ABHAY ISPAT (INDIA) PRIVATE LIMITED,MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX OFFICER, MUMBAI - 6, MUMBAI

ITA 3575/MUM/2025

AI Insights

The case revolves around the revisionary proceedings initiated by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961, concerning the deduction claimed under section 80G for Corporate Social Responsibility (CSR) expenses by Abhay Ispat (India) Pvt. Ltd. The PCIT set aside the original assessment order, which had accepted the assessee's return and allowed the deduction, citing that the CSR expenditure, being statutorily mandated, could not be considered a voluntary donation under section 80G. The Tribunal, however, found that the issue was debatable and had been decided in favor of the taxpayer in various precedents, thus quashing the PCIT's order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714473 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2020-2021
• Other Referred Cases: FDC Ltd. vs. PCIT, Allegis Services (India) (P.) Ltd. vs. Asstt. CIT, JMS Mining (P.) Ltd. vs. Pr.CIT, First American (India) (P.) Ltd. vs. Asstt. CIT, AluboundDacs (India) P. Ltd., Agilent Technology (International) Pvt. Ltd. vs. ACIT, CIT vs. Sikka Ports and Terminals Ltd., PCIT vs. Postal Gujarat Power Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: GAURAV KABRA
• Keywords: Set aside; Business income; Depreciation; Revision of order; Ineligible deduction
• Section: 143(3); 142(1); 263; 32; 37; 37(1); 80G

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.3575/MUM/2025 Assessment Year : 2020-21 Abhay Ispat (India) Pvt. Ltd., 304, Platinum, Jawahar Road Ghatkopar €, Mumbai - 400077 ……………. Appellant PAN: AADCA6167C v/s Principal Commissioner of Income Tax - 6, Room No.501, 5th Floor, Aayakar Bhavan, Maharishi Karve Road, Mumbai - 400020 ……………. Respondent Assessee by : Shri Gaurav Kabra Revenue by : Shri Rajesh Kumar Yadav, CIT-DR Date of Hearing – 31/07/2025 Date of Order – 05/08/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 22/03/2025, passed under section 263 of the Income Tax Act, 1961 (“the Act”) by the learned Principal Commissioner of Income Tax, Mumbai - 6 [“learned PCIT”], for the assessment year 2020-21. 2. In this appeal, the assessee has raised the following grounds: “1. On the fact and circumstances of the case as well as in Law, the Learned Principal Commissioner of Income Tax (PCIT) has erred in initiating proceedings U/s.263 of the Income Tax Act, 1961 (the Act) dated 03.03.2025 Printed from counselvise.com ITA No.3575/Mum/2025 (A.Y. 2020-21) 2 and passing an order U/s 263 of the Act, without considering the facts & Circumstances of the case. 2. On the fact and circumstances of the case as well as in Law, the Learned Principal CIT has erred in considering the order passed u/s. 143(3) r.w.s. 144B of the Income Tax Act, 1961 by the Learned Assessing officer as erroneous and prejudicial to the interest of the revenue, without appreciating the facts and circumstances of the case. 3. On the fact and circumstances of the case as well as in Law, the Learned Principal CIT has erred in set aside the assessment order passed by the Learned Assessing Officer, without considering the facts and circumstances of the case. 4. On the fact and circumstances of the case as well as in Law, the Learned Principal CIT has erred in directing the Learned Assessing Officer to make enquiries about the claim of section 80G deduction out of CSR expenses, without considering the facts and circumstances of the case. 5. The appellant craves leave to add, amend, alter or delete the said ground of appeal. 6. On the fact and circumstances of the case as well as in Law, the Learned Principal CIT has erred in passing Revision Order u/s.263 of the Income Tax Act, 1961 for the assessment order u/s. 143(3) r.w.s. 144B of the Act, 1961, passed by the Learned Assessing Officer after making adequate enquiries and application of mind, without considering the facts and circumstances of the case.” 3. The solitary grievance of the assessee is against the invocation of the revisionary proceedings under section 263 of the Act by the learned PCIT on the issue of deduction claimed under section 80G of the Act in respect of Corporate Social Responsibility (“CSR”) expenses. 4. The brief facts of the case as emanating from the record are: The assessee is engaged in wholesale and retail trade. For the year under consideration, the assessee filed its return of income declaring a total income of ₹ 16,63,88,490/-. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) were issued and served on the assessee. After considering the submissions of the assessee in response to the statutory notices, the assessment was concluded Printed from counselvise.com ITA No.3575/Mum/2025 (A.Y. 2020-21) 3 vide order dated 20.09.2022 passed under section 143(3) r.w.s. 144B of the Act accepting the return of income filed by the assessee. 