JOINT COMMISSIONER OF INCOME TAX OSD IN SITU CIRCLE 131, MUMBAI vs. TATA CAPITAL HOUSING FINANCE LIMITED, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “E” BENCH,
MUMBAI
BEFORESHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER
&
SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER
Joint Commissioner of Income
Tax O ,Circle – 131, Room
No.
540,
5th
Floor,
Aayakar
Bhavan, Maharishi Karve Marg,
Marine Lines Mumbai 400020,
Maharashtra v/s.
बनाम
Tata
Capital
Housing
Finance Limited,11th Floor,
Tower A, Peninsula Business
Park,
Ganpatrao
Kadam
Marg, Lower Parel, Mumbai
400 013, Maharashtra
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AADCT0491L
Appellant/अपीलार्थी
..
Respondent/प्रतिवादी

Appellant by :
Shri Niraj Sheth,AR
Respondent by :
Shri Hemanshu Joshi (Sr. DR)

Date of Hearing
11.03.2025
Date of Pronouncement
18.03.2025

आदेश / O R D E R

PER PRABHASH SHANKAR [A.M.] :-

The above captioned two appeals have been filed by the Revenue against the orders by the Learned Commissioner of Income-tax
(Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to the orders passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the AYs [A.Y.]
2018-19 and 2020-21. Since the issues are common and the appeals

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Tata Capital Housing Finance Limited, Mumbai were heard together, they are being taken up for adjudication vide this composite order for the sake of brevity.
2. The grounds of appeals of the Revenue are as under:
3. In both the appeals, issues being common relating to deduction u/s 80G w.r.t. Corporate Social Responsibility (henceforth ‘CSR’),the Revenue has claimed that the ld.CIT(A) erred in allowing deduction u/s 80G of the Act without verifying compliance with provisions of the Act and also allowing CSR expenses u/s 80G undermining the legislative intent of Explanation 2 to section 37(1) of the Act which expressly disallows CSR expenses as business deductions.
4. Brief facts of the case are that the assessee claimed certain deduction u/s 80G of the Act. The details of the donations made during the year under consideration on which deduction u/s. 80G has been claimed are tabulated in the assessment orders. The said amount of donation(s) made were eligible for deduction u/s. 80G(1)(ii) of the Act and therefore, the assessee had claimed a deduction of 50% of the said amount while computing the total income for the year. During the year under consideration, the assessee had incurred certain expenditure CSR expenditure and the same had been disallowed in terms of Explanation 2

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Tata Capital Housing Finance Limited, Mumbai to Section 37(1) of the Act, while computing total income under the Act.
During the course of the assessment proceedings, the Assessing Officer, inter-alia asked it to show cause as to why deduction u/s. 80G of the Act the amount spent towards CSR should not be disallowed. In response thereto, the assessee stated that the donations made during the year were eligible for deduction u/s. 80G of the Act. Copies of receipts of donations made and the approval received by the entities from the Competent Authority and extracts of bank statements were submitted to the Assessing Officer. It was pleaded that the Legislature does not prohibit donations made pursuant to CSR, to be ineligible for claiming deduction u/s. 80G of the Act. However, the ld.AO rejected the contention on the ground that the said amount had not been paid by the assessee voluntarily to become eligible for entity specified under Section 80G of the Act. But the same was paid by the assessee as a mandatory requirement as per Section 135 of the Companies Act, 2013 to spend certain amount for specified activities as per. The expression “shall ensure” used in Section 135(5) of the Companies Act 2013 clearly implies that there is a mandate to spend 2% of average net profits of the preceding three years on CSR activity. Thus, the requirement to spend amount is perceived by the legislature to be mandatory in nature and not voluntary. According to the AO, the assessee could also have very well

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Tata Capital Housing Finance Limited, Mumbai made payment to an entity not covered by Section 80G or it could have directly incurred the expenditure for the specified purpose, but it chose to spend only in those areas where it could claim deduction u/s 80G of the Act. Therefore, the sum paid could not be considered as a ‘donation’
for the purpose of Section 80G of the Act as the element of charity was missing in it. The main characteristic of charity is that it is purely voluntary and there is no legal obligation to make that contribution. The amounts spent on CSR activities, even though was contributed to the areas where 80G deduction is available, but the same lacked voluntary character and partakes the nature of an obligation to be fulfilled, a necessary requirement imposed by law in accordance with Section 135 of the Companies Act 2013. The intention of the legislature was never to allow deduction for CSR expenditure, as this would result in subsidizing the CSR expenditure by one-third amount. From the memorandum to budget, it is clear that the expenditure was not allowed as deduction in any form to avoid subsidizing of CSR expenditure by government and therefore claim and the contention of the assessee regarding allow ability of CSR expenditure under section 80G was against the basic nature of such amendment. Therefore, it was held by him that the claim regarding allow ability of CSR expenditure under section 80G of the Act was not correct and therefore, deductions claimed under section 80G for P a g e | 5

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Tata Capital Housing Finance Limited, Mumbai both the assessment years were disallowed and added back to the total income of the assessee.
5. In the subsequent appeal, theld.CIT(A) after observing that the issue had been examined by the juri ictional ITAT in various decision quoted by the appellant, held that there is no doubt that CSR is not an admissible business deduction u/s 37, however, there is no restriction in the law for not allowing deduction u/s 80G if its satisfies the conditions laid in the section 80G. Thus, he deleted the disallowance in both the years allowing appeals of the assessee.

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Tata Capital Housing Finance Limited, Mumbai issue has been deliberated at length in a catena of cases by various
Benches of ITAT including those of the coordinate bench which have consistently taken the position that there is no bar in claiming deduction u/s 80G in respect of CSR expenses. It would be worth relying on the recent decision of the coordinate Bench in the case of Jamnagar
Utilities
And Power
Private
October,
2024
in ITA
No.4452/Mum/2024 dated 09.10.2024.Relevant extracts are reproduced for the sake of clarity and brevity as below:
“5. We heard the parties and perused the material on record. During the year under consideration the assessee has claimed 50% of the amount donated to M/s Reliance Foundations which is registered under section 12A of the Act against the certificate issued under section 80G(5) of the Act. The AO denied the claim on the Jamnagar Utilities and Power Pvt. Ltd ground that the donation made is not voluntary but is under a statutory obligation. The CIT(A) allowed the claim of the assessee by placing reliance on the decision of the Co-ordinate Bench. We notice that the Co-ordinate Bench in assessee's own case for AY 2016-17 has considered a similar issue and held that:
"5. We have heard rival submission of the parties and perused the relevant material on record. In the case, the assessee debited Rs.8,60,00,000/- on account of CSR while computing total income. However, the assessee claimed
50% deduction i.e. Rs.4,30,00,000/- u/s 80G of the Act. According to the Officer CSR is statutory liability on the part of the assessee, which is to be incurred out of profit in compliance to the Companies Act whereas section 80G of the Act deal with donation in the nature of the voluntary out of once own violation. voluntary rather it was legal and the Assessing Officer held the CSR expenditure out of purview the section 80G of the Act and accordingly he disallowed the claim of deduction of the assessee of Rs.4,30,00,000/ the Ld. CIT(A) allowed the claim of the assessee observing as under:
"I have carefully considered the assessment order and submission made by the appellant. The appellant has relied upon the following judicial decisions including the decisions of juri ictional ITAT Mumbai where it has been held that payments towards donations made on account of corporate social

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Tata Capital Housing Finance Limited, Mumbai responsibility, disallowed under section 37(1), are allowable as deductions under section 80G of the Act:
DCIT Reliance Industries Ltd. [2023] Ι.Τ.Α. No. 2587& FNF India (P.)
M/s.
CIT-2
(ITA
No 490/MUM/2021)(Mumbai ITAT) 2588/Mum/2022 (Mumbai ITAT) Ltd.
Vs. ACIT Sling Media (P.)(2021) (133 taxmann.com 251) (Bangalore ITAT)
Ltd. Vs. DCIT Infinera India (P.)(2022) (194 ITD 1) (Bangalore ITAT) Ltd.
Vs. JCIT (2022) (194 ITD 463) (Bangalore ITAT) DCIT Vs. M/s. The Peerless
General FinanceJamnagar Utilities and Power Pvt. Ltd & Investment
&Co.Ltd (ITA No. 1469 & 1470/Kol/2019) (Kolkata ITAT) Further, it is also observed from the contents of above decision of Hon'ble ITAT that the explanatory memorandum to Finance Act No. 2, 2014, introducing
Explanation 2 to Section 37 (1) which prohibited the allowability of CSR expenditure as business expenditure. The memorandum clearly states that CSR expenditure described in sections 30 to 36 of the Income-tax Act, 1961
shall be allowed. Legislators never intended to deny deductions for CSR expenditure outright; it is only not allowable under section 37(1). As the amendment in section 37(1) does not apply to sections 30 to 36 of the Act, the same would not apply to section 80G of the Act. Thus, appellant shall be allowed to claim a deduction under section 80G of the Income Tax Act, 1961
to the extent of eligibility.
It is further viewed that juri ictional Hon'ble Mumbai ITAT in the case of M/s.
Reliance
Industries
Ltd.
V.DCIT[2023](ITA
NO.2587
&
2588/MUM/2022) has followed the decision rendered by Mumbai ITAT in the case of Naik
Sea foods
P
Ltd
V.Pr.CIT-2(ITA
NO.490/MUM/2021). In the case of Naik Sea foods P Ltd (supra), the co- ordinate bench has followed the decision rendered by Bangalore bench of Tribunal in the case of M/s FNF India P Ltd (ITA No. 1565/Bang/2019 dated
05-01- 2021), which in turn followed the decision rendered in the ease of Allegis
Services
(India)
Pvt.
Ltd.
v.
ACIT
(ITA
No.
1693/Bang/2019) and held that the assessee is eligible for deduction u/s 80G of the Act in respect of certain payments included in CSR Expenses. The relevant discussions made by the Tribunal are extracted below:-
"15. Considered the rival submissions and material placed on record, we observe from the record that Ld. Pr.CIT while examining the records of the assessment observed that the Assessing Officer has not Verified the expenses claimed by the assessee and allowed by the Assessing Officer, without making the proper verification and purchases which is 95% of the sale declared by the assessee and again Assessing Officer allowed the same without making proper verification. After considering the submissions of both the parties we observe from the record that with regard to section 80G deduction we observed that the Coordinate Bench of ITAT Bangalore
Bench decided the issue of deduction u/s. 80G relating to donations which is part of Corporate Social Responsibility in the case of M/s FNF India Pvt.

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Ltd., v. ACIT (ITA. No. 1565/Bang/2019 dated 05.01.2021). The relevant findings of the Bangalore Bench are reproduced below: -
"9. After hearing both the parties, we find that similar issue came up for consideration before this Tribunal in ITA No. 1693/Bang/2019 in the case of Allegis Services (India) Pvt. Ltd. v. ACIT. The Tribunal by its order dated 29.4.2020 held as under.-
"10. Section 135 of Companies Act, 2013 requires companies with CSR obligations, with effect from 01/04/2014. Finance (No.2) Act, 2014 inserted new Explanation 2 to sub-section (1) of section 37, so as to clarify that for purposes of sub-section (1) of section 37, any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.
11. This amendment will take effect from 1/04/2015 and will, accordingly, apply to assessment year 2015-16 and subsequent years.
12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under, the Head Income form Business and Profession.
Further, clarification regarding impact of Explanation 2 to section 37(1) of the Income
Tax Act in Explanatory Memorandum to The Finance (No.2) Bul, 2014 is as under:
"The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is Jamnagar Utilities and Power Pvt. Ltd incurred wholly and exclusively for the purposes of, carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditure cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein."
13. From the above it is clear that under Income tax Act, certain provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, Income from Business and Profession to those, who pursue corporate social responsibility projects under following sections.
 Section 30 provides deduction on repairs, municipal tax and insurance premium
Section 31, provides deduction on repairs and insurance of plant, machinery and furniture Section 32 provides for depreciation on tangible assets like building, machinery, plant, furniture and also on intangible assets like knowhow, patents, trademarks, licenses. Section 33 allows development rebate on machinery, plants and ships.
 Section 34 states conditions for depreciation and development rebate.

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 Section 35 grants deduction on expenditure for scientific research and knowledge extension in natural and applied sciences under agriculture, animal husbandry and fisheries. Payment to approved universities/research institutions or company also qualifies for deduction. In-house R&D is eligible for deduction, under this section.
Jamnagar Utilities and Power Pvt. Ltd Section 35CCD provides deduction for skill development projects, which constitute the flagship mission of the present
Government. Section 36 provides deduction regarding insurance premium on stock, health of employees, loans or commission for employees, interest on borrowed capital, employer contribution to provident fund, gratuity and payment of security transaction tax.
Income Tax Act, under section 80G, forming part of Chapter VIA, provides for deductions for computing taxable income as under:
 Section 80G(2) provides for sums expended by an assessen as donations against which deduction is available.
1. Certain donations, give 100% deduction, without any qualifying limit like Prime
Minister's National Relief Fund, National Defence Fund, National Illness Assistance
Fund etc., specified under section 80G(1) (i)
2. Donations with 50% deduction are also available under Section 80G for all those sums that do not fall under section 80G(1)i).
Under Section 80G(2) (ilihk) and (ilihl) there are specific exclusion of certain payments, that are part of CR responsibility, not eligible for deduction u/s80G.
1. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, Income form Business and Profession", where as monies spent under section 80G ate claimed while computing "Total Taxable income" in the hands of assessee. The point of claim under these provisions are different.
2. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies Jamnagar Utilities and Power Pvt. Ltd necessary conditions under section 30 to 36 of the Act, for computing income under the head, "Income from Business and Profession".
3. For claiming benefit under section 80G, deductions are considered at the stage of computing "Total taxable income". Even if any payments under section 80G forms part of CSR payments(keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, "Income form Business and Profession". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing "Total Taxable Income" cannot be denied to assessee, subject to fulfillment of necessary conditions therein.
4. We therefore do not agree with arguments advanced by Ld. Sr. DR

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Place: म ुंबई/Mumbai
ददनाुंक /Date 18.03.2025
Lubhna Shaikh / Steno

आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयुक्त / CIT
4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai
5. गार्ड फाईल / Guard file.
सत्यावपि प्रवि ////
आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt.