EATON TECHNOLOGIES PRIVATE LIMITED,PUNE vs. PRINCIPAL COMMISSIONER OF INCOME TAX, PUNE

आयकर अपीलीय अधिकरण “ए” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE

BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER

आयकर अपील सं. / ITA No.1306/PUN/2025 धििाारण वर्ा / Assessment Year : 2018-19 Eaton Technologies Private Limited, PCIT, Pune Cluster C Wing 1 EON Free Zone MIDC Kharadi, Knowledge Park, Plot No.1, Vs. Survey No. 77, Kharadi, Pune-411014 PAN : AABCE4323Q अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Vishal Kalra & S S Tomar Department by : Shri Mukul Kulkarni (virtually) Date of hearing : 08-04-2026 Date of 12-06-2026 Pronouncement : आदेश / ORDER PER ASTHA CHANDRA, JM : The appeal filed by the assessee is directed against the order dated 27.03.2025 passed u/s 263 of the Income Tax Act, 1961 (the “Act”) by the Ld. Principal Commissioner of Income Tax, Pune-1 (“PCIT”) pertaining to Assessment Year (“AY”) 2018-19.

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additions/disallowances – (i) transfer pricing adjustment of Rs.9,56,75,900, (ii) disallowances u/s 40(a)(ia) in pursuance of the DRP directions of Rs.6,60,60,000/- and (iii) disallowance u/s 14A read with Rule 8D of Rs.85,48,050/-.

2.1 On examination of the assessment records, the Ld. PCIT found certain prima-facie lacunae in the assessment order passed by Ld. AO which according to him was prejudicial to the interest of the Revenue. He therefore invoked the revisionary provisions u/s 263 of the Act and issued a show cause notice to the assessee on 01.10.2024 on the issue of allowability of deduction on expenditure towards CSR u/s 80G of the Act. The notice u/s 263 issued by the Ld. PCIT is reproduced below: “Please refer to the order passed u/s 143(3) r.w.s. 144C(13) of the ITAct for the A.Y. 2018-19 dated 29/06/2022 in your case. 2. On subsequent review of the assessment and records, the following facts are observed: 3. You have e-filed your return of income for A.Y. 2018-19 on 29/11/2018 declaring income at Rs. 527,46,73,760/-. Thereafter, the case was selected for complete scrutiny as per scrutiny selection norms through CASS to verify the following reasons: i. Claim of Any Other Amount Allowable as Deduction in Schedule BP ii. Default in TDS & Disallowance for such Default iii. Refund Claim iv. Foreign Financial Interest v. ICDS Compliance and Adjustment vi. Expenses Incurred for Earning Exempt Income vii. Deduction from Total Income under Chapter VI-A viii. International Transactions The AO completed assessment u/s 143(3) r.w.s. 144C(13) of Income Tax Act, 1961 on 29/06/2022 assessing total income at Rs. 544, 49,57,710/-. On perusal of the assessment record, it is noticed that the assessee had debited an amount of Rs. 6,33,50, 659/- towards CSR and the same was added back in the computation of income. However, at the same time the assessee has claimed and has been allowed by the AO deduction of Rs. 3,34,20,000/- u/s 80G. Since expenses incurred for CSR activities are not an allowable deduction as per explanation 2 below section 37(1), its allowability u/s 80G is not regular. Deduction u/s 80G of the Act is allowable on donations made 'voluntarily', whereas in your case, expenditure on account of CSR is a compulsion under the provisions of section 135 of the Companies Act. Hence, such expenditure cannot be considered to be eligible for deduction u/s 80G of the Act. Further, by claiming such expenditure as deduction u/s 80G you have indirectly claimed the same as business expenditure to that extent which is not an allowable expenditure under

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the provisions of section 37(1) of the IT Act. It has been clarified vide Finance Act, 2014, that "any corporate social responsibility (CSR) expenditure incurred by an assessee on the CSR activities as per section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession". It is seen that the AO failed to examine above aspect and eligibility of claim of deduction u/s. 80G of the Act. Failure on the part of the AO in taking into consideration the above facts and in making necessary disallowance/addition (as discussed in preceding Paras) despite the fact that the case was selected for completed scrutiny and also the fact that deduction from total income under Chapter VIA was one of the issues for verification, has rendered the assessment order dated 29/06/2022 erroneous in so far as it is prejudicial to the interest of the revenue. 4. In view of the above, the order dated 29/06/2022 passed by the Assessing Officer under section 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 for the A.Y 2018-19 is erroneous and prejudicial to the interest of revenue within the meaning of Explanation 2 of sub-section 1 of section 263 of the Income-tax Act, 1961 and is proposed to be revised. 5. In this connection, you are given opportunity of being heard by the undersigned. You may therefore attend this office in person or through authorized representative on 08/10/2024 at 12.30 P.M. on the above mentioned address along with the information/documents on which you may rely upon.”

2.2 In response to the above notice, the assessee filed its written submission on 16.10.2024 and 07.11.2024 which is reproduced in Para 4 of the Ld. PCIT’s order. The gist of the assessee’s submission is as under: “1. The Assessing Officer had already examined the claim of deduction under Chapter VI during the course of assessment and therefore, it cannot be re- examined under section 263 on mere change of opinion. 2. The order passed by the AO is not erroneous and prejudicial to the interest of the revenue. 3. On merits the issue of allowability of deduction on expenditure under CSR under section 80G of the Act is fully covered by various decisions of High Courts and ITAT including jurisdictional benches which are binding in the case of the Assessee.”

2.3 After considering the same as well as various judgments cited by the assessee in support of its claim, the Ld. PCIT held that both the condition specified u/s 263 of the Act are satisfied in the present case and it is a fit case to invoke the provisions of section 263 of the Act. He, therefore, partly set aside the assessment order for AY 2018-19 on the issue of deduction u/s 80G of the Act and directed the Ld. AO to examine and decide the issue as per law after giving sufficient opportunity to the assessee to represent its case. The relevant findings and observations of the Ld. PCIT are reproduced below: “5. I have considered the entire written submission carefully. So far as the judgements cited by the assessee are concerned, these are not applicable in assessee's case because the facts are distinguishable. The crucial fact unique to the instant case being the failure of the AO to make preliminary

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enquiries/examinations and the important context which has not been considered in the cited decisions is that of consistent contestation of the adverse decisions on the issue by the Revenue in the higher appellate fora. The issue hasn't yet reached finality and the consistent departmental view which should have been broadly followed by the AO is 'to not to allow the deduction under section 80G for the CSR expenses'. 5.1 The assessee's contention that the AO had already examined the claim of deduction under chapter VIA during the course of assessment and therefore it cannot be re-examined u/s 263 on mere change of opinion is not tenable. It can be seen from the records that the AO had called for certain details vide notice u/s 142(1) of the Act dated 24.12.2020. Annexure of this notice has a mention at Sr. No. 5 which is as follows: "Kindly furnish the details along with supporting documents for deduction under chapter VI' The assessee, in response to this notice had submitted the details of various deductions claimed under chapter VIA including the deduction claimed u/s 80G. However, it is seen from the records that the AO has not conducted any examinations or verifications or enquiries in respect of details submitted by the assessee in respect of deduction claimed u/s 80G of the Act. The AO did not undertake any efforts to examine whether the payments for donations made and claimed as deduction u/s 80G of the Act, were in order or were also included in the CSR expenses by the assessee. It is also very pertinent to note that the AO had not called for any details in respect of CSR expenses incurred by the assessee in the relevant year. This goes to prove that the AO failed to take following actions in order to examine the issue of allowability of deduction u/s 80G of the Act in respect of expenses which are also shown as CSR expenses. (i) Verifying / examining the expenses claimed as deduction u/s 80G. (ii) Calling for the details of expenses claimed as CSR expenses and verifying/ examining the same. (iii) Verifying the expenses claimed as deductible u/s 80G of the Act by matching the same with the expenses claimed as CSR and finding out the expenses which are claimed as deductible u/s 80G and also claimed as expenditure u/s CSR expenses. (iv) Examining the allowability of deductions u/s 80G of the Act and those expenses which are also claimed as expenses under the head CSR expenses by the assessee, by applying the relevant provisions of the Income Tax Act. 5.2 The assessee in its submission has not refuted the statement made in the notice of hearing dated 01/10/2024 in respect of Revision proceedings u/s 263 of the Act that, the claim of deduction under section 80G of the Act was made by it in respect of the entire amount of CSR of Rs 6,33,50,659/-. It is also seen that the entire claim of deduction under section 80G of the Act of Rs. 3,34,20,000/- has been allowed by the FAO by accepting the summary submission of the assessee without enquiries. Thus, out of total CSR expenditure which was originally disallowed as CSR expenses, amount of Rs. 3,34,20,000/-has again been claimed as deduction under section 80G of the Act. Since both CSR expense and donations under section 80G of the Act are two different mode of ensuring fund for public welfare, treating the same expense under two different heads would defeat the very purpose of it. 5.3 The Finance Act, 2014 inserted a new explanation in sub-section (1) of section 37 clarifying that for the purposes of sub-section (1) of the said section, any expenditure incurred by an assessee on the activities relating to Corporate Social Responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. This amendment was effective from 1st April, 2015 i.e. to

