M/S GODFREY PHILLIPS INDIA LTD ,MUMBAI vs. THE ASSESSING OFFICER, NATIONAL FACELESS ASSESSMENT CENTRE, DELHI/ CIRCLE1(3)(1), MUMBAI

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 juri iction 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 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.

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 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 juri ictional tribunals in favour of the Appellant. 15. The learned AR has specifically referred and relied on following two cases in support of his case:

5. Reliance was also placed on the decision of Mumbai Bench of the Tribunal in the case of Synergia Lifesciences Pvt Ltd M/s. Godfrey Phillips India Ltd A.Y. 2014-15 and A.Y. 2015-16 vs DCIT: ITA No. 938/Mum/2023 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.

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.

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 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.

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.

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:

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 Juri ictional 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) 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 juri ictional 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 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 Juri iction 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. 19. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 15.04.2025 (MS. PADMAVATHY S.) (RAJ KUMAR CHAUHAN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER)

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