5. Subsequently, on the basis of objections raised by the internal audit, notice under section 263 of the Act was issued on 03.03.2025 on the basis that vide order dated 20.09.2022 passed under section 143(3) r.w.s 144B of the Act the assessment was concluded accepting the return of income and allowing the deduction claimed by the assessee under section 80G of the Act in respect of CSR expenses without making any examination on the said issue. In response, the assessee submitted that it spent ₹ 1,55,000/- towards CSR, which was suo-moto disallowed under section 37(1) of the Act. Further, the assessee submitted that it claimed deduction under section 80G of the Act to the tune of ₹ 77,500/- (being 50% of ₹ 1,55,000/-). As per the assessee, the aforesaid payment as donation was made to various foundations, trusts, clubs, etc., and thus the same is eligible for deduction under section 80G of the Act. Further, the assessee submitted that except section 37, there is no other provision in the Act which disallows, restricts or prohibits the claim of any deduction for CSR if the CSR expenditure is otherwise eligible for deduction. Thus, the assessee submitted that the CSR expenditure is eligible for deduction under section 80G of the Act, even if the expenditure was disallowed under section 37(1) of the Act by virtue of the provisions of Explanation - 2 to section 37 of the Act. In support of its submission, the assessee placed reliance upon the following decisions, wherein deduction under section 80G of the Act was allowed in respect of CSR expenditure: - a. FDC Ltd. vs. PCIT, 157 taxmann.com 387 (Mumbai – Trib) Printed from counselvise.com ITA No.3575/Mum/2025 (A.Y. 2020-21) 4 b. Allegis Services (India) (P .) Ltd. vs. Asstt. CIT, [ITA No.1693 (Bang.) of 2019 c. JMS Mining (P .) Ltd. vs. Pr.CIT (2021) 130 taxmann.com 118 (Kol. – Trib) d. First American (India) (P .) Ltd. vs. Asstt. CIT [ITA No.1762 (Bang.) of 2019 dated 29.04.2020. e. AluboundDacs (India) P . Ltd. 163 Taxmann.com 536 (Mumbai – Trib). 6. The learned PCIT, vide impugned order, disagreed with the submissions of the assessee and held that the CSR expenditure, being statutorily mandated, cannot be considered as a voluntary donation under section 80G of the Act. The learned PCIT also placed reliance upon the decision of the Co- ordinate Bench of the Tribunal in Agilent Technology (International) Pvt. Ltd. vs. ACIT, reported in (2024) 160 taxmann.com 238 (Delhi – Trib), wherein CSR contribution was held to be not allowable as deduction under section 80G of the Act as the same lacks the voluntariness required to qualify as donation under section 80G of the Act. Accordingly, the learned PCIT held that the assessment order dated 20.09.2022 passed under section 143(3) r.w.s. 144B of the Act is erroneous insofar as it is prejudicial to the interests of the Revenue. Accordingly, the learned PCIT set aside the assessment order on the issue of deduction claimed under section 80G of the Act in respect of CSR expenditure and directed the AO to make an enquiry on this issue after providing an opportunity of hearing to the assessee. Being aggrieved, the assessee is in appeal before us. 7. During the hearing, the learned Authorised Representative (“learned AR”) submitted that all the details pertaining to the claim of deduction under section 80G of the Act in respect of CSR expenditure were filed by the assessee before the learned PCIT in response to the notice under section 263 Printed from counselvise.com ITA No.3575/Mum/2025 (A.Y. 2020-21) 5 of the Act. However, the learned PCIT did not point out any defect in the details so filed by the assessee. The learned AR submitted that merely on the basis that CSR expenditure is not voluntary in nature, the learned PCIT set aside the assessment order and held the same to be erroneous and prejudicial to the interest of the revenue. Further, the learned AR submitted that this issue is no longer res integra and has been decided in favour of the taxpayer by various decisions of the Coordinate Bench of the Tribunal. Accordingly, the learned AR submitted that even though the Delhi Bench of the Tribunal has taken a view in favour of the Revenue, the same only leads to the conclusion that this issue is debatable, and therefore, outside the purview of the revisionary proceedings under section 263 of the Act. 8. On the other hand, the learned Departmental Representative (“learned DR”), vehemently relying upon the impugned order, submitted that the AO while passing the assessment order did not make any inquiry on this issue and passed the assessment order accepting the return of income, allowing the claim of deduction made by the assessee under section 80G of the Act in respect of CSR expenditure. Thus, the learned DR submitted that the assessment order was passed without making inquiries or verification which should have been made, and therefore, the assessment order is erroneous insofar as it is prejudicial to the interest of the revenue. 9. We have considered the submissions of both sides and perused the material available on record. In the present case, the assessee incurred expenditure of ₹ 1,55,000/- towards CSR and disallowed the same while computing its income under the head “income from business” in terms of Printed from counselvise.com ITA No.3575/Mum/2025 (A.Y. 2020-21) 6 provisions of Explanation – 2 to section 37(1) of the Act. However, while computing the deduction under section 80G of the Act, the assessee claimed a deduction of ₹ 77,500/- (50% of ₹ 1,55,000/-) being the CSR expenditure covered under the provisions of section 80G of the Act. Thus, undisputedly, the assessee has not claimed the CSR expenditure under section 37(1) of the Act, and its claim is only restricted to section 80G of the Act. It is evident from the record that the learned PCIT, on the basis that the said expenditure was incurred voluntarily and therefore cannot be called a donation, initiated the revisionary proceedings under section 263 of the Act. We find that while disagreeing with the submissions of the assessee and setting aside the assessment order, the learned PCIT, vide impugned order, placed reliance upon the decision of the Delhi Bench of the Tribunal in Agilent technologies (International) Pvt. Ltd. and held that for a payment to be considered for deduction under section 80G of the Act, the same should be voluntary in nature, unlike in the present case where the payment was made in compliance of the provisions of the Companies Act, 2013. 