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Facts
For Assessment Year 2016-17, the assessee's case was reopened, and during reassessment, a deduction of Rs. 4,30,00,000/- claimed under Section 80G for Corporate Social Responsibility (CSR) expenditure was disallowed by the Assessing Officer. The AO contended that CSR, being a mandatory liability under the Companies Act, 2013, was not a voluntary donation and thus not eligible for Section 80G deduction. The Ld. CIT(A) subsequently deleted this disallowance.
Held
The Income Tax Appellate Tribunal (ITAT) upheld the Ld. CIT(A)'s decision, confirming that the assessee is eligible for the Section 80G deduction on CSR expenditure. The Tribunal noted that there is no specific bar in Section 80G against claiming such a deduction if all conditions are met, and denying it merely because it's CSR would lead to an unintended double disallowance. Consequently, the Revenue's appeal challenging the allowance of the deduction was dismissed.
Key Issues
Whether deduction under Section 80G of the Income Tax Act, 1961, is allowable for Corporate Social Responsibility (CSR) expenditure mandated by the Companies Act, 2013, despite Explanation 2 to Section 37(1) disallowing CSR as business expenditure.
Sections Cited
Income Tax Act, 1961: Sections 30, 31, 32, 33, 34, 35, 35CCD, 36, 37(1), 80G, 80G(1), 80G(1)(i), 80G(2), 80G(2)(iiihk), 80G(2)(iiihl), 143(3), 147, 148, 144B, Companies Act, 2013: Section 135
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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
The captioned appeal by the Revenue and cross objection by The captioned appeal by the Revenue and cross objection by The captioned appeal by the Revenue and cross objection by the assessee are directed against order dated 23.02.2024 passed by the assessee are directed against order dated 23.02.2024 passed by the assessee are directed against order dated 23.02.2024 passed by the Ld. Commissioner of Income the Ld. Commissioner of Income-tax (Appeals) – National Faceless National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment y Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment y 2016-17.
2. The grounds raised by the Revenue in its appeal are The grounds raised by the Revenue in its appeal are The grounds raised by the Revenue in its appeal are reproduced as under: reproduced as under:
"Whether on the facts and in the circumstances of the case and in law, "Whether on the facts and in the circumstances of the case and in law, "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right holding that the assessee shall be eligible for the Ld. CIT(A) was right holding that the assessee shall be eligible for the Ld. CIT(A) was right holding that the assessee shall be eligible for deduction u/s 80G deduction u/s 80G without appreciating the fact that Corporate Social without appreciating the fact that Corporate Social Responsibility ('CSR) under mandatory requirement of the Companies Act, Responsibility ('CSR) under mandatory requirement of the Companies Act, Responsibility ('CSR) under mandatory requirement of the Companies Act, 2013"? 3. Briefly stated, facts of the case are that assessment u/s 143(3) Briefly stated, facts of the case are that assessment u/s 143(3) Briefly stated, facts of the case are that assessment u/s 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) was comp tax Act, 1961 (in short ‘the Act’) was comp tax Act, 1961 (in short ‘the Act’) was completed on 27.12.2018 wherein the returned income filed by the assessee was 27.12.2018 wherein the returned income filed by the assessee was 27.12.2018 wherein the returned income filed by the assessee was accepted. Subsequently, the case was reopened by way of issue of accepted. Subsequently, the case was reopened by way of issue of accepted. Subsequently, the case was reopened by way of issue of notice u/s 148 of the Act dated 26.02.2021. In response, the notice u/s 148 of the Act dated 26.02.2021. In response, the notice u/s 148 of the Act dated 26.02.2021. In response, the assessee filed return of income on 23.04.2021 declaring total assessee filed return of income on 23.04.2021 declaring assessee filed return of income on 23.04.2021 declaring income at Rs.598,63,34,620/ income at Rs.598,63,34,620/-. In the reassessment completed u/s . In the reassessment completed u/s 147 r.w.s. 144B of the Act dated 24.03.2023, the Assessing Officer 147 r.w.s. 144B of the Act dated 24.03.2023, the Assessing Officer 147 r.w.s. 144B of the Act dated 24.03.2023, the Assessing Officer made disallowance of the deduction claimed u/s 80G of the Act made disallowance of the deduction claimed u/s 80G of the Act made disallowance of the deduction claimed u/s 80G of the Act Jamnagar Utilities and Power Pvt. Ltd. Jamnagar Utilities and Power Pvt. Ltd. CO amounting to Rs.4,30,00,000/ amounting to Rs.4,30,00,000/- holding that the same was i holding that the same was in the nature of corporate social responsibility (CSR) expenditure incurred nature of corporate social responsibility (CSR) expen nature of corporate social responsibility (CSR) expen by the assessee, which is not allowable. by the assessee, which is not allowable.
