JASHAN JEWELS PRIVATE LIMITED ,MUMBAI vs. PCIT -5, MUMBAI

2. That the Ld. PCIT erred in holding that the deduction

2. That the Ld. PCIT erred in holding that the deduction

2. That the Ld. PCIT erred in holding that the deduction claimed under Section 80G for donations made to eligi claimed under Section 80G for donations made to eligi claimed under Section 80G for donations made to eligible charitable institutions out of Corporate Social Responsibility charitable institutions out of Corporate Social Responsibility charitable institutions out of Corporate Social Responsibility (CSR) expenditure is not allowable. The PCIT in coming to this (CSR) expenditure is not allowable. The PCIT in coming to this (CSR) expenditure is not allowable. The PCIT in coming to this conclusion has ignored the fact that it is only under conclusion has ignored the fact that it is only under conclusion has ignored the fact that it is only under Explanation 2 to section 37(1) which denies deduction for CSR Explanation 2 to section 37(1) which denies deduction for CSR Explanation 2 to section 37(1) which denies deduction for CSR expenses while computing 'business income' under Chapter IV hile computing 'business income' under Chapter IV- hile computing 'business income' under Chapter IV D and; that there is no bar from claiming the given benefit D and; that there is no bar from claiming the given benefit D and; that there is no bar from claiming the given benefit under section 80G, which falls under Chapter VI under section 80G, which falls under Chapter VI-A.

3. That Ld. PCIT erred in holding that since CSR donations are 3. That Ld. PCIT erred in holding that since CSR donations are 3. That Ld. PCIT erred in holding that since CSR donations are not voluntary, benefit of sectio not voluntary, benefit of section 80G is not available. The PCIT n 80G is not available. The PCIT has ignored the fact that there is no provision under Chapter has ignored the fact that there is no provision under Chapter has ignored the fact that there is no provision under Chapter VI-A which states that just because CSR donations are A which states that just because CSR donations are A which states that just because CSR donations are mandatory benefit of 80G cannot be claimed. This position is mandatory benefit of 80G cannot be claimed. This position is mandatory benefit of 80G cannot be claimed. This position is also supported by various judicial precedents also supported by various judicial precedents which states which states that so long as donations are made to charitable funds, having that so long as donations are made to charitable funds, having that so long as donations are made to charitable funds, having valid 80G registration, even though these donations form part valid 80G registration, even though these donations form part valid 80G registration, even though these donations form part of CSR obligations, 80G benefit cannot be denied unless of CSR obligations, 80G benefit cannot be denied unless of CSR obligations, 80G benefit cannot be denied unless specifically barred by law. specifically barred by law.

4. That Ld. PCIT erred in applying Section 263 without

4. That Ld. PCIT erred in applying Section 263 without

4. That Ld. PCIT erred in applying Section 263 without substantiating as to how the order of the AO was erroneous substantiating as to how the order of the AO was erroneous substantiating as to how the order of the AO was erroneous and prejudicial to the interest of the Revenue. The appellant in and prejudicial to the interest of the Revenue. The appellant in and prejudicial to the interest of the Revenue. The appellant in the return of income had given details of each of the charitable the return of income had given details of each of the charitable the return of income had given details of each of the charitable trusts to whom donations were given and therefore the AO om donations were given and therefore the AO om donations were given and therefore the AO was aware of the entire break was aware of the entire break-up of donations on which up of donations on which deduction under section 80G was claimed. Since none of the deduction under section 80G was claimed. Since none of the deduction under section 80G was claimed. Since none of the donations were to organisations specifically prohibited, there donations were to organisations specifically prohibited, there donations were to organisations specifically prohibited, there was no reason for the PCIT to have was no reason for the PCIT to have tareted the order passed tareted the order passed under section 143(3) as erroneous as well as prejudicial to the under section 143(3) as erroneous as well as prejudicial to the under section 143(3) as erroneous as well as prejudicial to the interest of revenue. interest of revenue.

5. The Ld. PCIT erred in also directing a further addition of INR 5. The Ld. PCIT erred in also directing a further addition of INR 5. The Ld. PCIT erred in also directing a further addition of INR 5,05,000 under Section 37 of the Act, being the difference 5,05,000 under Section 37 of the Act, being the difference 5,05,000 under Section 37 of the Act, being the difference between donation of between donation of INR 23,25,000 on which 80G benefit was INR 23,25,000 on which 80G benefit was claimed and INR 18,20,000 charged to profit and loss account claimed and INR 18,20,000 charged to profit and loss account claimed and INR 18,20,000 charged to profit and loss account which was voluntarily disallowed by the appellant under which was voluntarily disallowed by the appellant under which was voluntarily disallowed by the appellant under section 37 of the Act. The Ld. PCIT failed to appreciate the section 37 of the Act. The Ld. PCIT failed to appreciate the section 37 of the Act. The Ld. PCIT failed to appreciate the facts that the appellant had always suo facts that the appellant had always suo Moto disallowed Moto disallowed under section 37(1) the entire amount charged to the profit and under section 37(1) the entire amount charged to the profit and under section 37(1) the entire amount charged to the profit and loss account towards CSR expenditure including disallowing loss account towards CSR expenditure including disallowing loss account towards CSR expenditure including disallowing INR 18,20,000. The amount of INR 23,25,000 had therefore INR 18,20,000. The amount of INR 23,25,000 had therefore INR 18,20,000. The amount of INR 23,25,000 had therefore already suffered the disallowance under section 37(1) and already suffered the disallowance under section 37(1) and already suffered the disallowance under section 37(1) and what was claimed under 80G was 50% of INR 23,25,000 at hat was claimed under 80G was 50% of INR 23,25,000 at hat was claimed under 80G was 50% of INR 23,25,000 at INR 11,62,500 as payment towards these donations were INR 11,62,500 as payment towards these donations were INR 11,62,500 as payment towards these donations were made during the year and deduction under section 80G is made during the year and deduction under section 80G is made during the year and deduction under section 80G is available on payment basis. Accordingly, the Ld. PCIT failed to available on payment basis. Accordingly, the Ld. PCIT failed to available on payment basis. Accordingly, the Ld. PCIT failed to appreciate that there is no appreciate that there is no link between the amount charged to link between the amount charged to profit and loss account of INR 18,20,000 and INR 23,25,000 profit and loss account of INR 18,20,000 and INR 23,25,000 profit and loss account of INR 18,20,000 and INR 23,25,000 considered while claiming considered while claiming 80G deduction.

2. Briefly stated, the facts are that the assessee filed its return of Briefly stated, the facts are that the assessee filed its return of Briefly stated, the facts are that the assessee filed its return of income on 18.01.2021, declaring total income of ₹1 income on 18.01.2021, declaring total income of 12,38,42,550/-. The case was selected for scrutiny and assessment was completed The case was selected for scrutiny and assessment was completed The case was selected for scrutiny and assessment was completed under Section 143(3) read with Section 144B of the Act on under Section 143(3) read with Section 144B of the Act on under Section 143(3) read with Section 144B of the Act on 14.07.2022. The Assessing Officer, after due verification, accepted 14.07.2022. The Assessing Officer, after due verification, accepted 14.07.2022. The Assessing Officer, after due verification, accepted the returned income. Subsequently, the learned PCIT called for the the returned income. Subsequently, the learned PCIT the returned income. Subsequently, the learned PCIT assessment records and, upon examination, formed the view that assessment records and, upon examination, formed the view that assessment records and, upon examination, formed the view that the order passed by the Assessing Officer was erroneous in so far as the order passed by the Assessing Officer was erroneous in so far as the order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interests of the Revenue. The basis for such it was prejudicial to the interests of the Revenue. The basis for such it was prejudicial to the interests of the Revenue. The basis for such a conclusion was that the Assessing O a conclusion was that the Assessing Officer had allowed a fficer had allowed a deduction of ₹11,62,500/ 11,62,500/- under Section 80G of the Act, which under Section 80G of the Act, which formed part of the assessee’s corporate social responsibility (CSR) formed part of the assessee’s corporate social responsibility (CSR) formed part of the assessee’s corporate social responsibility (CSR) expenditure. A show cause notice under Section 263 was issued on A show cause notice under Section 263 was issued on A show cause notice under Section 263 was issued on 14.03.2025.

2.1 After considering the s After considering the submissions of the assessee, the PCIT ubmissions of the assessee, the PCIT held that the nature of CSR expenditure being statutorily held that the nature of CSR expenditure being statutorily held that the nature of CSR expenditure being statutorily mandated, lacked the element of voluntariness and, therefore, could mandated, lacked the element of voluntariness and, therefore, could mandated, lacked the element of voluntariness and, therefore, could not qualify for deduction under Section 80G. It was further not qualify for deduction under Section 80G. It was further not qualify for deduction under Section 80G. It was further observed that only voluntary dona observed that only voluntary donations, and not statutory tions, and not statutory obligations, could qualify under Section 80G. In support, the PCIT obligations, could qualify under Section 80G. In support, the PCIT obligations, could qualify under Section 80G. In support, the PCIT relied upon the CBDT Circular No. 01/2015 dated 21.01.2015 and relied upon the CBDT Circular No. 01/2015 dated 21.01.2015 and relied upon the CBDT Circular No. 01/2015 dated 21.01.2015 and various judicial precedents. The PCIT further noted that the various judicial precedents. The PCIT further noted that the various judicial precedents. The PCIT further noted that the assessee had suo motu disallowed ₹18,20,000/- out of the total assessee had suo motu disallowed out of the total CSR expenditure of ₹23,25,000/-, and therefore the remaining CSR expenditure of , and therefore the remaining ₹5,05,000/- ought also to have been disallowed under Explanation ought also to have been disallowed under Explanation ought also to have been disallowed under Explanation 2 to Section 37(1) of the Act. Accordingly, the PCIT held the 2 to Section 37(1) of the Act. Accordingly, the PCIT held the 2 to Section 37(1) of the Act. Accordingly, the PCIT held the assessment order to be erroneous and directed assessment order to be erroneous and directed the Assessing Officer to pass a fresh assessment order after proper examination Officer to pass a fresh assessment order after proper examination Officer to pass a fresh assessment order after proper examination and also initiate penalty proceedings. and also initiate penalty proceedings.The relevant finding the Ld. The relevant finding the Ld. PCIT is reproduced as under: PCIT is reproduced as under:

“5. I have perused the facts of the case and submissions made 5. I have perused the facts of the case and submissions made 5. I have perused the facts of the case and submissions made by the assessee. by the assessee. The assessee has stated that it has incurred The assessee has stated that it has incurred CSR expenses of Rs.23,25,000/ CSR expenses of Rs.23,25,000/- during FY 2019-20 relevant 20 relevant to AY 2020-21. From perusal of the details furnished, it is seen 21. From perusal of the details furnished, it is seen 21. From perusal of the details furnished, it is seen that that the the assessee assessee has has suo suo-moto moto added added back back only only Rs.18,20,000/ Rs.18,20,000/- as per the provisions of Explanation 2 to xplanation 2 to Section 37(1) of the Act while computing its total income. Section 37(1) of the Act while computing its total income. Section 37(1) of the Act while computing its total income. However, the total CSR expenditure of Rs.23,25,000/ However, the total CSR expenditure of Rs.23,25,000/ However, the total CSR expenditure of Rs.23,25,000/- is disallowable as per the provisions of Explanation 2 to Section disallowable as per the provisions of Explanation 2 to Section disallowable as per the provisions of Explanation 2 to Section 37(1) of the Act. Accordingly, the difference of Rs.5,05,000/ 37(1) of the Act. Accordingly, the difference of Rs.5,05,000/ 37(1) of the Act. Accordingly, the difference of Rs.5,05,000/- also needs to be disallowed and added back as per the also needs to be disallowed and added back as per the also needs to be disallowed and added back as per the provisions of Explanation 2 to Section 37(1) of the Act while provisions of Explanation 2 to Section 37(1) of the Act while provisions of Explanation 2 to Section 37(1) of the Act while computing its total income. Further, contention of the assessee computing its total income. Further, contention of the assessee computing its total income. Further, contention of the assessee that expenditure on Corporate Social Responsibility (CSR) can that expenditure on Corporate Social Responsibility (CSR) can that expenditure on Corporate Social Responsibility (CSR) can be claimedas be claimedas deduction u/s 80G of the Act for any eligible deduction u/s 80G of the Act for any eligible donation cannot be accepted for the following reasons: donation cannot be accepted for the following reasons: donation cannot be accepted for the following reasons:- 5.1 Section 37(1) of the Act allows for deduction of business 5.1 Section 37(1) of the Act allows for deduction of business 5.1 Section 37(1) of the Act allows for deduction of business expenses provided they are incurred "wholly and exclusively" expenses provided they are incurred "wholly and exclusively" expenses provided they are incurred "wholly and exclusively" for the purposes of business. E for the purposes of business. Explanation2 to Section 37(1), xplanation2 to Section 37(1), introduced through the Finance (No. 2) Act, 2014, specifically introduced through the Finance (No. 2) Act, 2014, specifically introduced through the Finance (No. 2) Act, 2014, specifically disallows CSR expenses, noting that these expenses are not disallows CSR expenses, noting that these expenses are not disallows CSR expenses, noting that these expenses are not considered business considered business- related and thus cannot be deducted. related and thus cannot be deducted. This provision underscores the legislative int This provision underscores the legislative intent to impose CSR ent to impose CSR obligations without tax relief. CSR expenditures were never obligations without tax relief. CSR expenditures were never obligations without tax relief. CSR expenditures were never intended to provide fiscal advantages to companies but to intended to provide fiscal advantages to companies but to intended to provide fiscal advantages to companies but to ensure they fulfill their statutory obligations under Section 135 ensure they fulfill their statutory obligations under Section 135 ensure they fulfill their statutory obligations under Section 135 of the Companies Act, 2013. The legislative intent of of the Companies Act, 2013. The legislative intent of of the Companies Act, 2013. The legislative intent of introduction of Explanation 2 to Section 37(1) of the Act, introduction of Explanation 2 to Section 37(1) of the Act, introduction of Explanation 2 to Section 37(1) of the Act, introduced through the Finance (No. 2) Act, 2014, is elaborated introduced through the Finance (No. 2) Act, 2014, is elaborated introduced through the Finance (No. 2) Act, 2014, is elaborated in the Explanatory Notes to the Finance Bill 2014 (CBDT in the Explanatory Notes to the Finance Bill 2014 (CBDT in the Explanatory Notes to the Finance Bill 2014 (CBDT Circular No.1/2015 dated 21.01.2015) which is reproduced Circular No.1/2015 dated 21.01.2015) which is reproduced Circular No.1/2015 dated 21.01.2015) which is reproduced below:- "CSR expendi "CSR expenditure, being an application of income, is not ture, being an application of income, is not incurred wholly and exclusively for the purposes of incurred wholly and exclusively for the purposes of incurred wholly and exclusively for the purposes of carrying on business. As the application of income is carrying on business. As the application of income is carrying on business. As the application of income is not allowed as deduction for the purposes of computing not allowed as deduction for the purposes of computing not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR taxable income of a company, amount spent on CSR taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing the annot be allowed as deduction for computing the annot be allowed as deduction for computing the taxable income of the company. Moreover, the objective taxable income of the company. Moreover, the objective taxable income of the company. Moreover, the objective of CSR is to share burden of the Government in of CSR is to share burden of the Government in of CSR is to share burden of the Government in providing social services by companies having net providing social services by companies having net providing social services by companies having net worth/turnover/profit above a threshold. If such worth/turnover/profit above a threshold. If such worth/turnover/profit above a threshold. If such expense expenses are allowed as tax deduction, this would s are allowed as tax deduction, this would result in subsidizing of around one result in subsidizing of around one-third of such third of such expenses expenses expenses by by by the the the Government Government Government by by by way way way of of of tax tax tax expenditure.” expenditure.” From the above, it is clear that the CSR expenditure is From the above, it is clear that the CSR expenditure is From the above, it is clear that the CSR expenditure is CSR in any form to avoid subsidizing of CSR expendit any form to avoid subsidizing of CSR expendit any form to avoid subsidizing of CSR expenditure by government and therefore re is not to be allowed as deduction government and therefore re is not to be allowed as deduction government and therefore re is not to be allowed as deduction claim of the assessee and the contention of the assessee claim of the assessee and the contention of the assessee claim of the assessee and the contention of the assessee regarding allowability of CSR expenditure under section 80G regarding allowability of CSR expenditure under section 80G regarding allowability of CSR expenditure under section 80G is against the basic intent of the provision. It is trite law that is against the basic intent of the provision. It is trite law that is against the basic intent of the provision. It is trite law that what cannot be allowed in view of specific provisions cannot t cannot be allowed in view of specific provisions cannot t cannot be allowed in view of specific provisions cannot be allowed indirectly unless specifically provided in the Act. be allowed indirectly unless specifically provided in the Act. be allowed indirectly unless specifically provided in the Act.

5.2 Section 80G of the Act provides tax deductions for 5.2 Section 80G of the Act provides tax deductions for 5.2 Section 80G of the Act provides tax deductions for voluntary donations made to specified charitable institutions voluntary donations made to specified charitable institutions voluntary donations made to specified charitable institutions or funds. The core or funds. The core purpose of this section is to encourage purpose of this section is to encourage philanthropy and voluntary social contributions. The issue at philanthropy and voluntary social contributions. The issue at philanthropy and voluntary social contributions. The issue at hand is whether mandatory CSR contributions can be hand is whether mandatory CSR contributions can be hand is whether mandatory CSR contributions can be reclassified as donations under this section. It is imperative to reclassified as donations under this section. It is imperative to reclassified as donations under this section. It is imperative to note that Section 80G was designed t note that Section 80G was designed to incentivize purely o incentivize purely voluntary voluntary voluntary donations, donations, donations, not not not statutorily statutorily statutorily mandated mandated mandated CSR CSR CSR obligations. Allowing CSR expenditures to qualify under obligations. Allowing CSR expenditures to qualify under obligations. Allowing CSR expenditures to qualify under Section 80G would undermine the legislative intent behind the Section 80G would undermine the legislative intent behind the Section 80G would undermine the legislative intent behind the disallowance introduced in Section 37(1).CSR expenses are disallowance introduced in Section 37(1).CSR expenses are disallowance introduced in Section 37(1).CSR expenses are mandated by law, and as such, they lack the essential by law, and as such, they lack the essential by law, and as such, they lack the essential characteristic of voluntariness, which is a core requirement for characteristic of voluntariness, which is a core requirement for characteristic of voluntariness, which is a core requirement for claiming deductions under Section 80G.The essence of a claiming deductions under Section 80G.The essence of a claiming deductions under Section 80G.The essence of a donation, as confirmed by several judicial precedents, is its donation, as confirmed by several judicial precedents, is its donation, as confirmed by several judicial precedents, is its voluntary nature, which is ab voluntary nature, which is absent in the case of CSR sent in the case of CSR expenditures. The Hon'ble Supreme Court in the case of PVG expenditures. The Hon'ble Supreme Court in the case of PVG expenditures. The Hon'ble Supreme Court in the case of PVG Raju, Raja of Vizianagaram [1976 SCR (1) 1017] has Raju, Raja of Vizianagaram [1976 SCR (1) 1017] has Raju, Raja of Vizianagaram [1976 SCR (1) 1017] has specifically held that donations refer to payments made specifically held that donations refer to payments made specifically held that donations refer to payments made voluntarily, without coercion or legal obligation. This principle voluntarily, without coercion or legal obligation. This principle voluntarily, without coercion or legal obligation. This principle is directly applicable here since CSR payments are mandated is directly applicable here since CSR payments are mandated is directly applicable here since CSR payments are mandated by law. The payments made by the assessee towards CSR, by law. The payments made by the assessee towards CSR, by law. The payments made by the assessee towards CSR, therefore, cannot be construed as voluntary donations eligible therefore, cannot be construed as voluntary donations eligible therefore, cannot be construed as voluntary donations eligible for deductions under Section 80G. While contributions to the for deductions under Section 80G. While contributions to the for deductions under Section 80G. While contributions to the Swachh Bharat Kos Swachh Bharat Kosh and Clean Ganga Fund are recognized h and Clean Ganga Fund are recognized as eligible for deductions under Section 80G, this eligibility is as eligible for deductions under Section 80G, this eligibility is as eligible for deductions under Section 80G, this eligibility is confined to voluntary contributions. However, when these confined to voluntary contributions. However, when these confined to voluntary contributions. However, when these contributions are made as part of the statutory CSR contributions are made as part of the statutory CSR contributions are made as part of the statutory CSR obligations under Section 135r.w. Schedule obligations under Section 135r.w. Schedule VII of the VII of the Companies Act, 2013, they cease to qualify as voluntary Companies Act, 2013, they cease to qualify as voluntary Companies Act, 2013, they cease to qualify as voluntary donations. The exclusion for deduction u/s80G of the Act for donations. The exclusion for deduction u/s80G of the Act for donations. The exclusion for deduction u/s80G of the Act for Prime Minister's National Relief Fund, Swachh Bharat Kosh, Prime Minister's National Relief Fund, Swachh Bharat Kosh, Prime Minister's National Relief Fund, Swachh Bharat Kosh, Clean Ganga Fund or other specified funds does not Clean Ganga Fund or other specified funds does not Clean Ganga Fund or other specified funds does not necessarily mean t necessarily mean that all other donations made out of CSR hat all other donations made out of CSR expenditures are entitled for claim u/s80Gof the Act. These expenditures are entitled for claim u/s80Gof the Act. These expenditures are entitled for claim u/s80Gof the Act. These exceptions are provided for claiming deduction under Section exceptions are provided for claiming deduction under Section exceptions are provided for claiming deduction under Section 80G of the Act, hence it cannot be inferred that the amount 80G of the Act, hence it cannot be inferred that the amount 80G of the Act, hence it cannot be inferred that the amount spent under section 135(5) of the C spent under section 135(5) of the Companies Act, 2013, the ompanies Act, 2013, the assessee is also eligible for deduction u/s80G of the Act even assessee is also eligible for deduction u/s80G of the Act even assessee is also eligible for deduction u/s80G of the Act even though the assessee though the assessee may be satisfying the requisite conditions may be satisfying the requisite conditions prescribed for deduction u/s 80G of the Act. prescribed for deduction u/s 80G of the Act. 5.3 The provisions of Sections 37(1) (including Explanation 5.3 The provisions of Sections 37(1) (including Explanation 5.3 The provisions of Sections 37(1) (including Explanation 2) and Section 80Gof the Act must be read harmoniously. and Section 80Gof the Act must be read harmoniously. and Section 80Gof the Act must be read harmoniously. Allowing CSR expenditures to be deductible under Section 80G Allowing CSR expenditures to be deductible under Section 80G Allowing CSR expenditures to be deductible under Section 80G of the Act would render Explanation 2 to Section 37(1) of the of the Act would render Explanation 2 to Section 37(1) of the of the Act would render Explanation 2 to Section 37(1) of the Act nugatory and would effectively nullify the specific Act nugatory and would effectively nullify the specific Act nugatory and would effectively nullify the specific disallowance legislat disallowance legislated by the Parliament. The principle of ed by the Parliament. The principle of harmonious construction requires that statutes be interpreted harmonious construction requires that statutes be interpreted harmonious construction requires that statutes be interpreted in a manner that gives effect to all provisions without in a manner that gives effect to all provisions without in a manner that gives effect to all provisions without rendering any part redundant. The Hon'ble Supreme Court in rendering any part redundant. The Hon'ble Supreme Court in rendering any part redundant. The Hon'ble Supreme Court in the case of South India Corporation (Pvt the case of South India Corporation (Pvt.) Ltd. V/s. Secretary, .) Ltd. V/s. Secretary, Board of Revenue, Trivandrum &Anr. [AIR 1964 SC 207] Board of Revenue, Trivandrum &Anr. [AIR 1964 SC 207] Board of Revenue, Trivandrum &Anr. [AIR 1964 SC 207] haslaid down the principle that statutes must be read as a haslaid down the principle that statutes must be read as a haslaid down the principle that statutes must be read as a whole and construction must be adopted that gives effect to all whole and construction must be adopted that gives effect to all whole and construction must be adopted that gives effect to all parts of the statute. The principle of harmonious constr parts of the statute. The principle of harmonious constr parts of the statute. The principle of harmonious construction mandates that provisions must be interpreted to avoid conflicts mandates that provisions must be interpreted to avoid conflicts mandates that provisions must be interpreted to avoid conflicts and each part of the statute should be given meaningful effect. and each part of the statute should be given meaningful effect. and each part of the statute should be given meaningful effect. Accordingly, allowing CSR expenditures to be claimed under Accordingly, allowing CSR expenditures to be claimed under Accordingly, allowing CSR expenditures to be claimed under Section 80G would negate the specific statutory disallowance Section 80G would negate the specific statutory disallowance Section 80G would negate the specific statutory disallowance under Section 37(1) and result in unintended tax benefits nder Section 37(1) and result in unintended tax benefits nder Section 37(1) and result in unintended tax benefits which would be inconsistent with the legislative framework which would be inconsistent with the legislative framework which would be inconsistent with the legislative framework governing CSR and tax deductions. The intention of the governing CSR and tax deductions. The intention of the governing CSR and tax deductions. The intention of the legislature was never to allow deduction u/s 80G for CSR legislature was never to allow deduction u/s 80G for CSR legislature was never to allow deduction u/s 80G for CSR expenditure carried out, els expenditure carried out, else it would result in subsidizing the e it would result in subsidizing the CSR expenditure. CSR expenditure. 5.4 CSR expenditure has to be mandatorily incurred by certain 5.4 CSR expenditure has to be mandatorily incurred by certain 5.4 CSR expenditure has to be mandatorily incurred by certain specified companies as per provisions of Section 135 of the specified companies as per provisions of Section 135 of the specified companies as per provisions of Section 135 of the Companies Act. Accordingly, it is a statutory obligation cast Companies Act. Accordingly, it is a statutory obligation cast Companies Act. Accordingly, it is a statutory obligation cast upon certain compa upon certain companies to share certain portion of profits to nies to share certain portion of profits to the activities towards social responsibilities. It is for this the activities towards social responsibilities. It is for this the activities towards social responsibilities. It is for this reason that this expenditure was clarified to be an expenditure reason that this expenditure was clarified to be an expenditure reason that this expenditure was clarified to be an expenditure not incurred fully and wholly for the purpose of business not incurred fully and wholly for the purpose of business not incurred fully and wholly for the purpose of business through Explanation 2 to th through Explanation 2 to the section 37(1) of the Act. Further, e section 37(1) of the Act. Further, Ministry of Corporate Affairs Circular No. 01/2016 dated Ministry of Corporate Affairs Circular No. 01/2016 dated Ministry of Corporate Affairs Circular No. 01/2016 dated 12.01.2016 clarifies that no specific tax exemptions have been 12.01.2016 clarifies that no specific tax exemptions have been 12.01.2016 clarifies that no specific tax exemptions have been extended extended to extended to to CSR CSR CSR expenditures. expenditures. The Circular explicitly expenditures. The Circular explicitly The Circular explicitly reinforces that CSR expenditures are not elig reinforces that CSR expenditures are not eligible for tax ible for tax deductions as business expenditures under Section 37(1) and deductions as business expenditures under Section 37(1) and deductions as business expenditures under Section 37(1) and by extension should not qualify as voluntary donations under by extension should not qualify as voluntary donations under by extension should not qualify as voluntary donations under Section 80G. The expression "shall ensure" used in Section Section 80G. The expression "shall ensure" used in Section Section 80G. The expression "shall ensure" used in Section 135(5) of the Companies Act, 2013 clearly implies that there is 135(5) of the Companies Act, 2013 clearly implies that there is 135(5) of the Companies Act, 2013 clearly implies that there is a mandate to spend 2% of average net profits of the preceding a mandate to spend 2% of average net profits of the preceding a mandate to spend 2% of average net profits of the preceding three years on CSR activity. three years on CSR activity.” 2.2 It was further recorded that appeals filed by the Revenue It was further recorded that appeals filed by the Revenue It was further recorded that appeals filed by the Revenue before the Hon’ble Bombay High Court, against ITAT orders before the Hon’ble Bombay High Court, against ITAT orders before the Hon’ble Bombay High Court, against ITAT orders allowing CSR-related deductions under Secti related deductions under Section 80G, are pending on 80G, are pending consideration, and therefore reliance on such decisions by the consideration, and therefore reliance on such decisions by the consideration, and therefore reliance on such decisions by the assessee was misplaced. assessee was misplaced. The relevant noting of the Ld. PCIT is The relevant noting of the Ld. PCIT is reproduced as under: reproduced as under:

“5.5 As regards the judicial pronouncements cited by the 5.5 As regards the judicial pronouncements cited by the 5.5 As regards the judicial pronouncements cited by the assessee, it is stated that appe assessee, it is stated that appeals filed by the Department als filed by the Department before the Hon'ble Bombay High Court on this issue are before the Hon'ble Bombay High Court on this issue are before the Hon'ble Bombay High Court on this issue are pending for adjudication in the following cases: pending for adjudication in the following cases:- Sr. No Name Name of of the the PAN ITAT Order No. High Court Loading Assessee No.

1. Blue Blue Cross Cross AAACB1549G 1806/Mum/2023 ITXAL/30782/2024 Laboratories Pvt. Laboratories Pvt. Ltd.

“9. Further, under normal circumstances the Commiss 9. Further, under normal circumstances the Commiss 9. Further, under normal circumstances the Commissioner oversees the issues and directs the Assessing Officer to oversees the issues and directs the Assessing Officer to oversees the issues and directs the Assessing Officer to examine the same. As per provisions of Section 263 of the Act examine the same. As per provisions of Section 263 of the Act examine the same. As per provisions of Section 263 of the Act of the Act the power of suo of the Act the power of suo-moto revision exercisable by the moto revision exercisable by the Commissioner of Income Tax is undoubtedly supervisory in Commissioner of Income Tax is undoubtedly supervisory in Commissioner of Income Tax is undoubtedly supervisory in nature. A bare reading of Section 263 of the Act of the Act also nature. A bare reading of Section 263 of the Act of the Act also e reading of Section 263 of the Act of the Act also makes it clear that the Commissioner has to be satisfied of makes it clear that the Commissioner has to be satisfied of makes it clear that the Commissioner has to be satisfied of twin conditions namely, (i) the order of the Assessing Officer twin conditions namely, (i) the order of the Assessing Officer twin conditions namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the sought to be revised is erroneous; and (ii) it is prejudicial to the sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. It has also been held in many cases the Revenue. It has also been held in many cases the Revenue. It has also been held in many cases that the Commissioner is not necessarily required to record a that the Commissioner is not necessarily required to record a that the Commissioner is not necessarily required to record a final conclusion on the issue at hand. final conclusion on the issue at hand.

5.1 In the face of such conflicting judicial precedents, the legal In the face of such conflicting judicial precedents, the legal In the face of such conflicting judicial precedents, the legal position that emerges is that two views are reasonably possible on position that emerges is that two views are reasonably possible on position that emerges is that two views are reasonably possible on the issue. It is trite law that where the Assessing Officer adopts one the issue. It is trite law that where the Assessing Officer adopts one the issue. It is trite law that where the Assessing Officer adopts one such plausible view, the mere fact that the Commissioner prefers an ible view, the mere fact that the Commissioner prefers an ible view, the mere fact that the Commissioner prefers an alternative view does not render the assessment erroneous. In this alternative view does not render the assessment erroneous. alternative view does not render the assessment erroneous. context, reference may be made to the decision of context, reference may be made to the decision of Hon’ble Supreme Hon’ble Supreme Court in CIT v. Max India Ltd. CIT v. Max India Ltd. [(2007) 295 ITR 282 (SC)], where [(2007) 295 ITR 282 (SC)], wherein it is laid down that where two views are reasonably possible on a laid down that where two views are reasonably possible on a laid down that where two views are reasonably possible on a particular issue, and the Assessing Officer has taken one such view, particular issue, and the Assessing Officer has taken one such view, particular issue, and the Assessing Officer has taken one such view, the mere preference of the Commissioner for an alternative the mere preference of the Commissioner for an alternative the mere preference of the Commissioner for an alternative interpretation does not justify the invocation of revisionary interpretation does not justify the invocation of revisiona interpretation does not justify the invocation of revisiona jurisdiction under section 263 of the Act. jurisdiction under section 263 of the Act.

5.2 It is also relevant to observe that the PCIT, in the present case, It is also relevant to observe that the PCIT, in the present case, It is also relevant to observe that the PCIT, in the present case, has not invoked Explanation 2 to Section 263 of the Act so as to has not invoked Explanation 2 to Section 263 of the Act so as to has not invoked Explanation 2 to Section 263 of the Act so as to contend that the assessment order is deemed to be erroneous due contend that the assessment order is deemed to be erroneous due contend that the assessment order is deemed to be erroneous due to lack of proper enquiry. On the contrary, the record indicates that proper enquiry. On the contrary, the record indicates that proper enquiry. On the contrary, the record indicates that the Assessing Officer had raised a specific query and the assessee the Assessing Officer had raised a specific query and the assessee the Assessing Officer had raised a specific query and the assessee had responded in detail, providing the requisite information. There had responded in detail, providing the requisite information. There had responded in detail, providing the requisite information. There is, thus, no material to support the conclusion that the Assessing is, thus, no material to support the conclusion that the Asse is, thus, no material to support the conclusion that the Asse Officer failed to conduct the enquiry that was warranted in the facts Officer failed to conduct the enquiry that was warranted in the facts Officer failed to conduct the enquiry that was warranted in the facts of the case. The jurisdiction under Section 263 cannot be exercised The jurisdiction under Section 263 cannot be exercised The jurisdiction under Section 263 cannot be exercised merely because the Commissioner has a different understanding of merely because the Commissioner has a different understanding of merely because the Commissioner has a different understanding of the law or prefers an alternate interpretation. the law or prefers an alternate interpretation. In absence of any In absence of any demonstrable error in the assessment order, or failure of the demonstrable error in the assessment order, or failure of the demonstrable error in the assessment order, or failure of the Assessing Officer to apply his mind to the relevant issue, the Assessing Officer to apply his mind to the relevant issue, the Assessing Officer to apply his mind to the relevant issue, the essential preconditions for invoking Section 263 are not satisfied. essential preconditions for invoking Section 263 are not satisfied. essential preconditions for invoking Section 263 are not satisfied.

5.3 In light of the above discussion, we are In light of the above discussion, we are of the considered of the considered opinion that the order passed by the Assessing Officer cannot be opinion that the order passed by the Assessing Officer cannot be opinion that the order passed by the Assessing Officer cannot be characterized as erroneous or prejudicial to the interests of the characterized as erroneous or prejudicial to the interests of the characterized as erroneous or prejudicial to the interests of the Revenue. Accordingly, the revisionary order passed by the learned Revenue. Accordingly, the revisionary order passed by the learned Revenue. Accordingly, the revisionary order passed by the learned PCIT under Section 263 of the Act is not PCIT under Section 263 of the Act is not sustainable in law and is sustainable in law and is hereby quashed.

5.4 The grounds of appeal of the assessee are accordingly allowed. The grounds of appeal of the assessee are accordingly allowed. The grounds of appeal of the assessee are accordingly allowed.

Order pronounced in the open Court on nounced in the open Court on 17/07/2025. /07/2025.