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Facts
The Principal Commissioner of Income Tax (PCIT) passed an order under Section 263 of the Income Tax Act, 1961, revising the assessee's assessment. The PCIT found the assessment erroneous on three grounds: misclassification of a Rs. 1.59 Cr capital loss from share sales as Short Term Capital Loss (STCL) instead of Long Term Capital Loss (LTCL), short disallowance of expenses under Section 14A by Rs. 37.89 lakhs, and an incorrect claim of Section 80G deduction for CSR expenses of Rs. 1 Cr. The PCIT directed the Assessing Officer (AO) to pass a fresh assessment order on these issues.
Held
The Tribunal set aside the PCIT's order regarding the classification of capital loss (STCL vs. LTCL) and the Section 80G deduction for CSR expenses, concluding that the AO's original view on these two points was correct and legally tenable. However, the Tribunal upheld the PCIT's finding that the disallowance under Section 14A was short, agreeing that the assessment order was erroneous on this count due to under-disallowance of Rs. 37.89 lakhs.
Key Issues
Whether the PCIT's revisional order under Section 263 was valid in finding the assessment erroneous regarding: (a) the classification of capital loss (STCL vs. LTCL) from share sales, (b) the quantum of disallowance of expenses under Section 14A, and (c) the allowability of Section 80G deduction for CSR expenses.
Sections Cited
263, 1961, 143(3), 144B, 14A, 80G, 45(2A), 37(1), Rule 8D
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
(Assessment Year: 2020-21) Torrent Investments Ltd., Vs. Principal Commissioner of (Formerly known as Torrent Income Tax-3, Investments Pvt. Ltd.), Ahmedabad Samanvay, 600, Tapovan, Ambavadi, Ahmedabad-380015 [PAN No.AAACT5459R] (Appellant) .. (Respondent) Shri Vartik Chokshi, AR Appellant by : Respondent by : Shri Sher Singh, CIT-DR Date of Hearing 12.08.2025 09.09.2025 Date of Pronouncement O R D E R PER: ANNAPURNA GUPTA - AM: The present appeal has been filed by the assessee against the order passed by the Ld. Principal Commissioner of Income Tax, (hereinafter referred to as “PCIT”), PCIT, Ahmedabad-3 dated 29.03.2025 passed under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2020-21.
Grounds raised by the assessee are as under:
“1. In law and in the facts and circumstances of the Appellant's case, impugned order passed u/s. 263 of the Act is bad in law and deserves to be quashed.
2. In law and in the facts and circumstances of the Appellant's case, the Hon'ble PCIT has erred in passing the order u/s. 263 of the Act without appreciating / considering the explanations /details furnished by the appellant company in its submission dated 25.03.2025 in response to notice issued u/s. 263 of the Act during the revisional proceedings.
Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 2 - 3. In law and in the facts and circumstances of the Appellant's case, the Hon'ble PCIT has erred in setting aside the assessment order passed u/s. 143(3) r.w.s. 144B of the Act dated 22.09.2022 and directing the Ld. Assessing Officer to pass a fresh assessment order in accordance with law.
In law and in the facts and circumstances of the Appellant's case, the Hon'ble PCIT has failed to appreciate that the twin conditions for assuming jurisdiction u/s. 263 of the Act are not satisfied in the case of appellant company as issue which has been relied upon for passing the order u/s. 263 does not show any error or prejudice to the interest of the revenue.
In law and in the facts and circumstances of the Appellant's case, the Hon'ble PCIT has erred in holding that the appellant company has not followed the principle of FIFO method while selling the shares of Puro Wellness Private Limited and thereby claimed the loss of Rs. 1,59,36,465/- arising on its sale as Short Term Capital Loss instead of Long Term Capital Loss, without properly examining the facts of the case and contentions raised by the Appellant company.
6. In law and in the facts and circumstances of the Appellant's case, the Hon'ble PCIT has erred in holding that the AO has not properly verified the issue of disallowance under section 14A of the Act, where one of the reasons for selection of the case for the scrutiny assessment was the issue of disallowance u/s. 14A of the Act and the assessment order u/s. 143(3) of the Act has been passed by the then Assessing Officer after considering and accepting the submissions made by the Appellant company.
7. In law and in the facts and circumstances of the Appellant's case, the Hon'ble PCIT has erred in holding that the entire expenses claimed by the Appellant company i.e. Rs. 42,82,354/- should have been disallowed under section 14A of the Act, whereas, the amount of disallowance made under section 14Aof the Act is Rs. 4,92,537/- and hence, this has resulted into underassessment of income of Rs. 37,89,817/- (Rs. 42,82,354 - Rs. 4,92,537), without appreciating the contentions raised by the appellant.
In law and in the facts and circumstances of the Appellant's case, the Hon'ble PCIT has erred in holding that CSR is a legal liability and the same cannot be claimed as deduction under section 80G of the Act, since the donations under CSR are not made voluntarily; when there is no such restriction in section 80G of the Act.
9. In law and in the facts and circumstances of the Appellant's case, the Hon'ble PCIT has erred in holding that the then Assessing Officer has erred in not disallowing deduction claimed under section 80G of the Act in respect CSR expense, of Rs. 1,00,00,000/- (50% of Rs. 2,00,00,000/-), without appreciating the fact that the appellant has complied with all the conditions prescribed under the provisions of section 80G of the Act.
10. The appellant company craves leaves to add, amend, alter and 7 or delete any ground of appeal before or at the time of hearing.”
Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 3 - 3. A perusal of the order of the Ld. PCIT reveals that the assessment order passed in the case of the assessee for the impugned year under Section 143(3) of the Act was found to be erroneous causing prejudice to the Revenue on the following counts:
(i) Allowing claim of Short Term Capital Loss (STCL) of Rs. 1,59,36,465/- which as per the Ld. PCIT was actually in the nature of Long Term Capital Loss (LTCL). The assessee while treating the loss as Short Term in nature had set off the loss against Short Term Capital Gains (STCG), thus returning net Short Term Capital Gain of 14,35,43,906/-. Since as per the Ld. PCIT the loss was in the nature of Long Term Capital Loss, the assessee was not entitled to claim set off of the same against Short Term Capital Gain and in effect, therefore, the Short Term Capital Gain returned by the assessee was short assessed to the extent of Short Term Capital Loss so set off by the assessee amounting to Rs. 1,59,36,465/-.
(ii) The assessee having claimed disallowance of expenses under Section 14A of the Act amounting to Rs. 4,92,537/- which was allowed by the Assessing Officer while as per the Ld. PCIT as per the records itself the disallowance ought to have Rs. 42,82,354/-. Thus, in effect, as per the Ld. PCIT the disallowance made of expenses under Section 14A of the Act was short to the extent of Rs. 37,89,817/-.
(iii) The assessee was noted to have incurred CSR expenses of Rs. 2,00,00,000/- which though disallowed while computing the income of the assessee, however, exemption to the extent of Rs. 50% of the same amounting to Rs. 1,00,00,000/- had been claimed and allowed to the assessee under Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 4 - Section 80G of the Act. As per the Ld. PCIT the deduction so allowed under Section 80G of the Act was against the provisions of law.
4. Finding the assessment order to be erroneous causing prejudice to the Revenue on account of the above three issues,the Ld. PCIT set-aside the order passed by Assessing Officer under Section 143(3) of the Act on the impugned issues directing the Assessing Officer to pass a fresh assessment order after verification of the issues of Short Term / Long Term Capital Loss on sale of shares and after disallowing the deduction under Section 80G of the Act for CSR expenses and the expenses which had not been disallowed under Section 14A of the Act.
5. During the course of hearing before us, the contention of the Ld. Counsel for the assessee was that all the issues noted by the Ld. PCIT were examined during assessment proceedings and on merits it had been demonstrated that all the claims had been rightly and correctly made by the assessee as per the provisions of law and therefore, there was no error in the order of the Assessing Officer with respect to any of the issues noted by the Ld. PCIT.
Taking up the first issue of claim of Short Term Capital Loss by the assessee which as per the Ld. PCIT was in the nature of LTCL, the facts relating to the issue are that the assessee had computed net STCG of Rs. 14,35,43,906/- after setting off STCL of Rs. 1,59,36,465/- towards sale of 45,10,121 shares of Puro Wellness Pvt. Ltd. The said shares were noted to be sold on 01.08.2019 for consideration of Rs. 2,55,64,745/- and purchase consideration of the same was Rs. 4,15,01,210/-. The Ld. PCIT noted from Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 5 - the computation table of LTCG/LTCL that the assessee had made two more sale transactions of shares of Puro Wellness Pvt. Ltd. and claimed LTCL of Rs. 5,74,43,636/-. The computation of the same showed 1,20,00,000/- shares of Puro Wellness Pvt. Ltd. sold on 28.11.2019 which were purchased on 21.10.2016 and 20.01.2017 to the extent of 50 lac shares and 70 lac shares respectively. As per the Ld. PCIT the shares of Puro Wellness Pvt. Ltd. sold on 01.08.2019, loss incurred on which was claimed as STCG, ought to have been considered against the shares purchased on 21.10.2016 i.e. the shares purchased first in time following the FIFO method and accordingly, the loss on the sale of shares on 01.08.2019 was to be treated as LTCL. And consequently therefore, the assessee was not entitled to set off of any loss against the STCG earned by it. That therefore, the STCG returned by the assessee was short to the extent of STCL wrongly set off against the same amounting to Rs. 1,59,36,465/- which had resulted in under assessment of income of the assessee to this extent and short levy of tax.
During the course of hearing before us, Ld. Counsel for the assessee pointed out from the submissions made to the Ld. PCIT during revisionary proceedings placed before us at Paper Book Page No. 4 to 77, dated 22-03- 25 & 11-01-2024, that it had been pointed out to the Ld. PCIT that this issue had been examined by the AO during assessment proceedings and it had been pointed out to him that the assessee had sold 1,61,50,121 shares of Puro Wellness Pvt. Ltd. during the year all on the same date 28.11.2019 and that in the computation of income for the year under consideration the date of sale of shares of 41,50,121 had inadvertently been mentioned as on 01.08.2019 instead of 28.11.2019. It was pointed out that in the ITR however the assessee Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 6 - company had rightly considered the date of such shares as 28.11.2019. He pointed out that all details of sale of such shares along with evidences had been filed during the assessment proceedings also. He further pointed out that considering the fact that all the shares was sold on the same date on 28.11.2019, the assessee company had considered the cost of acquisition of these shares on FIFO basis only;
50,00,000 shares treated as sold out of purchase made on 21.10.2016; 70,00,000 shares treated as sold out of purchases made on 20.01.2017 and 41,50,121 shares (the balance treated as sold out of shares purchased on 08.01.2018).
7.1 It was also pointed out that the cost of acquisition of the shares was the same i.e. 10 per shares. Accordingly, for 45,10,121 shares sold on 28.11.2019 and which were acquired on 08.01.2018, the assessee had rightly treated the loss incurred on the same amounting to Rs. 1,59,36,465/- as Short Term Capital Loss. Ld. Counsel for the assessee pointed out from the said letter that it was brought to the notice of the Ld. PCIT that the date of sale of the shares 01.08.2019 had been inadvertently mentioned in the computation of income and correct date was 28.11.2019. Further, it was pointed out that all these facts were inquired into and verified by the Assessing Officer also during the assessment proceedings. The Ld. Counsel for the assessee further pointed out that the assessee submitted to the Ld. PCIT that even if the date of sale of 41,50,121 shares is taken as 01.08.2019 then also the computation of capital loss would be the same. The computation to this effect was filed to the Ld.
“From: Torrent Investments Limited (Formerly known as Torrent Investments Private Limited) PAN: AAACT5459R Samanvay, 600, Tapovan, Ambawadi, 25th March, 2025 Ahmedabad To, The Principal Commissioner of Income Tax, Ahmedabad-3 Respected Madam, Sub: Reply to notice issued for revisional proceedings u/s. 263 of the Income Tax Act. 1961 (hereinafter referred to as "the Act") for AY 2020-21 Ref: Notice bearing DIN no. ITBA/REV/F/REV1/2024-25/1074793602(1) dated 20.03.2025 With reference to the captioned subject, the assessee company is in receipt of the above referred notice dated 20.03.2025, wherein your good honor has asked it to furnish accounts / documents / information with respect to the ongoing revisional proceedings in its case for the year under consideration. Your good honor has proposed to make additions / disallowances to the total income of the assessee company on account of certain issues. Relevant para of the above referred notice is reproduced as under: 3. On examination of case records during the year under consideration, on perusal of the Profit & Loss account. Balance sheet and ITR, it is observed that in the computation of income you have computed net STCG of Rs 14,35,43,906/-. White computing the STCG you have shown a short-term Capital Loss of Rs 1,59.36,465/- towards sale of 45,10,121 shares of Puro Wellness Pvt Ltd [Sale date 01.08.2019, Sale value Rs 2,55,64,745/- & Purchase value Rs 4,15,01,210/-]. Further, on perusal of LTCG/LTCL computation table, it is observed that you had made two safe transactions of shares of Puro Wellness Pvt Ltd and claimed LTCL of Rs 5,74,43,636/-. It is observed that you have incorrectly claimed short term capital loss on sale transaction dated 01/08/2019 of shares of Puro Wellness Pvt Ltd. As such you had to consider FIFO method in view of Section 45(2A) of I.T. Act towards the sale of aforesaid shares as shares purchased on 21.10.2016 and 20.10.2017 were to be considered while calculating Capital Gain/Loss in the sale transaction dated 01/08/2019. Therefore, the aforesaid loss was to be treated as Long Term Capital Loss. As such, setting off STCL of Rs.
Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 8 - 1,59,36,465/- with STCG on other transactions was irregular which has resulted in underassessment of income of Rs 1,59,36,465/- and consequent short levy of tax.
4. Further, on perusal of the Profit & Loss account, ITR and computation of income, it is observed that you had earned exempted dividend income of Rs, 861,35,04,2837- from your investment. As such you had made various investments, income from which do not form part of total income, however you had disallowed only an amount ofRs. 4,92,537/- u/s. 14A. 4.1 You were issued a show caused notice vide notice dated 08.03.2022 to disallow an amount of Rs. 64,82,90,362/- u/s. 14A of the I.T. Act subject to the quantum of effective expenses claimed by you after adjustments. However, in reply you had admitted that after claiming expenses adjustments, you had claimed effective expenses of Rs. 42,82,354/- and the disallowance u/s. 14A r.w.r. 8D of the I.T. Act, in no case, exceeds the actual expenses claimed by you. 4.2 As such, the disallowance u/s. 14A with rule 8D of the I.T. Act in this case should be 42,82,354/- whereas you had disallowed only 4,92,537/- u/s. 14A and remaining amount was not disallowed during assessment proceedings despite show-cause notice issuance and as admitted by you for the same in your reply. This has therefore, resulted in underassessment of income of Rs. 37,89,817/-. (Rs. 42,82,354-Rs. 4, 92,537).
5. Further, on scrutiny of records, it was observed that you had claimed an expenditure of Rs.2,00,00,000/- as CSR expenditure in P&L A/c. The amount of Rs. Rs.2,00,00,000/- was added back in the computation of income. Further, it was noticed that you had claimed exemption to the tune of Rs. 1,00,00,000 (50% of Rs. 2,00,00,000/-) from income on account of donation made of Rs.2,00,00,000/- u/s 80G. You may furnish details of the payments made for CSR expenditure and reason why S. 80G deduction has been claimed on the same.
6. CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing the taxable income of the company. Moreover, the objective of CSR is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold. If such expenses are allowed as tax deduction, this would result in subsidizing of around one third of such expenses by the Government by way of tax expenditure. 6.1. Since, you have claimed 80G deductions out of CSR expenses; It is pertinent to mention here that CSR is a legal liability on your part and is mandated out of the profits earned during the year.
Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 9 - 6.2 Therefore, the amount of donation as per the P&L A/c. is Rs.1,00,00,000/-(50% of Rs. 2,00,00,000/-) which is included in the CSR expenses, which was not allowable, which was allowed by the A.O. during assessment. This has resulted in under assessment of income of Rs. 1,00,00,000 and consequent short levy of tax of Rs. 39,02,080/-.
7. It is thus, apparent that order passed by the then AO in your case for A Y 2020-21 u/s. 143(3) of the Act is erroneous in so far as it is prejudicial to the interest of revenue to above extent. You are therefore, given one more opportunity to explain as to why the revisional order under section 263 of the Act should not be passed for AY 2020-21. On the basis of above, it is seen that the issues for which your honor has proposed for revision proceedings are, as under: Set off of STCL of Rs 1,59,36,465/- with STCG on other transactions in computation of income; Disallowance u/s. 14A r, w. r. 8D of IT Rules, 1962 to the extent of Rs. 4,92,537/- instead of Rs, 42,82,354/-. CSR expenditure amounting to Rs. 2,00,00,000/- claimed as deduction u/s. 80G of the Act amounting to Rs. 1,00,00,000/- (being 50% of the eligible expenditure). In this regard, the assessee company submits, as under: At the outset, the assessee company submits that it has duly furnished the detailed explanation / documents in respect of set off of STCL against STCG and disallowance made under section 14A of the Act, as asked by your good honor vide its submission dated 13.02.2025. The copy of the said submission along with the acknowledgement of the submission filed is attached herewith vide Annexure -1. For your good honour's reference, the assessee company once again submits, as under: 1 Set-off of STCL of Rs. 1.59.36.465/- with STCG on other transactions: 1.1 The above allegation is stated to have been made by your honor on the basis of observation that the assessee company has computed the net STCG of Rs. 14,35,43,906/- and at the time of computing the same, the assessee company has shown the short-term capital loss of Rs. 1,59,36,465/- towards sale of 45,10,121 shares of Puro Wellness Pvt Ltd [Sale date 01.08.2019; Sale value Rs. 2,55,64,745/- & Purchase value Rs 4,15,01,210/-]. Further, your honor has stated that the assessee company had made two sale transactions of shares of Puro Wellness Pvt Ltd and claimed LTCL of Rs 5,74,43,636, the details of which are as under: Sr. Quantity Date of Date of Sale value Indexed Gain/(Loss) No. sale purchase (in Rs.) Purchase (in Rs.) cost (in Rs.)
50,00,000 28.11.2019 21.10.2016 3,08,00,000 5,47,34,848 (2,39,34,848) 2. 70,00,000 28.11.2019 20.01.2017 4,31,20,000 7,66,28,788 (3,35,08,788) Total LTCL 5,74,43,636 From the above information, your honor has stated that the assessee company has wrongly claimed short term capita! loss of Rs. 1, 59,36, 465/- on sale of shares of Puro Wellness Pvt Ltd on 01.08.2019, based on the ground that considering the FIFO method in view of Section 45(2A) of Act, the cost of such shares should have been taken from the shares purchased on 21.10.2016 and 20,10.2017 and accordingly, the said loss should be long-term capital loss instead of the short-term capital loss. 1.2 In this connection, at the outset, the assessee company submits that your honor has considered the date of sale of 45,10,121 shares of Puro Wellness Pvt Ltd as 01 .08.2019 instead of 28.11.2019. 1.3 The said date of 01 .08.2019 might have been considered by your good honor on the basis of the computation of income furnished by the assessee company during the course of assessment proceedings. In this connection, the assessee company submits that at the time of preparing the computation of income for the year under consideration, the date of sale of 45,10,121 shares of Puro Wellness Pvt. Ltd. is inadvertently mentioned as 01.08,2018 instead of 28.11.2019. However, in the ITR, the assessee company has rightly considered the date of sale of such shares as 28.11.2019 and thereby considered the capital gain / loss arising on the sale of the said shares as STCL. Further, the assessee company had also furnished the correct details of sale of such shares during the course of assessment proceedings. 1.4 With this background, the assessee company submits the details of the sale of shares of Puro Wellness Pvt Ltd. here as under, which was also submitted to the Ld. Assessing Officer through submission dated 13.12.2021 vide Annexure-10. Sr. Quantity Date of Date of LTCG Sale value Purchase Indexed Profit/(Loss) No. sale purchase / Cost Cost STCG 1. 50,00,000 28.11.2019 21.10.2016 LTCG 3,08,00,000 5,00,00,000 5,47,34,848 (2,39,34,848) 2. 70,00,000 28.11.2019 20.01.2017 LTCG 4,31,20,000 7,00,00,000 7,66,28,788 (3,35,08,788) Total Long Term Capital Loss 5,74,43,636 3. 41,50,121 28.11.2019 08.01.2018 STCG 2,55,64,745 4,15,01,210 - (1,59,36,465) Total Short Term Capital Loss (1,59,36,465) On perusal of the above, your good honor shall appreciate that the entire shares of Puro Wellness Pvt. Ltd. have been sold on the single date i.e., 28.11.2019. In order to substantiate the same, the assessee company submits following details: The fact that the shares of Puro Wellness Private Limited have been sold by the assessee company on 28/11/2019 is disclosed in the foot note of Note-8 "Investments" in the financial statements, the relevant extract of which is as under:”
Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 11 - 8. Ld. Counsel for the assessee, therefore, contended that on the issue of capital loss claimed by the assessee amounting to Rs. 1.54 crores, the assessee had suitably demonstrated to the Ld. PCIT that the claim of the assessee was as per law and even as per the method prescribed by the Ld. PCIT, i.e. FIFO method, and that this issue had been duly examined and verified by the AO during the assessment proceedings who had taken a correct view on the same.
