E-XPRESS INTERACTIVE SOFTWARE PRIVATE LIMITED,MUMBAI V. PCIT-04, MUMBAI

ITA 1951/MUM/2025

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The case revolves around an appeal by E-xpress Interactive Software Private Limited against the order of the Principal Commissioner of Income Tax (PCIT), which set aside the assessment order allowing deductions for Corporate Social Responsibility (CSR) expenses under section 80G of the Income Tax Act. The PCIT's order was based on the premise that CSR expenses, being non-deductible under section 37, could not be allowed as deductions under section 80G. The Tribunal examined whether the PCIT's exercise of power under section 263 was justified, considering the debatable nature of the issue and the lack of a clear prohibition in section 80G against such deductions when the donations are made to eligible institutions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712174 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2020-2021
• Other Referred Cases: Dalal and Broacha Stock Broking (P.) Ltd. vs. Pr. CIT, ACG Pam Pharma Technologies Private Limited vs. PCIT, Dy. CIT vs. Gabriel India Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RITESH MISRA
• Assessee Lawyers: BHUPENDRA SHAH
• Keywords: Set aside; Revised return; Business expenditure; Assessment record; Charitable institution
• Section: 143(3); 263; 37; 37(1); 80C; 80G

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VP AND SHRI PRABHASH SHANKAR, AM ITA No. 1951/Mum/2025 (Assessment Year: 2020-21) E-xpress Interactive Software Private Limited 401, 4th Floor, Wester Edge 1, Western Express High Way, Borivali (E), Mumbai-400 066 Vs. PCIT-4, Mumbai PAN/GIR No. AAACE 6838 R (Appellant) : (Respondent) Appellant by : Shri Bhupendra Shah Respondent by : Shri Ritesh Misra Date of Hearing : 16.07.2025 Date of Pronouncement : 24.07.2025 O R D E R Per Saktijit Dey, VP: This is an appeal by the assessee against order dated 21.03.2025, passed u/s. 263 of the Income Tax Act, 1961 (‘the Act’) by learned Principal Commissioner of Income Tax (‘ld. PCIT’), Mumbai, pertaining to the assessment year (A.Y.) 2020-21. 2. Briefly stated, the assessee is a resident corporate entity. For the assessment year under dispute, the assessee filed its return of income on 13.02.2021, declaring total income at Rs.7,27,57,020/-. Subsequently, assessee filed a revised return of income on 27.03.2021, declaring total income of Rs.6,95,09,2020/-. 3. In course of assessment proceeding, the Assessing Officer (AO) verified the books of account as well as financial statements of the assessee. Further, he called upon the assessee to furnish details relating to various issues and also justify its allowability. Printed from counselvise.com 2 ITA No. 1951/Mum/2025 (A.Y. 2020-21) E-xpress Interactive Software Private Limited vs. PCIT Ultimately, vide order dated 03.09.2022, the A.O. completed the assessment u/s. 143(3) r.w.s. 144B of the Act, accepting the income offered by the assessee in the revised return of income. 4. Post completion of assessment, as aforesaid, ld. PCIT, as it appears from his impugned order, based on audit memo, called for and examined the assessment records of the assessee with reference to deduction claimed of an amount of Rs.37,56,350/-, towards Corporate Social Responsibility (CSR) expenses. He found that the assessee in the previous year relevant to assessment year under dispute had paid an amount of Rs.32,48,000/- towards donation to Prime Minister's National Relief Fund (PMNRF) and claimed it as deduction u/s. 80G of the Act. He was of the view that CSR expenses, being not deductible u/s. 37 of the Act, could not have been allowed as deduction u/s. 80G of the Act. Therefore, he was of the view that the assessment order passed, allowing the deduction claimed by the assessee u/s. 80C of the Act, is erroneous and prejudicial to the interest of the Revenue, in terms with section 263 of the Act. Accordingly, he issued a show cause notice to the assessee requiring it to show cause as to why the assessment order should not be revised. In response to the show cause notice the assessee filed a detailed reply, vehemently objecting to exercise of jurisdiction u/s. 263 of the Act, on such a highly debatable issue. The ld. PCIT, however, did not find merit in the submissions of the assessee. Hence, he proceeded to pass an order u/s. 263 of the Act, setting aside the assessment order with a direction to A.O. to enquire into assessee’s claim of deduction u/s. 80G of the Act, in respect of CSR expenses and modified the assessment order accordingly. Printed from counselvise.com 3 ITA No. 1951/Mum/2025 (A.Y. 2020-21) E-xpress Interactive Software Private Limited vs. PCIT 5. Before us, ld. Counsel appearing for the assessee submitted, there is no bar for claim of deduction of CSR expenses u/s. 80G of the Act. He submitted, the issue is no more res integra as there are number of judicial precedents, wherein, the issue has been decided in favour of the assessee. In this context, he relied upon the following decisions: i. Dalal and Broacha Stock Broking (P.) Ltd. vs. Pr. CIT [2025] 175 taxmann.com 984 (Mum-Trib.) ii. ACG Pam Pharma Technologies Private Limited vs. PCIT (in ITA No. 2734/Mum/2025 vide order dated 01.07.2025) iii. Dy. CIT vs. Gabriel India Limited (ITA Nos. 1708, 1709 & 1710/Pun/2024 vide order dated 13.03.2025) 6. The learned Departmental Representative ('ld. DR' for short) relied upon the observations of ld. PCIT in order passed u/s. 263 of the Act. 7. We have considered rival submissions and perused the materials on record. We have also applied our mind to the judicial precedents cited before us. Undisputedly, Explanation 2 to section 37(1) of the Act prohibits claim of deduction of CSR expenses as ‘business expense’. However, the issue arising for consideration is - ‘whether donation of CSR expenses to an eligible institution, organization, having approval u/s. 80G of the Act would be eligible for deduction or not?’. On a careful reading of section 80G of the Act, as it stands now, we were unable to locate any prohibition /bar therein with regard to claim of deduction qua CSR expenses donated to an institution/organization having valid approval u/s. 80G of the Act. Therefore, the claim of deduction u/s. 80G of the Act per se cannot be disallowed without any corresponding amendment to section 80G of the Act as is their Explanation 2 to section 37(1) of the Act. In any case of the matter, the issue is highly contentions and debatable. More than one opinion can be formed on such an issue. Printed from counselvise.com 4 ITA No. 1951/Mum/2025 (A.Y. 2020-21) E-xpress Interactive Software Private Limited vs. PCIT Therefore, the view taken by the A.O. in allowing the deduction claimed by the assessee can be considered to be a plausible view. That being the case, though the assessment order may be prejudicial to the interest of the Revenue, however, it cannot be considered as erroneous. More so, considering various decisions of the Tribunal, allowing deduction u/s. 80G of the Act in respect of CSR expenses. 8. One more aspect, which we may advert to is ‘whether the exercise of power u/s. 263 of the Act is independent or at the behest of some other authority/agency. From the impugned order of ld. PCIT, it is manifest that based on audit note, he has exercised the jurisdiction u/s. 263 of the Act. Therefore, in our view, the exercise of power u/s. 263 of the Act in this case is not independent, but at the behest of someone else. This cannot be the intent of section 263 of the Act. Be that as it may, there are plethora of decisions rendered by various benches of the Tribunal holdings that CSR expenses though are not allowable u/s. 37(1) of the Act, however, the assessee can claim deduction u/s. 80G of the Act, if the conditions of that provision in respect of donee institution/organization is fulfilled. In this context, we may gainfully refer to the following observations of the co- ordinate bench in case of Dalal and Broacha Stock Broking (P.) Ltd. vs. Pr. CIT (supra) : 6. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. On careful perusal of assessment order, we find that case was selected for scrutiny on the issue of large amount of donation. No doubt that the assessing officer during the assessment examined the issue and disallowed donation under section 80G to Urvashi Foundations. Though, there is no discussion about the donation to other charitable trust or institution, however the assessing officer has sought details of donations to all about such charitable trust and institution. We find that the assessee also furnished all required details to the assessing officer. Thus, the assessing officer impliedly accepted the donation to such charitable trust or institution. We find that recently Co-ordinate Bench of Mumbai Tribunal in DCIT Vs Gabriel India (2025) 173 taxmann.com 219 (Mum) on similar issue where the assessee–company claimed deduction under section 80G at the rate of 50% of CSR expenses and furnished receipts of donees evidencing eligibility of deduction under section 80G allowed claim of such assessee. The tribunal while allowing relief to the assessee followed various other decisions of the different benches of the Tribunal. The relevant part of the decision if extracted below. “7. After giving a thoughtful consideration to the orders of the authorities below, we are of the considered view that the Coordinate Benches have been consistently taking the Printed from counselvise.com 5 ITA No. 1951/Mum/2025 (A.Y. 2020-21) E-xpress Interactive Software Private Limited vs. PCIT stand that 80G deduction cannot be denied. The relevant findings in the case of Ericsson India Global Services (P) Ltd. (supra), read as under:- \"7. We have considered rival submissions and perused the material on record. We have also applied our mind to case laws cited before us. Undisputedly, expenditure incurred towards CSR is specifically prohibited from being allowed as deduction towards business expenditure by insertion of Explanation - 2 to Section 37(1) of the Act by Finance Act, 2014 w.e.f01.04.2015. However, there is no such Ericsson India Global Services Pvt. Ltd. v. DCIT corresponding amendment to section 80G of the Act. Only condition for claiming deduction under section 80G of the Act as per the existing provision is the institute to which donation is made must have been registered under section 80G of the Act. Once the aforesaid condition is fulfilled, the donor is entitled to avail the deduction. This is also the view expressed by the Coordinate Bench in case of Honda Motorcycle and Scooter India Pvt. Ltd. (supra). The relevant observation