4. On further appeal, the Ld. CIT(A) deleted the disallowance in On further appeal, the Ld. CIT(A) deleted the disallowance in On further appeal, the Ld. CIT(A) deleted the disallowance in view of various decisions of the Co view of various decisions of the Co-ordinate Bench relied upon by ordinate Bench relied upon by him.
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. In the case, the assessee debited relevant material on record. In the case, the assessee debited relevant material on record. In the case, the assessee debited Rs.8,60,00,000/- on account of CSR on account of CSR, which was added back was which was added back was while computing total total income for the purpose of filing return of for the purpose of filing return of income. However, the assessee claimed 50% deduction i.e. . However, the assessee claimed 50% deduction i.e. . However, the assessee claimed 50% deduction i.e. Rs.4,30,00,000/- u/s 80G of the Act. According to the u/s 80G of the Act. According to the u/s 80G of the Act. According to the Assessing Officer CSR is statutory liability on the part of the assessee, which statutory liability on the part of the assessee, which statutory liability on the part of the assessee, which is to be incurred out of profit in compliance to the Companies Act to be incurred out of profit in compliance to the Companies Act, to be incurred out of profit in compliance to the Companies Act whereas section 80G of the Act deal with donation in the nature of hereas section 80G of the Act deal with donation in the nature of hereas section 80G of the Act deal with donation in the nature of the voluntary out of once own violation. the voluntary out of once own violation. The CSR not being CSR not being voluntary rather it was legal mand voluntary rather it was legal mandate on the part of the assessee, ate on the part of the assessee, the Assessing Officer held the CSR expenditure out of purview he Assessing Officer held the CSR expenditure out of purview he Assessing Officer held the CSR expenditure out of purview of the section 80G of the Act and accordingly he disallowed the claim the section 80G of the Act and accordingly he disallowed the claim the section 80G of the Act and accordingly he disallowed the claim of deduction of the assessee of Rs.4,30,00,000/ of deduction of the assessee of Rs.4,30,00,000/-. On further appeal, . On further appeal, the Ld. CIT(A) allowed the claim of the assessee observing as under: the Ld. CIT(A) allowed the claim of the assessee observing as under: the Ld. CIT(A) allowed the claim of the assessee observing as under:
“I have carefully considered the assessment order and submission made by I have carefully considered the assessment order and submission made by I have carefully considered the assessment order and submission made by the appellant. The appellant has relied upon the following judicial decisions appellant. The appellant has relied upon the following judicial decisions appellant. The appellant has relied upon the following judicial decisions Jamnagar Utilities and Power Pvt. Ltd. Jamnagar Utilities and Power Pvt. Ltd. CO ITA No. 122/M/2024 including the decisions of jurisdictional ITAT Mumbai where it has been held including the decisions of jurisdictional ITAT Mumbai where it has been held including the decisions of jurisdictional ITAT Mumbai where it has been held that payments towards donatio that payments towards donations made on account of corporate social ns made on account of corporate social responsibility, disallowed under section 37(1), are allowable as deductions responsibility, disallowed under section 37(1), are allowable as deductions responsibility, disallowed under section 37(1), are allowable as deductions under section 80G of the Act: under section 80G of the Act: DCIT v. Reliance Industries Ltd. [2023] & DCIT v. Reliance Industries Ltd. [2023] I.T.A. No. 2587 & DCIT v. Reliance Industries Ltd. [2023] I.T.A. No. 2587 & 2588/Mum/2022 (Mumbai ITAT) 2588/Mum/2022 (Mumbai ITAT) M/s. Naik Seafoods Pvt. L M/s. Naik Seafoods Pvt. Ltd. Vs. Pr. CIT - 2 (ITA No 490/MUM/2021) 2 (ITA No 490/MUM/2021) (Mumbai ITAT) (Mumbai ITAT) FNF India (P.) Ltd. Vs. ACIT [2021] (133 taxmann.com 251) FNF India (P.) Ltd. Vs. ACIT [2021] (133 taxmann.com 251) FNF India (P.) Ltd. Vs. ACIT [2021] (133 taxmann.com 251) (Bangalore ITAT) (Bangalore ITAT) Sling Media (P.) Ltd. Vs. DCIT [2022] (194 ITD 1) (Banglore ITAT) Sling Media (P.) Ltd. Vs. DCIT [2022] (194 ITD 1) (Banglore ITAT) Sling Media (P.) Ltd. Vs. DCIT [2022] (194 ITD 1) (Banglore ITAT) Infinera India (P.) Ltd. Vs. JCIT [2022] (194 ITD 463) (Ban Infinera India (P.) Ltd. Vs. JCIT [2022] (194 ITD 463) (Ban Infinera India (P.) Ltd. Vs. JCIT [2022] (194 ITD 463) (Bangalore ITAT) DCIT Vs. M/s. The Peerless General Finance & Investment & Co. Ltd DCIT Vs. M/s. The Peerless General Finance & Investment & Co. Ltd DCIT Vs. M/s. The Peerless General Finance & Investment & Co. Ltd (ITA No. 1469 & 1470/Kol/2019) (Kolkata ITAT) (ITA No. 1469 & 1470/Kol/2019) (Kolkata ITAT) Further, it is also observed from the contents of above decision of Hon'ble Further, it is also observed from the contents of above decision of Hon'ble Further, it is also observed from the contents of above decision of Hon'ble ITAT that the explanatory memorandum to Finance Act No. ITAT that the explanatory memorandum to Finance Act No. ITAT that the explanatory memorandum to Finance Act No. 2, 2014, introducing Explanation 2 to Section 37 (1) which prohibited the allowability introducing Explanation 2 to Section 37 (1) which prohibited the allowability introducing Explanation 2 to Section 37 (1) which prohibited the allowability of CSR expenditure as business expenditure. The memorandum clearly of CSR expenditure as business expenditure. The memorandum clearly of CSR expenditure as business expenditure. The memorandum clearly states that CSR expenditure described in sections 30 to 36 of the Income states that CSR expenditure described in sections 30 to 36 of the Income states that CSR expenditure described in sections 30 to 36 of the Income-tax Act, 1961 shall be allow Act, 1961 shall be allowed. Legislators never intended to deny deductions Legislators never intended to deny deductions for CSR expenditure outright; it is only not allowable under section 37(1). As for CSR expenditure outright; it is only not allowable under section 37(1). As for CSR expenditure outright; it is only not allowable under section 37(1). As the amendment in section 37(1) does not apply to sections 30 to 36 of the the amendment in section 37(1) does not apply to sections 30 to 36 of the the amendment in section 37(1) does not apply to sections 30 to 36 of the Act, the same would not apply to section 80G of the A Act, the same would not apply to section 80G of the Act. Thus, appellant shall be allowed to claim a deduction under section 80G of the Income Tax shall be allowed to claim a deduction under section 80G of the Income Tax shall be allowed to claim a deduction under section 80G of the Income Tax Act, 1961 to the extent of eligibility.. Act, 1961 to the extent of eligibility.. It is further viewed that jurisdictional Hon'ble Mumbai ITAT in the case of It is further viewed that jurisdictional Hon'ble Mumbai ITAT in the case of It is further viewed that jurisdictional Hon'ble Mumbai ITAT in the case of M/s. M/s. Reliance Reliance Industries Industries Ltd. Ltd. V.DCIT[2023](ITA V.DCIT[2023](IT A NO.2587 NO.2587 & & 2588/MUM/2022) has followed the decision rendered by Mumbai ITAT in 2588/MUM/2022) has followed the decision rendered by Mumbai ITAT in 2588/MUM/2022) has followed the decision rendered by Mumbai ITAT in the case of Naik Sea foods P Ltd V.Pr. CIT the case of Naik Sea foods P Ltd V.Pr. CIT-2(ITA NO.490/MUM/2021). In the 2(ITA NO.490/MUM/2021). In the case of Naik Sea foods P Ltd (supra), the co case of Naik Sea foods P Ltd (supra), the co-ordinate bench has followed the ordinate bench has followed the decision rendered by Bang decision rendered by Bangalore bench of Tribunal in the case of M/s FNF alore bench of Tribunal in the case of M/s FNF India P Ltd (ITA No. 1565/Bang/2019 dated 05 India P Ltd (ITA No. 1565/Bang/2019 dated 05-01-2021), which in turn 2021), which in turn followed the decision rendered in the case of Allegis Services (India) Pvt. Ltd. followed the decision rendered in the case of Allegis Services (India) Pvt. Ltd. followed the decision rendered in the case of Allegis Services (India) Pvt. Ltd. v. ACIT (ITA No. 1693/Bang/2019) and held that the assessee v. ACIT (ITA No. 1693/Bang/2019) and held that the assessee v. ACIT (ITA No. 1693/Bang/2019) and held that the assessee is eligible for deduction u/s 80G of the Act in respect of certain payments included in CSR deduction u/s 80G of the Act in respect of certain payments included in CSR deduction u/s 80G of the Act in respect of certain payments included in CSR Expenses. The relevant discussions made by the Tribunal are extracted Expenses. The relevant discussions made by the Tribunal are extracted Expenses. The relevant discussions made by the Tribunal are extracted below:- "15. Considered the rival submissions and material placed on record, "15. Considered the rival submissions and material placed on record, "15. Considered the rival submissions and material placed on record, we observe from we observe from the record that Ld. Pr.CIT while examining the the record that Ld. Pr.CIT while examining the records of the assessment observed that the Assessing Officer has records of the assessment observed that the Assessing Officer has records of the assessment observed that the Assessing Officer has not Verified the expenses claimed by the assessee and allowed by not Verified the expenses claimed by the assessee and allowed by not Verified the expenses claimed by the assessee and allowed by the Assessing Officer ITA NO. 490/MUM/2021 (A.Y: 2016 the Assessing Officer ITA NO. 490/MUM/2021 (A.Y: 2016 the Assessing Officer ITA NO. 490/MUM/2021 (A.Y: 2016-17) M/s. Naik Seafoods P Naik Seafoods Pvt. Ltd., without making the proper verification and vt. Ltd., without making the proper verification and purchases which is 95% of the sale declared by the assessee and purchases which is 95% of the sale declared by the assessee and purchases which is 95% of the sale declared by the assessee and Jamnagar Utilities and Power Pvt. Ltd. Jamnagar Utilities and Power Pvt. Ltd. CO ITA No. 122/M/2024 again Assessing Officer allowed the same without making proper again Assessing Officer allowed the same without making proper again Assessing Officer allowed the same without making proper verification. After considering the submissions of both the parties we verification. After considering the submissions of both the parties we verification. After considering the submissions of both the parties we observe from the record that with regard to section 80G _ deduction ve from the record that with regard to section 80G _ deduction ve from the record that with regard to section 80G _ deduction we observed that the Coordinate Bench of ITAT Bangalore Bench we observed that the Coordinate Bench of ITAT Bangalore Bench we observed that the Coordinate Bench of ITAT Bangalore Bench decided the issue of deduction u/s. 80G relating to donations which decided the issue of deduction u/s. 80G relating to donations which decided the issue of deduction u/s. 80G relating to donations which is part of Corporate Social Responsibility in the case of M/s.F is part of Corporate Social Responsibility in the case of M/s.F is part of Corporate Social Responsibility in the case of M/s.FNF India Pvt. Ltd., v. ACIT (ITA. No. 1565/Bang/2019 dated India Pvt. Ltd., v. ACIT (ITA. No. 1565/Bang/2019 dated India Pvt. Ltd., v. ACIT (ITA. No. 1565/Bang/2019 dated 05.01.2021). The relevant findings of the Bangalore Bench are 05.01.2021). The relevant findings of the Bangalore Bench are 05.01.2021). The relevant findings of the Bangalore Bench are reproduced below: reproduced below: - "9. After hearing both the parties, we find that similar issue came up "9. After hearing both the parties, we find that similar issue came up "9. After hearing both the parties, we find that similar issue came up for consideration before this Tribunal in IT for consideration before this Tribunal in in A No.1693/Bang/2019 in the case of Allegis Services (India) Pvt. Ltd. v. ACIT. The Tribunal by the case of Allegis Services (India) Pvt. Ltd. v. ACIT. The Tribunal by the case of Allegis Services (India) Pvt. Ltd. v. ACIT. The Tribunal by its order dated 29.4.2020 held as under. its order dated 29.4.2020 held as under.- "10. Section 135 of Companies Act, 2013 requires companies with "10. Section 135 of Companies Act, 2013 requires companies with "10. Section 135 of Companies Act, 2013 requires companies with CSR obligations, with effect from 01/04/2014. CSR obligations, with effect from 01/04/2014. Finance ( Finance (No.2) Act, 2014 inserted new Explanation 2 to sub No.2) Act, 2014 inserted new Explanation 2 to sub- section (1) of section 37, so as to clarify that for purposes of sub (1) of section 37, so as to clarify that for purposes of sub (1) of section 37, so as to clarify that for purposes of sub-section (1) of section 37, any expenditure incurred by an assessee on the of section 37, any expenditure incurred by an assessee on the of section 37, any expenditure incurred by an assessee on the activities relating to corporate social responsibility referre activities relating to corporate social responsibility referre activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an section 135 of the Companies Act, 2013 shall not be deemed to be an section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the expenditure incurred by the assessee for the purposes of the expenditure incurred by the assessee for the purposes of the business or profession. business or profession.
