CAPGEMINI TECHNOLOGY SERVICES INDIA LIMITED,PUNE vs. ASSISTANT COMMISSIONER OF INCOME TAX, PUNE

Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. PCIT in setting aside the order passed by the Assessing Officer u/s 143(3) of the Act by invoking the provisions of section 263 of the Act.

Facts of the case, in brief, are that the assessee is a software service company and filed its return of income on 30.11.2018 declaring total income of Rs.927,28,16,760/- as per normal computation and the book profit u/s 115JB of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) at Rs.2252,55,55,273/-. Subsequently the assessee company filed a revised return on 29.03.2019 declaring total income of Rs.914,04,90,300/- as per normal computation and book profit u/s 115JJB of the IT Act, 1961 at Rs.2252,55,55,273/-. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 144C(13) of the Act determining the total income of the assessee at Rs.2559,32,51,650/- under the normal provisions and the book profit at Rs.2252,55,55,273/-.

Subsequently the Ld. PCIT called for examining the record and noted that the Assessing Officer has allowed deduction of Rs.8,10,85,470/- u/s 80G of the Act which includes deduction in respect of expenditure on account of Corporate Social Responsibility (CSR). According to the Ld. PCIT, deduction u/s 80G is allowable on donations made voluntarily whereas in the case of the assessee the expenditure on account of CSR is a compulsion under the provisions of section 135 of the Companies Act. Hence, such expenditure cannot be considered to be eligible for deduction u/s 80G of the Act. Further, according to him by claiming such expenditure as deduction u/s 80G the assessee has indirectly claimed the same as business expenditure to that extent which is not an allowable expenditure under the provisions of section 37(1) of the Act. He referred to the Finance Act, 2014, according to which any Corporate Social Responsibility (CSR) expenditure incurred by the assessee on CSR activities as per 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. However, the Assessing Officer has failed to examine the above aspect and eligibility of claim of deduction u/s 80G of the Act. He, therefore, issued a show cause notice to the assessee asking it to explain as to why the order of the Assessing Officer to this extent should not be treated as erroneous and prejudicial to the interest of Revenue. Rejecting the various explanations given by the assessee, the Ld. PCIT partly set aside the order passed by the Assessing Officer on 29.07.2022 on the issue of deduction u/s 80G of the Act. The relevant observations of the Ld. PCIT from para 6 onwards read as under: “6. I have considered the entire written submission carefully. So far as the judgements cited by the assessee are concerned, these are not applicable in assessee's case because the facts are distinguishable. The crucial fact unique to the instant case being the failure of the AO to make preliminary enquiries/examinations and the important context which has not been considered in the cited decisions is that of consistent contestation of the adverse decisions on the issue by the Revenue in the higher appellate fora. The issue hasn't yet reached finality and the consistent departmental view which should have been broadly followed by the AO is to not to allow the deduction under section 80G for the CSR expenses. 7 The assessee's contention that the AO had already examined the claim of deduction under chapter VIA during the course of assessment and therefore it cannot be re-examined u/s 263 on mere change of opinion is not tenable. It can be seen from the records that the AO had called for certain details vide notice u/s 142(1) of the Act dated 8.1.2021. Annexure of this notice has a mention at Sr. No. 8 which is as follows: ‘Please give complete details and justification for deductions claimed under Chapter VIA along with documentary evidences thereof’. The assessee, in response to this notice had submitted details of deduction claimed u/s 80G. It was submitted by the assessee that 'during the year an amount of Rs.160,525,674/- was incurred towards CSR activity. Out of this expenditure, an amount of Rs.8,10,85,470/- is the deduction claimed u/s 80G of the Act. Copy of the receipts are attached as per Annexure 4A till 4G for your reference'. However, it is seen from the records that, the AO has not conducted any examinations or verifications or enquiries in respect of details submitted by the assessee in respect of deduction claimed u/s 80G of the Act. The AO did not undertake any efforts to examine whether the payments for donations made and claimed as deduction u/s 80G of the Act, were in order or it also included in the CSR expenses incurred by the assessee. It is also very pertinent to note that, the AO had not called for any details in respect of CSR expenses incurred by the assessee in the relevant year. This goes to prove that the AD failed to take following actions in order to examine the issue of allowability of deduction u/s 80G of the Act in respect of expenses which are also shown as CSR expenses. (i) Verifying/examining the expenses claimed as deduction u/s 80G (ii) Calling for the details of expenses claimed as CSR expenses and verifying/examining the same (iii) Verifying the expenses claimed as deductible u/s 80G of the Act by matching the same with the expenses claimed as CSR and finding out the expenses which are claimed as deductible u/s 80G and also claimed as expenditure u/s CSR expenses. (iv) Examining the allowability of deductions u/s 80G of the Act and those expenses which are also claimed as expenses under the head CSR expenses by the assessee, by applying the relevant provisions of the Income Tax Act. 7.1 The assessee in its submission has not refuted the statement made in the notice of hearing dated 25.9.2024 in respect of Revision proceedings u/s 263 of the Act that, the claim of deduction under section 80G of the Act made by it included the expenses of CSR. It is also seen that the entire claim of deduction under section 80G of the Act of Rs.8,10,85,470/- has been allowed by the JAO by accepting the summary submission of the assessee without further enquiries. Thus, out of total CSR expenditure which was originally disallowed as CSR expenses, amount of Rs.8,10,85,470/- has again been claimed as deduction under section 80G of the Act. Since both CSR expenses and donations under section 80G of the Act are two different modes of ensuring funds for public welfare, treating the same expense under two different heads would defeat the very purpose of it. 7.2 The Finance Act, 2014 inserted a new explanation in sub-section (1) of section 37 clarifying that for the purposes of sub-section (1) of the said section, 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. This amendment was effective from 1st April, 2015 i.e. to the assessment year 2015-16 and subsequent years. The objective of CSR expenditure is to share burden of the Government in providing social services by companies having net worth of Rs.500 crore or more, or turnover of Rs. 1000 crore or more, or a net profit of Rs.5 crore or more. Memorandum explaining the provisions of the Finance Bill (No.2), 2014 clearly provided that if such expenses

Aggrieved with such order of the Ld. PCIT, the assessee is in appeal before the Tribunal.

The Ld. Counsel for the assessee at the outset drew the attention of the Bench to the notices issued by the Assessing Officer u/s 142(1) of the Act on 08.01.2021 and 04.08.2021, copies of which are placed at pages 76 to 86 of the paper book. Referring to the notice u/s 142(1) of the Act dated 08.01.2021, he drew the attention of the Bench to clause (8) of the said notice which reads as under: “8. Please give complete details and justification for deductions claimed under Chapter VI A along with documentary evidence thereof.”

Referring to the decision of the Mumbai Bench of the Tribunal in the case of Dalal and Broacha Stock Broking (P.) Ltd. Vs. PCIT (2025) 175 taxmann.com 984 (Mumbai-Trib.), he submitted that the Tribunal in the said decision has held that where the assessee claimed deduction @ 50% on CSR expenses u/s 80G and the Assessing Officer allowed the same after considering the details of donations to all charitable trusts and institutions furnished by the assessee, the view taken by the Assessing Officer cannot be said to be erroneous and thus, revisionary order passed by the PCIT was to be quashed. He accordingly submitted that the issue being squarely covered in favour of the assessee by various decisions, the Ld. PCIT is not justified in invoking provisions of section 263 of the IT Act.

Referring to various decisions, he submitted that when the issue is a debatable one and the Assessing Officer has taken one of the possible view, the PCIT cannot invoke the jurisdiction u/s 263 of the Act. He accordingly submitted that 263 proceedings initiated by the Ld. PCIT should be set aside and the grounds raised by the assessee be allowed.

The Ld. DR on the other hand heavily relied on the order of the Ld. PCIT invoking the jurisdiction u/s 263 of the Act. He submitted that the Assessing Officer in the order has only asked once regarding the allowability of claim of deduction u/s 80G of the Act and on the basis of the reply given by the assessee the Assessing Officer allowed the claim of deduction u/s 80G which is not correct. He accordingly submitted that since the Ld. PCIT has given justifiable reasons in his order partly setting aside the order of the Assessing Officer to the extent of 80G deduction, therefore, the same should be upheld and the grounds raised by the assessee be dismissed.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has claimed CSR expenses of Rs.160,525,674/-, out of which an amount of Rs.8,10,85,470/- was claimed as deduction u/s 80G of the Act. It is also an admitted fact that the CSR expenses were disallowed by the assessee in the computation of income. So far as the claim of deduction u/s 80G of the Act is concerned, the assessee has filed the receipts for claiming such deduction u/s 80G. We find the Assessing Officer during the course of assessment proceedings, has asked the assessee to justify the claim of deduction under Chapter VI-A to which the assessee has replied, the details of which have already been reproduced in the preceding paragraphs. We find after considering the claim of deduction u/s 80G of the Act, the Assessing Officer allowed the same and passed the order u/s 143(3) of the Act. Under these circumstances, we have to see as to whether the Ld. PCIT can invoke jurisdiction u/s 263 of the Act on account of order passed by the Assessing Officer allowing the claim of deduction u/s 80G of the Act out of such CSR expenditure.

We find the Mumbai Bench of the Tribunal in the case of Dalal and Broacha Stock Broking (P.) Ltd. Vs. PCIT (supra) under identical circumstances has quashed the 263 proceedings by observing as under: “6. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. On careful perusal of assessment order, we find that case was selected for scrutiny on the issue of large amount of donation. No doubt that the assessing officer during the assessment examined the issue and disallowed donation under section 80G to Urvashi Foundations. Though, there is no discussion about the donation to other charitable trust or institution, however the assessing officer has sought details of donations to all about such charitable trust and institution. We find that the assessee also furnished all required details to the assessing officer. Thus, the assessing officer impliedly accepted the donation to such charitable trust or institution. We find that recently Co-ordinate Bench of Mumbai Tribunal in DCIT Vs Gabriel India (2025) 173 taxmann.com 219 (Mum) on similar issue where the assessee–company claimed deduction under section 80G at the rate of 50% of CSR expenses and furnished receipts of donees evidencing eligibility of deduction under section 80G allowed claim of such assessee. The tribunal while allowing relief to the assessee followed various other decisions of the different benches of the Tribunal. The relevant part of the decision if extracted below: “7.After giving a thoughtful consideration to the orders of the authorities below, we are of the considered view that the Coordinate Benches have been consistently taking the stand that 80G deduction cannot be denied. The relevant findings in the case of Ericsson India Global Services (P) Ltd. (supra), read as under:- "7. We have considered rival submissions and perused the material on record. We have also applied our mind to case laws cited before us. Undisputedly, expenditure incurred towards CSR is specifically prohibited from being allowed as deduction towards business expenditure by insertion of Explanation - 2 to Section 37(1) of the Act by Finance Act, 2014 w.e.f01.04.2015. However, there is no such Ericsson India Global Services Pvt. Ltd. v. DCIT corresponding amendment to section 80G of the Act. Only condition for claiming deduction under section 80G of the Act as per the existing provision is the institute to which donation is made must have been registered under section 80G of the Act. Once the aforesaid condition is fulfilled, the donor is entitled to avail the deduction. This is also the view expressed by the Coordinate Bench in case of Honda Motorcycle and Scooter India Pvt. Ltd. (supra). The relevant observation are as under: "17. Apropos the issue of disallowance u/s 80G of the Income-tax Act, 1961 (for short 'the Act') : The assessee made certain donation to approved institutions or funds and claimed 50% of the total donation made as deduction u/s 80G. This amount also formed part of the CSR initiative of the assessee company which amounts to INR 22,81,29,964/-. It is observed that the assessee has duly disallowed CSR expenditure of INR 22,81,29,964/-debited to the statement of profit and loss under section 37 of the Act. DRP rejected the claim of the assessee by saying that the donation is pursuant to the CSR policy of the company and lacks the test of voluntariness as required under section 80G. The AO has disallowed the claim on the ground that anything donation over and above the CSR u/s 80G will be only allowed as the CSR expense is not an allowable expense u/s 37 of the Act. Ld. Counsel of the assessee placed reliance on the following decisions :- JMS Mining (P.) Ltd. v. PCIT [2021] 130 taxmann.com 118/190 ITD 702/91 ITR(T) 80 (Kolkata - Trib.) Goldman Sachs Services (P) Ltd. v. JCIT (2020) ([2020] 117 taxmann.com 535 (Bangalore - Trib.) ) (ITAT Bangalore) (iii) First American (India) Pvt. Ltd. (ITA No. 1762/Bang/2019) Allegis Services (India) Pvt. Ltd. (ITA No. 1693 /Bang/ 2019) Ld. Counsel further submitted that if the intention was to deny deduction of CSR expenses under section 80G, appropriate amendments on lines of section 37(1) should also have been made under section 80G of the Act. In the absence of any such amendment, CSR expenses should not be disallowed under section 80G of the Act.

We have heard both the parties and perused the records. We find that ITAT, Bangalore Bench in the case of Goldman Sachs Services (P.) Ltd. (supra) has held that the other contributions made under section 135 (5) of the Companies Act are also eligible for deduction/s 80G of Ericsson India Global Services Pvt. Ltd. v. DCIT the Act subject to satisfying the requisite conditions prescribed for deduction u/s 80G of the Act. For this purpose, the issue is remanded to the file ofAO to examine the same whether the payments satisfy the claim of donation u/s 80G of the Act. We find that the case law is fully applicable to the facts of the case. There is no restriction in the Act that expenditure when disallowed for CSR cannot be considered u/s 80G of the Act. Hence, we remit the issue to the file of AO to verify whether these payments were qualified as donations u/s 80G of the Act or not, if they qualify as donation u/s 80G of the Act then the requisite amount deserves to be allowed."

The facts of the case in hand show that the assessee has submitted the receipts of the donees evidencing the eligibility of deduction u/s 80G of the Act. Therefore, respectfully following the decision of the Coordinate Bench, we do not find any reason to interfere with the findings of the ld. CIT(A). The decision relied upon by the ld. D/R is on different reasoning as the Coordinate Bench was of the opinion that CSR expenses cannot be allowed u/s 37(1) of the Act, therefore, no deduction is allowed u/s 80G, whereas in the case in hand, assessee has claimed deduction u/s 80G and not u/s 37(1) of the Act. Accordingly, is also dismissed.

Considering the fact that view taken by assessing officer while allowing 50% of donation under section 80G out of CSR expenses are in accordance with the decisions of various benches of Tribunal. Thus, the view taken by assessing officer cannot be said to be erroneous. Thus, the pre-requisite twin conditions for exercising jurisdiction under section 263 has not meet out in the present case hence we quash / set aside the order of Pr. CIT dated 17.03.2025. In the result, grounds of appeal raised by assessee are allowed.”

We find following the above decision, the Pune Bench of the Tribunal in the case of Dana Anand India (P.) Ltd. Vs. DCIT (supra) has held that the deduction claimed by the assessee u/s 80G of the Act on account of CSR expenditure deservers to be allowed. The relevant observations of the Tribunal from para 7 onwards read as under: “7. After hearing both sides we find the assessee made CSR expenditure to the extent of Rs.1,57,55,750/- which was disallowed by him in the computation of income u/s 37(1) of the Act. However, the assessee claimed the same as deduction u/s 80G of the Act which was not allowed by the Assessing Officer and the DRP upheld the action of the Assessing Officer. 8. We find the Pune Bench of the Tribunal in the case of Advik Hi Tech (P.) Ltd. vs. DCIT (2024) 168 taxmann.com 587 (Pune-Trib.) has held that the deduction claimed by the assessee u/s 80G on account of Corporate Social Responsibility (CSR) deserves to be allowed. The relevant observations of the Tribunal read as under: “8. We have heard the Ld. Representatives of the parties and perused the records. The facts are not in dispute. We find that an identical issue came up for consideration before the Co-ordinate Bench of Pune Tribunal in the case of Credit Suisse Services (India) Private Limited (supra) wherein the Tribunal dismissed the appeal of the Revenue relying on the decision of the ITAT Bangalore in the case of Allegi Services (India) Pvt. Ltd. V. ACIT in wherein it was held that the assessee is entitled to claim deduction u/s 80G with respect to donations forming part of CSR expenses. The relevant observations and findings of the Coordinate Bench of Pune Tribunal in the case of Credit Suisse Services (India) Private Limited (supra) are as under : “3. Both the learned representatives next invited our attention to the CIT(A)'s impugned detailed discussion allowing the assessee’s sec.80G deduction claim as under : “5. Decision I have carefully perused grounds of appeal

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 necessary conditions under section 30 to 36 of the Act, for computing income under the head, “Income from Business and Profession”.

We therefore do not agree with arguments advanced by Ld.Sr.DR.

On the basis of above discussion, in our view, authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act.

Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate its claim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility. Accordingly grounds raised

Respectfully following the decision of the Co-ordinate Bench of the Tribunal in the case of Advik Hi Tech (P.) Ltd. vs. DCIT (supra) which in turn has followed the decision of the Tribunal in the case of DCIT Vs. Credit Suisse Services (India) Private Limited vide order dated 15.05.2024 for assessment year 2020-21 and in absence of any contrary material brought to our notice by the Ld. DR, we hold that the Assessing Officer is not justified in denying the claim of deduction u/s 80G of the Act. We, therefore, direct the Assessing Officer to allow the benefit of deduction u/s 80G of the Act. The first issue raised by the assessee in the grounds of appeal is accordingly allowed.”