10. We find that the Coordinate Bench of the Tribunal in CIT vs. Sikka Ports and Terminals Ltd., reported in (2025) 173 taxmann.com 366 (Mum – Trib), after considering the decision placed reliance upon by the learned PCIT in Agilent Technologies (International) Pvt. Ltd. (supra), observed as follows: - “7. Therefore to examine if CSR spending of the assessee would be a donation it is essential to examine whether the donations given by the assessee to M/s. Reliance Foundation and M/s Shyam Kothari Foundation without any material return and without any consideration and whether it was a grant for quid pro quo. It is not the case of the revenue that the assessee has made contributions to these institutions with an intention get something in return. The only contention of the revenue is that the contributions are made as part of a mandate and not voluntary. However, the Hon'ble Supreme Court in the above Printed from counselvise.com ITA No.3575/Mum/2025 (A.Y. 2020-21) 7 case has laid down the basic principle that a payment made without any material return and without any consideration and not for quid pro quo is a donation. Therefore in our considered view, the payment made whether voluntarily or as part of a mandate does not negate the intention of the contribution made. The reliance placed by the Id DR on the decision of Agilent Technologies (International) Pvt. Ltd (supra) is factually distinguishable. The DRP whose order was upheld in the said case, had placed reliance on the decision of the Hon'ble High Court in the case of DCIT v. Hindustan Darr Oliver Ltd. (1994) 45 TTJ Mumbai 552 where the payment made was held as not a donation since it was found that the intention behind making the donation was to get reserved seats in the college run by the institute to whom the payments are made as part of SR spending. As already mentioned, the revenue is not contending that the assessee in the present case has made payments to get something material in return.” 11. Further, we find that in Allegis Services (India) Private Ltd. V/s ACIT, in ITA No. 1693/Bang./2019, the deduction in respect of CSR expenditure under section 80G of the Act was objected to on a similar basis as in the present case. While deciding the issue in favour of the taxpayer, the Bangalore Bench of the Tribunal, vide order dated 29/04/2020, observed as follows: - \"We have perused submissions advanced by both sides in light of records placed before us. 10. Section 135 of Companies Act, 2013 requires companies with CSR obligations, with effect from 01/04/2014. Finance (No.2) Act, 2014 inserted new Explanation 2 to sub- section (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 activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. 11. This amendment will take effect from 1/04/2015 and will, accordingly, apply to assessment year 2015-16 and subsequent years. 12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head Income Business and Profession. Further, clarification regarding of Explanation 2 to section 37(1) of the Income Tax Act in Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as under: \"The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such Printed from counselvise.com ITA No.3575/Mum/2025 (A.Y. 2020-21) 8 expenditure cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clare that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein.\" 13. From the above it is clear that under Income tax Act, certain provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, 'Income from Business and Profession\" to those, who pursue corporate social responsibility projects under following sections.  Section 30 provides deduction on repairs, municipal tax and insurance premiums.  Section 31, provides deduction on repairs and insurance of plant, machinery and furniture.  Section 32 provides for depreciation on tangible assets like building, machinery, plant, furniture and also on intangible assets like know-how, patents, trademarks, licenses.  Section 33 allows development rebate on machinery, plants and ships.  Section 34 states conditions for depreciation and development rebate.  Section 35 grants deduction on expenditure for scientific research and knowledge extension in natural and applied sciences under agriculture, animal husbandry and fisheries. Payment to approved universities/research institutions or company also qualifies for deduction.  In-house R&D is eligible for deduction, under this section.  Section 35CCD provides deduction for skill development projects, which constitute the flagship mission of the present Government.  