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Facts
The assessee claimed deduction under Section 80G for CSR expenses. The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under Section 263, holding that the assessment order allowing the deduction was erroneous and prejudicial to the revenue. The PCIT directed the Assessing Officer (AO) to re-examine the assessment.
Held
The Tribunal held that the AO had examined the CSR expenditure claim and allowed the deduction based on available material and case laws. The PCIT's action under Section 263 was based on a change of opinion and did not meet the twin conditions of the order being erroneous and prejudicial to the revenue.
Key Issues
Whether the PCIT's revisionary order under Section 263 was justified when the Assessing Officer had already examined and allowed the deduction for CSR expenses under Section 80G based on prior assessment and case laws.
Sections Cited
263, 143(3), 68, 80G, 37(1), 142(1)
AI-generated summary — verify with the full judgment below
PER PAWAN SINGH, JUDICIAL MEMBER:
This appeal by assessee is directed against the order of Principal Commissioner of Income Tax (PCIT) – 8, Mumbai dated 10.03.2025 for AY 2020-21. The assessee has following grounds of appeal:
1. On the facts and in the circumstances of the appellant's case and in law, the Ld. Principal Commissioner of Income Tax, erred on facts and in law in passing order u/s 263 directing the Assessing Officer to re-examine assessment order dated 29.09.2022 u/s 143(3) of the Income Tax Act, 1961 which is illegal, bad-in-law and void for want of jurisdiction.
2. On the facts and in the circumstances of the appellant's case and in law, the Ld. Principal Commissioner of Income Tax, erred in passing the revisionary order u/s 263 of the Income Tax Act, 1961 despite the fact that the twin perquisites of initiating revisionary action i.e., the order of the Assessing Officer sought to be revised was erroneous; and (ii) it was prejudicial to the interests of the revenue; were lacking simultaneously.
3. On the facts and in the circumstances of the appellant's case and in law, the Ld. Principal Commissioner of Income Tax, erred on facts and in law in passing order u/s 263 of the Act directing the Assessing Officer to pass fresh assessment order as against the assessment order passed u/s 143(3) r.w.s 144 on 29.09.2022 which was passed after in-depth examination, scrutiny and meticulous analysis of the material, information and details placed on record, which cannot be treated as improper enquiries by the Assessing Officer in absence of any new material/ evidence on record of the Ld. Principal Commissioner of Income Tax and therefore, failed to appreciate that Explanation 2(a) u/s 263(1) does not justify revision of any order under the guise of enquiries that may be endless.
4. On the facts and in the circumstances of the appellant's case and in law, the Ld. Principal Commissioner of Income Tax erred on facts and in law by invoking Section 263 of the Act solely due to change of opinion from that of the Ld. Assessing Officer. Such an instance does not empower the Ld. Principal Commissioner of Income Tax u/s 263 of the Act to supersede his opinion in lieu of the lawful opinion formed by the Ld. Assessing Officer without even demonstrating as to how the opinion of Ld. Assessing Officer was irrational or unsustainable in Law in view of law settled by Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. v. Commissioner of Income-tax [2000] 243 ITR 83 (SC) and followed by Jurisdictional Delhi High Court in many cases.
5. On the facts and in the circumstances of the appellant's case and in law, the Ld. Principal Commissioner of Income Tax erred on facts and in law by going beyond the jurisdictional rights granted u/s 263 of the Income Tax Act, 1961. As the order passed by the assessing officer is not erroneous as per the Explanation 2 to Section 263 of the Income Tax Act, 1961 and thereby making the order u/s 263 is invalid, illegal, unwarranted and bad in law.
6. On the facts and in the circumstances of the appellant's case and in law, the Ld. Principal Commissioner of Income Tax, erred on facts and in law in passing order u/s 263 of the Act directing the Assessing Officer to pass fresh assessment order for making disallowance of CSR Expenditure claimed as deduction u/s 80G of Chapter VIA of the Act to the tune of Rs. 48,54,723/- despite the fact that the said expenditure was eligible for deduction u/s 80G of the Act thereby completely ignoring the decisions of the jurisdictional High Court and Tribunal in the matter.
7. The appellant craves leave to add to, alter, amend, modify and/or delete all or any of the foregoing grounds of appeal.”
Brief facts of the case are that assessee-company filed its return of income of Rs. 31.64 crore. The case was selected for scrutiny. The assessing officer while passing the assessment order made various additions under the head income from house property, under section 68 and addition under head income from business and profession. The assessment was revised, ld. Pr. CIT by exercising jurisdiction under section 263 on 10.03.2025. Before passing the order under section 263, the ld. Pr. CIT issued show cause notice dated 28.02.2025. In the show cause notice, the ld. Pr. CIT noted that on perusal of assessment record, it was seen that in the computation of income, the assessee has shown Rs. 70.40 lacs on account Corporate Social Responsibility(CSR) expenses. Out of the said amount, the assessee has shown gross eligible deduction under section 80G of Rs. 66.09 lacs and consequently claimed deduction of Rs. 48.54 lacs under section 80G. The assessee made donation to various entities of Rs. 35.09 lacs and claimed 50% of deduction thereof that is Rs. 17,54,723/- under section 80G.
The assessee has also made donation to CMRF of Rs. 31,00,000/- and claimed 100% deduction. Thus, the assessee has not made payment of CSR expenses as voluntary. The CSR expenditure by assessee forms part of mandatory 3 requirement of facts and consequently not eligible for deduction under section 80G. Allowing deduction under section 80G will resultantly subsidising such expenses incurred by assessee which is not the intent of Legislature. The assessee is not eligible for deduction under section 80G and was required to be added back to the total income of assessee. Accordingly, same needs to be added back to the income of assessee. This resulted under assessment of income. Thus, assessment order is erroneous and prejudicial to the interest of revenue. The assessee was asked to file reply n 06.03.2025. The assessee filed its reply dated 04.03.2025 on 06.03.2025. In reply, the assessee submitted that assessment was completed under section 143(3) by making various additions and the same is under challenged in the appeal. The assessing officer passed assessment order after in-depth verification of record. The assessing officer examined the claim of deduction under section 80G during assessment. The assessee furnished all relevant details relates to CSR which was added back to the income of assessee in schedule BP of total income. The assessee claimed deduction of Rs. 48.54 lacs under section 80G. Thus, the assessing officer made verification of fact after detailed analysis of material available before him he made a conscious decision by not disallowing deduction under section 80G. The assessee also relied on certain case law. The reply of assessee was not accepted by ld. Pr. CIT. The ld. Pr. CIT reiterated his contention as raised in show cause notice. The ld. Pr. CIT held that issue raised by him required verification because claim with respect to CSR expenses is not allowable as per provisions of section 37, the assessee claimed expenditure for deduction which is allowable under section 80G. The ld. Pr. CIT after referring Explanation 2 to section 263 of Income Tax Act held that assessment order is passed without making enquiries or verification which should have been made and allow relief without enquiry on claim. Thus, the assessment order is erroneous and prejudicial to the interest of revenue. The assessing officer was directed to pass the fresh assessment order in accordance with law after making enquiries and allowing opportunity to the assessee. Aggrieved by the order of ld. Pr. CIT, the assessee has filed present appeal before Tribunal.
We have heard the submission of learned Authorised Representative (ld. AR) of the assessee and the learned Commissioner of Income Tax - Departmental Representative (ld. CIT-DR) for the revenue. The ld. AR of the assessee submits that issue raised by ld. Pr. CIT in his show cause notice was examined by assessing officer during assessment by issuing specific show cause notice. The ld. AR submits that during assessment, the assessing officer issued notice under section 142(1) dated 28.06.2022, copy of which placed at page no. 51 to 59 of paper book. The ld. AR invited our attention on question no. 28 of Annexure attached with notice dated 28.06.2022 wherein question with regard to evidence and support of claim of deduction under section 80G of Rs. 48.54 lacs was required. The ld. AR of the assessee submits that assessee vide its reply filed on 06.08.2022 filed complete details including on the question of assessing officer on the deduction under section 80G. Copy of reply is filed at page no. 62 to 63 of paper book and acknowledgement of ITBA portal at page no. 60 & 61. Thus, the assessing officer examined the claim of deduction under section 80G. The assessing officer on examining the issue was fully satisfied and made no addition. The assessing officer while allowing deduction under section 80G took a reasonable plausible and legally sustainable view. The decision taken by assessing officer cannot be classified is erroneous as there are series of decisions wherein it has been held that where assessee claimed deduction under section 80G @ 50% of CSR expenses and the recipient of donations are eligible for donations under section 80G, the claim is eligible for deduction. To support such view, the ld. AR relied upon the decision of Hon’ble Jurisdictional High Court in Castrol India Ltd. vs DCIT (2024) 161 taxmann.com 75 ACIT vs Sharda Cropechem Ltd. (ITA No. 6163/M/2024 dated 21.01.2025 ACIT vs Sikka Ports and Terminals Ltd. (ITA No. 3047/M/2024 &3755/M/2024 dated 30.12.2024 ACIT vs Jamnagar Utilities and Power Pvt. Ltd. (ITA No. 2117/M/2024 dated 24.07.2024 Peak XV Partners Advisors (P) Ltd. Vs DCIT (2025) 173 taxmann.com 180 (Bang- Trib) Dalal and Broacha Stock Broking Pvt. Ltd. vs PCIT (ITA No. 2718/M/2025 dated 23.06.2025 4. On the other hand, learned Commissioner Income Tax – Departmental Representative (ld. CIT-DR) for the revenue supported the order of ld. Pr. CIT.
The ld. Pr. CIT through the revenue submits that there is no reference to examine the issue of donation vis-à-vis CSR expenditure. The CSR expenditure is statutory obligation and no such deduction is eligible for such expenditure. The ld. CIT-DR also relied upon the decision of Delhi Tribunal in Agilent Technologies (International) (P) Ltd. vs ACIT (2024) 160 taxmann.com 238 (Delhi-Trib) wherein it was held that CSR expenditure are not allowable as business expenditure under section 37(1), so no deduction under section 80G is allowable.
In the rejoinder submission, the ld. AR of the assessee submits that the decision of Delhi Tribunal was considered by Mumbai Tribunal in DCIT Vs Gabriel India Ltd. (supra) in para 6 of its decision and held that decision of Delhi Tribunal in Agilent Technologies (International) (P) Ltd. Vs ACIT (supra) is on different reasoning and on the deduction under section 37, however, in the present case the assessee has claimed deduction under section 80G.
We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by both the parties. We find that assessment in the present case was completed on 19.02.2022. The assessing officer while passing the assessment order made various disallowanc. However, there is no discussion about the issue identified by ld. Pr. CIT while exercising his jurisdiction under section 263. However, on perusal of notices under section 142(1) dated 8.06.2022, we find that assessing officer sought explanation on various issues including on the deduction under section 80G along with supporting documents.
The assessee vide its reply dated 09.08.2022 furnished various details including the detail of examination claimed under section 80G. The assessee also furnished receipt of donations and per Annexure-XII of the reply. The assessee explained that they have claimed deduction of 50% of total donation. As noted above, the assessing officer has not made such references in the assessment order. Thus, assessing officer impliedly accepted the explanation offered by assessee. We find that co-ordinate bench of Mumbai Tribunal in DCIT Vs Gabriel India Ltd. (supra), Vistex Asia Pacific Private Limited (supra) and Axis Securities Limited (supra) consistently allowed deduction under section 80G @ 50% of CSR expenses. We, further, find that this combination in Dalal and Broacha Stock Broking Pvt. Ltd. in ITA No. No. 2718/Mum/2025 dated 19.06.2025 by considering other decision of Tribunal passed the following order:
“6. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. On careful perusal of assessment order, we find that case was selected for scrutiny on the issue of large amount of donation. No doubt that the assessing officer during the assessment examined the issue and disallowed donation under section 80G to Urvashi Foundations. Though, there is no discussion about the donation to other charitable trust or institution, however the assessing officer has sought detailsof donations to all about such charitable trust and institution. We find that the assessee also furnished all required details to the assessing officer. Thus, the assessing officer impliedly accepted the donation to such charitable trust or institution. We find that recently Co-ordinate Bench of Mumbai Tribunal in DCIT Vs Gabriel India (2025) 173 taxmann.com 219 (Mum) on similar issue where the assessee–company claimed deduction under section 80G at the rate of 50% of CSR expenses and furnished receipts of donees evidencing eligibility of deduction under section 80G allowed claim of such assessee. The tribunal while allowing relief to the assessee followed various other decisions of the different benches of the Tribunal. The relevant part of the decision if extracted below.
“7.After giving a thoughtful consideration to the orders of the authorities below, we are of the considered view that the Coordinate
Benches have been consistently taking the stand that 80G deduction cannot be denied. The relevant findings in the case of Ericsson India Global Services (P) Ltd. (supra), read as under:- "7. We have considered rival submissions and perused the material on record. We have also applied our mind to case laws cited before us. Undisputedly, expenditure incurred towards CSR is specifically prohibited from being allowed as deduction towards business expenditure by insertion of Explanation - 2 to Section 37(1) of the Act by Finance Act, 2014 w.e.f01.04.2015. However, there is no such Ericsson India Global Services Pvt. Ltd. v. DCIT corresponding amendment to section 80G of the Act. Only condition for claiming deduction under section 80G of the Act as per the existing provision is the institute to which donation is made must have been registered under section 80G of the Act. Once the aforesaid condition is fulfilled, the donor is entitled to avail the deduction. This is also the view expressed by the Coordinate Bench in case of Honda Motorcycle and Scooter India Pvt. Ltd. (supra). The relevant observation are as under: "17. Apropos the issue of disallowance u/s 80G of the Income-tax Act, 1961 (for short 'the Act') : The assessee made certain donation to approved institutions or funds and claimed 50% of the total donation made as deduction u/s 80G. This amount also formed part of the CSR initiative of the assessee company which amounts to INR 22,81,29,964/-. It is observed that the assessee has duly disallowed CSR expenditure of INR 22,81,29,964/-debited to the statement of profit and loss under section 37 of the Act. DRP rejected the claim of the assessee by saying that the donation is pursuant to the CSR policy of the company and lacks the test of voluntariness as required under section 80G. The AO has disallowed the claim on the ground that anything donation over and above the CSR u/s 80G will be only allowed as the CSR expense is not an allowable expense u/s 37 of the Act. Ld. Counsel of the assessee placed reliance on the following decisions :-
JMS Mining (P.) Ltd. v. PCIT [2021] 130 taxmann.com 118/190 ITD 702/91 ITR(T) 80 (Kolkata - Trib.)
Goldman Sachs Services (P) Ltd. v. JCIT (2020) ([2020] 117 taxmann.com 535 (Bangalore - Trib.) ) (ITAT Bangalore) (iii) First American (India) Pvt. Ltd. (ITA No. 1762/Bang/2019)
Allegis Services (India) Pvt. Ltd. (ITA No. 1693 /Bang/ 2019) Ld. Counsel further submitted that if the intention was to deny deduction of CSR expenses under section 80G, appropriate amendments on lines of section 37(1) should also have been made under section 80G of the Act. In the absence of any such amendment, CSR expenses should not be disallowed under section 80G of the Act.
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 ofAO to examine the same whether the payments satisfy the 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."
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 Co-ordinate 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, is also dismissed. 9.In the result, appeals of the revenue are dismissed.” 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.
Considering the consistent decision of Co-ordinate Bench of Tribunal, we find that in accepting the claim of donation under section 80G @ 50% of total donation in the assessment order is not erroneous as the action of assessing officer is legally sustainable view. Thus, in our considered view, the twin conditions prescribed under section 263 of the Income Tax Act is not fulfilled in the present case. As the pre-requisite conditions for exercising jurisdiction under section 263 has not meet out in the present, hence we quash/set aside the order of ld. Pr. CIT. In the result, grounds of appeal raised by the assessee are allowed.
8. In the result, the appeal of the assessee is allowed.