FLUOR DANIEL INDIA PRIVATE LIMITED,DELHI V. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1), CR BUILDING, IP ESTATE, NEW DELHI, DELHI

ITA 3830/DEL/2024

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Fluor Daniel India Private Limited appealed against the final assessment order for the Assessment Year 2020-21, which included an assessed income higher than the returned income and disallowed deductions under section 80G for CSR expenditures. The primary contention was whether CSR expenditures, which are mandatory under the Companies Act, 2013, should affect the eligibility for deductions under section 80G of the Income Tax Act. The Tribunal examined various precedents and found that the issue was covered in favor of the assessee by previous ITAT decisions. The Tribunal also addressed a clerical error in the computation of interest payable, remitting this issue back to the Assessing Officer.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23719 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: misc
• Other Referred Cases: Cheil India (P.) Ltd. vs DCIT, American Express (India) P. Ltd. vs PCIT, Interglobe Technology Quotient (P.) Ltd. vs ACIT, Societe Generale Securities India (P.) Ltd. vs PCIT, Power Mech Projects Ltd. vs DCIT, Sling Media (P.) Ltd. vs DCIT, FNF India (P.) Ltd. vs ACIT, Goldman Sachs Services (P.) Ltd. vs JCIT, Ratna Sagar Pvt. Ltd. vs ACIT, Honda Motorcycle & Scooter India Pvt. Ltd. vs ACIT, Ericsson India Global Services Private Limited vs DCIT, Optum Global Solutions (India) Private Limited vs DCIT
• Laws Referred To: Income Tax Act, 1961, Companies Act, 2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S.K. JHADAV
• Assessee Lawyers: VISHAL KALRA
• Keywords: Set aside; Business income; Opportunity of being heard; Business expenditure
• Section: 144; 251; 37; 37(1); 80G

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’: NEW DELHI BEFORE SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.3830/DEL/2024 (Assessment Year: 2020-21) Fluor Daniel India Private Limited, vs. DCIT, Circle 7 (1), B-9, LGF, Green Park Market, South West Delhi, New Delhi. New Delhi – 110 016. (PAN : AAACF0927G) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Vishal Kalra, Advocate Shri Ankit Sahni, Advocate Shri Yishu Goel, AR REVENUE BY : Shri S.K. Jhadav, CIT DR Date of Hearing : 16.01.2025 Date of Order : 26.03.2025 O R D E R PER S.RIFAUR RAHMAN, AM : 1. This appeal is filed by the assessee against the final assessment order dated 27.06.2024 passed u/s 144 r.w.s.144C (13) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter called ‘the Act’) subsequent to the directions of the Ld. Dispute Resolution Panel (DRP)/TPO for Assessment Year 2020-21 raising following grounds of appeal :- “1. That on the facts and circumstances of the case and in law, the AO has erred in completing the assessment of the Appellant at an assessed income of INR 1,56,60,30,950, in pursuance to the 2 ITA No.3830/DEL/2024 directions issued by the Hon'ble Dispute Resolution Panel (HDRP\"), as against the returned income of INR 1,55,48,77,420 declared by the Appellant. 2. That on the facts and in the circumstances of the case and in law, the Ld. AO was not justified and has erred both on facts and in law in disallowing the claim under section 80G of the Act to the tune of INR 1,11,53,530 in respect of eligible donations amount included under Cooperate Social Responsibility ('CSR') expenditure disallowed under Section 37(1) of the Act. 3. That on the facts and in the circumstances of the case and in law, the Ld. AO has grossly erred by not appreciating that the scope of the restriction imposed under section 37 of the Act, falling under Chapter-IV of the Act relating to \"computation of business income\" does not extend to Chapter VI-A of the Act, dealing with \"deductions to be made in computing total income\" as both chapters are independent of each other. 4. That the Ld. AO has grossly erred in holding that the amount has been paid by the Appellant as a mandatory requirement as per Section 135 of the Companies Act, 2013 and thus, it is not a voluntary donation eligible for deduction under section 80G of the Act. 5. That on facts and circumstances of the case and in law, the Ld. AO erred in holding that the sum paid by the Appellant cannot be considered as a 'donation' for the purpose of section 80G of the Act as the element of charity is missing in it. 6. That on facts and circumstances of the case and in law, the Ld. AO has grossly erred in incorrectly adding an amount of INR 2,66,675 as \"Total Interest and Fee Payable\" in the computation sheet annexed to the final assessment order while determining the total demand payable. 7. That on the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A of the Act. 3 ITA No.3830/DEL/2024 Each of the above grounds is independent and without prejudice to the other grounds of appeal preferred by the Appellant.” 2. Grounds No.1 is general in nature, hence not adjudicated and Ground No.7 being premature is dismissed as such. Grounds no.2 to 5 having solitary issue of claiming deduction under section 80G of the Income-tax Act, 1961 (for short ‘the Act’). Ground No.6 is with regard to interest and fee payable wrongly computed in the computation sheet in case of final assessment order. 3. With regard to grounds no.2 to 5, relevant facts are, during assessment proceedings, the AO observed that assessee has debited an amount of Rs.2,23,07,059/- on account of donation and corporate social responsibility. In computation of income sheet, the assessee has added back the amount of Rs.2,23,07,059/- to its income as being inadmissible expenses as per section 37 of the Act. However, the assessee has claimed deduction of Rs.2,12,04,514/- under Chapter VIA (section 80G) out of the total donation of Rs.3,02,59,386/- paid to different organizations covered by section 80G of the Act. The AO observed that the newly inserted section 135 of the Companies Act mandates that every company fulfilling the threshold specified therein in terms of net worth or turnover or net profits shall ensure that the company spends in every financial year at least 2% of the average net profit during three immediately preceding financial years. He rejected the contentions of the assessee that for 4 ITA No.3830/DEL/2024 claiming deduction of CSR, there is no restriction imposed on claiming deduction u/s 80G of the Act. After considering the detailed submissions of the assessee, the AO rejected the contentions of the assessee by observing that the issue under consideration is still open and no final judgment on this issue have been received. In the previous year also, there is addition on this issue. Finally he rejected the deductions claimed by the assessee u/s 80G to the extent of Rs.2,23,07,059/- and 50% of the eligible amount of Rs.1,11,53,530/- is not allowed u/s 80G of the Act. Accordingly, he made addition to the income of the assessee. 4. Aggrieved assessee filed objections before the ld. DRP and ld. DRP also rejected the plea of the assessee and sustained the addition. 5. Aggrieved assessee is in appeal before us. 6. At the time of hearing, ld. AR of the assessee submitted that the issue under consideration is squarely covered by various decisions of the coordinate Bench as well as other ITAT Benches. He relied on the following decisions :- (i) Cheil India (P.) Ltd. vs DCIT [2024]169 taxmann.com 507 (Delhi - Trib.) (ii) American Express (India) P. Ltd. vs PCIT [2024]208 ITD 564 (Delhi-Trib.) (iii) Interglobe Technology Quotient (P.) Ltd. vs ACIT [2024] 114 ITR(T) 611 (Delhi-Trib.) 5 ITA No.3830/DEL/2024 (iv) Societe Generale Securities India (P.) Ltd. vs PCIT [2023] 157 taxmann.com 533 (Mumbai - Trib.) (v) Power Mech Projects Ltd. vs DCIT [2023]156 taxmann.com 575 (Hyderabad - Trib.) 36-41 (vi) Sling Media (P.) Ltd. vs DCIT [2022]135 taxmann.com 164 (Bangalore - Trib.) (vii) FNF India (P.) Ltd. vs ACIT [2021]133 taxmann.com 251 (Bangalore - Trib.) (viii) Goldman Sachs Services (P.) Ltd. vs JCIT [2020]117 taxmann.com 535 (Bangalore). 7. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities. 8. Considered the rival submissions and material placed on record. We observed that the issue under consideration is elaborately discussed by the coordinate Bench in the decision of Cheil India (P.) Ltd. (supra). The relevant findings of the Bench are given below :- “5. We have heard both the parties and perused the records. 6. At the time of hearing, Ld. AR for the assessee submitted that the issue in dispute is squarely covered by the following catena of ITAT orders. Hence, he requested to follow the ratio of the following decisions in the instant case and allow the grounds raised in the appeal. 1. Ratna Sagar Pvt. Ltd. vs. ACIT, Central Circle- 4, New Delhi ITA No. 2256/Del/23 2. Honda Motorcycle & Scooter India Pvt. Ltd. vs. ACIT, Circle 1(1), Gurugram ITA No. 1523/Del/22 3. Interglobe Technology Quotient Private Limited vs. ACIT, Circle 10(1), New Delhi. ITA No. 95/Del/24 4. M/s Goldman Sachs Services Pvt. Ltd. vs. JCIT, Special Range-3, Bangalore. IT(TP)A No. 2355/ Bang/2019 6 ITA No.3830/DEL/2024 5. M/s JMS Mining Pvt. Ltd. vs. PCIT, Kolkata-2, Kolkata. ITA No. 146/Kol/21 6. Ericsson India Global Services Private Limited vs. DCIT, Circle 7(1), New Delhi ITA No. 1150/Del/22 7. Optum Global Solutions (India) Private Limited, Hyderabad vs. DCIT, Circle 5(1), Hyderabad ITA-TP Nos. 145 & 482/Hyd/2022 8. Societe Generale Securities India (P) Ltd. vs. PCIT [2024] 204 ITD 796 (Mumbai – Trib) 9. Power Mech Projects Ltd. vs. DCIT [2023] 156 taxmann.com 575 (Hyderabad Trib.) 7. Per contra, Ld. DR could not controvert the statement of the Ld. AR that the issue in dispute is squarely covered in favour of the assessee. 