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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: MS. PADMAVATHY S. & SHRI. RAJ KUMAR CHAUHAN
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is directed against the order dated 18.01.2024 passed by the Learned Commissioner of Income Tax (Appeals)–Delhi - 26, [hereinafter referred to as the “CIT(A)”],for the Assessment Year 2015-2016passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] wherein the Assessment Order M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 dated 30.03.2022 was confirmed and addition of Rs.2,21,70,0740/-, which was claimed deduction under Section 80G on account of expenses made as corporate social responsibility was upheld.
Brief facts as culled out from the proceedings before the lower authorities are that the assessee is engaged in the business of manufacturing of cigarettes, tobacco and chewing products, tea and retail products. During the year under consideration, the Assessee has shown income from sales at Rs.44,53,11,79,000/-, other income at Rs.32,77,55,000/- and net profit has been computed at Rs.271,39,88,000/- in Profit and Loss Account. The return of income was e-filed on 30/11/2025, declaring total income of Rs.262,49,40,650/-. The return was processed under Section 143(1) of the Act. Notice u/s. 143(2) was issued on 06/04/2016 and thereafter notice under Section 143(1) was issued on 16/09/2016 and 18/05/2017 along with questionnaire and in response the Assessee Company filed/furnished the details called for. Accordingly, assessment under Section 143(3) of the Act was carried out vide Assessment Order dated 30/10/2017. However, on perusal of the assessment records of the Assessee for Assessment Year 2015-2016,it was noticed from the computation of income that Assessee Company has added donation and CSR expenses of Rs.5,66,35,988/-(-) Page | 2 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 (Rs.91,62,920/- + 4,74,73,068) and claimed deduction under Section 80G of Rs. 2,67,51,534/- which was allowed. It is further observed that since both CSR expenses and 80G donations are two different modes of ensuring funds for public welfare, hence, treating the same expenses under two different heads would defeat the very purpose of it, hence, the same is required to be disallowed in the assessment, however, this was not done in the original assessment order. It was therefore observed in the reasons for reopening of assessment that it is clear that because of the above reasons, there was failure on the part of the Assessee to disclose fully and truly all material facts necessary for assessment for the year in question within the meaning of first Proviso to Section 147(1) of the Act. Since more than 4 years have lapsed from the end of the Assessment year under consideration, therefore, as required by Section 151 of the Act, the satisfaction of the Principal Commissioner of Income Tax, Mumbai (PCIT), for fitness of the case for issuing notice under Section 148 of the Act was requested and the request was duly considered and approved by the Principal Commissioner of Income Tax, (PCIT)Mumbai -1, vide letter dated 25/03/2021. After the said approval, a notice u/s. 148 of the Act was issued to the assessee. The said notice was duly replied by the assessee vide reply dated 19/04/2021. The reasons of re-opening were supplied on 05/08/2021. During the assessment proceeding, the Page | 3 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 learned Assessing Officer while passing the re-assessment order dated 30/03/2022 was of the opinion that the amount has not been paid by the assessee voluntarily to become eligible under Section 80G of the Act and the said amount has been paid by the assessee as a mandatory requirement as per Section 135 of the Companies Act, 2013. Therefore, the sum paid by the assessee cannot be considered as a „donation‟ for the purpose of Section 80G of the Act, as the element of charity was missing in it because the amount spent on CSR activities, even though is contributed to the areas where 80G deduction is available, but the same lacks voluntary character and partakes the nature of an obligation to be fulfilled by the assessee under the Companies Act. It was therefore observed that assessee cannot suo moto expand the scope of Section 80G and expenditure on CSR activities is non-deductible for tax purposes unless falling under the provisions of Section 30 to 36 of the Act. Hence, the claim of deduction u/s. 80G was not accepted and the sum of Rs. 2,21,70,074/- which was claimed as expenses made as Corporate Social Responsibility (CSR) were added to the total income.
Aggrieved by the said Assessment order, the assessee filed appeal before ld. CIT(A). The assessee in appeal before the ld. CIT(A), has challenged the reopening of the assessment as well as addition made Page | 4 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 of the amount claimed under Section 80G of the Act. The ld. CIT(A) has dismissed both the grounds upholding reassessment and confirming the addition made vide assessment order dated 30.03.2022.
Aggrieved by the impugned order of the ld. CIT(A), the assessee is in appeal before us and has raised the following grounds of appeal “GROUND NO. I: REOPENING OF ASSESSMENT IS BAD IN LAW
1. On the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-26, New Delhi ("the Ld. CIT(A)") erred in upholding the action of the Additional/Joint/ Deputy/ Assistant Commissioner of Income Tax/Income-tax Officer, National Faceless Assessment Centre, Delhi (" the Ld. AO") of re-opening of the assessment u/s. 147 of the Income Tax Act ("the Act"). WITHOUT PREJUDICE TO GROUND NO. I GROUND NO. II: DISALLOWANCE OF DEDUCTION U/S 80G OF THE ACT AMOUNTING OF RS. 2,21,70,074/-
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO of disallowing the deduction of Rs. 2,21,70,074/-claimed u/s. 80G of the Act, on the alleged ground that the amount paid is not voluntary as the donations has been paid under Corporate Social Responsibility as per section 135(5) of the Companies Act, 2013, thus not covered under donation u/s. 80G of the Act
2. The Appellant prays that the aforesaid disallowance of deduction u/s. 80G of the Act amounting to Rs. 2,21,70,074/- be deleted.” Ground No.1 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16
5. We have heard the ld. AR for the assessee, who has argued that reopening of the assessment is bad in law because in the absence of failure on the part of the appellant to fully and truly disclose the material facts, issue of reopening notice after 4 years from the end of the assessment year is bad in law. Secondly, reopening under Section 147 of the act in the absence of any material, is bad in law and void. Thirdly, reopening has been done on the change of opinion only and the same is bad in law and contrary to the settled principle of law. Fourthly, reopening is bad in law because approval of Principal CIT was obtained mechanically. It is argued that the original assessment was completed under Section 143 of the Act and during the original assessment proceedings, the appellant had provided all the details called for by the ld. AO. The appellant has provided complete details of the deduction claimed under section 80G; that the appellant has categorically pointed out the donation which were contributed for carrying out the CSR activities. It is further argued that ld. AO has referred the computation of income of the appellant which has been filed with the ld. AO during the original assessment proceeding. Since the reopening was based on the material which was already before the ld. AO during the original assessment proceeding, the appellant has objected to the reassessment proceeding on the ground that there was no lapse on the part of the appellant to disclose material facts; there Page | 6 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 was no new material before the ld. AO and that it was a case of change of opinion on the part of the ld. AO.
It is also submitted that the ld. PCIT approval has been obtained mechanically and accordingly the opening of assessment is bad in law since the due process of law has not been followed.
The Ld .DR on the other hand supported the judgment of ld. CIT(A) and submitted that the reassessment has been done on the valid grounds as there was sufficient material to suggest that the appellant/assessee has failed to disclose fully and truly all the material facts necessary for assessment which resulted into escapement of income from tax.
We have considered the rival submission and examined the impugned order. The ld. CIT(A) has dealt with the objections and arguments to the reopening of the assessment in para no.5.2 to 5.2.1 and the same are extracted below. “5.2 I have considered the fact of the case and submissions filed by the appellant. The appellant contented that the reasons are only based on information already on record like return of income, computation of income, annual report, tax audit report and other documents filed and the replies filed during the assessment proceedings does not hold ground as if the assessment order is non- speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Hon'ble Delhi High Court in the case of Techspan India Pvt. Ltd. vs Income Tax Officer 283 ITR 212 Delhi wherein it has been established as under:-
M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 "The other aspect regarding which I wish to strike a note of caution is that before interfering with the proposed reopening of the assessment on the ground that the same is based only on a change in opinion, the Court ought to verify whether the assessment earlier concluded has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring to tax, income that has escaped assessment cannot be aborted by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the reassessment proceedings. There may be cases where the material is available with the assessing officer but the same is either ignored or escapes his attention while making the assessment. There can be no legal impediment in the reopening of assessment in such cases, nor can it be said that the reassessment is based only on a change of opinion." In view of the decision of the above-mentioned judgement of Hon'ble Delhi Court, contention of the appellant is not found acceptable, since from the assessment order it is nowhere apparent that the AO has examined the issue of deduction claimed u/s 80G on the funds which were also claimed to be incurred for the purpose of CSR. 5.2.1 Further, the appellant contented that it has been consistently held by Courts that before the assessing officer can be said to have validly invoked jurisdiction to reassess the income of an assessee under section 147 of the Act beyond four years, it must be shown that the provisions of the proviso thereto are complied with and the approval of the CIT was obtained mechanically. On perusal of the assessment record, it has been found that the assessing officer has reopened the case after obtaining proper approval from the competent authority. The Pr.CIT after considering the facts of the case and after proper application of mind has granted the approval for reopening the case. Therefore, the issue raised by the appellant found to be meritless. Hence, this ground of appeal raised by the appellant is hereby dismissed.”
M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 9. We have also examined the original assessment order dated 30/10/2017.On perusal of the same, we have noticed that there is nothing to suggest that the ld. AO has examined the issue of deduction claimed under Section 80G on the funds which were also claimed to be spent for the purpose of CSR. We have also examined the reasons for reopening and approval given by the ld. PCIT. We do not find any reason to disbelieve the opinion of the ld. CIT(A) as extracted above and the approval given by the ld. PCIT u/s. 151 of the Act. The issue whether the amount claimed under as contribution towards social responsibility (CSR) expenses can also be claimed by deduction under Section 80G of the Act was not brought to the notice of the ld. AO in the original assessment order and for reason that opening of the assessment, in our opinion, is neither bad in law nor void as is being claimed by the assessee. The finding recorded by the ld. CIT(A) as extracted above are found to be apt and opposite which is based on said legal principle and settled precedents of law. For these reasons, we do not find any merit in the ground no. 1 and the same is accordingly dismissed. Ground No.2 10. In the written argument on behalf the revenue it has been argued:- firstly if CSR expenditure is deductible under Section 80G, it would render explanation 2 to Section 37(1) nugatory; Secondly, Section Page | 9 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 80G of the Act provides that deductions for voluntary donations are made to the specified charitable institutions or funds and the core purpose of this Section is to encourage philanthropy and voluntary social contributions. Section 80G was designed to incentivize purely voluntary donations, not statutorily mandated CSR obligations. Therefore, allowing CSR expenditures to quality under Section 80G would undermine the legislative intent behind the disallowance introduced in Section 37(1). In written arguments, the ld. DR has referred and relied upon the case of Hon'ble Supreme Court in Commissioner of Expenditure-Tax v. PVG Raju, Raja of Vizianagaram [(1976 SCR (1) 1017] & Delhi Tribunal in case of Agilent Technologies (International) (P.) Ltd. Vs. ACIT [(2024) 160 taxmann.com 238 (Delhi-Trib.)] a) Commissioner of Expenditure-Tax v. PVG Raju, Raja of Vizianagaram [(1976 SCR (1) 1017)]: The Hon'ble Supreme Court emphasized that a donation is defined as a voluntary payment made without any expectation of return or consideration. The Court further ruled that payments made under statutory obligations do not qualify as donations. In the present case, the CSR payments made under Section 135 of the Companies Act, 2013, do not fulfill the essential criterion of voluntariness, rendering them ineligible for deduction under Section 80G. b) Agilent Technologies (International) (P.) Ltd. v. ACIT [(2024) 160 taxmann.com 238 (Delhi - Trib.)]: The ITAT Delhi ruled that CSR contributions, whether directed to the Prime Minister's National Relief Fund or other eligible charitable institutions, do not qualify for deductions under Section 80G. The Tribunal cited the Finance Act, 2014, which expressly disallowed CSR expenditures as deductible business expenses under Section 37(1). The judgment reaffirmed that CSR expenditures, being a Page | 10 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 legal mandate, lack the voluntariness required to qualify as donations under Section 80G. This principle is critical to the case at hand, where the assessee's CSR contributions are similarly mandated and cannot be treated as deductible donations.
11. It is therefore submitted on behalf of the revenue that disallowance of CSR expenditures claimed u/s. 80G by the assessee need to be upheld and the order of the ld. CIT(A) be confirmed.
12. The ld. AR on the other hand argued that from the plain reading of Section 80G of the Act, the contention made by the appellant are covered within the ambit of Section 80G of the Act. The Ld.AR has refered to Explanation 2 Section 37(1) of the Act and submitted that there is no correlation between 37(1) and Section 80G of the Act. He further argued that Memorandum to Finance Act 2014 has clarified that no deduction will be allowed for CSR expenses as business expenditure, but it make no reference to the ineligibility or restriction in claiming deduction under Section 80G for CSR amount spent in the Companies Act, 2013‟s obligations.
13. Regarding the reliance by the learned DR on the of the judgment of the Hon‟ble Supreme Court in Commissioner of Expenditure Tax Vs. PVG Raju, Raja of Vizianagaram [(1976 SCR (1) 1017)] and Honorable Delhi Tribunal in case of Agilent Technologies (International) (P) Ltd. Vs. ACIT [(2024) 160 taxmann.com 238 (Delhi-Trib) (Supra), it is submitted that reliance on both the cases is misplaced because the M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 issue before the Honorable Supreme Court was whether payment made by the assessee to its own political party would be regarded as donation considering that such payments had an element of reciprocal benefit. It is therefore submitted that in this context the Honorable Supreme Court has simply added that only such payments which are made without any monetary quid pro quo can be regarded as donation. It is further stated that in the said decision the issue was not whether a payment made under statutory obligation can or cannot be regarded as donation. It is therefore stated that the decision of the Honorable Supreme Court has no bearing on the facts of the present case. Hence, the reliance of the Learned of the AR on the said judgment of the Honorable Apex Court is completely misplaced. It is further stated that the conclusion drawn by the Learned DR that the Honorable Supreme Court held that payment made under statutory obligation do not qualify as donation is completely incorrect.
Regarding the Honorable Delhi Tribunal case i.e. Agilent Technologies (International) (P) Ltd. (Supra)., it is stated that the Honorable Tribunal has not discussed about the impact of voluntariness of the payment while deciding the said issue. It is submitted that Honorable Delhi Tribunal while delivering the said decision has not discussed the plethora of decisions already rendered Page | 12 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 by various courts including Delhi Tribunal case of Ericsson India Global Services (P.) Ltd. Vs. DCIT [2014] 160 taxmann.com 599 (Delhi –Tribunal) and Honda Motorcycle and Scooter India (P.) Ltd. Vs. ACIT [2023] 153 taxmann.com 567 (Delhi- Trib). It is further stated that the Delhi Tribunal of case of Agilent Technologies (International) (P.) Ltd. (Supra) is not applicable to the facts of the case and there are many decisions of the jurisdictional tribunals in favour of the Appellant.
The learned AR has specifically referred and relied on following two cases in support of his case: a) Interglobe Technology Quotient Private Ltd. vs. ACIT, Circle – 10(1), New Delhi, (ITA No. 95/Del./2024, (Delhi Tribunal), Order dated 25.05.2024. b) M/s. Alubound Dacs India Limited Vs. Dy. CIT, Circle 6(1)(1), in order dated 27.05.2024.
We have examined both the cases relied by the ld. AR. We have noticed that learned Delhi Tribunal in the case of Interglobe Technology Quotient Private Limited, dated 28/05/2024 has dealt with argument raised on behalf of the revenue before us and the finding of Delhi Tribunal in paragraph 6.5 to 7.5 are relevant and extracted as under:
6.5. Reliance was also placed on the decision of Mumbai Bench of the Tribunal in the case of Synergia Lifesciences Pvt Ltd Page | 13 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 vs DCIT:
Mum Trib), which has relied on the decision of Bangalore bench of the Tribunal in the case of Allegis (supra) and held that "the claim for deduction under section SOG of the Act in respect of CSR expenses cannot be denied". The Tribunal, however, remitted the issue to the file of the assessing officer with the directions to allow deduction under section 80G of the Act is the conditions specified therein are satisfied. He also cited the following decisions for the same proposition of law. - FNF India Private Limited vs ACIT: 133 taxmann.com 251 (Bang Trib.) - Infinera India (P.) Ltd vs. JCIT: 194 ITD 463 (Bang Trib.) - First American (India) Private Limited: (Bang. Trib) - Sling Media (P) Ltd vs. DCIT: 194 ITD 1 (Bang Trib.) - JMS Mining (P.) Ltd vs PCIT: 130 taxmann.com 118 (Kol Trib.) - DCIT vs. Peerless General Finance & Investment Co Ltd: 112 taxmann.com 410 (Kol Trib.) - Diamond Beverages Private Limited vs PCIT: ITA No.208/Kol/2022 (Kol Trib.) Power Mech Projects Ltd vs DCIT: ITA No.155/Hyd/2023 (Hyd Trib.) - Supreme Buildestates Pvt Ltd vs DCIT: ITA No.495/Jpr/2023 (Jpr Trib.) - Naik Seafoods Pvt Ltd vs. PCIT: ITA 490/Mum/2021 (Mum Trib.) - Societe Generale Securities India Pvt Ltd vs. PCIT: ITA 1921/Mum/2023 (Mum Trib.) 7. Learned DR has failed to bring forth any decision to the contrary. Thus, we accept the plea of learned counsel on the basis of case law cited, denial of CSR expenditure u/s 37(1) of the Act is not embargo to claim deduction u/s 80G of the Act. 7.1 Further, we like to observe that as a matter of fact as per Section 135 of the Companies Act, 2013 ('CA 2013), the qualifying Companies as mentioned therein are required to spend certain percentage of profits of last three years on activities pertaining to Corporate Social Responsibility (CSR). The expenditure on CSR. could be by way of expenditure on projects directly undertaken by said companies, such as setting up and running schools, social Page | 14 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 business projects, etc. Such expenditure would include expenditure otherwise falling for consideration under section 37(1) of the Act. On the other hand, companies, instead of undertaking or participating directly in a project, may choose to give donations to institutions that are engaged in undertaking such projects, which is also a recognized way of compliance of CSR obligation. 7.2 The assessing officer and CIT(A) have relied upon General Circular 14/2021 dated 25.08.2021 issued by MCA and "Explanatory Notes to the provisions of the Finance (No.2) Act, 2014" to hold that donations made as part of CSR expenditure are not allowable as deduction. The foundation of their reasoning being that the donation is voluntary in nature, while CSR expenditures are under statutory obligations. 7.3 As we take notice of the fact that Parliament legislated that CSR expenses would not be eligible for deduction as business expenditure under section 37 of the Act by inserting Explanation 2 to section 37(1) vide the Finance (No.2) Act, 2014 (applicable from the assessment year 2015-16), which provided that any expenditure incurred by an assessee on the activities relating to CSR referred to in section 135 of the CA 2013, shall not be deemed to be an expenditure incurred by an assessee for the purpose of business or profession and shall not be allowed as deduction under section 37(1) of the IT Act. The intent of Parliament in bringing the aforesaid provision is given in the Explanatory Memorandum to the Finance (No.2) Bill, 2014 and is reproduced as under: "CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for .computing the taxable income of the company, Moreover, the objective of CSR is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold. If such expenses are allowed as tax deduction, this would result in subsidizing of around one-third of such expenses by the Government by way of tax expenditure." (emphasis supplied) Page | 15 7.4 The aforesaid explanatory memorandum categorically expresses the legislative intent and the rationale of disallowance of CSR expenditure referred to in section 135 of the Companies Act, that such expenditure is application of income and not incurred for the purposes of business. We are of considered view that this in itself justifies the grant of deduction u/s 80G. As CSR expenditure is application of income of the assessee under the Income Tax Act, that means it continues to form part of the Total income of the assessee. Section 80G(1) of the Act provides that in computing the total income of an assessee, there shall be deducted, in accordance with the provisions of this section, such sum paid by the assessee in the previous year as a donation. Further, section 80G(2) lists down the sums on which deduction shall be allowed to the assessee, Section 80G falls in Chapter VIA, which comes into play only after the gross total income has been computed by applying the computation provisions under various heads of income, including the Explanation 2 to section 37(1) of the Act. Thus, there is no correlation between suo-moto disallowance in section 37(1) and claim of deduction under section 80G of the Act. 7.5 As with regard to the reasoning that CSR expenditure are not voluntary but mandatory in nature due to penal consequences, we are of considered view that voluntary nature of donation is by nature of fact that it is not on the basis of any reciprocal promise of donee. The CSR expenditures are also without any reciprocal commitment from beneficiary being philanthropic in nature. The Act permits deduction of donations as per Section 80G of the Act, even though, assessee is not gaining any benefit out of any reciprocity from donee. Similar is the case of CSR expenditure. Thus the reasoning of learned Tax Authority, the CSR expenditure is mandatory, does not justify disallowance of these expenditures u/s 80G, if other conditions of section 80G are fulfilled. There is no allegation of Revenue that other conditions of Section 80G are not fulfilled. We, thus sustain the ground.”
Similarly, the Hon‟ble Jurisdictional Tribunal Mumbai in the case M/s. Alubound Dacs India Limited Vs. Dy. CIT, Circle 6(1)(1), in ITA M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 No.3663/Mum/2023, order dated 27.05.2024 has also considered both the judgment relied by the learned DR before us and had held that the assessee is entitled to deduction under Section 80G of the Act of the amount spent towards CSR expenditure. Finding of Mumbai Tribunal in paragraph 8-13 are relevant and extracted as under: “8. Ground no. 2 pertains to the disallowance of Rs.15 lacs u/s. 80G of the Act towards CSR expenses. The Id. A.O. has rejected the claim of the assessee for the reason that the CSR expenses is not a voluntary donation but is merely a statutory obligation u/s. 135 of the Companies Act, 2013 read with Schedule VII of the Companies Rules, 2014. The Id. A.O. has also relied on the insertion of Explanation 2 to section 37(1) of the Act vide Finance (No.2) Act, 2014 where the CSR expenses incurred by the Companies Act shall not be allowed as 'business expenditure' as per the said provision. The Id. A.O. relied on the decision of the Hon'ble Apex Court in the case of Commissioner of Expenditure - Tax vs. PVG Raju, Raja of Vizianaram [1967] SCR (1)1017C which has held that donation has to be voluntary for it to satisfy the test of voluntariness. The Id. CIT(A) upheld the order of the Id. A.O. holding that the reasoning given by the Id. A.O. was justifiable.
The learned Authorised Representative (ld. AR for short) for the assessee contended that the issue of deduction of CSR expenses u/s. 80G of the Act is squarely covered by various decisions of the co-ordinate bench in favour of the assessee. The Id. AR further reiterated that there has been express bar in claiming the said expenses u/s. 37(1) of the Act and also on sub clause (iiihk) and (iiihl) of section 80G(2)(a) of the Act pertaining to Swatch Bharat Kosh and Clean Ganga Fund where donation made pursuant to CSR is not an allowable deduction. The Id. AR further contended that the test of voluntariness is irrelevant in claiming deduction u/s. 80G of the Act where there is no criteria specified by the Act. The Id. AR relied on a catena of decisions where the donation towards CSR has been allowed u/s. 80G of the Act.
M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 10. The learned Departmental Representative (ld. DR for short), on the other hand, controverted the said fact and stated that donation to CSR expenses are not voluntary in nature and is a compliance to be made by the assessee as per section 135 of the Companies Act, 2013. The Id. DR reiterated that the Hon'ble Apex Court in the case of PVR Raja (supra) has categorically held that any payment has to be voluntary in order to be termed as a 'donation'. The Id. DR relied on the orders of the lower authorities.
We have heard the rival submissions and perused the materials available on record. The only moot question to be decided here is whether the expenditure towards CSR activities are an allowable deduction u/s. 80G of the Act. The CSR expenses are governed by section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies (CSR) Policy Rules, 2014 where companies having net worth of Rs.500 crores or more or turnover of Rs. 1000 crores or more or net profit of Rs.5 crores or more have to mandatorily comply with the CSR provisions specified u/s. 135(1) of the Companies Act, 2013. The above mentioned companies are liable to spend atleast 2% of its average net profit for the immediately preceding three financial years on CSR activities. In the present case, the assessee has contributed Rs.30 lacs to various educational and charitable trust for which the assessee has claimed 50% of the total donation paid as deduction u/s. 80G of the Act. Prior to the Finance (No.2) Act, 2014, the said expenditure was claimed as 'business expenditure' u/s. 37(1) of the Act where after the insertion of Explanation 2 to section 37(1) of the Act, the CSR expenses referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purpose of business or profession. It is observed that the said expenses pertaining to CSR has been claimed as deduction u/s. 80G of the Act which claim was perennially rejected by the Revenue for the reason that only donations which are voluntary in nature will come under the purview of section 80G of the Act and donation towards CSR was merely a statutory obligation on companies as per section 135 of the Companies Act, 2013. It is pertinent to point out that the intention of the legislature was clear when the same was clarified by the Finance (No.2) Act, 2014 that CSR expenses will not fall under the business expenditure and also there has been an express bar specified in sub clause (iiihk) and (ihl) of section 80G(2)(a) Page | 18 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 of the Act that any sum paid by the assessee as donation to Swatch Bharat Kosh and Clean Ganga Fund will not come under the purview of deduction u/s. 80G of the Act subject to certain conditions. This justifies the fact that the other donations specified u/s. 80G of the Act would be entitled to deduction provided the conditions stipulated u/s. 80G of the Act are satisfied. In the present case in hand, the contributions made by the assessee would not fall under the two exceptions specified above which clearly mandates that the assessee is entitled to claim deduction for the donations contributed during the year under consideration u/s.80G of the Act. The decision relied upon by the Id. A.O. in the case of PVG Raju (supra) is distinguishable on the facts of the present case where there is no requirement of proving the voluntariness of the donation contributed by the assessee for claiming deduction u/s 80G of the Act. The amendment brought about by Finance Act, 2015 to section 80G of the Act which had inserted the sub clauses (iiihk) and (iiihl) to be the exception for qualifying a donation for claiming u/s. 80G of the Act could also be an evidencing factor to substantiate that CSR expenditures which falls under the nature specified in section 30 to 36 of the Act are an allowable deduction u/s. 80G of the Act.
On the above observation, we deem it fit to hold that the assessee is entitled to deduction claimed u/s. 80G of the Act towards the CSR expenditure incurred by it. We, therefore, direct the Id. A.O. to allow the claim of the assessee subject to the condition that the assessee has satisfied the other requirements warranted u/s.80G of the Act. Hence, ground no. 2 raised by the assessee is allowed.
In the result, the appeal filed by the assessee is partly allowed.”
We are in respectful agreement with the above findings of the Hon‟ble Delhi Tribunal as well as Hon‟ble Bombay Tribunal referred (supra). We respectfully follow the jurisdictional Tribunal and are of the considered opinion that the case relied upon the learned DR i.e., the case of PVJ Raju (supra) is distinguishable on the facts. We also Page | 19 M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 find ourselves in respectful agreement with the finding of the Hon‟ble Jurisdiction Tribunal to the effect that the amendment brought out by the Finance Act, 2015 to Section 80G(2)(a) of the Act which had inserted the sub Clauses (iiihk) and (iiihl) to be the only exception for qualifying a donation for claiming u/s. 80G of the Act pertaining to Swatch Bharat Kosh and Clean Ganga Fund where donation made pursuant to CSR is not an allowable deduction. This fact substantiate that CSR expenditure which falls under the nature specified in Section 30 to 36 of the Act are an allowable deduction u/s. 80G of the Act. We accordingly, direct the AO to allow the claim of the assessee subject to condition that the assessee has satisfied the other requirements under Section 80G of the Act. Hence, Ground No.2 raised by the assessee/appellant is allowed.
In the result, the appeal of the assessee is partly allowed.