PASHUPATI CAPITAL SERVICES PRIVATE LIMITED,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX OFFICER, MUMBAI - 4, MUMBAI

ITA 2985/MUM/2025Status: DisposedITAT Mumbai31 July 2025AY 2020-2127 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is legally entitled to claim a deduction under section 80G of the Act out of CSR expenses, subject to factual verification. The Tribunal found that the AO's assessment order, which allowed the claim, was not erroneous. The PCIT's assumption of jurisdiction under section 263 was therefore found to be incorrect. The reasoning was that the issue of CSR expenses being eligible for deduction under section 80G was no longer res integra, having been settled by various Tribunal judgments, including the jurisdictional Tribunal. The AO had accepted the claim in consonance with these settled legal principles. The Tribunal noted that there is no restriction in the Act disallowing CSR expenses from being considered for section 80G deduction if they otherwise qualify as donations. The Tribunal relied on the decision in Goldman Sachs Services (P.) Ltd. and directed the AO to verify if the payments qualified as donations under section 80G and, if so, to allow the requisite amount. The Tribunal quashed the order of the PCIT, allowing the assessee's grounds of appeal.

What were the facts?

The assessee, M/s. Pashupati Capital Services Pvt. Ltd., filed its return for AY 2020-21, claiming a total income of Rs. 52,95,84,170/-. The Assessing Officer (AO) completed the assessment under sections 143(3) and 144B, accepting the returned income. The Principal Commissioner of Income Tax (PCIT), exercising powers under section 263, reviewed the assessment order. The PCIT noted that the assessee debited Rs. 71 lakhs towards CSR expenses, which were added back as disallowable. However, the assessee claimed Rs. 36,23,500/- as deduction under section 80G against these CSR expenses. The PCIT believed this claim was erroneous and prejudicial to the revenue, as CSR expenses are mandatory under the Companies Act and lack the voluntary character for 80G deduction. The PCIT set aside the AO's order, directing further inquiry.

What were the issues?

1. Whether the assessee is legally entitled to claim a deduction of Rs. 36,23,500/- under section 80G of the Income Tax Act, 1961, out of Rs. 71,00,000/- spent on Corporate Social Responsibility (CSR) expenses? (Question of law and fact, concerning Section 80G and Section 37(1) Explanation 2 of the Income Tax Act, 1961, and Section 135 of the Companies Act, 2013). Assessee's contentions: The deduction under section 80G is independent of section 37(1) and is available from gross total income, not just business income. CSR expenditure, even if disallowed under section 37(1), can be eligible for section 80G deduction if the donee institutions are registered under section 80G. Relied on decisions of the Mumbai ITAT in Alubound Dacs (India) Pvt. Ltd. vs. DCIT and FDC Ltd. Vs. PCIT, among others. Revenue's contentions: The PCIT argued that CSR expenses are mandatory under the Companies Act, lacking the voluntary character required for 80G deduction. The PCIT also contended that the AO's order was erroneous due to incorrect assumption of facts as no specific query was raised regarding CSR expenses eligible for 80G deduction, making it prejudicial to the revenue.

Which sections of the Income-tax Act were involved?

Section 263,Section 80G,Section 143(3),Section 144B,Section 37(1),Section 135

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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN

For Appellant: Ms. Vinita Shah, Ld. AR
For Respondent: Shri R. A. Dhyani, Ld. DR
Pronounced: 31.07.2025

PER RAJ KUMAR CHAUHAN (J.M.):

1.

This appeal is filed by the appellant/assessee against the order dated 21.03.2025of Learned Principal Commissioner of Income Tax, Mumbai[hereinafter referred to as the “PCIT"], passed under section 263 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the A.Y. 2020-21 wherein Ld. PCIT set aside the order dated 19.09.2022 of AO and directed to enquire the claim of section 80G deduction out of CSR expenses and modify the assessment order as per findings given by the Ld. PCIT.

2.

The brief facts of the case are that, the asses

The order continues below.

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