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Facts
The assessee's appeal pertains to AY 2020-21, challenging an order by the PCIT under Section 263. The PCIT assumed jurisdiction, alleging the assessment order was erroneous and prejudicial to revenue. The core issue is the allowability of a deduction under Section 80G for CSR expenditure.
Held
The Tribunal held that the issue of allowing CSR expenditure as a deduction under Section 80G is a debatable issue, and such issues cannot be grounds for assuming jurisdiction under Section 263. The Tribunal relied on the Bombay High Court's ruling in PCIT vs. Postal Gujarat Power Ltd.
Key Issues
Whether the PCIT was justified in assuming jurisdiction under Section 263 of the Act when the allowability of CSR expenditure deduction under Section 80G is a debatable issue?
Sections Cited
263, 143(3), 144B, 37(1), 80G
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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI SANDEEP SINGH KARHAIL, HON’BLE
Shri Dharan Gandhi a/w Shri Sanjay Gandhi, A/Rs Assessee by : Revenue by : Shri R. A. Dhyani, CIT D/R सुनवाई की तारीख/Date of Hearing : 21/08/2025 घोषणा की तारीख /Date of Pronouncement : 26/08/2025 आदेश/O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the ld. Principal Commissioner of Income Tax, Mumbai – 3 [hereinafter the “ld. PCIT”] dated 13/03/2025 pertaining to AY 2020-21.
The sum and substance of the grievance of the assessee is that the ld. PCIT erred in assuming jurisdiction conferred upon him by the provisions of Section 263 of the Act and further erred in holding that the assessment order dated 22/09/2022 framed u/s 143(3) r.w.s. 144B of the Act is erroneous inasmuch as it is prejudicial to the interest of the revenue. 3. Briefly stated the facts of the case are that the return for the year under consideration was selected for complete scrutiny under CASS for the following reasons:-
2 “1. Non-compliance to Income Computation & Disclosure Standards 2. Deductees have claimed tax deduction against payments other than salary payments by a TAN in their ITRs, however, corresponding TDS statements are either not filed by the deductor or show a substantially lower figure of tax deduction (Selection of case of deductor) 3. Large "any other amount allowable as deduction" claimed in Schedule BP of return 4. Claim of Large Value Refund”
Subsequently the returned income of Rs. 93,47,58,280/- was assed at Rs.94,38,06,740/-. Assuming jurisdiction conferred upon him by the provisions of Section 263 of the Act, the ld. PCIT issued the following showcause notice:-
The entire quarrel revolves around the claim of deduction u/s 80G of the Act in respect of CSR expenditure of Rs. 1,68,54,000/-. 50% of which i.e., Rs. 84,47,000/- was claimed as deduction u/s 80G of the Act. According to the ld. PCIT the said deduction should not have been allowed by the AO and the assessment order is not only erroneous but also prejudicial to the interest of the revenue.
We have given a thoughtful consideration to the impugned order of the ld. PCIT. We are of the considered view that the issue raised by the ld. PCIT is a highly debatable issue as the Co-ordinate Benches of the Tribunal have taken a consistent view that CSR expenditure can be claimed as expenditure u/s 80G of the Act in the cases of Motilal Oswal Securities Ltd. (ITA No. 1795/Mum/2023, order dated 18.08.2023), Allegis Services India Pvt. Ltd. (ITA No. 1693/Bang/2019), IMS Mining Put. Ltd. [130 taxmann.com 118 (Kolkata Trib.)] and Elan Pharma (India) Pot. Ltd. vs. PCIT in ITA No. 2419/Mum/2025. We find that the impugned issue is a highly debatable issue and such highly debatable issue cannot be subject matter of assumption of jurisdiction u/s 263 of the Act.
Even if no specific enquiry was made by the AO during the course of the scrutiny assessment proceedings, but being a debatable issue it is outside the purview of revisionary powers u/s 263 of the Act. At this stage, it is relevant to note the following observations of the Hon'ble Bombay High Court in PCIT vs. Postal Gujarat Power Ltd, reported in (2019) 10 taxmann.com 418 (Bom):- "9. The Revenue may be correct in contending that, the Assessing Officer had not carried out detailed enquiries with respect to this claim of assessee. However, this by itself would not be sufficient to enable the Commissioner to exercise revisional power. In a given case, as in the present one, if the answer to the legal issue can be had on the basis of the material already on record, there would be no useful purpose in asking the Assessing Officer to carry out the same exercise and come to the same conclusion as the Tribunal in the present case has. In this context, we do not accept the contention of the Counsel for the Revenue that, answer in law had to come from the Assessing Officer and not the Tribunal. He had argued that even if the Tribunal was right in law, since the Assessing Officer had not come to the said conclusion, the order of the Commissioner should not be disturbed. In our opinion, if the Tribunal has come to the correct conclusions in law and said conclusions are based on materials already on record, it would be futile to reinstate the order of the Commissioner, which in turn, would require the Assessing Officer to carry out the same exercise and axiomatically come to the same conclusion. This line, we are adopting, is within the fold of the requirement of the order of Assessing Officer being erroneous. In other words, if it can be demonstrated that the order was not erroneous, the order of revision would, in any case, require an interference. The matter can be looked from slightly different angle. If while examining the order of the A.O. Commissioner notices that, though the A.O. was not examined for claim of the assessee, but the claim itself is legally tenable, would be judicial in exercising and set aside the assessment? The answer may be in the negative"
The above mentioned binding observations of the Hon’ble Jurisdictional High Court are sufficient for not sending the matter back to the file of the AO for verification as it would be a futile exercise as the issue has already been decided in several judicial decisions by the Co- ordiante Benches in favour of the assessee and against the revenue. Considering the facts of the case in totality, in light of the decision of the 5 Hon’ble Bombay High Court (supra), the assessment order dated 22/09/2022 is restored and that of the ld. PCIT is set aside.
In the result, appeal of the assessee is allowed.