Having stated so, Ld. Counsel for the assessee pointed that the Ld. PCIT noted all the submissions of the assessee but without pointing any infirmity in the same he held that the issue was required to be properly examined by the AO and no inquiry was apparently done during assessment proceedings and therefore, the assessment order was erroneous. He drew our attention to Para 4.1.1. and 4.1.2 of the order of the Ld. PCIT in this regard. Ld. Counsel for the assessee, therefore, contented that the Ld. PCIT finding error in the assessment order on the issue of alleged incorrect claim of STCL was arbitrary and without dealing with the explanation of the assessee before him or without pointing out any error in the said explanation. That there was clearly no finding of error in the order of the Ld. AO on this issue.
The Ld. DR, however, supported the order of the Ld. PCIT.
We have considered the contention of both the sides and have gone through the order of the Ld. PCIT on the issue of alleged incorrect claim of STCL on the sale of shares of Puro Wellness Pvt. Ltd. allowed to the assessee by the AO to the tune of Rs. 1.54 crores. Before us, Ld. Counsel for the assessee has factually demonstrated:
Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 12 - That it was explained with evidences to the Ld. PCIT that there was no error in the STCL claimed by the assessee. That the Ld. PCIT had picked up the date of sale of shares as 01.08.2019 from the computation of income for holding that the asessee had earned LTCL, while the correct date was 28.11.2019 and the assessee had rightly treated the nature of loss as Short Term. That evidences in this regard were also filed by the assessee.
The assessee had demonstrated that it had computed the STCL following the method prescribed by the Ld. PCIT i.e. FIFO method.
The assessee had also demonstrated that even if the date of sale of the said shares was taken as 01.08.2019 the assessee still would have incurred STCL of Rs. 1.54 crores.All calculations in this regard were submitted to the Ld. PCIT and It was also demonstrated before him that this issue was examined during assessment proceedings and the assessee had placed all evidences with respect to the sale and purchase of shares before the AO who had examined them.
The above facts, we find, have been affirmed by the Ld. PCIT but he has not pointed out any infirmity in the explanation filed by the assessee. It is not the case of the Ld. PCIT that the contention of the assessee that the Ld. PCIT had incorrectly picked up the date of sale of the shares as 01.08.2019 was incorrect or that it is not duly substantiated. It is not even his case that the computation of loss on the sale of these shares submitted by the assessee Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 13 - to have been calculated as per the method prescribed by the PCIT i.e. FIFO method, was incorrect. It is not even the case of the Ld. PCIT that the alternate revised calculation of loss on sale of shares of Puro Wellness Pvt. Ltd. submitted by the assessee taking the date of sale of shares as on 01.08.2019 as noted by the PCIT, still resulting in STCL of Rs. 1.54 crores, was incorrect.
To put it briefly, we find, that the Ld. PCIT has found no fault at all in the detailed, reasoned and duly evidenced explanation by the assessee demonstrating that its claim of STCL of Rs. 1.54 crores was correct and as per the method prescribed by the Ld. PCIT himself. It is abundantly clear therefore that there is no infirmity or incorrectness found by the Ld. PCIT in the claim of the assessee to STCL to the tune of Rs.1.54 Crs.
The assessee, we have noted, had demonstrated to the Ld. PCIT that all these facts and evidences were furnished to the AO also during assessment proceedings. Therefore, we hold, it stands that issue was duly examined by the AO during assessment proceedings who had taken a correct view by allowing assesses claim of STCL of Rs.1,54 Crs.
In view of the above, the Ld. PCIT having given no reason for holding the claim of the assessee to be incorrect despite the detailed explanation furnished by the assessee , the AO we hold had rightly allowed the said claim to the assessee and there is no question of the assessment order being erroneous for having allowed the claim of STCL of Rs. 1.54 crores to the assessee.
Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 14 - 16. In light of the same the findings of the Ld. PCIT of the assessment order being erroneous on account of allowing of STCL of Rs. 1.54 crores on the sale of shares on Puro Wellness Pvt. Ltd. is held to be an incorrect and not sustainable.
Taking up the next issue of disallowance of expenses under Section 14A of the Act.
The case of the Ld. PCIT is that the assessment records on verification revealed that the assessee had disallowed an amount of Rs. 64,82,90,362/- under Section 14A of the Act subject to the quantum of effective expenses claimed by the assessee after adjustment. He noted that during assessment proceedings the assessee had admitted that after claiming expenses adjustment, the effective expenses of the assessee amounted to Rs. 42,85,894/-. However, he noted that the assessee had disallowed only Rs. 4,92,537/- under Section 14A of the Act, while as per the assessee itself it ought to have disallowed expenses to the tune of Rs. 42,82,354/-. As per the Ld. PCIT, there was underassessment of income to the tune of Rs 37,89,817/- (Rs.42,82,354 – Rs. 4,92,537) expenses not disallowed u/s 14A of the Act.
The contention of the Ld. Counsel of the assessee before us was that the issue was examined during assessment proceedings and the assessee’s claim of disallowance of expenses to the tune of Rs. 4,92,537/- was valid. However, the Ld. Counsel for the assessee was unable to controvert the findings of the Ld. PCIT that as per the assessee’s calculation of disallowance of expenses the same amounted to Rs. 64.82 crores subject to the quantum of
In the light of the same we agree with the Ld. PCIT that the disallowance of expenses under Section 14A of the Act ought to have been Rs. 42,82,354/- as per the admitted case of the assessee itself and therefore, we hold that the Ld. PCIT was right in holding the assessment order was erroneous for having allowed assessee’s claim of disallowance of expenses under Section 14A of the Act only to the extent of Rs. 4,92,537/-. The order passed by Ld. PCIT holding the assessment order to be erroneous causing prejudice to the Revenue on account of short disallowance of expenses under Section 14A of the Act is therefore, upheld.
The next issue relates to allowability of CSR expense as deduction under Section 80G of the Act.
The Ld. PCIT found the assessment order erroneous causing prejudice to the Revenue with respect to the claim of deduction under Section 80G of the Act of CSR expenses. The assessee had incurred CSR expenses of 2,00,00,000/- which was disallowed while computing the income of the assessee. However, 50% of the said amount was claimed as deduction on account of donation made, under Section 80G of the Act. The case of the Ld. PCIT was that CSR expenses were not allowable in any manner either as expense under Section 37(1) of the Act or as donation u/s 80G of the Act. Ld. Counsel for the assessee pointed that it was brought to the notice of the Ld. PCIT that the ITAT in a number of cases had held that CSR expenses were allowable for claim of deduction as donation under Section 80G of the Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 16 - Act. He pointed out from the submissions made to the Ld. PCIT that the following decisions were brought to his notice holding so;
M/s. FNF India Pvt. Ltd. vs. ACIT in Advik Hi Tech (P.) Ltd. vs. DCIT 168 taxmann.com 587 (Pune–Trib.) (09.10.2024), Goldman Sachs Services Pvt. Ltd. vs. JCIT in IT(TP)A No. 2355/Bang/2019 JMS Mining (P.) Ltd. vs. PCIT (2021) 130 taxmann.com 118.
He contended that despite the Ld. PCIT being made aware of the position of law in this regard and demonstrating clearly that the assessee’s claim of CSR Expenses as donation u/s 80G of the Act was in accordance with law, the Ld. PCIT still went ahead and held that the claim of the assesse was not in accordance with law, without distinguishing the said case laws.
Ld. DR was unable to controvert the contention of the Ld. Counsel for the assessee that the issue of claim of deduction under Section 80G of the Act had consistently been decided in favour of the assessee by various decisions of the ITAT.
In light of the same we agree with the Ld. Counsel for the assessee that the assessee’s claim of deduction under Section 80G of the Act of CSR Expenses was in accordance with law as interpreted by various decisions of the ITAT cited by the Ld. Counsel for the assessee before us. The claim of the assessee therefore being in accordance with law, the assessment order , we hold, was not erroneous causing prejudice to the Revenue for allowing Torrent Investments Ltd. vs. PCIT Asst.Year –2020-21 - 17 - such legally tenable claim to the assessee. The findings of the error by the Ld. PCIT, therefore, on the issue of allowing of claim of CSR expenses under Section 80G of the Act is accordingly held to be against the provisions of law and therefore not sustainable.
The order of the Ld. PCIT, therefore, is set-aside on the issue of STCL on the sale of shares of Puro Wellness Pvt. Ltd. and deduction claimed under Section80G of the Act of CSR expenses. While it is upheld on the issue of short disallowance of expenses under Section 14A of the Act.
In the result, the appeal of the assessee is partly allowed. This Order pronounced in Open Court on 09/09/2025