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the assessment year 2015-16 and subsequent years. The objective of CSR expenditure is to share burden of the Government in providing social services by companies having net worth of Rs.500 crore or more, or turnover of Rs. 1000 crore or more, or a net profit of Rs.5 crore or more. Memorandum explaining the provisions of the Finance Bill (No.2), 2014 clearly provided that if such expenses are allowed as tax deduction, this would result in subsidizing of around one-third of such expenses by the Government by way of tax expenditure. The legislative intention was to ensure that companies with certain strong financials make the expenditure towards this purpose and by allowing deduction, the Government would be subsidizing one third of it by way of revenue foregone. It is also worthwhile to mention that this approach can develop into large scale modus operandi by the assessee and the entire effort of the legislature to treat CSR expenditure as appropriation of profit after tax (w.e.f. AY 2015-16) would be wasted if the same expenditure is allowed twice. 5.4 In view of the above discussion and also the facts mentioned in the earlier paragraphs, the expenses considered by the assessee for the purpose of claiming deduction under section 80G which were also part of the CSR expenses cannot be said to be voluntary since the same were incurred only under the compulsion of law. Since the element of voluntariness is missing in this case, the said spending does not fall in the ambit of section 80G of the Act. The assessee cannot claim compliance of the provisions under section 135 of the Companies Act at the same time, when such payments are claimed as donations under section 80G of the Income Tax Act. 5.5 Thus, it is evident that the AO has allowed the deduction under section 80G of the Act to the tune of Rs. 3,34,20,000/- on account of CSR expenses without considering the aspect discussed above, and without making proper verification in this regard and without examining the actual facts of the case. Failure on the part of the AO rendered the assessment order dated 04/05/2021 under section 143(3) read with section 144C(13) read with section 144B of the Act as erroneous and prejudicial to the interest of revenue.”

“1. That on the facts and circumstances of the case and in law, the assumption of jurisdiction by the PCIT under section 263 of the Act, based on conjucture and surmises and without recording an objective finding or a conclusive evidence as to how the assessment order passed by the Assessing Officer ("AO") under section 143(3) of the Act is erroneous and prejudicial to the interest of Revenue, thus, bad in law and liable to be quashed. 2. That on the facts and circumstances of the case and in law, the PCIT has erred in exceeding the jurisdiction by initiating the revisionary proceedings under section 263 of the Act without appreciating that that PCIT has no jurisdiction to re-examine an issue which had already been considered by the AO, and initiation of such revisionary proceedings is bad in law and liable to be quashed. 3. That on the facts and circumstances of the case and in law, the PCIT has erred in invoking jurisdiction under section 263 of the Act and partly setting aside the order passed by the AO qua to the deduction under section 80G of the Act without appreciating that the assessment order passed was neither erroneous nor prejudicial to the interest of the revenue.

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PCIT is completely justified in partly setting aside the order of the Ld. AO to the extent of 80G deduction towards CSR expenditure incurred by the assessee. Therefore, the order of the Ld. PCIT should be upheld and grounds raised by the assessee be dismissed.

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passed the impugned order for the reasons which we have already reproduced in the preceding paragraphs.

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during the course of the assessment and applied his mind on the matter, as such order cannot be considered to be erroneous.

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I have carefully perused grounds of appeal, facts of the case, submissions made by the Appellant, assessment order and other evidences on records. 5.1. Ground 1 Vide this Ground, the Appellant has challenged action of the AO in making the disallowance of Rs.4,55,13,521/- u/s 80G with respect to the donations forming part of Corporate Social Responsibility („CSR‟). In this regard, the Appellant has submitted that : • The amount paid to various funds is without any consideration in return and is in the nature of irrevocable contribution. Thus, such contributions partake the character of donation • Since, all other requisite conditions under section 80G have been satisfied and not in dispute, the Appellant is eligible for deduction under section 80G of the Act. The institution to whom the Donations are made are duly registered under section 80G(5) of the Act • The CSR expenditure is not allowed only for the purpose of section 37 for computing business income. If such expenditure is otherwise allowable as deduction under other provisions of the Act, the same cannot be disturbed. • The donations/expenditure made by the Appellant is towards women empowerment, education, environmental research etc. and forms part of CSR expenditure as per Schedule VII of the Companies Act, 2013. • The legislature has restricted the benefit only in two specific cases being „Swachh Bharat Kosh‟ („SBK‟) and „Clean Ganga Fund‟ („CGF‟) as per subclause (iiihk) and (iiihl) of section 80G(2)(a) of the Act, thereby implying that CSR contribution to other eligible institution qualifies for deduction under section 80G of the Act. The Appellant has made CSR contribution to funds other than SBK and CGF, thus, claim under section 80G of the Act shall be allowed. • The said claim, as discussed above, is supported by the Explanatory Memorandum to Finance Bill 2014 with restriction placed only in relation to specified funds under section 80G, clarification issued by MCA and multiple favourable decisions. I have considered the submissions made by the Appellant. I find that the issue is covered in favour of the Appellant by various decisions of Hon‟ble Tribunals. I find that Hon‟ble ITAT Bangalore in the case of Allegi Services (India) Pvt Ltd vs ACIT, (ITA No.1693/Bangalore/2019) has decided this issue in favour of the assessee. Relevant part of the said decision is reproduced as under : “Brief facts of the case are as under: 2. Assessee is a company and filed its return of income on 30/11/2016 declaring income of Rs.73,44,38,310/-. The case was selected for scrutiny and notice under section 143 (2) and 142 (1) along with questionnaire was issued to assessee. In response to statutory notices, representative of assessee appeared before Ld.AO and filed requisite details as called for. 3. Ld.AO from the details furnished by assessee observed that assessee claimed deduction amounting to Rs.8,40,000/- under section 80 G of the Act, towards donation paid. Ld.AO was of the opinion that claim made under section 80 G of the Act, was not

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allowable as the amount was forming part of CSR expenses debited to profit and loss account. Ld.AO was of the opinion that donation made outside CSR expenses was only eligible to be claimed under section 80 G of the Act. ………………………… 14. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, „Income form Business and Profession”, where as monies spent under section 80G are claimed while computing „„Total Taxable income” in the hands of assessee. The point of claim under these provisions are different. 15. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, “Income from Business and Profession”. 16. For claiming benefit under section 80G, deductions are considered at the stage of computing “Total taxable income”. Even if any payments under section 80G forms part of CSR payments ( keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, “Income form Business and Profession". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing “Total Taxable Income” cannot be denied to assessee, subject to fulfillment of necessary conditions therein. 17. We therefore do not agree with arguments advanced by Ld.Sr.DR. 18. In present facts of case, Ld.AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, “Income from Business and Profession”. It has been submitted that some payments forming part of CSR were claimed as deduction under section 80G of the Act, for computing “Total taxable income”, which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing „Total Taxable Income”. If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature. 19. On the basis of above discussion, in our view, authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act. 20. Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate its claim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility. Accordingly grounds raised by assessee stands allowed for statistical purposes.

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In the result appeal filed by assessee stands allowed." In view of the above facts and respectfully following the decision of Hon‟ble ITAT Bangalore in the case of Allegi Services (India) Pvt Ltd (supra), I am of the considered view that the appellant is entitled to claim deduction u/s 80G with respect to the donations forming part of CSR expenses. However, in this regard, I direct the AO to verify whether the Appellant satisfies the requisite conditions prescribed for deduction u/s 80G. In case it satisfies the conditions for deduction u/s 80G, the claim of Rs. 4,55,13,521/- has to be allowed. If found contrary, the stand of the AO stands confirmed. The AO is directed to give effect by passing a speaking order. The Appellant is directed to furnish all relevant details online before the AO for verification. Ground is, thus, allowed for statistical purpose.” 4. Mr. Murkunde vehemently argued in favour of the Revenue‟s pleadings that the Ld. CIT(A)'s herein has erred in law and on facts in accepting the assessee‟s sec.80G deduction claim of Rs.4,55,13,521/- qua “CSR expenditure” not exigible for relief u/sec.37 of the Act. 5. The assessee has drawn strong support from Ld. CIT(A)'s above extracted detailed discussion. 6. We have given our thoughtful consideration to the foregoing rival stands and find no merit in the Revenue‟s instant sole substantive grievance. Suffice to say, the Revenue‟s only argument is that once the impugned expenditure is not allowable u/sec.37 of the Act; the same is also not exigible to sec.80G deduction as well. We find no substance in Revenue‟s instant sole substantive grievance as the Ld. CIT(A)'s detailed discussion has considered a catena of case law of various judicial forums (supra) already accepting the very issue in assessee‟s favour and against the department. We thus adopt judicial consistency herein as well to uphold the Ld. CIT(A)'s detailed discussion accepting the assessee‟s sec.80G deduction claim. Rejected accordingly.” 9. Respectfully following the decision of the Co-ordinate Bench of Pune Tribunal in the case of Credit Suisse Services (India) Private Limited (supra) and in the absence of any contrary material brought on record by the Revenue to take a different view, we set aside the order of Ld. CIT(A) on the issue and allow the appeal of the assessee.” 9. Respectfully following the decision of the Co-ordinate Bench of the Tribunal in the case of Advik Hi Tech (P.) Ltd. vs. DCIT (supra) which in turn has followed the decision of the Tribunal in the case of DCIT Vs. Credit Suisse Services (India) Private Limited vide ITA No.44/PUN/2024 order dated 15.05.2024 for assessment year 2020-21 and in absence of any contrary material brought to our notice by the Ld. DR, we hold that the Assessing Officer is not justified in denying the claim of deduction u/s 80G of the Act. We, therefore, direct the Assessing Officer to allow the benefit of deduction u/s 80G of the Act. The first issue raised by the assessee in the grounds of appeal is accordingly allowed.”

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Dana Anand (P.) Ltd. (supra) held that the deduction u/s 80G on account of CSR expenses is an allowable deduction.

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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. 18. We have heard both the parties and perused the records. We find that ITAT, Bangalore Bench in the case of Goldman Sachs Services (P.) Ltd. (supra) has held that the other contributions made under section 135 (5) of the Companies Act are also eligible for deduction/s 80G of Ericsson India Global Services Pvt. Ltd. v. DCIT the Act subject to satisfying the requisite conditions prescribed for deduction u/s 80G of the Act. For this purpose, the issue is remanded to the file of AO to examine the same whether the payments satisfy the

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claim of donation u/s 80G of the Act. We find that the case law is fully applicable to the facts of the case. There is no restriction in the Act that expenditure when disallowed for CSR cannot be considered u/s 80G of the Act. Hence, we remit the issue to the file of AO to verify whether these payments were qualified as donations u/s 80G of the Act or not, if they qualify as donation u/s 80G of the Act then the requisite amount deserves to be allowed." 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." 8. The facts of the case in hand show that the assessee has submitted the receipts of the donees evidencing the eligibility of deduction u/s 80G of the Act. Therefore, respectfully following the decision of the Coordinate Bench, we do not find any reason to interfere with the findings of the ld. CIT(A). The decision relied upon by the ld. D/R is on different reasoning as the Coordinate Bench was of the opinion that CSR expenses cannot be allowed u/s 37(1) of the Act, therefore, no deduction is allowed u/s 80G, whereas in the case in hand, assessee has claimed deduction u/s 80G and not u/s 37(1) of the Act. Accordingly, ITA No. 1710/PUN/2023 is also dismissed. 9. In the result, appeals of the revenue are dismissed.” 7. Considering the fact that view taken by assessing officer while allowing 50% of donation under section 80G out of CSR expenses are in accordance with the decisions of various benches of Tribunal. Thus, the view taken by assessing officer cannot be said to be erroneous. Thus, the pre-requisite twin conditions for exercising jurisdiction under section 263 has not meet out in the present case hence we quash / set aside the order of Pr. CIT dated 17.03.2025. In the result, grounds of appeal raised by assessee are allowed.”