This amendment will take 11. This amendment will take effect from 1/04/2015 and will, effect from 1/04/2015 and will, accordingly, apply to assessment accordingly, apply to assessment year 2015-16 and subsequent 16 and subsequent years.
Thus, CSR expenditure is to be disallowed by new Explanation 2 12. Thus, CSR expenditure is to be disallowed by new Explanation 2 12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head 'Income to section 37(1), while computing Income under the Head 'Income to section 37(1), while computing Income under the Head 'Income form Business and Profession'. form Business and Profession'. Further, clarification regarding clarification regarding impact of impact of Explanation 2 to section 37(1) of the Income Tax Act int section 37(1) of the Income Tax Act int Explanatory Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as Memorandum to The Finance (No.2) Bill, 2014 is as under: *The existing provisions of section 37(1) of the Act provide that *The existing provisions of section 37(1) of the Act provide that *The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in deduction for any expenditure, which is not mentioned specifically in deduction for any expenditure, which is not mentioned specifically in section 30 section 30 to section 36 of the Act, shall be allowed if the same is to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on incurred wholly and exclusively for the purposes of carrying on incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application business or profession. As the CSR expenditure (being an application business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on busin of income) is not incurred for the purposes of carrying on busin of income) is not incurred for the purposes of carrying on business, such expenditure cannot be allowed under the existing provisions of such expenditure cannot be allowed under the existing provisions of such expenditure cannot be allowed under the existing provisions of section 37 of the Income section 37 of the Income-tax Act. Therefore, in order to provide tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes certainty on this issue, it is proposed to clarify that for the purposes certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by of section 37(1) any expenditure incurred by an assessee on the an assessee on the activities relating to corporate social responsibility referred to in activities relating to corporate social responsibility referred to in activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have section 135 of the Companies Act, 2013 shall not be deemed to have section 135 of the Companies Act, 2013 shall not be deemed to have Jamnagar Utilities and Power Pvt. Ltd. Jamnagar Utilities and Power Pvt. Ltd. CO ITA No. 122/M/2024 been incurred for the purpose of business and, hence, shall not be been incurred for the purpose of business and, hence, shall not be been incurred for the purpose of business and, hence, shall not be allowed as deduction under sectio allowed as deduction under section 37. However, the CSR n 37. However, the CSR expenditure which is of the nature described in section 30 to section expenditure which is of the nature described in section 30 to section expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject 36 of the Act shall be allowed deduction under those sections subject 36 of the Act shall be allowed deduction under those sections subject to ultillment of conditions, if any, specified therein." to ultillment of conditions, if any, specified therein."
From the above it is clear that 13. From the above it is clear that under Income tax Act, certain under Income tax Act, certain provisions explicitly state that deductions for expenditure would be provisions explicitly state that deductions for expenditure would be provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, 'Income from allowed while computing income under the head, 'Income from allowed while computing income under the head, 'Income from Business and Profession" to those, who pursue corporate social Business and Profession" to those, who pursue corporate social Business and Profession" to those, who pursue corporate social responsibility projects under foll responsibility projects under following sections. Section 30 provides deduction on repairs, municipal tax and Section 30 provides deduction on repairs, municipal tax and Section 30 provides deduction on repairs, municipal tax and insurance premium insurance premium Section 31, provides deduction on repairs and insurance of plant, Section 31, provides deduction on repairs and insurance of plant, Section 31, provides deduction on repairs and insurance of plant, machinery and furniture Section 32 provides for depreciation on machinery and furniture Section 32 provides for depreciation on machinery and furniture Section 32 provides for depreciation on tangible assets like building, tangible assets like building, machinery, plant, furniture and also on machinery, plant, furniture and also on intangible assets like knowhow, patents, trademarks, licenses. intangible assets like knowhow, patents, trademarks, licenses. intangible assets like knowhow, patents, trademarks, licenses. Section 33 allows development rebate on machinery, plants and Section 33 allows development rebate on machinery, plants and Section 33 allows development rebate on machinery, plants and ships. Section 34 states conditions for depreciation and development Section 34 states conditions for depreciation and development Section 34 states conditions for depreciation and development rebate. Section 35 gra Section 35 grants deduction on expenditure for scientific research nts deduction on expenditure for scientific research and knowledge extension in natural and applied sciences under and knowledge extension in natural and applied sciences under and knowledge extension in natural and applied sciences under agriculture, animal husbandry and fisheries. Payment to approved agriculture, animal husbandry and fisheries. Payment to approved agriculture, animal husbandry and fisheries. Payment to approved universities/research institutions or company also qualifies for universities/research institutions or company also qualifies for universities/research institutions or company also qualifies for deduction. deduction. In-house R&D is eligible for deduction, under this section. house R&D is eligible for deduction, under this section. Section 35CCD provides deduction for skill development projects, Section 35CCD provides deduction for skill development projects, Section 35CCD provides deduction for skill development projects, which constitute the flagship mission of the present Government. which constitute the flagship mission of the present Government. which constitute the flagship mission of the present Government. Section 36 provides deduction regarding insurance premium on Section 36 provides deduction regarding insurance premium on Section 36 provides deduction regarding insurance premium on stock, health of employees, loans or commission for employees, , health of employees, loans or commission for employees, , health of employees, loans or commission for employees, interest on borrowed capital, employer contribution to provident interest on borrowed capital, employer contribution to provident interest on borrowed capital, employer contribution to provident fund, gratuity and payment of security transaction tax. fund, gratuity and payment of security transaction tax. fund, gratuity and payment of security transaction tax. Income Tax Act, under section 80G, forming part of Chapter VIA, provides for Income Tax Act, under section 80G, forming part of Chapter VIA, provides for Income Tax Act, under section 80G, forming part of Chapter VIA, provides for deductions for computing taxable income as under: deductions for computing taxable income as under: Section 80G(2) provides for sums expended by an assessee as Section 80G(2) provides for sums expended by an assessee as Section 80G(2) provides for sums expended by an assessee as donations against which deduction is available. donations against which deduction is available.
1. Certain donations, give 100% deduction, without any qualifying limit 1. Certain donations, give 100% deduction, without any qualifying limit 1. Certain donations, give 100% deduction, without any qualifying limit like Prime Minister's Nati like Prime Minister's National Relief Fund, National Defence Fund, onal Relief Fund, National Defence Fund, National Illness Assistance Fund etc., specified under section 80G(I) (i) National Illness Assistance Fund etc., specified under section 80G(I) (i) National Illness Assistance Fund etc., specified under section 80G(I) (i) 2. Donations with 50% deduction are also available under Section 80G 2. Donations with 50% deduction are also available under Section 80G 2. Donations with 50% deduction are also available under Section 80G for all those sums that do not fall under section 80G(1)i). for all those sums that do not fall under section 80G(1)i). for all those sums that do not fall under section 80G(1)i).
Jamnagar Utilities and Power Pvt. Ltd. Jamnagar Utilities and Power Pvt. Ltd. CO ITA No. 122/M/2024 Under Section 80G(2) (ilihk) and (ilihl) there are specific exclusion of certain n 80G(2) (ilihk) and (ilihl) there are specific exclusion of certain n 80G(2) (ilihk) and (ilihl) there are specific exclusion of certain payments, that are part ofCR responsibility, not eligible for payments, that are part ofCR responsibility, not eligible for payments, that are part ofCR responsibility, not eligible for deduction u/s80G.
In our view, expenditure incurred under section 30 to 36 are 1. In our view, expenditure incurred under section 30 to 36 are 1. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the claimed while computing income under the head, 'Income form head, 'Income form Business and Profession", where as monies spent under section 80G Business and Profession", where as monies spent under section 80G Business and Profession", where as monies spent under section 80G ate claimed while computing "Total Taxable income" in the hands of ate claimed while computing "Total Taxable income" in the hands of ate claimed while computing "Total Taxable income" in the hands of assessee. The point of claim under these provisions are different. assessee. The point of claim under these provisions are different. assessee. The point of claim under these provisions are different.
Further, intention of legislature 2. Further, intention of legislature is very clear and unambiguous, is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from expenditure incurred under section 30 to 36 are excluded from expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically Explanation 2 to section 37(1) of the Act, they are specifically Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. excluded in clarification issued. There is no restriction on an There is no restriction on an expenditure being claimed un expenditure being claimed under above sections to be exempt, as der above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the long as it satisfies necessary conditions under section 30 to 36 of the long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, "Income from Business Act, for computing income under the head, "Income from Business Act, for computing income under the head, "Income from Business and Profession ". and Profession ".
For claiming benefit under section 80G, deductions are 3. For claiming benefit under section 80G, deductions are 3. For claiming benefit under section 80G, deductions are considered at the stage of computing "Total taxable income". Even if any at the stage of computing "Total taxable income". Even if any at the stage of computing "Total taxable income". Even if any payments under section 80G forms part of CSR payments(keeping in payments under section 80G forms part of CSR payments(keeping in payments under section 80G forms part of CSR payments(keeping in mind ineligible deduction expressly provided u/s.80G), the same mind ineligible deduction expressly provided u/s.80G), the same mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income u would already stand excluded while computing, Income u would already stand excluded while computing, Income under the head, "Income form Business and Profession". The effect of such head, "Income form Business and Profession". The effect of such head, "Income form Business and Profession". The effect of such disallowance would lead to increase in Business income. Thereafter disallowance would lead to increase in Business income. Thereafter disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing "Total benefit accruing to assessee under Chapter VIA for computing "Total benefit accruing to assessee under Chapter VIA for computing "Total Taxable Income" cannot be denied to assessee, su Taxable Income" cannot be denied to assessee, subject to fulfillment bject to fulfillment of necessary conditions therein. of necessary conditions therein.
We therefore do not agree with arguments advanced by Ld. Sr. DR 4. We therefore do not agree with arguments advanced by Ld. Sr. DR 4. We therefore do not agree with arguments advanced by Ld. Sr. DR 5. In present facts of case, Ld.AR submitted that all payments 5. In present facts of case, Ld.AR submitted that all payments 5. 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 forming part of CSR does not form part of profit and loss account for forming part of CSR does not form part of profit and loss account for computing Income under the head, "Income from Business and mputing Income under the head, "Income from Business and mputing Income under the head, "Income from Business and Professionit has been submitted that some payments forming part of Professionit has been submitted that some payments forming part of Professionit has been submitted that some payments forming part of GSR were claimed as deduction under section 80G of the Act, for GSR were claimed as deduction under section 80G of the Act, for GSR were claimed as deduction under section 80G of the Act, for computing "Total taxable income", which has been disallowed by computing "Total taxable income", which has been disallowed by computing "Total taxable income", which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit rities below. In our view, assessee cannot be denied the benefit rities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing 'Total of claim under Chapter VI A, which is considered for computing 'Total of claim under Chapter VI A, which is considered for computing 'Total Taxable Income". If assessee is denied this benefit, merely because Taxable Income". If assessee is denied this benefit, merely because Taxable Income". If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double such payment forms part of CSR, would lead to double such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature. which is not the intention of Legislature.
1. On the basis of above discussion, in our view, authorities below 1. On the basis of above discussion, in our view, authorities below 1. On the basis of above discussion, in our view, authorities below have erred in have erred in denying claim of assessee under section 80G of the Act. 77e denying claim of assessee under section 80G of the Act. 77e also note that authorities below have not verified natur also note that authorities below have not verified nature of Jamnagar Utilities and Power Pvt. Ltd. Jamnagar Utilities and Power Pvt. Ltd. CO ITA No. 122/M/2024 payments qualifying exemption under section 80G of the Act payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act. and quantum of eligibility as per section 80G(1) of the Act.
1. Under such circumstances, we are remitting the issue back to 1. Under such circumstances, we are remitting the issue back to 1. Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under Ld.AO for verifying conditions necessary to claim deduction under Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. ection 80G of the Act. Assessee is directed to file all requisite details Assessee is directed to file all requisite details in order to substantiate its claim before Ld.AO. Ld.AO is then in order to substantiate its claim before Ld.AO. Ld.AO is then in order to substantiate its claim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility. Accordingly directed to grant deduction to the extent of eligibility. Accordingly directed to grant deduction to the extent of eligibility. Accordingly grounds raised by assessee stands allowed for sta grounds raised by assessee stands allowed for statistical purposes. tistical purposes. In view of the decision of jurisdictional Hon'ble Mumbai ITAT in the case of In view of the decision of jurisdictional Hon'ble Mumbai ITAT in the case of In view of the decision of jurisdictional Hon'ble Mumbai ITAT in the case of M/s. M/s. M/s. Reliance Reliance Reliance Industries Industries Industries Ltd. Ltd. Ltd. V.DCIT[2023](ITA V.DCIT[2023](ITA V.DCIT[2023](ITA NO.2587 NO.2587 NO.2587 & & & 2588/MUM/2022) and Naik Seafoods Pvt. Ltd. V.Pr.CIT 2588/MUM/2022) and Naik Seafoods Pvt. Ltd. V.Pr.CIT 2588/MUM/2022) and Naik Seafoods Pvt. Ltd. V.Pr.CIT-2[2021]) it is held that AO ha No.490/MUM/2021, it is held that AO has erred in denying claim of the s erred in denying claim of the appellant under section 80G of the Act. It is also observed that assessing appellant under section 80G of the Act. It is also observed that assessing appellant under section 80G of the Act. It is also observed that assessing officer has not verified nature of payments qualifying exemption u/s.80G of officer has not verified nature of payments qualifying exemption u/s.80G of officer has not verified nature of payments qualifying exemption u/s.80G of the Act and quantum of eligibility as per section 80G(1) of the Act. Ther the Act and quantum of eligibility as per section 80G(1) of the Act. Ther the Act and quantum of eligibility as per section 80G(1) of the Act. Therefore, AO is directed to verify conditions necessary to claim deductión u/s.80G of AO is directed to verify conditions necessary to claim deductión u/s.80G of AO is directed to verify conditions necessary to claim deductión u/s.80G of the Act and grant deduction to the extent of eligibility. Accordingly, this the Act and grant deduction to the extent of eligibility. Accordingly, this the Act and grant deduction to the extent of eligibility. Accordingly, this ground stands allowed for statistical purposes. ground stands allowed for statistical purposes.” 5.1 We find that the Ld. CIT(A) has followed the We find that the Ld. CIT(A) has followed the decision of the Co decision of the Co- ordinate Bench on the issue in dispute. Further, we find that the ordinate Bench on the issue in dispute. Further, we find that the ordinate Bench on the issue in dispute. Further, we find that the assessee has fulfilled all the conditions for deduction u/s 80G of assessee has fulfilled all the conditions for deduction u/s 80G of assessee has fulfilled all the conditions for deduction u/s 80G of the Act in respect of deduction claimed the Act in respect of deduction claimed. We also note there is no e also note there is no specific bar in section 80G of the Ac ar in section 80G of the Act for claiming deduction in t for claiming deduction in respect of CSR expenditure if respect of CSR expenditure if an assessee otherwise otherwise fulfill all the requirement of section 80G of the Act. In view of the above, requirement of section 80G of the Act. In view of the above, requirement of section 80G of the Act. In view of the above, respectfully following the finding of the Co respectfully following the finding of the Co-ordinate Bench of ITAT ordinate Bench of ITAT on the issue in disp on the issue in dispute referred by the Ld. CIT(A), w d by the Ld. CIT(A), we uphold the finding of the Ld. CIT(A) on the issue in dispute. The ground of finding of the Ld. CIT(A) on the issue in dispute. The ground of finding of the Ld. CIT(A) on the issue in dispute. The ground of appeal of the Revenue is accordingly dismissed. appeal of the Revenue is accordingly dismissed.
6. The ground raised by the assessee being in support of order of The ground raised by the assessee being in support of order of The ground raised by the assessee being in support of order of the Ld. CIT(A) and since we have already the Ld. CIT(A) and since we have already upheld the finding of the upheld the finding of the Jamnagar Utilities and Power Pvt. Ltd. Jamnagar Utilities and Power Pvt. Ltd. CO Ld. CIT(A) and dismissed the appeal of the R Ld. CIT(A) and dismissed the appeal of the Revenue, t evenue, the ground raised by the assessee raised by the assessee is rendered academic. Accordingly, we are rendered academic. Accordingly, we are not required to adjudicate upon the same. not required to adjudicate upon the same.
In the result, both the appeal of the Revenue and the Cr In the result, both the appeal of the Revenue and the Cr In the result, both the appeal of the Revenue and the Cross- objection of the assessee are dismissed. objection of the assessee are dismissed.
Order pronounced in the open Court on nounced in the open Court on 24/07/2024. /07/2024.