DANA ANAND INDIA PRIVATE LIMITED,PUNE vs. DCIT, AKURDI,PUNE

This appeal filed by the assessee is directed against the order dated 13.06.2024 of the Assessing Officer passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) for assessment year 2020-21.

3. The assessee approached the Dispute Resolution Panel (DRP) who deleted the TP adjustment of Rs.1,64,17,30,653/-. So far as the other additions made by the Assessing Officer in the draft assessment order are concerned, the DRP gave part relief to the assessee. The Assessing Officer accordingly passed the final order on 13.06.2024 determining the total income of the assessee at Rs.1,74,32,07,350/- by making the following additions:

S No. Description Amount (in INR) 1 Income as per Return of income filed 167,30,95,140/- 2 Income as computed u/s143(1)(a) 171,08,51,010/- 3 Variation in respect of disallowance of 1,57,55,750/- deduction claimed u/s 80G of the Act 4 Addition u/s 41 of the Act 6,66,765/- 5 Education cess 1,59,33,528/- 6 Total variations made 3,23,56,340/- 7 Total Income 174,32,07,350/-

On the facts and circumstances of the case and in law, I. Disallowance of Deduction w/s 80G of the Act 1. The learned AO erred in disallowing deduction claimed under section 80G amounting to Rs.1,57,55,750/- in respect of the donation to charitable institution registered u/s 80G.

2. The learned AO and DRP erred in not reckoning the legal principle that the provisions of section 37 and section 80G of the Act are independent and that the said donations have been already disallowed by the appellant in computing income from business as per the Explanation 2 to section 37(1) of the IT Act. The learned AO/ DRP failed to appreciate that the deduction u/'s 800 falling in Chapter VIA has been claimed by the appellant in respect of the amount donated voluntarily to the donee out of its own volition and benefit thereof has been claimed at the stage of computation of its total income as per the provisions of Section 80A of the Act. II. Disallowance under section 41(1) of the Act 3. The learned AO erred adding back an amount of Rs.6,66,765/- to the total income of the appellant, being the amounts written off by the vendor creditors unilaterally as so called 'bad debts' in their books of account.

4. The learned AO and DRP grossly erred in bringing to tax the amount of Rs. 6,66,765/- u/s 41(1) consisting of Rs.51,310/- on the ground that the GST invoices were available and details could have been accessed from GST network and the other amount of Rs.6,15,455/-on the ground that outstanding balance in the appellant's books in respect of the vendor was Rs.6,87,088/-. The learned AO and DRP failed to appreciate that the appellant had neither claimed the deduction of the said amounts nor accrued or incurred any debt/ liability thereof to pay the amounts to the vendors and information viz. on GST network or the outstanding balance did not substantiate or justify the unilateral decision of the vendor's to write off amount as so called bad debt.

5. The Ld. AO and DRP failed to appreciate that unilateral write off by the vendor of the appellant company does not ipso facto result in any benefit enduring in the hands of the appellant in respect of a trading liability and the provisions of Section 41 of the Act are not applicable. III. The learned AO/ DRP erred in declining to deal with the grievance of the appellant relating to the variations incorporated and effectively added in the recomputed total income in the draft assessment order pursuant to the variations made by the CPC at the time of processing of appellant's return of income.

Learned DRP erred in not appreciating the fact that its jurisdiction very much pertained to looking into said variations which had crept in the draft assessment order by way of addition of total amount thereof to total income and the learned DRP had requisite powers to affirm, reduce or enhance the variations proposed in the draft order as per the provisions of Section 144C(8). IV. The learned AO erred in not allowing the credit of taxes (refund) adjusted against the interest charged us 115P of Rs.1,97,07,060/- The appellant craves leave to add to, alter, amend or withdraw the grounds of appeal.

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 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

, facts of the case, submissions made by the Appellant, assessment order and other evidences on records. 5.1. Ground 1. Vide this Ground, the Appellant has challenged action of the AO in making the disallowance of Rs.4,55,13,521/- u/s 80G with respect to the donations forming part of Corporate Social Responsibility („CSR‟). In this regard, the Appellant has submitted that : • The amount paid to various funds is without any consideration in return and is in the nature of irrevocable contribution. Thus, such contributions partake the character of donation • Since, all other requisite conditions under section 80G have been satisfied and not in dispute, the Appellant is eligible for deduction under section 80G of the Act. The institution to whom the Donations are made are duly registered under section 80G(5) of the Act • The CSR expenditure is not allowed only for the purpose of section 37 for computing business income. If such expenditure is otherwise allowable as deduction under other provisions of the Act, the same cannot be disturbed. • The donations/expenditure made by the Appellant is towards women empowerment, education, environmental research etc. and forms part of CSR expenditure as per Schedule VII of the Companies Act, 2013. • The legislature has restricted the benefit only in two specific cases being „Swachh Bharat Kosh‟ („SBK‟) and „Clean Ganga Fund‟ („CGF‟) as per subclause (iiihk) and (iiihl) of section 80G(2)(a) of the Act, thereby implying that CSR contribution to other eligible institution qualifies for deduction under section 80G of the Act. The Appellant has made CSR contribution to funds other than SBK and CGF, thus, claim under section 80G of the Act shall be allowed. • The said claim, as discussed above, is supported by the Explanatory Memorandum to Finance Bill 2014 with restriction placed only in relation to specified funds under section 80G, clarification issued by MCA and multiple favourable decisions. I have considered the submissions made by the Appellant. I find that the issue is covered in favour of the Appellant by various decisions of Hon‟ble Tribunals. I find that Hon‟ble ITAT Bangalore in the case of Allegi Services (India) Pvt Ltd vs ACIT, (ITA No.1693/Bangalore/2019) has decided this issue in favour of the assessee. Relevant part of the said decision is reproduced as under : “Brief facts of the case are as under: 2. Assessee is a company and filed its return of income on 30/11/2016 declaring income of Rs.73,44,38,310/-. The case was selected for scrutiny and notice under section 143 (2) and 142 (1) along with questionnaire was issued to assessee. In response to statutory notices, representative of assessee appeared before Ld.AO and filed requisite details as called for.

16. 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.

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

18. In present facts of case, Ld.AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, “Income from Business and Profession”. It has been submitted that some payments forming part of CSR were claimed as deduction under section 80G of the Act, for computing “Total taxable income”, which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing „Total Taxable Income”. If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature. 19. 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. 20. 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 by assessee stands allowed for statistical purposes. In the result appeal filed by assessee stands allowed." In view of the above facts and respectfully following the decision of Hon‟ble ITAT Bangalore in the case of Allegi Services (India) Pvt Ltd (supra), I am of the considered view that the appellant is entitled to claim deduction u/s 80G with respect to the donations forming part of CSR expenses. However, in this regard, I direct the AO to verify whether the Appellant satisfies the requisite conditions prescribed for deduction u/s 80G. In case it satisfies the conditions for deduction u/s 80G, the claim of Rs. 4,55,13,521/- has to be allowed. If found contrary, the stand of the AO stands confirmed. The AO is directed to give effect by passing a speaking order. The Appellant is directed to furnish all relevant details online before the AO for verification. Ground is, thus, allowed for statistical purpose.”

4. Mr. Murkunde vehemently argued in favour of the Revenue‟s pleadings that the Ld. CIT(A)'s herein has erred in law and on facts in accepting the assessee‟s sec.80G deduction claim of Rs.4,55,13,521/- qua “CSR expenditure” not exigible for relief u/sec.37 of the Act.

5. The assessee has drawn strong support from Ld. CIT(A)'s above extracted detailed discussion.

6. We have given our thoughtful consideration to the foregoing rival stands and find no merit in the Revenue‟s instant sole substantive grievance. Suffice to say, the Revenue‟s only argument is that once the impugned expenditure is not allowable u/sec.37 of the Act; the same is also not exigible to sec.80G deduction as well. We find no substance in Revenue‟s instant sole substantive grievance as the Ld. CIT(A)'s detailed discussion has considered a catena of case law of various judicial forums (supra) already accepting the very issue in assessee‟s favour and against the department. We thus adopt judicial consistency herein as well to uphold the Ld. CIT(A)'s detailed discussion accepting the assessee‟s sec.80G deduction claim. Rejected accordingly.”

9. Respectfully following the decision of the Co-ordinate Bench of Pune Tribunal in the case of Credit Suisse Services (India) Private Limited (supra) and in the absence of any contrary material brought on record by the Revenue to take a different view, we set aside the order of Ld. CIT(A) on the issue and allow the appeal of the assessee.”

The first issue raised by the assessee in the grounds of appeal is accordingly allowed.

AABCG1087B Goldy Precision Stampings Pvt. Ltd. 51310/- AAACS5081L Nidec India Precision Tools Ltd. 615455/- APEPS5336Q Radhakrishna Shetty 170614 TOTAL 8,37,379/-

"II Disallowance under section 41(1) of the Act 3. The learned AO erred adding back an amount of Rs. 6,66,765/- to the total income of the appellant, being the amounts written off by the vendor creditors unilaterally as so called 'bad debts' in their books of account.

4. The learned AO and DRP grossly erred in bringing to tax the amount of Rs. 6,66,765/-u/s 41(1) consisting of Rs. 51,310/- on the ground that the GST invoices were available and details could have been accessed from GST network and the other amount of Rs. 6,15,455/- on the ground that outstanding balance in the appellant's books in respect of the vendor was Rs. 6,87,088/-. The learned AO and DRP failed to appreciate that the appellant had neither claimed the deduction of the said amounts nor accrued or incurred any debt/ liability thereof to pay the amounts to the vendors and information viz. on GST network or the outstanding balance did not substantiate or justify the unilateral decision of the vendor/s to write off amount as so called bad debt.

5. The Ld. AO and DRP failed to appreciate that unilateral write off by the vendor of the appellant company does not ipso facto result in any benefit enduring in the hands of the appellant in respect of a trading liability and the provisions of Section 41 of the Act are not applicable." Our Prayer 1. Subsequent to the passing of the assessment order dated 13.06.2024, Goldy Precision Stamping P Ltd. (GSP) vide its letter dated 3.10.2024 confirmed that the goods invoiced were not delivered to the appellant as the goods were lost in transit and the debit balance was written off in its books of account. Another creditor NIPL has vide its letter received by the appellant dated 29.08.2024 confirmed that the so called debits in its books of account were time worn debits coming from accounts of its predecessor company viz. erstwhile Mitsubishi Heavy Industries India Precision Tools Ltd. whose business was taken over by NIPL during the financial year ended 31st March 2019. Since the old debit entries brought forward in NIPL's books were lying in the accounts for more than 8 years it was not possible for NIPL to establish an audit trail as to whether the debits to appellant's account had arisen against supply of goods and whether the debits appearing had continued to appear as unpaid/ unadjusted due to rejection of goods or cancellation/adjustment of invoices and to clean up the accounts the said party unilaterally wrote off the amounts debited. It is submitted that both the parties after continuous follow up gave the aforesaid signed confirmations voluntarily and it was not in the hands of the appellant to make them available before the passing of finalized assessment order. The appellant submits that it was prevented by sufficient cause from producing the said supporting document/paper before the AO prior to his passing of finalized assessment order.

2. The aforesaid crucial confirmations received from the concerned vendors go to the root of the matter and clearly establish the authenticity and genuineness of appellant's claim that the amounts were unilaterally written off by the parties without accrual of any benefit enduring in appellant's hands as contemplated u/s 41 (1) of the Act.

3. Useful reference can be made in this regard to the decision of jurisdictional Bombay High Court in Prabhavati S. Shah v. CIT 231 ITR 0001 wherein Honourable High Court has held that information prima facie necessary and which would facilitate the judicial authority to decide the controversy in regard to the genuineness of the claim be permitted to be admitted. In the light of the aforesaid facts and attendant circumstances and judicial precedent it is prayed that the above referred confirmations of creditors be permitted to be adduced to facilitate the appellant to place its case before Your Honours.”

15. The Ld. DR on the other hand opposed the admission of the additional evidences. In his alternate contention, he submitted that the matter may be restored to the file of the Assessing Officer with a direction to verify the same and take a view.

Order pronounced in the open Court on 4th April, 2025.