Section 36 provides deduction regarding insurance premium on stock, health of employees, loans or commission for employees, interest on borrowed capital, employer contribution to provident fund, gratuity and payment of security transaction tax. Income Tax Act, under section 80G, forming part of Chapter VIA, provides for deductions for computing taxable income as under:  Section 80G(2) provides for sums expended by an assessee asdonations against which deduction is available. a) Certain donations, give 100% deduction, without any qualifying limit like Prime Minister's National Relief Fund, National Defence Fund, National Illness Assistance Fund etc., specified under section 80G(1)(i). Printed from counselvise.com ITA No.3575/Mum/2025 (A.Y. 2020-21) 9 b) Donations with 50% deduction are also availableunder Section 80G for all those sums that do not fallunder section 80G(1)(i). Under Section 80G(2) (iiihk) and (iiihl) there are specific exclusion of certain payments, that are part of CSR responsibility, not eligible for deduction u/s 80G. 14. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession\", whereas monies spent under section 80G are claimed while computing \"Total Taxable income\" in the hands of assessee. The point of claim under these provisions are different. 15. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, \"Income from Business and Profession\". 16. For claiming benefit under section 80G, deductions are considered at the stage of computing \"Total taxable income\". Even if any payments under section 80G forms part of CSR payments keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, \"Income form Business and Profession\". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing \"Total Taxable Income\" cannot be denied to assessee, subject to fulfillment of necessary conditions therein. 17. We therefore do not agree with arguments advanced by Ld. Sr.DR. 18. 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 computing Income under the head, \"Income from Business and Profession\". It has been submitted that some payments forming part of CSR were claimed as deduction under section80G of the Act, for computing \"Total taxable income\", which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing Total Taxable Income\". If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature. 19. On the basis of above discussion, in our view, authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act. 20. Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate Printed from counselvise.com ITA No.3575/Mum/2025 (A.Y. 2020-21) 10 its claim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility.\" 12. We find that the issue of the allowability of CSR expenditure under section 80G of the Act has been decided in favour of the taxpayer in various other decisions, as relied upon by the assessee in its submissions before the learned PCIT. Therefore, at the outset, it is evident that without going into the question whether there was an examination by the AO during the assessment proceedings, this issue itself is debatable in nature and thus is outside the purview of revisionary powers of the learned PCIT under section 263 of the Act. 13. At this stage, it is relevant to note the following observations of the Hon’ble Bombay High Court in PCIT vs. Postal Gujarat Power Ltd, reported in (2019) 10 taxmann.com 418 (Bom):- “9. The Revenue may be correct in contending that, the Assessing Officer had not carried out detailed enquiries with respect to this claim of assessee. However, this by itself would not be sufficient to enable the Commissioner to exercise revisional power. In a given case, as in the present one, if the answer to the legal issue can be had on the basis of the material already on record, there would be no useful purpose in asking the Assessing Officer to carry out the same exercise and come to the same conclusion as the Tribunal in the present case has. In this context, we do not accept the contention of the Counsel for the Revenue that, answer in law had to come from the Assessing Officer and not the Tribunal. He had argued that even if the Tribunal was right in law, since the Assessing Officer had not come to the said conclusion, the order of the Commissioner should not be disturbed. In our opinion, if the Tribunal has come to the correct conclusions in law and said conclusions are based on materials already on record, it would be futile to reinstate the order of the Commissioner, which in turn, would require the Assessing Officer to carry out the same exercise and axiomatically come to the same conclusion. This line, we are adopting, is within the fold of the requirement of the order of Assessing Officer being 'erroneous. In other words, if it can be demonstrated that the order was not erroneous, the order of revision would, in any case, require an interference. The matter can be looked from slightly different angle. If while examining the order of the A.O. Commissioner notices that, though the A.O. was not examined for claim of the assessee, but the claim itself is legally tenable, would be judicial in exercising and set aside the assessment? The answer may be in the negative” Printed from counselvise.com ITA No.3575/Mum/2025 (A.Y. 2020-21) 11 14. Therefore, in the light of the facts and circumstances of the present case, we are of the considered view that the learned PCIT erred in initiating revisionary proceedings under section 263 of the Act on the issue of deduction claimed under section 80G of the Act in respect of CSR expenses. Accordingly, the impugned order passed by the learned PCIT under section 263 of the Act is quashed, and the grounds raised by the assessee are allowed. 15. In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 05/08/2025 Sd/- OM PRAKASH KANT ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 05/08/2025 Prabhat Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "