AGILENT TECHNOLOGIES (INTERNATIONAL) PRIVATE LIMITED,MANESAR, GURGAON vs. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1), GURGAON

PER VIMAL KUMAR, JUDICIAL MEMBER:

The assessee’s appeal is against final Assessment Order dated 19.07.2024
of Learned Assessing Officer/Assessment Unit, Delhi (hereinafter referred as “Ld. AO”) under Section 143(3) read with section 144C(13) and 144B of the Income Tax Act, 1961 (hereinafter referred as “the Act”) for assessment year
2020-21. Assessee by:
S/Shri Mayank Khannam, Akhil Goel
& Vishal Goel, ARs
Department by:
Shri Dharm Veer Singh, CIT (DR)
Date of Hearing:
30.07.2025
Date of pronouncement:
17.09.2025
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Notice u/s 142(1)
24.11.2021
06.12.2021 Received
06.12.2021

Notice u/s 142(1)
13.10.2022
20.10.2022 Received
20.10.2022
21.10.2022

Notice u/s 142(1)
28.12.2022
04.01.2023 Received
04.01.2023
19.01.2023

Notice u/s 142(1)
30.05.2022
14.06.2023 Received
06.07.2023
19.07.2023
Adjourn ment in hearing
Full

144C order
29.09.2023

DRP order
20.06.2024

its Associated Enterprises (AE) was sent to the TPO on 21.01.2022 through the AO- Technical Unit after getting approval of Ld. PCIT(AU) on 19.01.2022. The said reference was received by the TPΟ on 21.01.2022 from the AO-Technical
Unit u/s 92CA(1) of the Act. Ld.TPO issued notice/show-cause-notice to assessee and passed order under Section 92CA(3) of the Act on 21.07.2023. On receipt of order of Ld. TPO, a show-cause-notice was issued to assessee on 18.09.2023 proposing to make addition to its total income as proposed by the Ld. TPO. The assessee filed reply on 21.09.2023. On completion of proceedings, Ld. AO vide order dated 19.07.2024 made additions of Rs.18,95,75,059/- and Rs.36,29,883/-.
4. Being aggrieved, the appellant/assessee preferred present appeal.
5. Learned Authorised Representative for the appellant/assessee regarding ground of appeal no.2, submitted that Ld. AO/TPO erred in enhancing the income of the Appellant by INR 187,980,588/- pertaining to provision of information technology enabled services ("ITeS") and INR 1,558,293/- pertaining to provision of software development services (" S"), to associated enterprises ("AEs") that do not satisfy the arm's length principle envisaged under the Act.
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INDIA PRIVATE LIMITED'S NIC code is 7290 (which is part of its CIN). As per the NIC code, it is inolved in Other computer related activities (for example maintenance of websites of other firms/ creation of multimedia presentations for other firms. etc.).
7. From examination of record in light of above submissions, it is crystal clear that Ld. AO while passing final assessment order made adjustment of Rs.58,83,45,812/- prior to the appellate order of Ld. TPO dated 29.07.204. Ld.
TPO had deleted the entire adjustment with respect to S segment and has reduced the adjustment in the ITeS segment and adjustment made pertaining to interest on outstanding receivables. Appellant filed rectification application dated 13.08.2024 at page 232 and 238 of paper books against final assessment order.
7.1
Ld. TPO took six comparables rejecting the comparables which were finally included in the final list. Ld. TPO wrongly rejected the comparables to be taken by appellant/assessed.
7.2
In assessment year 2018-19 in appellant’s case in ITANo.6727/Del/2019
for assessment year 2015-16 in order dated 16.06.2023. The Hon’ble ITAT observed as under:
“21. In ground no. 4, the assessee has challenged the adjustment of Rs.11,45,642/- proposed by the TPO on account of interest on outstanding receivables from the AEs.
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appreciating that Hon'ble Bench that in the Appellant's own case for AY 2018-
19 (refer to page no. 9 to 12 of Annexure 5 for the ITAT order passed in Appellant's own case for AY 2018-19).
9. Learned Authorized Representative for the Department of Revenue relied on orders of final assessment order.
10. From examination of record in light of aforesaid rival contentions, it is crystal clear that Ld. AO in final assessment order rejected documents claimed under Section 80G of the Act amounting to Rs.36,79,883/-.
10.1 The Co-ordinate Bench in ITA No.1171/Del/2022 titled as “Agilent
Technologies (International) P. Ltd. Vs. ACIT” decided on 26.03.2025 in paras
8 to 13. “8. As with regard to the rejecting of deduction claim under section 80G of the Act amounting to INR 55,41,779, the Ld. AR submitted that the Appellant as part of its Corporate Social Responsibility (‘CSR’) contributed INR 57,30,209 and disallowed the same in the computation of income under section 37 of the Act. Further, to arrive at the net taxable income, the Appellant claimed INR 55,41,779, pertaining to above contribution, as deduction under section 80G of the Act. The AO, upon directions of DRP, disallowed above deduction of INR 55,41,779 claimed
8 under section 80G of the Act. It was submitted that there is no requirement under section 80G of the Act for the contribution to be voluntary. Even if that condition is read into the section, the term voluntary must be seen contextually. There are no compulsions to contribute to a particular charitable institution under the Company Act.
The act of contributing to a particular institution/ cause cannot be said to be mandated by law, which merely requires the company to make a payment towards any of the prescribed activities/ institutions. The Appellant is given a choice to contribute towards any of the prescribed
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CSR activities, and hence, it cannot be said that the Appellant is doing it out of compulsion, without its free will or is being coerced to make the said contribution to any eligible institution.
9. It was submitted that the provisions of section 80G of the Act do not restrict the deduction in relation to the amount contributed towards CSR except for the contributions made under sub-clauses (iiihk) (Swachh
Bharat Kosh) & (iiihl) [Clean Ganga Fund] of section 80G(2)(a) of the Act. Apart from amounts covered under sub-clauses (iiihk) & (iiihl) of section 80G(2)(a) of the Act, there is no restriction under section 80G of the Act on claiming eligible amounts as deduction under the Act from the taxable income, even though such amounts end up being compliant with CSR provisions under Cos. Act. Ld. AR has placed upon the decisions of Delhi Bench of ITAT in the case of Interglobe Technology Quotient
Private Limited vs. ACIT [2024] 163 taxmann.com 542 and other few other judgments.
10. In regard to the ground no. 3 with its sub-grounds we find that this issue has been extensively dealt by co-ordinate bench in ITA No.
95/DEL/2024, case titled Interglobe Technology Quotient Private Limited
(supra), where one of us, judicial member, was also in quorum, and relevant part is reproduced as below:

“7.1 Further, we like to observe that as a matter of fact as per
Section 135 of the Companies Act, 2013 (‘CA 2013), the qualifying Companies as mentioned therein are required to spend certain percentage of profits of last three years on activities pertaining to Corporate Social Responsibility (CSR). The expenditure on CSR, could be by way of expenditure on projects directly undertaken by said companies, such as setting up and running schools, social business projects, etc. Such expenditure would include expenditure otherwise falling for consideration under section 37(1) of the Act. On the other hand, companies, instead of undertaking or participating directly in a project, may choose to give donations to institutions that are engaged in undertaking such projects, which is also a recognized way of compliance of CSR obligation.
7.2 The assessing officer and CIT(A) have relied upon General
Circular 14/2021 dated 25.08.2021 issued by MCA and “Explanatory Notes to the provisions of the Finance (No.2) Act,
2014” to hold that donations made as part of CSR expenditure are 9

not allowable as deduction. The foundation of their reasoning being that the donation is voluntary in nature, while CSR expenditures are under statutory obligations.
7.3 As we take notice of the fact that Parliament legislated that CSR expenses would not be eligible for deduction as business expenditure under section 37 of the Act by inserting Explanation 2
to section 37(1) vide the Finance (No.2) Act, 2014 (applicable from the assessment year 2015-16), which provided that any expenditure incurred by an assessee on the activities relating to CSR referred to in section 135 of the CA 2013, shall not be deemed to be an expenditure incurred by an assessee for the purpose of business or profession and shall not be allowed as deduction under section 37(1) of the IT Act. The intent of Parliament in bringing the aforesaid provision is given in the Explanatory Memorandum to the Finance (No.2) Bill, 2014 and is reproduced as under;
“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.” (emphasis supplied).
7.4 The aforesaid explanatory memorandum categorically expresses the legislative intent and the rationale of disallowance of CSR expenditure referred to in section 135 of the Companies Act, that such expenditure is application of income and not incurred for the purposes of business. We are of considered view that this in itself justifies the grant of deduction u/s 80G. As CSR expenditure is application of income of the assessee under the Income Tax Act, that means it continues to form part of the Total income of the assessee. Section 80G(1) of the Act provides that in computing the total income of an assessee, there shall be deducted, in accordance with the provisions of this section, such sum paid by the assessee in the previous year as a donation. Further, section 80G(2) lists down the sums on which deduction shall be allowed to the assessee.
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Section 80G falls in Chapter VIA, which comes into play only after the gross total income has been computed by applying the computation provisions under various heads of income, including the Explanation 2 to section 37(1) of the Act. Thus, there is no correlation between suo-moto disallowance in section 37(1) and claim of deduction under section 80G of the Act.
7.5 As with regard to the reasoning that CSR expenditure are not voluntary but mandatory in nature due to penal consequences, we are of considered view that voluntary nature of donation is by nature of fact that it is not on the basis of any reciprocal promise of donee. The CSR expenditures are also without any reciprocal commitment from beneficiary being philanthropic in nature. The Act permits deduction of donations as per Section 80G of the Act, even though, assessee is not gaining any benefit out of any reciprocity from donee. Similar is the case of CSR expenditure.
Thus the reasoning of learned Tax Authority, the CSR expenditure is mandatory, does not justify disallowance of these expenditures u/s 80G, if other conditions of section 80G are fulfilled. There is no allegation of Revenue that other conditions of Section 80G are not fulfilled. We, thus sustain the ground.”
11. Thus we are of considered view that ld. Tax authorities below have fallen in error to deny benefit of Section 80G to the assessee.
The ground is sustained”.

Order pronounced in the open court on 17th September, 2025. (S RIFAUR RAHMAN) (VIMAL KUMAR)

ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 17 /09/2025
Mohan Lal