JCIT(OSD)-14(1)(1), MUMBAI vs. AVENDUS CAPITAL PVT. LTD., MUMBAI

2. Briefly stated facts of the case are that the assessee filed stated facts of the case are that the assessee filed stated facts of the case are that the assessee filed return of income on 13/02/2021 declaring total income at rupees return of income on 13/02/2021 declaring total income return of income on 13/02/2021 declaring total income 69,44,25,330/-. The return of income . The return of income filed by the assessee was by the assessee was selected for the scrutiny assessment and statutory notices under or the scrutiny assessment and statutory notices under or the scrutiny assessment and statutory notices under the Income-tax Act, 1961 ( tax Act, 1961 (in short ‘the Act’) were issued and ) were issued and complied with. In the assessment completed under section 143(3) of complied with. In the assessment completed under section 143(3) of complied with. In the assessment completed under section 143(3) of the Act on 26/09/2022, the Assessing Officer made certain on 26/09/2022, the Assessing Officer made certain on 26/09/2022, the Assessing Officer made certain addition/disallowances. Aggrieved, the assessee filed appeal before lowances. Aggrieved, the assessee filed appeal before lowances. Aggrieved, the assessee filed appeal before the Ld. CIT(A) who granted relief to the assessee. Aggrieved with the the Ld. CIT(A) who granted relief to the assessee. Aggrieved with the the Ld. CIT(A) who granted relief to the assessee. Aggrieved with the relief allowed to the assessee, the Revenue is i f allowed to the assessee, the Revenue is in appeal before the n appeal before the Tribunal by way of raising raising grounds as reproduced as above. reproduced as above.

3. In ground No. 1( 1( one), the Revenue has challenged finding of challenged finding of the Ld. CIT(A) of deleting the addition made by the Assessing Officer the Ld. CIT(A) of deleting the addition made by the Assessing Officer the Ld. CIT(A) of deleting the addition made by the Assessing Officer for disallowance of ESOP expenses under section 37(1) of the Act. for disallowance of ESOP expenses under section 37(1) of the for disallowance of ESOP expenses under section 37(1) of the 3.1 The brief facts qua The brief facts qua the issue in dispute are that the issue in dispute are that the assessee debited ₹7,66,75,028/ 028/- to the profit and loss account as ‘share to the profit and loss account as ‘share- based payments to employees ‘which consist based payments to employees ‘which consisted of ‘employee share employee share- based payments’ of ₹ ₹5,70,00,000/-and ‘employee benefit expenses employee benefit expenses- optionally convertible expenses’ amounting to ₹1,96,75, optionally convertible expenses 1,96,75,028/-. The amount of Rs.1,96,75,028/ 1,96,75,028/- was disallowed by the assessee and was disallowed by the assessee and added in the computation of the income for added in the computation of the income for income income-tax return he amount of ₹5,70,00,000/- was purposes but the amount of as considered as revenue expenditure. revenue expenditure.

3.2 During the course of the assessment During the course of the assessment proceedings, roceedings, the assessee contended that stock options were granted to the employees at the contended that stock options were granted to the employees at the contended that stock options were granted to the employees at the market price prevailing on the date of the grant of option (exercise market price prevailing on the date of the grant of option market price prevailing on the date of the grant of option price) but that stock options vest gradually over the vesting period price) but that stock options vest gradually over the vesting period price) but that stock options vest gradually over the vesting period as per the terms of ESOPs, as per the terms of ESOPs, which is normally from one to which is normally from one to five years. On completion of the vesting period, the employee may exercise On completion of the vesting period, the employee may exercise On completion of the vesting period, the employee may exercise stock options at their discretion for issue of shares against options stock options at their discretion for issue of shares against options stock options at their discretion for issue of shares against options vested in them against exercise price. The fair value of option was against exercise price. The fair value of option was against exercise price. The fair value of option was determined based on excess of market value of the stock on the sed on excess of market value of the stock on the sed on excess of market value of the stock on the date of the grant and the exercise price. date of the grant and the exercise price.

3.3 The assessee contended that it was engaged in the investment The assessee contended that it was engaged in the investment The assessee contended that it was engaged in the investment banking and other financial service business where performance of banking and other financial service business where performance of banking and other financial service business where performance of an employee depends on his an employee depends on his ability to successfully finaliz y to successfully finalize deals/transactions with client and recover fees for his employer. deals/transactions with client and recover fees for his employer. deals/transactions with client and recover fees for his employer. Therefore ESOP were issued to employees for retention of such Therefore ESOP were issued to employees for retention of such Therefore ESOP were issued to employees for retention of such highly skilled resources highly skilled resources, hence the expenditure incurred the expenditure incurred on discounting of shares discounting of shares to employees was in the interest of the the interest of the business of the company. business of the company.

3.4 The assessee referred to the decision of th The assessee referred to the decision of the Hon’ble special e Hon’ble special bench of the Income- -tax Appellate Tribunal in the case of ppellate Tribunal in the case of Biocone Limited Vs DCIT DCIT (2013) 144 ITD 21 and submitted and submitted while undertaking to issue shares at discounted premium, the company undertaking to issue shares at discounted premium, the company undertaking to issue shares at discounted premium, the company does not pay anything to its employees but incurs obligation of does not pay anything to its employees but incurs obligation of does not pay anything to its employees but incurs obligation of issuing shares at a discounted price on future date in lieu of the issuing shares at a discounted price on future date in lieu of the issuing shares at a discounted price on future date in lieu of the services, which is nothing but an expenditure under section 37(1) of services, which is nothing but an expenditure under section 37 services, which is nothing but an expenditure under section 37 the Act. The Hon’ble Karnataka High Court in (2020) 121 . The Hon’ble Karnataka High Court in (2020) 121 . The Hon’ble Karnataka High Court in (2020) 121 taxmann.com 351 further affirmed taxmann.com 351 further affirmed the order of the special bench the order of the special bench Tribunal (supra) and noted that primary object of issuing shares a ribunal (supra) and noted that primary object of issuing shares at ribunal (supra) and noted that primary object of issuing shares a discounted price to the employees is not to waste capital but to earn discounted price to the employees is not to waste capital but discounted price to the employees is not to waste capital but profits by securing consistent services of the employees and profits by securing consistent services of the employees and profits by securing consistent services of the employees and therefore same cannot be construed as short receipt of capital. The therefore same cannot be construed as short receipt of capital. The therefore same cannot be construed as short receipt of capital. The assessee contended that in above assessee contended that in above decisions, it was held that as per it was held that as per a joint reading of the provisions of section 43(2) a joint reading of the provisions of section 43(2) and section 37(1) of and section 37(1) of the Act, the term ‘expenditure expenditure’ should refer not only to the amounts should refer not only to the amounts actually paid but also any obligation incurred in relation to the actually paid but also any obligation incurred in relation to the actually paid but also any obligation incurred in relation to the same by an assessee. same by an assessee.

3.5 Further, the assessee referred to the decision of Hon’ble the assessee referred to the decision of Hon’ble the assessee referred to the decision of Hon’ble Supreme Court in the case of Assam n the case of Assam Bangal Cement Co. Ltd Vs CIT Cement Co. Ltd Vs CIT (1995) 27 ITR 34 and submitted that the aim and object of the and submitted that the aim and object of the and submitted that the aim and object of the expenditure determine the character of the expenditure whether it expenditure determine the character of the expenditure whether it expenditure determine the character of the expenditure whether it would be a capital expenditure or revenue expenditure and the a capital expenditure or revenue expenditure and the a capital expenditure or revenue expenditure and the source or the manner of the payment would then be of no anner of the payment would then be of no anner of the payment would then be of no consequence. He submitted that when a company undertakes to consequence. He submitted that when a company undertakes to consequence. He submitted that when a company undertakes to issue shares to its employees issue shares to its employees at discounted premium on the future discounted premium on the future date, the primary object of this exercise is not to raise share capital date, the primary object of this exercise is not to raise share capit date, the primary object of this exercise is not to raise share capit but to earn profit by securing the consistent and concentrated t by securing the consistent and concentrated t by securing the consistent and concentrated efforts of its dedicated employee during the vesting period. It was efforts of its dedicated employee during the vesting period. It was efforts of its dedicated employee during the vesting period. It was further submitted that ESOP expenditure should be regarded as further submitted that ESOP expenditure should be regarded as further submitted that ESOP expenditure should be regarded as revenue in nature as it does not result in the creation of any asset revenue in nature as it does not result in the creation of any asset revenue in nature as it does not result in the creation of any asset for the company and primarily it is a consideration for the services pany and primarily it is a consideration for the services pany and primarily it is a consideration for the services rendered and effectively, it amounts to additional remuneration for rendered and effectively, it amounts to additional remuneration for rendered and effectively, it amounts to additional remuneration for the employees.

3.6 Further, the assessee submitted that expenditure of discount the assessee submitted that expenditure of discount the assessee submitted that expenditure of discount on shares issued to employees being for attracting, motivating, on shares issued to employees being for attracting on shares issued to employees being for attracting retaining and incentivising employees, therefore it was related to retaining and incentivising employees, therefore it was related to retaining and incentivising employees, therefore it was related to the services of the employee the services of the employee, hence should be regarded as laid out should be regarded as laid out or expended wholly and exclusively for the purpose of the business or expended wholly and exclusively for the purpose of the business or expended wholly and exclusively for the purpose of the business of the assessee company. of the assessee company.

3.7 Further, it was submitte was submitted that coordinate bench of the d that coordinate bench of the Tribunal in the case of the assessee for assessment year ribunal in the case of the assessee for assessment years 2009-10, ribunal in the case of the assessee for assessment year 2010-11 and 2011-12 held the expenditure on ESOP as revenue 12 held the expenditure on ESOP as revenue 12 held the expenditure on ESOP as revenue expenditure.

3.8 The learned Assessing Officer Assessing Officer rejected the contention the contentions of the assessee for two reasons. Firstly, the discount allowed to the assessee for two reasons. , the discount allowed to the employees while issuing shares employees while issuing shares though might be for retaining the though might be for retaining the employees, but it affects the capital of the company and leads to employees, but it affects the capital of the company and leads to employees, but it affects the capital of the company and leads to change in the amount of the share capital and number mount of the share capital and number mount of the share capital and number of the shares, accordingly it is shown in the balance sheet and not in the shares, accordingly it is shown in the balance sheet and not in the shares, accordingly it is shown in the balance sheet and not in the capital expenditure. Secondly, profit and loss account, hence it is profit and loss account, hence it is a capital expenditure. the special leave petition(SLP) filed by the the special leave petition(SLP) filed by the Revenue against the order against the order of the Hon’ble Karnataka High Court in t of the Hon’ble Karnataka High Court in the case of Biocone Ltd was he case of Biocone Ltd was pending before Hon’ble Supreme Court. pending before Hon’ble Supreme Court.

“4. After perusing the ITAT orders of the Coordinate Bench in 4. After perusing the ITAT orders of the Coordinate Bench in 4. After perusing the ITAT orders of the Coordinate Bench in appellant's own case, it observed that the appellant c appellant's own case, it observed that the appellant c appellant's own case, it observed that the appellant company is entitled to claim ESOP expenses are allowable expenses under entitled to claim ESOP expenses are allowable expenses under entitled to claim ESOP expenses are allowable expenses under section 37(1) of the Income Tax Act.As the facts and section 37(1) of the Income Tax Act.As the facts and section 37(1) of the Income Tax Act.As the facts and circumstances are similar, the decision of the Coordinate Bench circumstances are similar, the decision of the Coordinate Bench circumstances are similar, the decision of the Coordinate Bench in appellant's own case is followed. In & in appellant's own case is followed. In & in appellant's own case is followed. In ITA No. 1738 & 1739/Mum/2023 1739/Mum/2023 for A.Y. 2016-17 & 2017-18, the ITAT "A" 18, the ITAT "A" Bench decided the issue in favour of the respondent and relevant Bench decided the issue in favour of the respondent and relevant Bench decided the issue in favour of the respondent and relevant portion is reproduced as portion is reproduced as under :- "5. We have carefully perused the orders of the authorities "5. We have carefully perused the orders of the authorities "5. We have carefully perused the orders of the authorities below and the decision of the Tribunal brought to our below and the decision of the Tribunal brought to our below and the decision of the Tribunal brought to our notice. The grievance of the assessee is that the Ld. CIT(A) notice. The grievance of the assessee is that the Ld. CIT(A) notice. The grievance of the assessee is that the Ld. CIT(A) erred in confirming the disallowance of Rs. 1,20,47,684/- erred in confirming the disallowance of Rs. 1,20,47,684/ erred in confirming the disallowance of Rs. 1,20,47,684/ claimed u/s. 37(1) of the Act towards Employee Stock claimed u/s. 37(1) of the Act towards Employee Stock claimed u/s. 37(1) of the Act towards Employee Stock Option Plan (ESOP) expenses as capital expenditure. An Option Plan (ESOP) expenses as capital expenditure. An Option Plan (ESOP) expenses as capital expenditure. An identical issue was considered identical issue was considered by the Tribunal Special by the Tribunal Special Bench Bangalore in the case of Biocon (supra) has held Bench Bangalore in the case of Biocon (supra) has held Bench Bangalore in the case of Biocon (supra) has held that ESOP expenses is an allowable deduction u/s. 37(1) that ESOP expenses is an allowable deduction u/s. 37(1) that ESOP expenses is an allowable deduction u/s. 37(1) of the Act. The same view was followed by ITAT Pune of the Act. The same view was followed by ITAT Pune of the Act. The same view was followed by ITAT Pune Bench in the case of Sandvik Asia (supra). Respectfully Bench in the case of Sandvik Asia (supra). Respectfully Bench in the case of Sandvik Asia (supra). Respectfully following th following the decision of the Co-ordinate Benches, we set ordinate Benches, we set aside the order of the Ld. CIT(A) and direct the AO to allow aside the order of the Ld. CIT(A) and direct the AO to allow aside the order of the Ld. CIT(A) and direct the AO to allow the ESOP expenses as revenue the ESOP expenses as revenue expenditure." 7.1 Therefore, in principle we agree with the contention of the Therefore, in principle we agree with the contention of the Therefore, in principle we agree with the contention of the red in favour of the assessee that the issue in dispute is cove assessee that the issue in dispute is covered in favour of the assessee, but, we also agree the concern of the learned assessee, but, we also agree the concern of the learned assessee, but, we also agree the concern of the learned departmental representative that actual amount which is allowable departmental representative that actual amount which is allowable departmental representative that actual amount which is allowable to the assessee following the decision of the earlier years has not to the assessee following the decision of the earlier years has not to the assessee following the decision of the earlier years has not been explained by way of the details of the been explained by way of the details of the employees mployees concerned, who actually exercised the share option. In view of the above facts who actually exercised the share option. In view of the above facts who actually exercised the share option. In view of the above facts and circumstances, we restore the matter and circumstances, we restore the matter back to the file of the to the file of the Assessing Officer for allowing the claim of the assessee in Assessing Officer for allowing the claim of the assessee in Assessing Officer for allowing the claim of the assessee in accordance with law accordance with law after due verification of the quantum of of the quantum of expenses claimed by the assessee. The ground expenses claimed by the assessee. The ground no. 1 ( no. 1 (one) of the appeal of the assessee is accordingly allowed for statistical appeal of the assessee is accordingly allowed for statistical appeal of the assessee is accordingly allowed for statistical purposes.

8.1 The brief facts qua The brief facts qua the issue in dispute are that the assessee the issue in dispute are that the assessee company made various various kinds of investments, firstly firstly, investment in mutual fund debt growth plan, mutual fund debt growth plan, Secondly, investment in equity investment in equity shares of Indian companies being a strategic investment, thirdly shares of Indian companies being a strategic investment, shares of Indian companies being a strategic investment, investment in compulsorily convertible debenture and fourthly investment in compulsorily convertible debenture and investment in compulsorily convertible debenture and investment in partnership/Limited liability partnership. investment investment in partnership/Limited liability partnership. The in partnership/Limited liability partnership. The The contention of the assessee was that firstly, disallowance under contention of the assessee was that , disallowance under section 14A could not be made in the year where there is no could not be made in the year where there is no could not be made in the year where there is no dividend income, secondly secondly, 14A disallowance was not attracted , 14A disallowance was not attracted on the strategic investment, thirdly, judicial decisions were in favour the strategic investment, judicial decisions were in favour of the assessee. But according to t of the assessee. But according to the Assessing Officer, he Assessing Officer, any expenditure incurred for carrying out expenditure incurred for carrying out investment activity activity in shares, which were capable of earning exempted income, though not which were capable of earning exempted income, which were capable of earning exempted income, forming part of the total income forming part of the total income, was liable for disallowance under r disallowance under section 14A of the A A of the Act, but the assessee did not attribute any assessee did not attribute any expenses towards activity of investment. According to the Assessing expenses towards activity of investment. According to the Assessing expenses towards activity of investment. According to the Assessing Officer some expenditure must have been incurred towards the Officer some expenditure must have been incurred towards the Officer some expenditure must have been incurred towards the investment activity. Further . Further, The Assessing Officer rejected the , The Assessing Officer rejected the contention of the assessee and contention of the assessee and held that disallowance under section held that disallowance under section 14A is attracted even if no dividend income was earned during the 14A is attracted even if no dividend income was earned during the 14A is attracted even if no dividend income was earned during the relevant financial year. The learned ant financial year. The learned Assessing Officer also held that Assessing Officer also held that disallowance under section 14A is attracted on both strategic disallowance under section 14A is attracted on both strategic disallowance under section 14A is attracted on both strategic investment and stock and stock-in-trade. Thereafter, invoking rule 8D(2)(ii) of invoking rule 8D(2)(ii) of the Rules, he computed 1% of annual average ules, he computed 1% of annual average ules, he computed 1% of annual average of monthly investment at ₹7,52,91, 7,52,91,644/- and added the same for disallowance and added the same for disallowance under section 14A of the A A of the Act. On further appeal, the Ld. CIT(A) ct. On further appeal, the Ld. CIT(A) of Hon’ble Supreme Court in the case of Delhi following the decision following the decision of Hon’ble Supreme Court in the case of International Airport Private Limited (2022) 143 taxmann.com International Airport Private Limited (2022) 143 taxmann.com International Airport Private Limited (2022) 143 taxmann.com 209 (SC) held that where the assessee did not have exempt income, held that where the assessee did not have exempt income, held that where the assessee did not have exempt income, no disallowance under section 14A read with rule and the could be no disallowance under section 14A read with rule and the could be no disallowance under section 14A read with rule and the could be made. He also referred to the decision of Hon’ble Supreme Court in erred to the decision of Hon’ble Supreme Court in erred to the decision of Hon’ble Supreme Court in the case of PCIT Vs Oil Industry development Board 103 PCIT Vs Oil Industry development Board 103 PCIT Vs Oil Industry development Board 103 taxmann.com 326. Accordingly . Accordingly, deleted the addition. deleted the addition.

“7. Heard both the sides and perused the material on record. The 7. Heard both the sides and perused the material on record. The 7. Heard both the sides and perused the material on record. The Id. Counsel has contended that assesse has not earned any Id. Counsel has contended that assesse has not earned any Id. Counsel has contended that assesse has not earned any exempt income during the exempt income during the year under consideration. The Hon'ble year under consideration. The Hon'ble Delhi High Court in the case of Chem Investment Ltd. Vs. CIT Delhi High Court in the case of Chem Investment Ltd. Vs. CIT Delhi High Court in the case of Chem Investment Ltd. Vs. CIT (2015) 61 taxman.com 18 (Del) held that provision of Sec. 14A will (2015) 61 taxman.com 18 (Del) held that provision of Sec. 14A will (2015) 61 taxman.com 18 (Del) held that provision of Sec. 14A will not be applied in case no exempt income is received or receivable not be applied in case no exempt income is received or receivable not be applied in case no exempt income is received or receivable during the relevant prev during the relevant previous year. We find that the Hon'ble Delhi ious year. We find that the Hon'ble Delhi High Court in the case of PCIT Vs. Era Infrastructure (I) Ltd. (ITA High Court in the case of PCIT Vs. Era Infrastructure (I) Ltd. (ITA High Court in the case of PCIT Vs. Era Infrastructure (I) Ltd. (ITA No. 204/2022) held that amendment made by Finance Act 2022 to No. 204/2022) held that amendment made by Finance Act 2022 to No. 204/2022) held that amendment made by Finance Act 2022 to Sec. 14A by inserting non Sec. 14A by inserting non-obstante clause and explanation will obstante clause and explanation will take effect from 01.0 take effect from 01.04.2022 and cannot be presumed to have 4.2022 and cannot be presumed to have retrospective effect. Therefore, following the judicial findings as retrospective effect. Therefore, following the judicial findings as retrospective effect. Therefore, following the judicial findings as supra we delete the addition made by the assessing officer supra we delete the addition made by the assessing officer supra we delete the addition made by the assessing officer u/s 14A of the the Act.”

9.1 Further, we find that the Ld. CIT(A) has followed the finding of we find that the Ld. CIT(A) has followed the finding of we find that the Ld. CIT(A) has followed the finding of the Hon’ble Supreme Court in the case of Delhi International the Hon’ble Supreme Court in the case of Delhi International the Hon’ble Supreme Court in the case of Delhi International Airport Private Limited(supra) and Oil Industry development Airport Private Limited(supra) and Oil Industry development Airport Private Limited(supra) and Oil Industry development Board(supra), therefore we do not find any infirmity in the order of Board(supra), therefore we do not find any infirmity in the order of Board(supra), therefore we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the Ld. CIT(A) on the issue in dispute and accordingly the Ld. CIT(A) on the issue in dispute and accordingly the same. The ground No the same. The ground Nos. 2 to 4 of the appeal of the Revenue the appeal of the Revenue are accordingly dismissed. accordingly dismissed.

10.1 The brief facts qua the issue in dispute are that assessee The brief facts qua the issue in dispute are that assessee The brief facts qua the issue in dispute are that assessee debited some of ₹1,38,00, 1,38,00,000/- being CSR expenses but claimed being CSR expenses but claimed deduction of the same deduction of the same to the extent of the 50% under t under the provisions of the section 80G of the A G of the Act. According to the Assessing Officer t. According to the Assessing Officer claim of CSR expenses have been specifically prohibited under the claim of CSR expenses have been specifically prohibited under the claim of CSR expenses have been specifically prohibited under the provisions of section 37 of the provisions of section 37 of the Act, therefore same cannot be , therefore same cannot be allowed under the provisions of section 80 er the provisions of section 80G of the G of the Act. The Assessing Officer held that Assessing Officer held that under the provisions of section 80 er the provisions of section 80G only donation of voluntary nature are entitled for deduction whereas donation of voluntary nature are entitled for deduction whereas donation of voluntary nature are entitled for deduction whereas incurring of CSR expenses incurring of CSR expenses was mandatory under the provisions of mandatory under the provisions of the Companies Act 2013 ct 2013. On further appeal, the Ld. CIT(A) allowed the Ld. CIT(A) allowed the claim of the asse the claim of the assessee following the decisions of the C following the decisions of the Coordinate bench in the case of Motilal Oswal Securities Ltd (supera) Motilal Oswal Securities Ltd (supera), bench in the case of observing as under:

“5.3.4 The issue in dispute is no longer res 5.3.4 The issue in dispute is no longer res-integra. The allowability integra. The allowability of CSR under the provision of section 80G is decided in th of CSR under the provision of section 80G is decided in th of CSR under the provision of section 80G is decided in the case of Motilal Oswal Securities Ltd in dated Motilal Oswal Securities Ltd in dated Motilal Oswal Securities Ltd in ITA No.1795/Mum/2023 dated 18.08.2023 by Hon’ble ITAT, ‘D’ Bench Mumbai as under: 18.08.2023 by Hon’ble ITAT, ‘D’ Bench Mumbai as under: 18.08.2023 by Hon’ble ITAT, ‘D’ Bench Mumbai as under: “9. The issue arising in ground no. (iv), raised in Revenue's appeal, “9. The issue arising in ground no. (iv), raised in Revenue's appeal, “9. The issue arising in ground no. (iv), raised in Revenue's appeal, is pertaining to the deletion of disallowance of deduction cl is pertaining to the deletion of disallowance of deduction cl is pertaining to the deletion of disallowance of deduction claimed under section 80G of the Act on Corporate Social Responsibility under section 80G of the Act on Corporate Social Responsibility under section 80G of the Act on Corporate Social Responsibility ("CSR") expenses. ("CSR") expenses.

10. The brief facts of the case pertaining to this issue, as emanating 10. The brief facts of the case pertaining to this issue, as emanating 10. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the year under consideration, the from the record, are: During the year under consideration, the from the record, are: During the year under consideration, the assessee incurred CSR expenses of assessee incurred CSR expenses of Rs. 2,25,71,775, and claimed Rs. 2,25,71,775, and claimed donation under section 80G of the Act amounting to Rs. donation under section 80G of the Act amounting to Rs. donation under section 80G of the Act amounting to Rs. 2,21,41,893. The assessee was asked to show cause as to why the 2,21,41,893. The assessee was asked to show cause as to why the 2,21,41,893. The assessee was asked to show cause as to why the claim of deduction under section 80G of the Act of Rs. 1,10,70,947, claim of deduction under section 80G of the Act of Rs. 1,10,70,947, claim of deduction under section 80G of the Act of Rs. 1,10,70,947, against the CSR expenses should not be against the CSR expenses should not be disallowed. The AO vide disallowed. The AO vide order passed under section 143(3) of the Act did not agree with the order passed under section 143(3) of the Act did not agree with the order passed under section 143(3) of the Act did not agree with the submissions of the assessee and held that the expenditure incurred submissions of the assessee and held that the expenditure incurred submissions of the assessee and held that the expenditure incurred by the assessee under the provisions of the Companies Act, 2013, by the assessee under the provisions of the Companies Act, 2013, by the assessee under the provisions of the Companies Act, 2013, cannot be claimed as a donation cannot be claimed as a donation under section 80G of the Act. The under section 80G of the Act. The AO further held that the expenditure under the aforesaid provisions AO further held that the expenditure under the aforesaid provisions AO further held that the expenditure under the aforesaid provisions of the Companies Act, 2013 is a mandatory contribution and not a of the Companies Act, 2013 is a mandatory contribution and not a of the Companies Act, 2013 is a mandatory contribution and not a voluntary contribution and this expenditure has categorically been voluntary contribution and this expenditure has categorically been voluntary contribution and this expenditure has categorically been disallowed under secti disallowed under section 37 of the Act. The AO further held that if on 37 of the Act. The AO further held that if the tax deduction is allowed on CSR expenses then this would the tax deduction is allowed on CSR expenses then this would the tax deduction is allowed on CSR expenses then this would result result in in subsidising subsidising the the expenses expenses by by one-third one third amount. amount. Accordingly, the AO disallowed the deduction of Rs. 1,10,70,947, Accordingly, the AO disallowed the deduction of Rs. 1,10,70,947, Accordingly, the AO disallowed the deduction of Rs. 1,10,70,947, claim under section 80G of t claim under section 80G of the Act and added the same to the total he Act and added the same to the total income of the assessee. income of the assessee.

by the assessee on this issue following the judicial raised by the assessee on this issue following the judicial raised by the assessee on this issue following the judicial precedents rendered by the coordinate benches of the Tribunal. precedents rendered by the coordinate benches of the Tribunal. precedents rendered by the coordinate benches of the Tribunal. Being aggrieved, the Revenue is in appeal before us. aggrieved, the Revenue is in appeal before us.

12. We have considered the submissions of both sides and perused

12. We have considered the submissions of both sides and perused

12. We have considered the submissions of both sides and perused the material available on record. We find that the coordinate the material available on record. We find that the coordinate the material available on record. We find that the coordinate benches of the Tribunal have consistently taken the view in favour benches of the Tribunal have consistently taken the view in favour benches of the Tribunal have consistently taken the view in favour of the assess of the assessee and held that the CSR expenses even though not ee and held that the CSR expenses even though not allowed under section 37 of the Act pursuant to insertion of allowed under section 37 of the Act pursuant to insertion of allowed under section 37 of the Act pursuant to insertion of Explanation-2 to section 37 vide Finance Act, 2014 with effect from 2 to section 37 vide Finance Act, 2014 with effect from 2 to section 37 vide Finance Act, 2014 with effect from 01/04/2015. However, the said expenditure is allowable under 01/04/2015. However, the said expenditure is allowable under 01/04/2015. However, the said expenditure is allowable under section 80G of t section 80G of the Act.” 5.3.5 Further in the case of Allegis Services (India) Pvt. Ltd. in ITA 5.3.5 Further in the case of Allegis Services (India) Pvt. Ltd. in ITA 5.3.5 Further in the case of Allegis Services (India) Pvt. Ltd. in ITA No. No. No. 1693/Bang/2019 1693/Bang/2019 1693/Bang/2019 dated dated dated 29.04.2020 29.04.2020 29.04.2020 by by by Hon’ble Hon’ble Hon’ble ITAT, ITAT, ITAT, Bangalore, wherein it was held that: Bangalore, wherein it was held that: “18. In present facts of case, Ld.AR submitted that all payments “18. In present facts of case, Ld.AR submitted that all payments “18. In present facts of case, Ld.AR submitted that all payments forming part of CSR forming part of CSR does not form part of profit and loss account for does not form part of profit and loss account for computing Income under the head, “Income from Business and computing Income under the head, “Income from Business and computing Income under the head, “Income from Business and Profession”. It has been submitted that some payments forming part Profession”. It has been submitted that some payments forming part Profession”. It has been submitted that some payments forming part of CSR were claimed as deduction under section80G of the Act, for of CSR were claimed as deduction under section80G of the Act, for of CSR were claimed as deduction under section80G of the Act, for computing “To computing “Total taxable income”, which has been disallowed by tal taxable income”, which has been disallowed by authorities below. In our view, authorities below. In our view, assessee cannot be denied the assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for benefit of claim under Chapter VI A, which is considered for benefit of claim under Chapter VI A, which is considered for computing ‘Total Taxable Income”. If assessee is denied this benefit, computing ‘Total Taxable Income”. If assessee is denied this benefit, computing ‘Total Taxable Income”. If assessee is denied this benefit, merely becaus merely because such payment forms part of CSR, would lead to e such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature. double disallowance, which is not the intention of Legislature. double disallowance, which is not the intention of Legislature.

is allowed. Act. Accordingly, this ground of appeal is allowed.”

11. We have heard rival submission of the parties and have heard rival submission of the parties and have heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) has followed relevant material on record. We find that the Ld. CIT(A) has followed relevant material on record. We find that the Ld. CIT(A) has followed decision of the coordinate bench decision of the coordinate bench, which being a binding precedent, which being a binding precedent, we do not find any infirmity in the order of the Ld. CIT(A) on the we do not find any infirmity in the order of the Ld. CIT(A) on the we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute and accordingly issue in dispute and accordingly, we uphold the same. The ground old the same. The ground No. 5(five) of the appeal of the of the appeal of the Revenue is accordingly dismissed. is accordingly dismissed.

Order pronounced in the open Court on 06 ounced in the open Court on 06/03/2025. /03/2025.