are as under: \"17. Apropos the issue of disallowance u/s 80G of the Income-tax Act, 1961 (for short 'the Act') : The assessee made certain donation to approved institutions or funds and claimed 50% of the total donation made as deduction u/s 80G. This amount also formed part of the CSR initiative of the assessee company which amounts to INR 22,81,29,964/-. It is observed that the assessee has duly disallowed CSR expenditure of INR 22,81,29,964/-debited to the statement of profit and loss under section 37 of the Act. DRP rejected the claim of the assessee by saying that the donation is pursuant to the CSR policy of the company and lacks the test of voluntariness as required under section 80G. The AO has disallowed the claim on the ground that anything donation over and above the CSR u/s 80G will be only allowed as the CSR expense is not an allowable expense u/s 37 of the Act. Ld. Counsel of the assessee placed reliance on the following decisions :- JMS Mining (P.) Ltd. v. PCIT [2021] 130 taxmann.com 118/190 ITD 702/91 ITR(T) 80 (Kolkata - Trib.) Goldman Sachs Services (P) Ltd. v. JCIT (2020) ([2020] 117 taxmann.com 535 (Bangalore - Trib.) ) (ITAT Bangalore) (iii) First American (India) Pvt. Ltd. (ITA No. 1762/Bang/2019) Allegis Services (India) Pvt. Ltd. (ITA No. 1693 /Bang/ 2019) Ld. Counsel further submitted that if the intention was to deny deduction of CSR expenses under section 80G, appropriate amendments on lines of section 37(1) should also have been made under section 80G of the Act. In the absence of any such amendment, CSR expenses should not be disallowed under section 80G of the Act. 18. We have heard both the parties and perused the records. We find that ITAT, Bangalore Bench in the case of Goldman Sachs Services (P.) Ltd. (supra) has held that the other contributions made under section 135 (5) of the Companies Act are also eligible for deduction/s 80G of Ericsson India Global Services Pvt. Ltd. v. DCIT the Act subject to satisfying the requisite conditions prescribed for deduction u/s 80G of the Act. For this purpose, the issue is remanded to the file ofAO to examine the same whether the payments satisfy the claim of donation u/s 80G of the Act. We find that the case law is fully applicable to the facts of the case. There is no restriction in the Act that expenditure when disallowed for CSR cannot be considered u/s 80G of the Act. Hence, we remit the issue to the file of AO to verify whether these payments were qualified as donations u/s 80G Printed from counselvise.com 6 ITA No. 1951/Mum/2025 (A.Y. 2020-21) E-xpress Interactive Software Private Limited vs. PCIT of the Act or not, if they qualify as donation u/s 80G of the Act then the requisite amount deserves to be allowed.\" 8. Before us, it is the specific contention of learned Counsel of the assessee that the institutes to whom the assessee has donated the CRS fund are registered under section 80G of the Act. Keeping in view the submissions of the assessee as well as the ratio laid down in the judicial precedents cited before us, we direcl the Assessing Officer to allow assessee's claim of deduction under section 80G of the Act, subject to, factual verification of assessee's claim that the donee institutions are registered under section 80G of the Act and other conditions of section 80G of the Act are fulfilled. Ground is allowed for statistical purposes.\" 8. The facts of the case in hand show that the assessee has submitted the receipts of the donees evidencing the eligibility of deduction u/s 80G of the Act. Therefore, respectfully following the decision of the Coordinate Bench, we do not find any reason to interfere with the findings of the ld. CIT(A). The decision relied upon by the ld. D/R is on different reasoning as the Coordinate Bench was of the opinion that CSR expenses cannot be allowed u/s 37(1) of the Act, therefore, no deduction is allowed u/s 80G, whereas in the case in hand, assessee has claimed deduction u/s 80G and not u/s 37(1) of the Act. Accordingly, ITA No. 1710/PUN/2023 is also dismissed. 9. In the result, appeals of the revenue are dismissed.” 7. Considering the fact that view taken by assessing officer while allowing 50% of donation under section 80G out of CSR expenses are in accordance with the decisions of various benches of Tribunal. Thus, the view taken by assessing officer cannot be said to be erroneous. Thus, the pre- requisite twin conditions for exercising jurisdiction under section 263 has not meet out in the present case hence we quash / set aside the order of Pr. CIT dated 17.03.2025. In the result, grounds of appeal raised by assessee are allowed. 9. The other judicial precedents cited before us support the aforesaid view. Thus, in view of the aforesaid, we hold that exercise of power u/s. 263 of the Act in the facts of the present appeal is invalid, hence, without jurisdiction. Accordingly, we quash the impugned order passed u/s. 263 of the Act and restore the order of assessment. 10. In the result, the appeal is allowed. Order pronounced in the open court on 24.07.2025 Sd/- Sd/- (Prabhash Shankar) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 24.07.2025 Roshani, Sr. PS Printed from counselvise.com 7 ITA No. 1951/Mum/2025 (A.Y. 2020-21) E-xpress Interactive Software Private Limited vs. PCIT Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "