XILINX INDIA TECHNOLOGY SERVICES PRIVATE LIMITED,HYDERABAD vs. ACIT., CIRCLE-8(1), HYDERABAD

Brief facts of the case are that the assessee incurred certain expenses as a part of CSR expenditure, as mandated under section 135 of the Companies Act and both the authorities, namely, the learned Assessing Officer and the learned CIT(A) denied the same stating that the essential prerequisite element of donation, namely, the voluntariness, as stipulated in section 80G of the Income Tax Act, 1961 (for short “the Act”) is conspicuously absent in respect of these expenses that were met under the compulsion of law under section 135 of the Companies Act. 3. Learned CIT(A) referred to the objectives of CSR, namely, to share the burden of government in providing social services by Companies having net worth/turnover/profit above a threshold, and if such expenses are allowed as a tax deduction, it would result in subsidising of around one third of such expenditure, and therefore, the addition of Memorandum to the Finance Act, 2014 can be extended for deduction under section 80G of the CSR expenditure as allowing the same will defeat the primary purpose of introducing CSR, namely, sharing of burden of government. 4. In this appeal before us, learned AR pleaded that this issue is no longer res integra and is covered by the decisions of various benches of the Tribunal including the view taken by the Hyderabad Bench in the case of Optum Global Solutions (India) (P.) Ltd vs. DCIT (2023) 154 Taxmann.com 651 (Hyderabad-Trib), Power March Projects limited vs. DCIT (2023) 156 Taxmann.com 575 (Hyderabad-Trib) rendered, following the view taken by the Kolkata Bench of the Tribunal in the case of JMS mining (P.) Ltd vs. PCIT (2021) 130 Taxmann.com 118 (Kolkata-Trib) and other decisions. 5. Learned DR placed reliance on the reasoning given by the authorities below and justified the denial of deduction of the expenditure incurred by the assessee as mandated by section 135 of the Companies Act stating that if the same is allowed it will defeat the primary purpose of introducing CSR and sharing of the burden of government in providing social services by the company is having net worth/turnover/profit above a threshold.

We have gone through the record in the light of the submissions made on either side in the decisions cited by the learned AR, the coordinate benches of this Tribunal followed the view taken by the Kolkata Bench of the Tribunal in the case of JMS Mining (P.) Ltd (supra). For the sake of completeness, we deem it just and necessary to reproduce the relevant observations of the Kolkata Bench hereunder: – “22. From a bare reading of the section 80G of the Act we note that deduction under this section has to be made in accordance with and subject to the provisions of this section i.e. section 80G of the Act. As per this section i.e. section 80G of the Act, an amount equal to fifty percent (50%) of the aggregate of the sums specified in sub-section 2 [refer sub- clause (iv) of Clause (a) of Sub-section 2 of section 80G of the Act read with section 80G (1) (ii)] which allows the donation given to any other Fund or any institution to which this section applies and if it satisfies the requirement of sub-section (5) of section 80G of the Act, then 50% of the donation is allowable expenditure [refer section 80G (1) (ii)]even if the assessee has included the expenditure as CSR Expenditure because there is no prohibition or restriction placed by the Parliament on such a donation even if shown as CSR expenditure. The reason for saying so is that in section 80G of the Act certain restrictions in respect of deduction in respect of two (2) donations are expressly seen in this Section. So the Parliament has expressed its intention clearly by bringing in restriction in respect of expenditure classified by an assessee company while claiming deduction u/s. 80G of the Act i.e. CSR expenditure related to Swachh Bharat Kosh and Clean Ganga Fund. So if an assessee makes some donation to these projects and include/classify it as CSR expenditure while claiming deduction u/s. 80G of the Act then it will be allowed only the amount that is other than the sums spent by the assessee in pursuance of CSR u/s. 135 of the Companies Act. In other words, if an assessee company spends only the mandatory expenditure of 2% of net profit for CSR activity, which includes the amount of donation to Swach Bharat Kosh & Clean Ganga Fund (iiihk) and (iiihi) of clause (a) of sub-section (2) of section 80G of the Act, then deduction u/s. 80G of the Act is not allowable, which can be illustrated by giving certain examples (infra). However, in a case scenario, wherein the assessee expends the mandatory expenditure and gives donation to these two projects i.e. over and above the mandatory CSR expenditure u/s. 135 of Companies Act, that sum donated to Swach Bharat Kosh & Clean Ganga Fund will be eligible for 100% deduction u/s. 80G of the Act [refer section 80G (1)(i) and subject to section 80G (4)]. However, such a restriction in respect of expenditure made by an assessee to any other fund or institution as referred to in sub clause (iv) of clause (a) of sub-section 2 of section 80G of the Act had not been placed by the Legislature. And if the Parliament desired, it could have been made such kind of restriction or any restriction like in the case of donation to Swach Bharat Kosh & Clean Ganga Fund. So the assertion of Ld. PCIT that AO could not have allowed deduction u/s 80G of the Act to an assessee on the CSR expenditure/donation to an institution u/s 80G(2)(a)(iv) which is enjoying certificate 80G(5)(vi) of the Act, is erroneous and therefore cannot be accepted. For this, we rely on the interpretation maxim “Expressio Unius Esl Exclusio Alterius” which is a Latin phrase that means “express mention of one thing excludes all others. This is one of the rules used in interpretation of Statutes. The phrase indicates that items not on the list are assumed not to be covered by the Statute. When something is mentioned expressly in a Statute, it leads to the presumption that the things not mentioned are excluded. This is an aid to the construction of Statutes. Applying the legal maxim 'expressio unius est exclusio alterius', it can be safely inferred that when the Legislature in particular has provided for only the above referred two specific exceptions in Section 80G, then it is the implied intent of the Legislature to permit deduction u/s 80G in respect of CSR contributions made to funds/organizations referred to in all other sub-clauses of Section 80G [other than (iiihk) and (iiihl)] of the Act. The above analysis made by us, can be cumulatively illustrated by the following examples for ease of understanding purpose only and should not be cited for making claim which should be made subject to the facts and law involved in each case and also subject to section 80G(4) of the Act: Example: A company has reported eligible net profit u/s 135 of Companies Act, 2013 at Rs.100 crores. The minimum CSR contribution of 2% under Section 135(5) of the Act works out to be Rs. 2 crores. Situation 1 : The company has been spent the required minimum CSR contribution of Rs 2 crores towards construction of roads & schools in the vicinity of the backward area where the factory is located. Tax Treatment: The entire CSR expenditure of Rs.2 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act.

As discussed supra, we concur with the contention of the assessee that since Parliament intended certain restrictions to only CSR expenditure in respect of two donations included by an assessee as CSR expenditure i.e. [Swachh Bharat Kosh and Clean Ganga Fund] has impliedly not made any prohibition/restriction in respect of claim of CSR expenses in other cases if it is otherwise eligible under Section 80G of the Act. In this context we find that the assessee has made donation of Rs. 1.25 crores on 20.01.2016 by RTGS dated 19.01.2016 through UCO Bank which is evident from page 18 of PB which is received by Shree Charity Trust which was 80G(5)(vi) certificate of the Department dated 15.01.2009 placed at page 17 of PB. The assessee has also made payment of Rs. 10 Lakhs to Pt. Jashraj Music Academy Trust which is found placed at page 22 & 23 and the approval u/s 80G (5)(vi) of the Act in respect of Pt. Jashraj Music Academy Trust is found placed at page 19 of PB dated 30.03.2012 given by Director of Income Tax (Exemption). Therefore, since the assessee satisfies the condition u/s. 80G of the Act of the donees, the assessee’s claim for deduction of CSR expenses/contribution u/s 80G of the Act was allowed after enquiry by the AO. Thus we are of the opinion that the action of the AO allowing the claim u/s. 80G of the Act is a plausible view and is in line with the ratio of the decision of Tribunal cited (supra). Therefore we find that the Ld. PCIT has not been able to make out a case that on this issue raised by him, the AO's order is erroneous as well as prejudicial to the revenue. So the juri ictional fact as well as law is absent for invoking revisional juri iction. Therefore, the usurpation of juri iction by Ld. PCIT u/s 263 of the Act is bad in law and therefore need to be quashed and we order accordingly”. 7. At this stage, it is relevant to look into the provisions of Explanation- 2 to section 37(1) of the Act, which says that any expenditure relatable to the discharge of CSR, is not a business expenditure and cannot be allowed as such. If the assessee does not claim any deduction of such amount spent as CSR under any of the provisions between 30 and 36 of the Act, and suo- moto disallowed the same by adding it back to the P&L account, and it is only thereafter the business income of the assessee computed in accordance with the principles laid down for computation of the profits and gains of business or profession in sections 28 to 44DB of the Act, then the donations covered under section 80G of the Act cannot be denied and on compliance with Explanation-2 of section 37 of the Act, the Revenue shall not have any grievance. Whether or not the assessee suo moto disallowed the spend towards the CSR while computing the business income is a verifiable fact. 8. In the circumstances, while respectfully following the consistent view taken in these matters, we direct the learned Assessing Officer to verify whether the assessee does not claim any deduction of the amount spent as CSR under any of the provisions between 30 and 36 of the Act and suo moto disallow the same by adding it back to the P&L account, and it is only thereafter the business income of the assessee computed in accordance with the principles laid down for computation of the profits and gains of business or profession in sections 28 to 44DB of the Act, and if finds it to be so, then delete the disallowance of the donations covered under section 80G of the Act. Appeal of the assessee is allowed on the above terms. 9. In the result, appeal of the assessee is allowed. Order pronounced in the open court on this the 2nd January, 2025. (MANJUNATHA G.) JUDICIAL MEMBER Hyderabad, Dated: 02 /01/2025 L.Rama, SPS