FIRST ADVANTAGE PRIVATE LIMITED,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX, MUMBAI - 4, MUMBAI

PDF · subscribers
ITA 3291/MUM/2025Status: DisposedITAT Mumbai25 June 2025AY 2020-21Bench: SHRI NARENDRA KUMAR BILLAIYA, HON'BLE (Accountant Member), SHRI SANDEEP SINGH KARHAIL, HON'BLE (Judicial Member)6 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Income Tax Appellate Tribunal (ITAT) held that the issue of allowing Section 80G deduction for CSR expenses is highly debatable, and co-ordinate benches of the Tribunal have consistently taken a view in favor of the assessee on this matter. Therefore, the AO's view was plausible, and the Pr. CIT's invocation of Section 263 jurisdiction amounted to a mere change of opinion, which is impermissible. The Tribunal set aside the order of the ld. Pr. CIT and restored the original assessment order.

What were the facts?

The assessee, engaged in pre-employment screening, filed its return of income for AY 2020-21, declaring income under normal provisions and u/s 115JB. During scrutiny assessment, a deduction of Rs. 91,91,000/- claimed under Section 80G for CSR expenses was allowed by the Assessing Officer (AO) after due examination. The Principal Commissioner of Income Tax (Pr. CIT) subsequently initiated proceedings under Section 263, holding the assessment order erroneous and prejudicial to the revenue, primarily arguing that CSR expenses are mandatory, not voluntary donations, and the assessee was not eligible for 80G deduction after opting for a reduced tax rate under Section 115BAA.

What were the issues?

1. Whether the Pr. CIT was justified in invoking Section 263 to revise an assessment order allowing Section 80G deduction for CSR expenses. 2. Whether CSR expenses, being mandatory under the Companies Act 2013, can be considered as voluntary donations eligible for deduction under Section 80G, especially when the assessee has opted for reduced tax rates under Section 115BAA.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 143(2),Section 142(1),Section 80G,Section 115JB,Section 115BAA,Section 37,Section 135

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, “F” BENCH, MUMBAI

Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI SANDEEP SINGH KARHAIL, HON’BLE

For Appellant: Shri Nitesh Joshi/Ms. Sonakshi Jhunjhunwala, A/Rs
For Respondent: Shri Bhagirath Ramawat, Sr. D/R
Hearing: 24/06/2024Pronounced: 25/06/2024

आदेश/O R D E R

PER NARENDRA KUMAR BILLAIYA, AM:

1.

This appeal by the assessee is preferred against the order of the ld. Principal Commissioner of Income Tax, Mumbai- 4 [hereinafter “the ld. Pr. CIT”] dated 21/03/2025 pertaining to AY 2020-21 framed u/s 263 of the Income-tax Act, 1961 (hereinafter ‘the Act’).

2.

The sum and substance of the grievance of the assessee is that the ld. Pr. CIT 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 29/09/2022 framed u/s 143(3) of the Act is erroneous inasmuch as it is prejudicial to the interest of the revenue.

3.

Representatives of both the sides were heard at length, case records carefully perused and with the assistance of the Counsels, the 2 relevant documentary evidence brought on record, duly considered in the light of Rule 18(6) of the ITAT Rules, 1963.

4.

Briefly stated the facts of the case are that the assessee is engaged in the business of Comprehensive, Systematic, Consistent Object, Well Documented quest research pre-employment screening program. Assessee is a wholly-owned subsidiary of First Advantage Pvt Limited, Singapore (‘FADV Singapore’) and is part of the First Advantage (FADV) Group. The assessee filed its return of income on 22/01/2021 declaring total income at Rs. 42,97,82,030/- under the normal provisions and Rs. 31,40,82,502/- u/s 115JB of the Act. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.

5.

The notice dated 29/06/2021 issued u/s 143(2) of the Act, included one of the clarifications required initially relating to deduction from total income under Chapter VIA. Vide notice 16/12/2021 issued u/s 142(1) of the Act, annexed with the questionnaire, question no. 3 was stated as “3) Please give details of deduction claimed of Rs. 91,91,000/- u/s. 80G of the Income Tax Act, 1961 with documentary evidence", to which the assessee filed reply dated 18/01/2022 and furnished the necessary details in respect of deduction u/s 80G of the Act. 5.1. Facts on record show that the assessee charged its profit and loss account by Rs. 34,91,000/- as contribution towards CSR expenses and added back the same in its computation of income. The assessee has also paid Rs. 57,00,000/- but since it was not charged to profit and loss account, the same was claimed as deduction u/s 80G of the Act along 3 with deduction of Rs. 34,91,000/-. The AO examined the claim and allowed the deduction.

6.

Assuming jurisdiction conferred upon him by the provisions of Section 263 of the Act, the ld. Pr. CIT issued a showcause notice, which reads as under:-

6.1. The assessee attended the proceedings and reiterated its claim of deduction u/s 80G of the Act. However, the ld. Pr. CIT was of the firm 5 belief that CSR expenses are mandatory in nature and incurred by virtue of compliance to Section 135 of the Companies Act, 2013 read with Schedule VII of the Companies Rules, 2014 and Explanation 2 to Section 37 of the Act mandates that CSR expenses shall not be allowed as business expenditure. The ld. Pr. CIT was further of the belief that donation has to be voluntary and since the CSR expenses are statutory obligation, cannot be considered as voluntary donation. On such belief, the ld. Pr. CIT was of the opinion that the assessment order dated 29/09/2022 is erroneous and prejudicial to the interest of the revenue and accordingly set aside the same and directed the AO to enquire the claim of Section 80G deduction out of the CSR expenses and modify the assessment order as per findings given by him.

7.

We have given a thoughtful consideration to the observations made by the ld. Pr. CIT. The undisputed facts is that the claim was thoroughly examined during the course of scrutiny assessment proceedings and after thoroughly examining the claim, the AO took a view and allowed the claim as deduction u/s 80G of the Act.

8.

We have given a thoughtful consideration to the order of the ld. Pr. CIT. We are of the considered view that the issue raised by the ld. Pr. CIT 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), JMS Mining Pvt. Ltd. [130 taxmann.com 118 (Kolkata Trib.)] and Elan Pharma (India) Pvt. Ltd. vs. PCIT in ITA No. 2419/Mum/2025.

9.

As the issue is highly debatable, any view taken by the AO during the course of original assessment proceedings has to be considered as a plausible view and the view taken by the ld. Pr. CIT, howsoever plausible, is nothing but a change of opinion for which jurisdiction u/s 263 of the Act cannot be assumed. Considering the facts of the case in totality, we set aside the order of the ld. Pr. CIT and restore that of the AO dated 29/09/2022.

More judgments on Section 263

All 13,616 judgments and leading authorities on Section 263 →

Recent GST High Court judgments

Search GST case law →