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provisions of section 263 of the Act cannot be invoked for denial of deduction claimed u/s 80G of the Act in respect of donations classified as CSR, allowed the assessee’s appeal. The relevant extract of the order of the Tribunal in ACG Pam Pharma’s case (supra) is reproduced below:

“5. We have heard the counsels of both the parties, perused the material placed on record, Judgements cited before us and also orders passed by Revenue Authorities. From the record, we noticed that as per the facts of the present case the assessee is a company engaged in the business of broking, distribution of financial products etc. During the year under consideration, the assessee had made donation to Axis Foundation of Rs. 24,20,000/- and had claimed deduction under section 80G of the Act. Although the assessee had classified the amount of donation as “Corporate Social Responsibility” (CSR) expenses under section 135 of the Companies Act, 2013 in his books of account and suo moto disallowed the same in computation of income in accordance Explanation 2 of section 37 of the Act. However, in his return of income, the assessee claimed deduction under section 80G of the Act. The said claim was duly disclosed in the computation of income and tax audit report, which was examined and allowed by the Ld. AO while passing the order of assessment under section 143(3) of the Act dated 24.9.2022. 6. Later on, Ld. PCIT invoked revision jurisdiction under section 263 of the Act and passed the impugned order by holding that deduction under section 80G of the Act was erroneously allowed, since donation was in nature of CSR expenditure which is not voluntary in nature and thus not eligible for deduction. It was further held that the issue of section 80G/CSR was not discussed in the assessment order and hence assessment order is erroneous in so far as it is prejudicial to the interest of the Revenue.” Now, the question for determination before us is as to whether deduction claimed under section 80G of the Act is eligible in respect of donation classified as “Corporate Social Responsibility (CSR) and as to whether conditions for invoking section 263 of the Act are satisfied or not. 7. First for all, we take up the first issue/question and after hearing the parties at length on this issue, we noticed that Ld. PCIT has held that since CSR expenditure is mandatory therefore the same cannot constitute a donation, which is voluntary and hence not eligible for deduction under section 80G of the Act. Whereas it is an undisputed fact that donation made by the assessee are to entities registered under section 80G and that the assessee is otherwise eligible to claim deduction under section 80G of the Act. 8. We noticed that though section 135 of the Companies Act, 2013 mandates the quantum of CSR expenses, it does not mandate to whom and how the amount to be spent and the Appellant at its discretion can choose the mode of spending towards CSR. The donations made by the Appellant to ACS Cares Foundation are made voluntarily as there is no reciprocal commitment from the donees. In any case, section 80G of the Act does not put any condition for the donation to be voluntary in nature for the purpose of claiming deduction. CBDT, vide Circular No. 1/2015 dated 21st January 2015 which contains the Explanatory Notes provisions of the Finance (No. 2) Act, 2014, has stated that expenditure incurred which is eligible for CSR and allowable under other sections, shall be allowed as a deduction while computing income. The relevant extract of CBDT Circular is reproduced as under: "13.3 The provisions of section 37(1) of the Income-tax Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Income-tax Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is

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not incurred for the purposes of carrying on business, such expenditures cannot be allowed under the provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, said section 37 has been amended to clarify that for the purposes of sub-section (1) of section 37 any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under said section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Income-tax Act shall be allowed as deduction under those sections subject to fulfillment of conditions, if any, specified therein." 9. The CBDT Circular clearly states that the restriction on claiming deduction of CSR expense is only with respect to Section 37(1) of the Act wherein it will not be deemed to be a business expenditure for the purpose computing income under the head 'Profits and Gains from Business or Profession'. The Circular itself clarifies that CSR expenditure will be allowable under other sections under the same head of income. In view of CBDT Circular, it is clear that there is no express bar in claiming deduction in respect of CSR expenditure, other than under Section 37(1) of the Act. The Ministry of Corporate Affairs ("MCA") has issued Frequently Asked Questions ("FAQ") through General Circular No. 01/2016 dated January 12, 2016 (FAQ No. 6) has clarified on the issue as follows: "Question No. 6: What tax benefits can be availed under CSR? Answer: No specific tax exemptions have been extended to CSR expenditure per se. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. What no specific tax exemptions have been extended to expenditure incurred on CSR, spending on several activities like Prime Minister's Relief Fund, scientific research, rural development projects, skill development projects, agriculture extension projects etc, which find place in Schedule VII, already enjoys exemptions under different sections of the Income-tax Act, 1961." 10. This clarification being issued by the Ministry of Corporate Affairs, Government of India also confirms that donation covered under CSR Expenses are eligible for the deduction under section 80G of the Income-tax Act, 1961. Moreover, reliance is placed on the decision of the Coordinate Bench of the ITAT, Mumbai Bench in the case of ACIT v. Sharda Cropchem Limited (ITA No. 6163/Mum/2024) wherein it was held that donations which are classified as CSR expenditure are eligible for deduction under Section 80G of the Act. The relevant extract of the order is reproduced as under: "9. We have carefully perused relevant provisions of the Act and legal position emerging from the cited decision (supra).The CSR expenses which are required to be mandatorily incurred by the assessee-company as per section 135 of the Companies Act are not entitled to deduction under section 37(1) for assessment year 2015-16 by virtue of the fetter placed by Explanation 2 to section 37(1), which was inserted by the Finance (No. 2) Act, 2014. A plain reading of Explanation 2 to section 37(1) shows that any expenditure incurred towards CSR activities as referred to in section 135 of the Companies Act, 2013 shall not be allowed as ' business expenditure' and shall be deemed to have not been incurred for purpose of business. The embargo created by Explanation 2 inserted in section 37 by Finance (No. 2) Act, 2014 was to deny deduction for (3SR expenses incurred by companies, as and by way of regular business expenditure while computing 'income under the head business'. So, it can be clearly seen that this Explanation 2 to section 37(1) which denies deduction for CSR expenses by way of business expenditure is applicable only to the extent of computing 'business income' under Chapter IV-D. The said Explanation cannot be extended or imported to CSR contributions which are otherwise eligible for deduction under any other provision or Chapter,

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so as to say donations made by charitable trust registered under section 80G.Parliament has expressed its intention clearly by bringing in restriction in respect of expenditure classified by an assessee company while claiming deduction under section 80G i.e. CSR expenditure related to Swachh Bharat Kosh and Clean Ganga Fund. And if the Parliament desired, it could have been made such kind of restriction or any restriction like in the case of donation to Swachh Bharat Kosh& Clean Ganga Fund. So the assertion of the Assessing Officer is erroneous and therefore cannot be accepted. It can be safely inferred that when the Legislature in particular has provided for only the above referred tivo specific exceptions in section 80G, then it is the implied intent of the Legislature to permit deduction under section 80G in respect of CSR contributions made to funds/organizations referred to in all other sub-clauses of section 80G [other than (iiihk) and (iiihl)] of the Act. 9.1 It may be stated here that the co-ordinate Bench of ITAT, Mumbai in the case Alubound Dacs India Private Limited vs. Dy. CIT in IT A No. 3663/M u m/2023 ( A. Y. 2020 - 21)has duly considered similar contentious issue and decided the same in favour of the assessee. The relevant extracts are reproduced below for the sake of ready reference: ............. 9.3 Respectfully following the decisions cited above, we hold that the assessee is entitled to deduction claimed u/s. 80G of the Act towards the CSR expenditure incurred by it. We, therefore, direct the Id. A.O. to allow the claim of the assessee subject to the condition that the assessee has satisfied the other requirements warranted u/s.SOG of the Act. We do not find any infirmity in the appellate order. Hence, ground no. 3 raised by the Revenue is dismissed. 11. Thus, after evaluating the facts of the present case and also decision of the Coordinate Bench and the settled proposition of law, we are also of the view that the assessee is entitled for deduction claimed under section 80G of the Act towards CSR expenditure incurred by it. 12. Now the question for determination before us is as to whether Ld. PCIT could have invoked section 263 of the Act for denial of deduction claimed under section 80G of the Act in respect of donation classified as CSR. In this regard reliance is being placed upon the decision of Hon'ble Mumbai Tribunal in the case of Inter Gold (India) Pvt. Ltd. v. Pr. CIT (ITA No. 4400/Mum/2023) wherein it was held that the provisions of Section 263 of the Act cannot be invoked for denial of deduction claimed under Section 80G in respect of donations classified as CSR. The relevant extract of the order is reproduced below: "11. After considering the aforesaid submissions and the reasons given by the Id. PCIT, we are unable to sustain the impugned order u/s.263 on this issue for the reason that, this issue has been duly enquired and examined by the Id. AO during the course of assessment proceedings and without finding any defect in such order or how the claim allowed by the Id. AO u/s.80G is unsustainable in law, he cannot cancel the assessment order. Assessee has also relied upon various Tribunal decisions directly on this issue which has also been incorporated in the impugned order, wherein it has been held that even if the money spent for CSR is disallowable but if the same has been paid to charitable organisation and donation is claimed u/s.80G, the same is allowable, because both operate separately. Thus, taking a contrary opinion does not mean that order of the Id. AO erroneous and prejudicial to the interest of the Revenue. 12. Claiming a deduction from computation of business income as provided from sections 28 to 44DB is different from claiming a deduction under chapter VIA of the Act which is allowed from Total Income. As per Explanation 2 to Section 37, CSR expenditure is not allowable as