8. Upon careful consideration, we note that the Coordinate Bench of the Delhi Tribunal vide its order dated 29.08.2024 passed in ITA No. 2556/Del/2023 (AY 2018-19) in the case of M/s Ratna Sagar Pvt. Ltd. vs. ACIT has dealt the similar issue and held as under:- “5. We have heard the rival contentions and perused the material available on record and also gone through the orders of the authorities below. 5.1 At the time of hearing, Ld. AR for the assessee contended that the issue in dispute is squarely covered by the several case laws of the ITAT. In this regard, he referred to the ITAT decisions dated 28.05.2024 passed in ITA No. 95/Del/2024 (AY 2020-21) in the case of Interglobe Technology Quotient Private Limited; Honda Motorcycle and Scooter India Pvt. Ltd. vs. ACIT in ITA No. 1523/Del/2022 (AY 2017-18) dated 22.8.2023; & Ericsson India Global Services (P) Ltd. vs. DCIT in ITA No. 1150/Del/2022 (AY 2015-16) dated 05.03.2024. In view of above, he requested to follow the ratio of the aforesaid Tribunal’s orders and allow the issue in dispute in favour of the assessee raised in the instant appeal. 5.2 Ld. Sr. DR did not controvert the aforesaid proposition made by the Ld. AR, but he supported the orders of the authorities below. 7 ITA No.3830/DEL/2024 6. Upon careful consideration, we find considerable cogency in the contention of the Ld. AR that identical issue has been dealt by the Coordinate Bench of ITAT, Delhi vide order dated 28.05.2024 passed in ITA No. 95/Del/2024 (AY 2020-21) in the 5 case of Interglobe Technology Quotient Private Limited, wherein the Coordinate Bench has held as under:- “7. Learned DR has failed to bring forth any decision to the contrary. Thus, we accept the plea of learned counsel on the basis of case law cited, denial of CSR expenditure u/s 37(1) of the Act is not embargo to claim deduction u/s 80G of the Act. 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 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 8 ITA No.3830/DEL/2024 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 7 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. Section 80G falls in Chapter VIA, which comes into play only after 9 ITA No.3830/DEL/2024 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 8 that other conditions of Section 80G are not fulfilled. We, thus sustain the ground.” 7. After perusing the aforesaid findings, we find that the facts of the present case are identical to that of the aforesaid case of other assessee, hence, the issue in dispute involved in the instant appeal is squarely covered in favour of the assessee. Therefore, respectfully following binding precedent (Supra), we delete the addition sustained by the Ld. CIT(A) and accordingly, allow the ground of appeal raised by the Assessee. 8. In the result, appeal of the assessee is allowed.” 7. Respectfully following the precedent as aforesaid, we set aside the orders of the authorities below and accordingly decide the issue in dispute in favour of the assessee. 8. In the result, the Assessee’s appeal is allowed.” 10 ITA No.3830/DEL/2024 9. Respectfully following the above decision, we are inclined to allow Grounds No.2 to 5 raised by the assessee. 10. With regard to Ground No.6 raised by the assessee, at the time of hearing, ld. AR of the assessee brought to our notice page 39 of the appeal set which is a computation sheet attached to final assessment order and the AO has computed the net tax payable by the assessee. However, he brought to our notice column 37 to column 41 which is the column for computation of interest payable by the assessee and column 42 is the sub- total of interest payable by the assessee and ld. AR of the assessee brought to our notice that from column 37 to 41 there is no amount mentioned for any due payment of interest, however in the column 42 which is the subject total of interest payable and fees payable from column 37 - 41, it is mentioned as Rs.2,66,675/-. He submitted that the above interest payable determined by the assessee is plausible and not proper. He prayed that this issue may be remitted back to AO to determine the proper interest payable, if it is a mistake he may be directed to delete the same. 11. On the other hand, ld. DR of the Revenue relied on the orders of the lower authorities. However, he agreed that there is some clerical mistake crept up in the computation sheet. 11 ITA No.3830/DEL/2024 12. Considered the rival submissions and material available on record. We find cogency in the submissions of the ld. AR of the assessee. Accordingly, in the interest of justice, we remit this issue back to the file of the AO to decide afresh after going through the record and as per law, after providing an opportunity of being heard to the assessee. Accordingly, Ground No.6 raised by the assessee is allowed for statistical purposes 13. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on this 26th day of March, 2025. Sd/- sd/- (VIMAL KUMAR) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 26.03.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "