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Facts
The assessee claimed a 50% deduction under Section 80G for donations made towards Corporate Social Responsibility (CSR) expenses. The Assessing Officer (AO) scrutinized this claim during assessment proceedings under Section 143(3) and impliedly allowed it. Subsequently, the Principal Commissioner of Income Tax (PCIT) revised the assessment order under Section 263, deeming it erroneous and prejudicial to the revenue's interest, directing the AO to modify it.
Held
The Tribunal held that the AO had duly examined the assessee's claim for Section 80G deduction on CSR expenses and took a legally sustainable view, which was in accordance with consistent Tribunal decisions. Since the assessment order was neither erroneous nor prejudicial to the revenue, the twin conditions for invoking Section 263 were not met. Consequently, the PCIT's revisionary order was quashed.
Key Issues
Whether the PCIT had valid jurisdiction under Section 263 to revise an assessment order when the Assessing Officer had already scrutinized and allowed the assessee's claim for Section 80G deduction on CSR expenditure.
Sections Cited
263, 80G, 143(3), 37(1), 142(1), 14A
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PER PAWAN SINGH, JUDICIAL MEMBER:
This appeal by assessee is directed against the order of Principal Commissioner of Income Tax (PCIT) – 5, Mumbai dated 19.03.2025 for AY 2020-21. The assessee has following grounds of appeal:
1. The PCIT erred in assuming jurisdiction under section 263 of the Act without fulfilling the jurisdictional pre-conditions in the said section.
2. The PCIT erred in passing an order under section 263 of the Act without appreciating that the assessment was selected for scrutiny through CASS under the complete scrutiny category and the fact that the submissions were already made before the Assessing Officer (AO) during the assessment proceedings under section 143(3) of the Act wherein the details regarding the donations given and deductions claimed were provided before the Assessing Officer in response to the specific question of the AO asking for details of all deductions claimed by the appellant.
3. The PCIT erred in passing an order under section 263 of the Act and holding that the order passed by the Assessing Officer is prejudicial to the interest of the revenue despite the numerous judgements of the Hon’ble Mumbai Income Tax Appellate Tribunal as well as other Tribunals, in favour of the taxpayer, on availing deduction under section 80G of the Act on donations made towards Corporate Social Responsibility obligations even though they are mandated by the Companies Act, 21013.”
2. Rival submissions of both the parties have heard and record perused. The learned Authorised Representative (ld. AR) of the assessee submits that while filing return of income the assessee claimed @ 50% of donation made to All India Social Education Charitable Trust of Rs. 10,00,000/- and Pacific Medical University of Rs. 32,00,000/-. During the assessment, the assessing officer in a show cause notice dated 10.11.2021 raised a specific question regarding details of deductions, exemptions and rebate claimed during the year along with supporting documents. The assessee while furnishing reply to such show cause notice, notice vide its reply dated 22.02.2022, specifically explained that assessee made donation to All India Social Education Charitable Trust and Pacific Medical University and claimed deduction under section 80G of half of such donation. The assessee furnished complete details of such trust/institution to whom the assessee made such donation. The assessing officer thus, consider such issue and not made any addition. The ld. Pr. CIT revised the assessment order by setting aside the assessment order and held that assessment order dated 19.02.2022 is erroneous and so far as prejudicial to the interest of revenue. The assessing officer is directed to modify the assessment order by passing his speaking order. The order passed by assessing officer is neither erroneous nor prejudicial to the interest of revenue. There are serious of decisions wherein it has been held that when assessee has claimed deduction under section 80G @ 50% of CSR expenses and furnished evidence eligibility of claim under section 80G such claim is to allowed. To support his submission, the ld. AR relied upon the decision of Tribunal in DCIT vs Gabriel India Ltd. (2025)
173 taxmann.com 219 (Mumbai-Trib) and Vistex Asia Pacific Private Limited dated 13.06.2025 and Axis Securities Limited in ITA No. 2736/Mum/2025. The ld. AR of the assessee reiterated that assessing officer not only examined the issue but otherwise assessee is eligible for deduction under section 80G of 50% of Corporate Social Responsibility (CSR) expenses. The assessment order passed by Assessing Officer in not erroneous. The Assessing Officer while passing assessment order took legally sustainable view, which cannot be termed as erroneous. The grounds of appeal raised by the assessee are in fact covered in favour of the assessee.
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. CIT-DR for the revenue submits that there is no reference in the assessment order that assessing officer has examined 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 for the revenue 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.
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 disallowance under section 14A. However, there is no discussion about the issue identified by ld. Pr. CIT while exercising his jurisdiction under section 263. On perusal of notices under section 142(1) dated 10.11.2021, we find that assessing officer sought explanation on account of claim of refund out of advance tax and short details of deductions, exemptions and rebate claim during the year along with supporting documents. The assessee vide its reply dated 22.01.2022 furnished various details including the detail of exemption claimed under section 80G. The assessee also furnished receipt of donations made to All India Social Education Charitable Trust and Pacific Medical University aggregating to Rs. 42,00,000/-. The assessee explained that they have claimed deduction @ 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 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 the grounds of appeal raised by the assessee are in fact covered in favour of the assessee. Even otherwise, we find that during the assessment, the assessing officer examined the claim of deduction under section 80G and impliedly accepted the claim of donation under section 80G @ 50% of total donation out of CSR expenses. The order passed by assessee in officer in accepting the claim of assessee is not erroneous thereby the twin conditions prescribed under section 263 of the Income Tax Act is not fulfilled in the present case. Hence the order of ld. Pr. CIT dated 19.03.2025 is set aside/ quashed. In the result, grounds of appeal raised by the assessee is allowed.
8. In the result, the appeal of the assessee is allowed.