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Facts
The assessee filed its return declaring an income of Rs. 16,44,93,260/- which was later assessed at Rs. 16,72,93,660/-. The PCIT invoked Section 263 of the Income Tax Act, 1961, initiating revision proceedings against the assessment order.
Held
The Tribunal held that the issue raised by the PCIT regarding the deduction claimed for CSR expenditure was highly debatable. They noted that coordinate benches had consistently held that CSR expenditure can be claimed as a donation under Section 80G.
Key Issues
Whether the PCIT validly assumed jurisdiction under Section 263 for a debatable issue related to CSR expenditure claimed as a donation under Section 80G, and if the AO's view was a plausible one.
Sections Cited
263, 143(3), 144B, 37(1), 80G
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Before: SHRI SAKTIJIT DEY & SHRI NARENDRA KUMAR BILLAIYA
स िवाई की िारीख / Date of Hearing 04.06.2025 घोर्णा की िारीख/Date of Pronouncement 09.06.2025 आदेश / O R D E R PER NARENDRA KUMAR BILLAIYA [A.M.]: - This appeal by the assessee is preferred against the order of the Principal Commissioner of Income-tax, Mumbai-6 [hereinafter referred to as “PCIT”] dated 11.03.2025 pertaining to Assessment Year [AY] 2020-21.
The sum and substance of the grievance of the assessee is that the PCIT erred in assuming jurisdiction u/s 263 of the Income-tax Act, 1961 [hereinafter A.Y. 2020-21 Elan Pharma (India) Pvt. Ltd. referred to as “Act”], holding that the assessment order dated 09.09.2022 is not only erroneous but also prejudicial to the interest of the revenue.
3. Representatives of both the sides were heard at length. Case records carefully perused and the relevant documentary evidences brought on record duly considered in the light of Rule 18(6) of the ITAT Rule, 1963.
Briefly stated, the facts of the case are that the assessee is engaged in the business of manufacturing pharmaceutical, medical chemicals and botanical products. The assessee filed its return of income declaring total income of Rs. 16,44,93,260/-. The return was selected for scrutiny assessment, and subsequently, the assessment was completed at a total assessed income of Rs. 16,72,93,660/- vide an order dated 09.09.2022 framed u/s 143(3) r.w.s. 144B of the Act.
Assuming jurisdiction conferred upon him by the provisions of section 263 of the Act, the PCIT issued the following show cause notice to the assessee: “Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of the THE INCOME TAX ACT, 1961-Assessment Year 2020-21. In this regard, a hearing in the matter is fixed on 07/03/2025 at 03:45 PM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in 1. You have filed the return of income for A.Y.2020-21 on 15.01.2021 declaring total income at Rs. 16,44,93,260/-. The assessment was finalized u/s.143(3) r.w.s. 144B of the Act on 09.09.2022 with assessed income of Rs. 16,72,93,660/-, A.Y. 2020-21 Elan Pharma (India) Pvt. Ltd.
2. On perusal of assessment order u/s 143(3) r.w.s. 144B of the Act on 09.09.2022 it is observed that the order is erroneous and prejudicial to the interest of revenue for the following reasons: 2.1 On verification of the records, it is seen that that assessee has disallowed CSR expenditure of Rs. 15,00,000/- u/s 37(1) in the computation of income. However, against the CSR expenditure, assessee has claimed 50% deduction u/s. 80G of the Act amounting to Rs.7,50,000/-. As per Finance Act, 2014, since CSR expenses is not an allowable expenditure u/s.37(1) of the Act, the deduction claimed u/s.80G on the said expenditure ought to have been disallowed, thereby rendering the assessment erroneous and under assessment of income to the extent of Rs.7,50,000/-.
In view of the above, it is seen that the order passed u/143(3) r.w.s.144B of the Act on 09.09.2022 is erroneous and prejudicial to the interests of revenue and is required to be set-aside on the above issue by invoking the provisions of section 263 of the Act. Hence, it is requested to show-cause as to why the same should not be quashed/set aside for fresh adjudication after considering the facts as discussed above.
4. In this connection, you are hereby given an opportunity of being heard and your case is fixed for hearing/making submission online on or before the date mentioned above. In case of non-compliance, it will be presumed that you have no objection to the proposed revision u/s 263 of the Act, of the assessment order passed by the Assessing Officer u/s. 143(3) r.w.s.144B of the Act on 09.09.2022.”
The basis for the assumption of jurisdiction u/s 263 of the Act is the CSR expenditure of Rs. 15,00,000/- claimed as donation u/s 80G of the Act.
After giving a thoughtful consideration to the reasons given by the PCIT for assuming jurisdiction u/s 263 of the Act, we are of the considered view that the issue raised by the PCIT is a highly debatable issue. The coordinate benches of the Tribunal have taken a consistent view that CSR expenditure can be claimed as donation 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/Beng./2019), and JMS Mining Pvt. Ltd. (130 taxmann.com 118, Kolkata Trib.)
A.Y. 2020-21 Elan Pharma (India) Pvt. Ltd.
As the issue is highly debatable, any view taken by the AO during the course of the original assessment proceedings has to be considered as a plausible view, and the view taken by the PCIT 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 PCIT and restore that of the AO dated 09.09.2022 framed u/s 143(3) r.w.s. 144B of the Act.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 09.06.2025.