PANAMA PETROCHEM LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME-TAX, MUMBAI

Ground No. 1: Revision order passed by the Ld. PCIT under section 263 of the I.T. Act against the assessment order passed under section 143(3) r.w.s. 144B of the Act dated 26.09.2022 is bad in law.

1 On the facts and in The circumstances of the case and in law, the Id. PCIT erred in invoking the revision proceedings and consequently passing the order, directing the Id. AO in revising the assessment order u/s. 143(3) r.w.s. 144B alleging it to be erroneous and prejudicial to the interest of the revenue.

2 The appellant prays that the revision order passed by the Id. PCIT u/s. 263 of the Act be quashed.

Ground No. 2: Disallowance of Deduction of Rs. 10,50,000/- claimed u/s. 80G of the Act:

1 On the facts and in the circumstances of the case and in law, the ld. PCIT erred in directing the ld. AO to disallow the deduction of Rs. 10,50,000/- claimed under section 80G of the Act.

2 The appellant prays that the disallowance under section 80G of the Act be deleted.

In this case, Ld. AO has allowed the deduction under section 80G of the Act claimed by appellant company, the donation given to a school, which was approved for 80G purposes by the Commission of Income Tax. The Ld. PCIT has passed an order under section 263 of the Act adjudicating that the donation given by appellant is not allowable under section 80G of the Act because the same amount was already claimed as Corporate Social Responsibility (CSR) expenditure, which is mandatory in nature as per the provisions of Companies Act. The Ld. PCIT quoted Explanation 2 to section 37(1) of the I.T. Act which come into effect from 1.4.2015, says CSR expenditure incurred by the appellant cannot be allowed as business expenditure. As the Ld. AO has allowed this expenditure as deduction under section 80G of the Act, Ld. PCIT held that the same is bad in law. The Ld. PCIT has directed Ld. AO to pass an order afresh.

Aggrieved by the Revision Order passed by Ld. PCIT, the present appeal was filed. The Ld. AR of the appellant has argued before the ITAT that there is no prohibition in claiming the deduction under section 80G of the Act, even though the same was claimed as CSR expenditure also. The Ld. AR has relied on the following decisions of the Coordinate Benches :- a) Savit Oil Technologies Ltd. Vs. ACIT (ITA No. 1258/Mum/2023)(Mum-Trib) b) Blue Cross Labs (P) Ltd. Vs. PCIT-3 (ITA No. 1806/Mum/2023) (Mum-Trib) c) First American (P) Ltd. Vs. ACIT (ITA No. 1762/Bang/2019(Bang-Tri) d) National Seeds Corporation Ltd. Vs. ACIT (ITA No. 6794/Del/2014)(Del- CIT(A) (243 ITR 83)(SC), Hon'ble Supreme Court has held that for a valid order under section 263 of the Act, twin conditions of “error” and “prejudicial to the interest of Revenue” should be satisfied. While explaining the meaning of “Error”, Hon'ble Supreme Court has held that if the AO followed one of the two possible views, then the same cannot be termed as “Error”. In the present case, it is observed that there are plethora of decisions in favour of the appellant as relied on by appellant holding that in the present circumstances, donation under section 80G of the act is eligible for deduction even though the same was claimed under CSR expenditure, as mentioned by Ld. AR of the appellant. So, both the conditions, “Error” and “prejudicial to the interest of Revenue” are not fulfilled in this case to pass a valid order under section 263 of the Act. Hence, following the ratio of Hon'ble Supreme Court in the case of Malabar Industrial Company(supra), it is held that the order of PCIT under section 263 of the Act is bad in law and hence quashed.

The appeal of appellant company is allowed.

The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.