GSP CROP SCIENCE LIMITED,AHMEDABAD vs. THE PR.CIT-1, AHMEDABAD

PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:

This appeal has been filed by the Assessee against the order passed by the Ld. Principal Commissioner of Income Tax-1, (in short “Ld. PCIT”),
Ahmedabad vide order dated 12.03.2025 passed for A.Y. 2020-21. 2. The assessee has raised the following grounds of appeal:

“(1)
That on facts, and in law, the learned PCIT has grievously erred in exercising juri iction u/s 263 of the Act.

(2)
That on facts, and in law, the learned PCIT has grievously erred in setting aside the issue of claim of Deduction u/s 35(2AB) of Rs. 2,30,40,298/- without pointing any error in the said claim which is made as certified in Form 3CLA, and there is no error or prejudice to interest of Revenue.

(3)
That the learned PCIT has grievously erred in law, and on facts, in holding that the appellant has claimed excess depreciation of Rs.1,80,783/-, ignoring the fact that the appellant has claimed additional depreciation and depreciation as per law.

(4)
That the learned PCIT has grievously erred in law, and on facts, in holding that CSR expenses are not allowable as deduction u/s 80G of the Act, and erred in directing the AO to disallow the same.
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(5)
That the learned PCIT has grievously erred in law, and on facts, in directing the AO to verify the claim of set off of brought forward unabsorbed depreciation, without finding any error in appellant’s computation, and there is no prejudice to the revenue as there is no Tax impact since more MAT Credit is available to appellant.

(6)
The appellant craves leave to add, alter, amend any ground of appeal.”

The Pr. CIT noted that such CSR expenses, being mandatory under section 135 of the Companies Act, 2013, are liable to be disallowed under Explanation 2 to section 37(1) of the Income-tax Act. The Pr. CIT also noted that the assessee made the donations through a trust and did not directly undertake CSR activities, which further weakens the deduction claimed by the assessee. Therefore, this issue was also found erroneous and prejudicial to the Revenue and sent back to the A.O. for disallowance of the CSR expenses in any form. Fourth, on the issue of brought forward unabsorbed depreciation, the assessee had claimed a set-off of Rs. 5,26,89,087/- for AY
2018-19, whereas the eligible amount as per the assessment order of that year was Rs. 18,26,35,179/-. Although the assessee clarified that the excess claim was only Rs. 3,62,039/-, the Pr. CIT held that the correct figure needed verification. Hence, the matter was remanded to the A.O. for accurate recomputation. The Pr. CIT, after satisfying the twin conditions under section 263 that the assessment order was both erroneous and prejudicial to the interest of revenue set aside the original assessment order. The A.O. was directed to pass a fresh order after proper examination and applying the correct legal provisions on all four issues discussed.

specific finding with respect to Form 3CL submitted by the assessee. It was submitted that Principal CIT cannot resort to 263 proceedings only for giving a direction to carry out a verification of the claim of the assessee. With respect to claim of additional depreciation, the Counsel for the assessee submitted that the assessee had correctly claimed additional depreciation of Rs. 12,05,222/- as balance 50% additional depreciation related to the previous year’s assets put to use for less than 180 days and there is no excess depreciation claim of Rs. 1,80,783/- as alleged by Principal CIT. On the issue of claim of 80G deduction on CSR expenditure, the Counsel for the assessee submitted that various judicial precedents, including those of juri ictional
ITAT have decided this issue in favour of the assessee. Accordingly, there is no infirmity in the order of the Assessing Officer so as to call for any interference. Finally, on the issue set-off of unabsorbed depreciation,
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[2023] 156 taxmann.com 369. With regard to the additional depreciation of Rs. 12,05,222/-, we find that the assessee had claimed the balance 50%
additional depreciation as per the provisions of section 32(1)(iia), and the same had been examined and allowed by the Assessing Officer. The Principal
CIT has not brought on record any evidence to show that this depreciation was incorrectly claimed or allowed. A plausible interpretation of law adopted by the Assessing Officer, even if not explicitly discussed in the order, cannot render the assessment erroneous, particularly when no contrary judicial precedent has been cited. On the issue of deduction under section 80G for donations made as part of CSR, we find merit in the submissions of the assessee. The deduction under section 80G is governed by its own provisions and cannot be denied merely because the payment forms part of the CSR obligation. In fact, the Ahmedabad Tribunal in Gujarat State Financial
Services Ltd. [2025] 174 taxmann.com 461 and Gujarat Mineral
Development Corporation Ltd. [2025] 176 taxmann.com 227 has held that donations made to eligible institutions, even if part of CSR, are allowable under section 80G, so long as all conditions of that section are fulfilled. The restriction on allowability only applies to specific funds such as the Swachh
Bharat Kosh or Clean Ganga Fund, which is not the case here. Finally, regarding the set-off of unabsorbed depreciation, the Principal CIT has accepted that the assessee’s explanation carries weight and has nonetheless
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remanded the matter for verification. We reiterate that such a direction, in the absence of a demonstrated error or prejudice, cannot be sustained under section 263 in view of the decision in Principal CIT v. Vimla
Infrastructure (India) (P.) Ltd. [2025] 176 taxmann.com 78
(Chhattisgarh), where the Hon’ble High Court held that setting aside an assessment without conducting an independent inquiry or identifying a specific error is not justified. In view of the above facts and in light of the binding judicial precedents, we are of the considered opinion that the order passed by the Principal CIT under section 263 is unsustainable in law.
Accordingly, the impugned order passed under section 263 of the Act is hereby quashed and the assessment order passed by the Assessing Officer is restored.

TANMAY, Sr. PSआदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to :
1. अपीलाथŎ / The Appellant
2. ŮȑथŎ / The Respondent.
3. संबंिधत आयकर आयुƅ / Concerned CIT
4. आयकर आयुƅ(अपील) / The CIT(A)-
5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाडŊ फाईल / Guard file.

आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.