered view that the Coordinate The Ruby Mills Limited 9 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 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.

8. Before us, it is the specific contention of learned Counsel of the assessee that the institutes to whom the assessee has donated the CRS fund are registered under section 80G of the Act. Keeping in view the submissions of the assessee as well as the ratio laid down in the judicial precedents cited before us, we direcl the Assessing Officer to allow assessee's claim of deduction under section 80G of the Act, subject to, factual verification of assessee's claim that the donee institutions are registered under section 80G of the Act and other conditions of section 80G of the Act are fulfilled. Ground is allowed for statistical purposes."

raised by assessee are allowed.

7. Considering the consistent decision of Co-ordinate Bench of Tribunal, we find that in accepting the claim of donation under section 80G @ 50% of total donation in the assessment order is not erroneous as the action of assessing officer is legally sustainable view. Thus, in our considered view, the twin conditions prescribed under section 263 of the Income Tax Act is not fulfilled in the present case. As the pre-requisite conditions for exercising jurisdiction under section 263 has not meet out in the present, hence we quash/set aside the order of ld. Pr. CIT. In the result, grounds of appeal raised by the assessee are allowed.

8. In the result, the appeal of the assessee is allowed.”

21. In the case in hand, admittedly the AO has not questioned the claim of CSR expenditure of Rs. 71 lakhs and claim of deduction u/s 80G of the Act by the assesseei.e. 50% amount of CSR expenditure to the tune of Rs. 36,23,500/-. The CSR expenditure and the claim of deduction u/s 80G was not made the subject matter of the scrutiny assessment by the AO and the AO has simply accepted the claim of the assessee while keeping in mind the settled legal principle in that regard because the question of CSR expenditure as eligible deduction u/s 80G of the Act is no more res-integra as having been settled and allowed in favour of the assessee by the various judgments of the Tribunal including Jurisdictional Tribunal as referred in the preceding paras and the assessment order was passed in consonance with the settled legal principles on the issue. Therefore, the assessment order in this case cannot be said to be erroneous. Hence, the twin conditions as provided in explanation 2 of section 263 of the Act are not fulfilled.

8. Similarly, the other Coordinate Bench in which one of us was the member has decided the similar issued in for AY 2020-21, assessment order dated 14.08.2025 and the relevant portion in the said case regarding controversy in the present case are reproduced as under:- 7. Besides lack of enquiry the reason for the PCIT to invoke the provisions of section 263 is that the AO has erroneously allowed the deduction claimed by the assessee under section 80G of the Act. In this regard we notice that the Co-ordinate Bench in various cases have been consistently holding that there is no restriction under the law for the assessee to claim the expenses incurred towards CSR as deduction under section 80G provided the payments made are otherwise eligible for deduction under the said section. The revenue's argument is that the payments made towards CSR expenditure are not voluntary and therefore cannot be regarded as donation by placing reliance on the decision of the Hon'ble Supreme Court. From these discussions it is clear that whether the expenditure disallowed under section 37(1) towards CSR whether can be claimed as a deduction under section 80G is a debatable issue though the issue is reasonably settled at Tribunal level. The Hon'ble Supreme Court in the case of Malabar Industries Co. Ltd. [(2000) 243 ITR 83 (SC)] has laid down the ratio that when the issue is debatable and Page | 13 where there are two views are possible and where the AO has taken one of the plausible views, the revision proceedings cannot be initiated on the ground of the order being erroneous. In our considered view the above said ratio lay down by the Hon'ble Supreme Court is applicable in assessee's case and accordingly we hold that the PCIT is not correct in invoking the provisions of section 263. The order of the PCIT thus is quashed. 8. In result, appeal of the assessee is allowed.