RELIANCE INDUSTRIAL INFRASTRUCTURE LIMITED ,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX -3, MUBMAI

Brief facts of the case are that the assessee company is engaged in infrastructure and support service activity and had filed its return of income for the year under consideration M/s. Reliance Industrial Infrastructure Limited dated 10.02.2021 declaring total income at Rs.17,37,25,670/-. The assessee’s case was selected for complete scrutiny under CASS for the following reasons: “1. Reduction in profit because of application of Income Computation & Disclosure Standards.

Large refund claimed out of advance tax (Business ITR).

Deductees have claimed tax deduction against salary by a TAN in their ITRs, however, corresponding TDS statements are either not filed by the deductor, or show a substantially lower figure of tax deducted (Selection of case of deductor)”

Statutory notices u/s 143(2) & 142(1) of the Act were duly issued and served upon the assessee. After considering the assessee’s submission the Learned Assessing Officer (“Ld. AO” for short) passed the assessment order dated 28.09.2022 u/s 143(3) r.w.s. 144B of the Act determining the total income at Rs.17,71,21,074/- after making an addition/disallowance u/s 14A r.w.r 8D amounting to Rs.33,95,404/-. The Ld. PCIT invoked the revisionary juri iction u/s 263 of the Act for the reason that the assessee had debited an amount of Rs.35,00,000/- towards CSR expenditure and added the same to the total income in the computation of income as it is not allowable u/s 37(1) of the Act but had claimed 50% on the same amounting to Rs.17,50,000/- as CSR expenditure deductible u/s 80G of the Act, which was allowed by the Ld. AO during the appellate proceeding. The Ld. PCIT held that it is not an allowable deduction u/s 80G of the Act, thereby holding the assessment order to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Ld. PCIT set aside the assessment order directing the Ld. AO to disallow the deduction claimed by the assessee u/s 80G of the Act towards donation claimed out of CSR expenditure. M/s. Reliance Industrial Infrastructure Limited

The assessee has preferred the present appeal challenging the revisionary order of the Ld. PCIT.

The Learned Authorized Representative (“Ld. AR” for short) for the assessee contended that during the assessment proceeding the Ld. AO had issued notice u/s 143(2) of the Act dated 29.06.2021 where the issues raised pertained to ICDS compliance and adjustment and refunds claimed. The Ld. AR further contended that the assessee duly complied with the notices and had furnished all relevant details pertaining to the queries raised by the Ld. AO including details of disallowance of CSR expenses and the deduction claimed u/s 80G of the Act. Further, the Ld. AR stated that the tax audited report has also reported the deduction claimed by the assessee u/s 80G of the Act which implies that all the materials were available before the Ld. AO during the assessment proceeding and was considered by the Ld. AO. The Ld. AR argued that the issue pertaining to the revisionary proceeding has been decided in favour of the assessee by various decisions of the co- ordinate Benches and hence the same is a debatable issue which does not fall under the purview of the revisionary proceeding u/s 263 of the Act. The Ld. AR contended that the impugned order of Ld. PCIT does not satisfy the twin condition where the assessment order has to be erroneous and prejudicial to the interest of the Revenue. The Ld. AR relied on a catena of decisions in support of the assessee’s contention.

The Learned Departmental Representative (“Ld. DR” for short), on the other hand, controverted the said fact and stated that the expenditure claimed by the assessee is not allowable u/s 37(1) of the Act as per the explanatory notes to Finance Bill, 2014 provided M/s. Reliance Industrial Infrastructure Limited in Explanation-2 of the said provision. The Ld. DR contended that the Ld. AO has failed to conduct any enquiry with regard to the assessee’s claim of deduction which itself tantamounts to holding that the assessment order is erroneous and prejudicial to the interest of the Revenue. Further, the Ld. DR contended that the CSR expenditure is not a voluntary donation given by the assessee but rather a mandatory condition to be complied with as per the provisions of section 135 of the Companies Act and therefore the same would not be eligible for claiming deduction u/s 80G of the Act. The Ld. DR extensively relied on the order of the Ld. PCIT.

We have heard the rival submissions and perused the materials available on record. The moot issue that requires adjudication is whether the Ld. PCIT was right in invoking the revisionary juri iction u/s 263 of the Act pertaining to the issue towards the claim of CSR expenditure claimed as deduction u/s 80G of the Act and whether the action of the Ld. AO allowing the said claim amounts to the assessment order being erroneous and prejudicial to the interest of the Revenue in the absence of enquiry conducted by the Ld. AO as alleged by the Revenue. It is observed that the assessee company had claimed deduction of Rs.17,50,000/- being 50% of the donation amounting to Rs.35,00,000/- given to “Reliance Foundation” towards CSR expenditure, claiming the same u/s 80G of the Act as eligible donation as per the provisions. The first issue relates to whether the assessment order would be erroneous and prejudicial to the interest of the Revenue merely because the Ld. AO has failed to look into the issue of the claim of deduction of the assessee and that the same would entitle the Ld. PCIT to invoke revisionary juri iction u/s 263 of the Act. For this proposition, the Ld. AR had relied on the decision of the Hon’ble Juri ictional M/s. Reliance Industrial Infrastructure Limited

From the above observation, it is evident that when the claim of the assessee is in itself allowable, no enquiry or rather lack of detailed enquiry per se would not render the assessment order as “erroneous”. On the merits of the issue it is now a settled proposition of law by various decisions of the co-ordinate Benches that the payments made towards CSR expenditure though not voluntary but a mandatory requirement as per the Companies M/s. Reliance Industrial Infrastructure Limited

In the result, the appeal filed by the assessee is hereby allowed. Order pronounced in the open court on 18.03.2026 (VIKRAM SINGH YADAV) JUDICIAL MEMBER

The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,