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Facts
The assessee, a share broking company, claimed a deduction of Rs. 19,07,500 under Section 80G, including for CSR expenses, in its return for AY 2020-21. After the Assessing Officer allowed most of the 80G claim, the Pr. CIT invoked Section 263, contending that the 80G deduction was ineligible under Section 115BAA and not allowable for CSR expenses, subsequently setting aside the assessment order for re-enquiry.
Held
The Tribunal held that the Assessing Officer's view, allowing the Section 80G deduction for CSR expenses after due examination, was a plausible one and not erroneous. It concluded that the twin conditions for invoking Section 263 (that the order must be erroneous and prejudicial to the revenue) were not satisfied, citing consistent rulings by other Tribunal benches allowing such deductions. Therefore, the Tribunal quashed the Pr. CIT's revision order.
Key Issues
1. Whether the Pr. Commissioner of Income Tax was justified in invoking Section 263 to revise the assessment order regarding Section 80G deduction for CSR expenses. 2. Whether Section 80G deduction is allowable for CSR expenses when the assessee has opted for Section 115BAA.
Sections Cited
263, 80G, 115BAA, 142(1), 37(1), 135(5), 254(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) – 4, Mumbai dated 07.03.2025 for AY 2020-21. The assessee has following grounds of appeal:
1. The Ld. Pr. Commissioner of Income Tax has erred in law and in facts in passing revision order u/s 263 of the Act without satisfying the conditions laid down u/s 263 of the Act and without appreciating that the assessment order was neither erroneous nor prejudicial to the interest of revenue.
2. The Ld. Pr. Commissioner of Income Tax ought to have appreciated that the deduction u/s 80G of Rs. 19,07,500/- was rightly claimed by the appellant.
The Ld. Pr. Commissioner of Income Tax has erred in law and in facts in directing the Ld. Assessing Officer to enquire the claim of deduction u/s 80G of the Act w.r.t. CSR expenses and modify the assessment order.
4. The appellant craves leave of your Honour to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal.”
Brief facts of the case are that assessee is a company engaged in the business of share broking and share trading. The assessee filed its return of income for AY 2020-21 declaring income of Rs. 12.274 crore. Case was selected for complete scrutiny. On the issue for selection was large deduction of claim under section 80G. The assessing officer after issuing show cause notice and seeking of reply of assessee and consideration thereof, disallowed deduction of donation under section 80G in respect of certain donation in his order dated 27.09.2022.
The assessment order was revised by ld. Pr. CIT in his order dated 07.03.2025 by invoking his jurisdiction under section 263. Before passing the order under section 263, the ld. Pr. CIT issued show cause notice to the assessee on two issues i.e. (i) as per provision of section 115BAA of the Act, the assessee is not eligible for deduction under section 80G while computing total income and (ii) the assessee has debited an amount of Rs. 38,15,000/- towards Corporate Social Responsibility (CSR) and has claimed 50% of deduction under section 80G.
Deduction is claimed purely on CSR expenditure on which deduction under section 80G is not allowable. The ld. Pr. CIT was of the view that CSR expenditure by assessee form part of mandatory requirement of Companies Act, 2013 and consequently not eligible for deduction under section 80G. Allowing such deduction will result in subsidising this expenses incurred by assessee which is not intention of Legislature. The assessee filed its reply dated 14.02.2025. In the reply, the assessee stated that case of assessee was selected for complete scrutiny for the reasons of large deduction claimed under section 80G. The assessee has given donation of Rs. 38,15,000/- and claimed deduction of Rs. 19,07,500/- only under section 80G. The assessee has claimed concessional rate of taxation under section 115BAA and furnished Form No. 10IC as per Income Tax Rules. The assessee further, stated that during assessment, assessing officer issued notice under section 142(1) and called detail of deduction claimed under section 80G. The assessee furnished details of donation to various charitable institution/trust. The copy of show cause notice of assessing officer as well as reply filed before him was also filed. The assessee submitted that in the assessment order, certain deductions under section 80G were disallowed. The assessee by referring provisions of section 115BAA submits that in concessional rate of taxation under section BAA for AY 2020-21 deduction under section 80G is eligible. The assessee in its without prejudice submission submitted that in a various judicial pronouncement on identical to the facts of the assessee, the Tribunal has allowed similar deduction under section 80G, ratios of various decisions were quoted in the reply.
3. The ld. CIT(A) on considering the submission of assessee accepted the contention of assessee on his first issue that even for obtaining lower tax rate under section 115BAA for AY 2020-21, the assessee is eligible for deduction under section 80G. However, on second issue the ld. Pr. CIT was of the view that under section 80G cannot be allowed for expenses claimed under CSR. The ld. Pr. CIT held that assessing officer has disallowed donation under section 80G only in respect of Urvashi Foundations for which approval under section 80G was not furnished and balance of claim under section 80G was allowed by ld. Assessing Officer without discussing anything about the claim of expenses under CSR head vis-à-vis donation under section 80G. The ld. CIT(A) held that from the order of assessing officer, it is apparent that assessing officer has not examined the issue of CSR expenses vis-à-vis section 80G donation, therefore, the order passed by assessing officer is erroneous and so far as prejudicial to the interest of revenue. The assessment order was set aside and ld. Assessing Officer was directed to enquire the claim of section 80G deduction out of CSR expenses and passed the assessment order as per finding of the order of ld. Pr.
CIT. 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 learned Commissioner of Income Tax/Departmental Representative (CIT-DR) for the revenue. The ld. AR of the assessee submits that in the show cause notice, the ld. Pr. CIT raised two issues i.e. under the scheme of taxation at lower rate under section 115BAA, the assessee is not eligible for deduction under section 80G. However, on considering the reply of assessee, the ld. Pr. CIT was satisfied that assessee is eligible for such deduction. However, on second issue of deduction under section 80G from the CSR head, the ld. Pr. CIT revised assessment order. The ld. AR of the assessee submits that he has two folds submission, firstly, the case was selected for scrutiny for examination of the issue which is the subject matter of revision. The assessing officer during assessment extensively examined the issue and on considering the issue made disallowance with regard to one donation to Urvashi Foundations. However, on other donation, the assessing officer has accepted the explanation of assessee. The assessing officer was fully satisfied and made no addition. Thus, the assessing officer took reasonable plausible and legally sustainable view. The view taken by assessing officer cannot be termed as erroneous as there are series of decisions wherein it has been consistently held that where assessee claimed deduction under section 80G @ 50% of CSR expenses and the donees were eligible for deduction under section 80G claim of assessee was liable to be allowed. The Mumbai Bench in the latest decision in DCIT Vs. Gabriel India Ltd. (2025) 173 taxmann.com 219 (Mumbai – Trib.) by referring certain earlier decision also took the similar view. Secondly, the twin condition for invoking jurisdiction that assessment order is erroneous and in so far as prejudicial to the interest of revenue has not been satisfied in the present case. To support his submission, the ld. AR of the assessee relied upon the following decision: CIT vs. Nirav Modi (390 ITR 292), CIT vs. Nirav Modi (77 taxmann.com 78), CIT vs. Fine Jewellery (India) Ltd. (372 ITR 303), Moil Ltd. vs. CIT (396 ITR 244), DalalAndBroacha Stock Broking Pvt. Ltd. Narayan TatuRane vs. ITO (70 taxmann.com 227), JMS Mining Pvt. Ltd. PCIT (91 ITR (T) 80), SBI DFHI Ltd. vs. ACIT (ITA No. No. 1431/Mum/2023) dated 27.06.2023, ACIT vs. Sikka Ports and Terminals Ltd. (173 taxmann.com 366), American Express (India) P. Ltd. vs. PCIT (166 taxmann.com 91), DCIT vs. Gabriel India Ltd. (173 taxmann.com 219).
On the other hand, learned Commissioner of Income Tax/Departmental Representative (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 except for reference of disallowance of donation to Urvashi Foundations.
Since the assessing officer has not discussed anything about the issue of donation under section 80G vis-à-vis CSR in the assessment order and it was allowed without making proper examination of facts, therfore, the assessment order is erroneous and in so far as prejudicial to the interest of revenue.
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 details of 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."
8. 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.
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.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 23/06/2025.