INTERACTIVE BROKERS (INDIA) PRIVATE LIMITED,MUMBAI V. THE PRINCIPAL COMMISSIONER OF INCOME-TAX, MUMBAI-4, MUMBAI

ITA 3783/MUM/2025

AI Insights

The case revolves around the appeal by Interactive Brokers (India) Private Limited against the order of the PCIT, which had set aside the assessment order concerning the deduction claimed under section 80G for a donation of Rs.3,58,42,000 to the Prime Minister's National Relief Fund. The PCIT's revision was based on the grounds that the Assessing Officer (AO) had not adequately examined the claim of CSR expenses vis-a-vis donations under section 80G. The Tribunal, however, found that the AO had conducted a proper inquiry and examination, and the claim was allowable under section 80G as it was a donation made to a specified fund, despite being part of CSR activities.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713090 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2018-2019
• Other Referred Cases: Commissioner of Expenditure Tax vs. PVG Raju Raja of Vizianagaram, M/s. Goldman Sachs Services Pvt. Ltd v. Joint Commissioner of Income Tax. Special Range 3, Bangalore, M/s. Inter Gold (India) Private Limited vs. PCIT, M/s. Blue Dart Express Limited vs. PCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA S MAHAJAN
• Assessee Lawyers: PARAS SAVLA
• Keywords: Set aside; Business income; Business expenditure; Charitable institution; Revision of order
• Section: 263; 37; 28; 37(1); 80G

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SMT RENU JAUHRI, ACCOUNTANT MEMBER ITA No.3783/Mum/2025 (Assessment Year :2018-19) Interactive Brokers (India) Private Limited 502/A, Times Square Andheri-Kurla Road Andheri (E) Mumbai – 400 059 Vs. The Principal Commissioner of Income Tax, Mumbai-4 PAN/GIR No.AABCI6871R (Appellant) .. (Respondent) Assessee by Shri Paras Savla Revenue by Shri Virabhadra S Mahajan, Sr. DR Date of Hearing 22/07/2025 Date of Pronouncement 28/07/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 28/03/2025 passed by ld. PCIT-4 in his revisionary jurisdiction u/s.263 for the A.Y.2018-19. 2. The sole ground for setting aside the assessment order passed u/s.143(3) is that ld. Assessing Officer has accepted the deduction on donation of Rs.3,58,42,000/- made to Prime Minister Relief Fund claimed u/s.80G because the said amount was debited on account of expenditure incurred Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 2 towards CSR which was added back by the assessee in the computation of income. The relevant finding of the ld. CIT(A) in this regard reads as under:- “6.7. In the current case, it is important to note from the assessment order that the AO has, nowhere in the assessment order, mentioned or discussed anything about the claim of expenses under CSR head vis-à-vis donations u/s 80G. The appellant has referred to various court decisions to support its contention that there cannot be revision u/s 203 of the Act once the AO has taken conscious decision after proper enquiry and no error in the assessment order can be pointed out. The appellant has enclosed the copy of submission made before the Assessing Officer in assessment proceedings to stress upon the fact that the AO had taken decision after proper enquiry in the assessment proceedings. On this contention, I must reiterate that Section 263 can be resorted to in the case of incorrect assumption of facts as well as incorrect interpretation of law. In the current case, even though the AO had called for details of CSR expenses and Section 80G deductions, the AO's decision to allow deduction u/s. 800 pertaining to CSR expenses amounts to incorrect assumption of facts as regards CSR expenses eligible for Section 80G deductions and incorrect application of law. Therefore, revisionary power u/s 263 lies with the PCIT in the current facts of the case. 6.8 In common parlance, donations are made without any expectation of reciprocal return or benefits in lieu of the same whereas the expenses made under CSR head are for the benefits in the form of mandatory compliance as per section 135 of the Companies Act Thus, voluntariness is lacking in the expenses made under CSR head. In the decision by Supreme Court in the case of Commissioner of Expenditure Tax vs. PVG Raju Raja of Vizianagaram (supra), the Hon'ble Apex Court held that for any payment to constitute as donation, it must satisfy the test of voluntariness. The assessee, in the current case incurred expenses under CSR head as part of mandatory compliance of the provisions of Companies Act and this certainly lacked voluntariness character. Thus, it is apparent that the A.O had no occasion to examine the issue of CSR expenses vis-a-vis section 800 donations and to this extent, it Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 3 can be held that the assessment order suffers from infirmity being erroneous and also prejudicial to the interest of revenue for allowing ineligible claim of deduction of Rs. 3,58,42,000/- u/s 80G of the Act. Hence, the assessment order dated 24/06/2022 is hereby partly set aside to the file of the AO to enquire the claim of Section 80G deduction out of CSR expenses and modify the assessment order as per findings in this order. 3. Before us ld. Counsel submitted that first of all, ld. AO had raised specific query on two occasions and vide notice dated 10/12/2020, ld. AO had not only asked for details of deduction u/s.80G but also specifically asked the assessee to provide evidence in respect of donation to Prime Minister National Relief fund and also to get reason for CSR fund should be allowed u/s.80G as the section allowed deduction for voluntary donations while CSR is a statutory obligation. 4. In response, assessee has filed its detailed reply justifying the claim u/s.80G in the following manner:- Kindly provide evidence with respect to donation in Prime minister's National Relief Fund during AY 2018-19. Also, kindly provide reason why CSR funds should be allowed under section 80G as the section allows deduction for voluntary donations while CSR is a statutory obligation. The Assessee has claimed a deduction under section 80G of the Act of Rs 3,58,42,000/- for donation made to Prime Minister's National Relief Fund. Such donation helped the Assessee to meet its corporate social responsibility (CSR) obligation under the Companies Act, 2013. A copy of the receipt evidencing the donation made to the Prime Minister's National Relief Fund is enclosed as Annexure 6. Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 4 Section 37(1) of the Act grants deduction from the profits of the business, any expenditure not being in the nature described in section 30 to 36 and not being in the nature of capital or personal expenditure, laid out wholly and exclusively for the purpose of the business. As per explanation 2 to section 37(1) of the Act, any expenditure incurred by an assessee on the activities relating to CSR 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. Given this, the Assessee has disallowed this expenditure in its computation of total income (refer point 7(h) of Part A OI - Other Information and disallowed under point 15 of Schedule BP-Computation of income from business or profession of the income-tax return) and claimed the same as a deduction under section 80G of the Act. This is on the basis that the section 37 of the Act does not place any reservation for claiming a deduction under any other sections of the Act viz. Section BOG Section 80G of the Act does not contain any provision (express or otherwise) which prohibits deductions for donations which are incurred on CSR activities except donations to Swachh Bharat Kosh under Section 80G(2)(iiihk) and donations to 'Clean Ganga Fund under Section 80G(2)(ihl) of the Act. Accordingly, an inference can be drawn that if the donations in lieu of a CSR activity (other than to 'Swachh Bharat Kosh' and 'Clean Ganga Fund') are made to specified /notified institutions registered under section 80G by the assessee, then the CSR expenditure shall be eligible for deduction under section 80G of the Act. With respect to the abovementioned proposition, the Assessee wishes to place strong reliance on a recent judgement pronounced by the Income-tax Appellate Tribunal, Bangalore (ITAT in case of M/s. Goldman Sachs Services Pvt. Ltd v. Joint Commissioner of Income Tax. Special Range 3, Bangalore [IT(TP)A No.2355/Bang/20191, In the aforesaid case, the Assessing Officer ('AO') disallowed deduction for CSR expenditure as donation made by the taxpayer (except for direct contribution to the Prime Minister's National Relief Fund - in the instant case, the Assessee has contributed to Prime Minister's National Relief Fund only), on the basis that such Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 5 donation was not voluntary in nature and was incurred to comply with the Companies Act provisions. On appeal, the Dispute Resolution Panel ('DRP\") uphold the AO's draft order. Aggrieved by the AO's final order and DRP's directions, the taxpayer filed an appeal before the ITAT The ITAT propounded the case in favour of the taxpayer and observed the following The taxpayer had claimed deduction under section 80G of the Act and not under section 37 of the Act The AO had allowed deduction under section 80G of the Act with respect to donation made by the taxpayer to Prime Minister's National Relief Fund Only the CSR contributions to Swachh Bharat Kosh and Clean Ganga Fund, were specifically excluded from the ambit of section 80G of the Act and hence, other CSR contributions qualifying for a deduction under section 80G of the Act should be permitted. In view of the abovementioned discussions and the ITAT ruling the Assessee submits that the contribution made by the Assessee to the Prime Minister's National Relief Fund is eligible for a deduction under section 80G of the Act. 5. Thus, he submitted that ld. AO had conducted proper enquiry and verification and thereafter, has allowed claim of deduction u/s.80G. Thus, the order of the ld. AO neither can be said to be erroneous and prejudicial to the interest of the Revenue. 6. In any case he has relied upon various Tribunal decisions on this issue and placed specifically reliance on the following two decisions:- Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 6  ITA No. No.4400/Mum/2023 – M/s. Inter Gold (India) Private Limited vs. PCIT  ITA No. No.1101/Mum/2024 – M/s. Blue Dart Express Limited vs. PCIT 7. On the other hand, ld. DR relied upon the order of the ld. PCIT. 8. We have heard both the parties and also perused the relevant finding given in the impugned order as well as material placed on record. As noted above, the only issue on which ld. PCIT has set aside the assessment order passed by the ld. AO on the ground that firstly, ld. AO has not discussed in the assessment order about the claim of expenses under CSR vis-à-vis donation u/s.80G and expenses made under CSR are for the benefits in the form of mandatory compliance as per Section 135 of the Companies Act and donation u/s.80G should be clearly voluntary. First of all, the observation of the ld. PCIT that ld. AO has not examined the issue is apparently incorrect because ld. AO has raised specific queries for which assessee has given its reply as noted above. Thus, it cannot be held that there was no enquiry or verification by the ld. AO. In so far as merits of the issues are concerned, we find that this issue is squarely covered by the decision of this Tribunal in various cases. For the sake of ready reference, the decision of this Tribunal rendered in the context of order passed u/s.263 on exactly similar issue observed and held as under:- Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 7 “11. After considering the aforesaid submissions and the reasons given by the ld. PCIT, we are unable to sustain the impugned order u/s.263 on this issue for the reason that, this issue has been duly enquired and examined by the ld. AO during the course of assessment proceedings and without finding any defect in such order or how the claim allowed by the ld. AO u/s.80G is unsustainable in law, he cannot cancel the assessment order. Assessee has also relied upon various Tribunal decisions directly on this issue which has also been incorporated in the impugned order, wherein it has been held that even if the money spent for CSR is disallowable but if the same has been paid to charitable organisation and donation is claimed u/s.80G, the same is allowable, because both operate seperately. Thus, taking a contrary opinion does not mean that order of the ld. AO erroneous and prejudicial to the interest of the Revenue. 12. Claiming a deduction from computation of business income as provided from sections 28 to 44DB is different from claiming a deduction under chapter VIA of the Act which is allowed from Total Income. As per Explanation 2 to Section 37, CSR expenditure is not allowable as deduction while computing the business income under the provision of Section 28-44DB, whereas deduction u/s.80G is allowed while computing the total income under Chapter VIA. There is no pre-condition that claim for deduction u/s.80G on a donation should be voluntary. It is independent of computation of business income as it is allowed from Gross Total Income. The assessee had disallowed the CSR expenses while computing business income. Further, there is no dispute that the assessee has filed complete details of donation and also filed the certificate u/s.80G which was enclosed before the AO. Section 80G (1) of the Act provides that in computing total income of the assessee, they shall be deducted in accordance with the provision of Section, such sum paid by the assessee in the previous year as a donation. Deduction under Chapter VIA provides deduction from the gross total income which is computed after making necessary allowances / disallowances in accordance with Section 28-44BB of the Act including Explanation to Section 37(1). Thus, Section 37(1) and Section 80G of the Act are independent and the principles governing what is not allowable u/s. 37(1) have been provided in the section itself. Even in section 80G also, what is not allowable has also been Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 8 provided under the Act. For instance, Section 80G specifically mentions two clauses, viz., section 800(2)(a)(iihk) and (iiihl), i.e., contributions towards „Swacha Bharat Kosh‟ and „Clean Ganga Fund‟, where donation in the nature of CSR Expenditure is not allowable as deduction under section 80G of the Act. Therefore, the disallowances for deduction under section 80G vis-à-vis CSR can be restricted to contributions made to these Funds mentioned in Section 800(2)(a)(iiihk) and (iiihl) only. It is an undisputed fact that the assessee has not claimed any deduction against the aforesaid clauses of 80G (2)(a) of the Act and as such entire donation claimed by the assessee is allowable u/s 80G. The Ministry of Corporate Affairs (\"MCA\") has issued \"FAQs\" through General circular no. 01/2016 dated January 12, 2016 (FAQ No. 6) and has clarified on the issue as follows: \"Question No. 6: What tax benefits can be availed under CSR? Answer: No specific tax exemptions have been extended to CSR expenditure per se. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. While no specific tax exemptions have been extended to expenditure incurred on CSR, spending on several activities like Prime Minister's Relief Fund, scientific research, rural development projects, skill development projects, agriculture extension projects etc, which fund place in Schedule VII, already enjoys exemptions under different sections of the Income-tax Act, 1961.\" 12. This clarification being issued by the Ministry of Corporate Affairs, Government of India clarifies that donation covered under CSR Expenses which not are eligible for the deduction under section 80G of the Income-tax Act, 1961, but are allowed under different sections. Ergo, there is nothing that if any expenditure is disallowable u/s 37 the same cannot be allowed under other provisions of Act, if the conditions of allowability are satisfied. Thus, allowing the claim of deduction u/s.80G by the ld. AO cannot be held to be unsustainable in law or amounts to erroneous and prejudicial to the interest of the Revenue. Thus order of the Ld. PCIT is reversed on this point.” Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 9 9. Similar view has been taken in the case of Blue Dart Express Limited in ITA No. No.1101/Mum/2024 which is as under:- “9. We have heard both the parties and also perused the relevant material referred to before us. First of all from the perusal of the re-assessment order which is the subject matter of revision u/s.263 by the ld. PCIT, we find that this was one of the ground for reopening and ld. AO has raised specific query as noted above on exactly same issue. The assessee has given its detailed reply and after examining those replies, the ld. AO has allowed the deduction u/s.80G holding that assessee has already disallowed CSR expenses u/s.37(1), and there is no bar for claiming deduction u/s.80G unless the same is not in accordance with the provision of the Section 80G and there is no issue of mutual exclusiveness of the claim found in this regard. Ld. PCIT has not brought on record any law or judicial precedence that such an observation and finding of the ld. AO is incorrect in law. Once the ld. AO has taken a possible view and there is no contrary law, then to take a different view in a revisionary jurisdiction u/s.263, cannot be held that the order of the ld. AO is erroneous and prejudicial to the interest of the Revenue. There is no case of invoking Explanation 2 to Section 263 which ld. PCIT has done, because ld. AO has made his enquiry and verification on the same issue. Ld. PCIT cannot cancel the assessment order to re-examine the same issue without finding any defect in such order that how the claim made u/s.80G is unsustainable in law. 10. On merits also, we find that view of ld. AO is correct in law. Claiming a deduction from computation of business income as provided from sections 28 to 44DB is different from claiming a deduction under chapter VIA of the Act which is allowed from Total Income. As per Explanation 2 to Section 37, CSR expenditure is not allowable as deduction while computing the business income under the provision of Section 28-44DB, whereas deduction u/s.80G is allowed while computing the total income under Chapter VIA. There is no pre-condition that claim for deduction u/s.80G on a donation should be voluntary. It is independent of computation of business income as it is allowed from Gross Total Income. The assessee had disallowed the CSR expenses while computing business income. Further, Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 10 there is no dispute that the assessee has filed complete details of donation and also filed the certificate u/s.80G which was enclosed before the AO. Section 80G (1) of the Act provides that in computing total income of the assessee, they shall be deducted in accordance with the provision of Section, such sum paid by the assessee in the previous year as a donation. Deduction under Chapter VIA provides deduction from the gross total income which is computed after making necessary allowances / disallowances in accordance with Section 28-44BB of the Act including Explanation to Section 37(1). Thus, Section 37(1) and Section 80G of the Act are independent and the principles governing what is not allowable u/s. 37(1) have been provided in the section itself. Even in section 80G also, what is not allowable has also been provided under the Act. For instance, Section 80G specifically mentions two clauses, viz., section 800(2)(a)(iihk) and (iiihl), i.e., contributions towards „Swacha Bharat Kosh‟ and „Clean Ganga Fund‟, where donation in the nature of CSR Expenditure is not allowable as deduction under section 80G of the Act. Therefore, the disallowances for deduction under section 80G vis-à-vis CSR can be restricted to contributions made to these Funds mentioned in Section 800(2)(a)(iiihk) and (iiihl) only. It is an undisputed fact that the assessee has not claimed any deduction against the aforesaid clauses of 80G (2)(a) of the Act and as such entire donation claimed by the assessee is allowable u/s 80G. The Ministry of Corporate Affairs (\"MCA\") has issued \"FAQs\" through General circular no. 01/2016 dated January 12, 2016 (FAQ No. 6) and has clarified on the issue as follows: \"Question No. 6: What tax benefits can be availed under CSR? Answer: No specific tax exemptions have been extended to CSR expenditure per se. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. While no specific tax exemptions have been extended to expenditure incurred on CSR, spending on several activities like Prime Minister's Relief Fund, scientific research, rural development projects, skill development projects, agriculture extension projects etc, which fund place in Schedule VII, already enjoys exemptions under different sections of the Income-tax Act, 1961.\" Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 11 11. This clarification being issued by the Ministry of Corporate Affairs, Government of India clarifies that donation covered under CSR Expenses which not are eligible for the deduction under section 80G of the Income-tax Act, 1961, but are allowed under different sections. Ergo, there is nothing that if any expenditure is disallowable u/s 37 the same cannot be allowed under other provisions of Act, if the conditions of allowability are satisfied. Thus, allowing the claim of deduction u/s.80G by the ld. AO cannot be held to be unsustainable in law or amounts to erroneous and prejudicial to the interest of the Revenue. Thus order of the Ld. PCIT is reversed on this point. 12. Thus, we hold that ld. PCIT is not correct in law in cancelling the assessment order by the ld. AO on this issue. Accordingly, the order of the ld. PCIT is quashed. Consequently, the appeal of the assessee is allowed.” 10. Thus, in view of the aforesaid decision of the Tribunal, we hold that ld. PCIT was not correct in law and setting aside the assessment order holding it to be erroneous and prejudicial to the interest of the Revenue. Accordingly, the order of the ld. PCIT is quashed. 11. In the result, appeal of the assessee is allowed. Order pronounced on 28th July, 2025. Sd/- (RENU JAUHRI) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 28/07/2025 KARUNA, sr.ps Printed from counselvise.com ITA No.3783/Mum/2025 Interactive Brokers (India) Pvt. Ltd., 12 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Printed from counselvise.com "