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deduction while computing the business income under the provision of Section 28-44DB, whereas deduction u/s.SOG is allowed while computing the total income under Chapter VIA. There is no pre-condition that claim for deduction u/s.SQG on a donation should be voluntary. It is independent of computation of business income as it is allowed from Gross Total Income. The assessee had disallowed the CSR expenses while computing business income. Further, there is no dispute tlwt the assessee has filed complete details of donation and also filed the certificate u/s.80G which was enclosed before the AO. Section 80G (1) of the Act provides that in computing total income of the assessee, they shall be deducted in accordance with the provision of Section, such sum paid by the assessee in the previous year as a donation. Deduction under Chapter VIA provides deduction from the gross total income which is computed after making necessary allowances / disallowances in accordance with Section 28- 44BB of the Act including Explanation to Section 37(1). Thus, Section 37(1) and Section 80G of the Act are independent and the principles governing what is not allowable u/s. 37(1) have been provided in the section itself. Even in section 80G also, what is not allowable has also been provided under the Act. For instance, Section 80G specifically mentions two clauses, viz., section 800(2)(a)(iihk) and (iiihl), i.e., contributions towards 'Swacha Bharat Kosh' and 'Clean Ganga Fund', where donation in the nature of CSR Expenditure is not allowable as deduction under section 80G of the Act. Therefore, the disallowances for deduction under section 80G vis-avis CSR can be restricted to contributions made to these Funds mentioned in Section 80G(2)(a)(iiihk) and (iiihl) only. It is an undisputed fact that the assessee has not claimed any deduction against the aforesaid clauses of 8OG(2)(a) of the Act and as such entire donation claimed by the assessee is allowable u/s 80G. The Ministry of Corporate Affairs ("MCA") has issued "FAQs" through General circular no. 01/2016 dated January 12, 2016 (FAQ No. 6) and has clarified on the issue as follows: "Question No. 6: What tax benefits can be availed under CSR? Answer: No specific tax exemptions have been extended to CSR expenditure per se. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. While no specific tax exemptions have been extended to expenditure incurred on CSR, spending on several activities like Prime Minister's Relief Fund, scientific research, rural development projects, skill development projects, agriculture extension projects etc, which fund place in Schedule VII, already enjoys exemptions under different sections of the Income-tax Act, 1961." 12. This clarification being issued by the Ministry of Corporate Affairs, Government of India clarifies that donation covered under CSR Expenses which not are eligible for the deduction under section 80G of the Incometax Act, 1961, but are allowed under different sections. Ergo, there is nothing that if any expenditure is disallowable u/s 37 the same cannot be allowed under other provisions of Act, if the conditions of allowability are satisfied. Titus, allowing the claim of deduction u/s. 80G by the Id. AO cannot be held to be unsustainable in law or amounts to erroneous and prejudicial to the interest of the Revenue. Thus order of the Ld. PCIT is reversed on this point." 13. Therefore after having gone through the decisions referred above and also keeping in view of the facts of the present case, we are also of the view that Ld. PCIT has wrongly invoked provisions of section 263 of the Act for denial of deduction claimed by the assessee under section 263 of the Act in respect of donation classified as CSR. Therefore we do not have substance in the impugned order and the same is thus stands quashed and the assessment order passed by the Ld. AO is restored and accordingly appeal of the assessee is allowed.”

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Order pronounced in the open court on 12th June, 2026.

Sd/- Sd/- (R.K. Panda) (Astha Chandra) JUDICIAL MEMBER VICE PRESIDENT पुणे / Pune; दिन ांक / Dated : 12th June, 2026. रदि Ravi Kumar Digitally signed by Ravi Kumar Date: 2026.06.15 11:42:10 +05'30' आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : अपील र्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The Pr. CIT concerned. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “ए” बेंच, 4. पुणे / DR, ITAT, “A” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER,

सहायक पंजीकार/ Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune