ACIT 13-2-2, MUMBAI vs. SHARDA CROPCHEM LIMITED, MUMBAI

ITA 6163/MUM/2024Status: DisposedITAT Mumbai21 January 202518 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(A) on both issues. Regarding Product Registration Expenditure (PRE), the Tribunal noted that the ITAT Mumbai had consistently held PRE to be revenue in nature in the assessee's own cases for earlier assessment years on identical facts. Since the AO had not presented any distinguishable features for the current years, the Tribunal found no infirmity in the CIT(A)'s decision to allow PRE as revenue expenditure and consequently dismissed the Revenue's grounds related to PRE and depreciation. For the Section 80G claim concerning CSR expenses, the Tribunal observed that expenditure under Sections 30 to 36 are claimed while computing 'Income from Business and Profession', whereas Section 80G deductions are claimed while computing 'Total Taxable Income'. The Tribunal reasoned that denying the benefit under Chapter VI A for computing 'Total Taxable Income' merely because the payment forms part of CSR would lead to double disallowance, which is not the legislative intent. However, the Tribunal also noted that the authorities below had not verified the nature of payments qualifying for exemption under Section 80G and the quantum of eligibility. Therefore, the Tribunal remitted the issue back to the AO for verification of the conditions necessary to claim deduction under Section 80G, directing the assessee to file requisite details and the AO to grant deduction to the extent eligible. The Tribunal dismissed the Revenue's ground on this issue, allowing it for statistical purposes.

What were the facts?

The Revenue filed appeals before the Income-Tax Appellate Tribunal (ITAT) challenging the orders of the Commissioner of Income-tax (Appeals) for Assessment Years (AY) 2016-17 and 2018-19. The appeals concerned the classification of Product Registration Expenditure (PRE) and the allowability of a deduction under Section 80G for Corporate Social Responsibility (CSR) expenses. For AY 2018-19, the Assessing Officer (AO) treated PRE of Rs. 80,41,02,275/- as capital expenditure and added it to the assessee's income, though he allowed depreciation on it. The AO also disallowed a claim of Rs. 1,57,52,645/- under Section 80G for CSR expenses. The CIT(A) allowed the PRE as revenue expenditure and deleted the depreciation. The CIT(A) also allowed the Section 80G claim. The appeals for AY 2016-17 involved similar issues with PRE of Rs. 81,55,63,732/-.

What were the issues?

1. Whether, on the facts and in law, the CIT(A) was correct in directing that the Product Registration Expenditure of Rs. 80,41,02,275/- be treated as revenue expenditure, as per Section 37 of the Income-tax Act, 1961. 2. Whether, on the facts and in law, the CIT(A) was correct in deleting the depreciation allowed by the AO on the disallowance of the Product Registration Expenditure of Rs. 80,41,02,275/-, treating it as capital expenditure. 3. Whether, on the facts and in law, the CIT(A) was correct in allowing the claim of deduction under Section 80G of the Act at Rs. 1,57,52,645/-, considering it was incurred for CSR expenses under Section 135 of the Companies Act, 2013, despite the Explanation to Section 37(1) of the Income-tax Act, 1961. Assessee's Contention (implied from CIT(A)'s order and Tribunal's discussion): - Product Registration Expenditure is revenue in nature, supported by ITAT Mumbai's decisions in the assessee's own case for earlier AYs. - CSR expenses, even if mandatory, can be claimed under Section 80G if they meet the conditions, and disallowing them would lead to double disallowance. Revenue's Contention (implied from AO's actions and CIT(A)'s discussion): - Product Registration Expenditure provides an enduring advantage and forms part of the capital structure, hence it is capital in nature. - CSR expenditure incurred under the Companies Act, 2013, is a mandatory contribution and not a voluntary donation eligible for deduction under Section 80G. Such expenditure is also disallowed under Section 37(1) as per the Explanation.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 37,Section 80G,Section 135,Section 30,Section 36,Section 80G(2)(a),Section 80G(1)

AI-generated summary — verify with the full judgment below

Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR

For Appellant: Shri Rohan Deshpande / Ms. ShikhaUpadhayay,ARs
For Respondent: Ms. NeenaJeph,CIT(DR)
Hearing: 14.01.2025Pronounced: 21.01.2025

Heard together (2 matters)

ITA No. 6163/MUM/2024
ITA No. 6164/MUM/2024

Read from the judgment's own cause title. This page is filed under one of them.

PER PRABHASH SHANKAR [A.M.] :- The above captioned appeals have been filed by the Revenue against the orders passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi[hereinafter referred to as “CIT(A)"] pertaining to assessment orders passed u/s.143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Years 2016-17 and 2018-19. Since the issues involved are identical, these appeals are taken up

The order continues below.

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