Appeal details
Counselvise Citation
[2020] 111 COUNSELVISE.COM (IT) 2046 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-04-2020
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2016-2017
Appeal Filed On
26-07-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI. B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.1693/BANG/2019 ASSESSMENT YEAR : 2016 17 ALLEGIS SERVICES (INDIA) PVT.LTD., COMMERCE @ MANTRI, LEVEL 3, NO.12/1 AND 12/2, NS PLAYA, BANNERGHATTA ROAD, BANGALORE 5600076 PAN AAFCA 0825 M VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI C NARAYAN, C.A RESPONDENT BY : SHRI RAJENDRA CHNDRASHEKAR,JCIT -DR DATE OF HEARING : 09-03-2020 DATE OF PRONOUNCEMENT : -04-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 27/05/2019 PASSED BY LD.CIT (A)-1, BANGALORE FOR ASSESSMENT YEAR 2016-17 ON FOLLOWING GROUNDS OF APP EAL: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, ALLEGIS SERVICES (INDIA) PRIVATE LIMITED ('ALLEGIS INDIA' OR 'THE COMPANY' OR 'THE APPELLANT') RESPECTFULLY CRAVES, L EAVE TO PREFER AN APPEAL UNDER SECTION 253 OF THE INCOME-TA X ACT, 1961 ('THE ACT') AGAINST THE ORDER PASSED BY THE COMMISS IONER OF INCOME TAX (APPEALS) - 1, BANGALORE ['THE CIT(A)'] DATED 27 MAY 2019, ON THE FOLLOWING GROUNDS: PAGE 2 OF 10 ITA NO.1693/BANG/2019 A. Y : 2016 17 1.THE LEARNED CIT(A) HAS ERRED, IN FACT AND LAW, BY NOT ALLOWING THE ELIGIBLE DEDUCTION OF DONATION AMOUNTI NG TO INR 8.40.000 IN ACCORDANCE WITH SECTION 80G OF THE ACT. 2.THE LEARNED CIT(A) HAS ERRED. IN FACT AND LAW, BY HOLDING THAT THE DONATION PAID BY THE APPELLANT FORMS PART OF TH E MANDATORY REQUIREMENT OF THE COMPANIES ACT 2013 AND CONSEQUEN TLY NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80G OF THE ACT . 3.THE LEARNED CIT(A) HAS ERRED, IN LAW, BY HOLDING THAT THE AMOUNT PAID TO TRUST UNDER SECTION 80G(2)(IV) OF TH E ACT DOES NOT QUALIFY AS DONATION IN ACCORDANCE WITH SECTION 80G OF THE ACT. THE APPELLANT SUBMITS THAT EACH OF THE ABOVE GROUND S IS INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS A COMPANY AND FILED ITS RETURN OF INCO ME ON 30/11/2016 DECLARING INCOME OF RS.73,44,38,310/-. T HE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143 (2) AND 142 (1) ALONG WITH QUESTIONNAIRE WAS ISSUED TO ASSE SSEE. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVE OF AS SESSEE APPEARED BEFORE LD.AO AND FILED REQUISITE DETAILS A S CALLED FOR. 3. LD.AO FROM THE DETAILS FURNISHED BY ASSESSEE OBSER VED THAT ASSESSEE CLAIMED DEDUCTION AMOUNTING TO RS.8,40,000 /- UNDER SECTION 80 G OF THE ACT, TOWARDS DONATION PAID. LD. AO WAS OF THE OPINION THAT CLAIM MADE UNDER SECTION 80 G OF THE A CT, WAS NOT ALLOWABLE AS THE AMOUNT WAS FORMING PART OF CSR EXP ENSES DEBITED TO PROFIT AND LOSS ACCOUNT. LD.AO WAS OF TH E OPINION THAT DONATION MADE OUTSIDE CSR EXPENSES WAS ONLY ELIGIBL E TO BE CLAIMED UNDER SECTION 80 G OF THE ACT. 4. LD. AO DISALLOWED THE SUM IN THE HANDS OF ASSESSEE. AGGRIEVED BY ADDITION MADE BY LD.AO, ASSESSEE PREFE RRED APPEAL BEFORE LD.CIT (A). LD.CIT (A) WAS OF THE OPINION TH AT SUM PAID NEED TO BE VOLUNTARY PAYMENT FOR PURPOSE OF BEING E LIGIBLE FOR DEDUCTION UNDER SECTION 80 G OF THE ACT. LD. CIT(A) OPINED THAT PAGE 3 OF 10 ITA NO.1693/BANG/2019 A. Y : 2016 17 SUM PAID BY ASSESSEE WAS NOT VOLUNTARY WHICH IS AN ESSENTIAL ELEMENT TO TREAT THE AMOUNT AS DONATION. THE DISALL OWANCE MADE BY LD.AO WAS THEREFORE UPHELD. 5. AGGRIEVED BY ORDER OF LD.CIT (A), ASSESSEE IS IN A PPEAL BEFORE US NOW. 6. LD.AR SUBMITTED THAT ALL GROUNDS RAISED ARE IN CON NECTION TO DISALLOWANCE OF DONATION UNDER SECTION 80 G OF THE ACT BY HOLDING IT TO BE CSR EXPENSES. 7. HE SUBMITTED THAT OUT OF TOTAL CSR EXPENSES, SUM A MOUNTING TO RS.16,80,000/- WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80G OF THE ACT. IT HAS BEEN SUBMITTED THAT, DONATIONS MADE U/S 80G ARE ELIGIBLE EXPENDITURE UNDER SECTION 80G OF THE ACT, AND CANNOT BE DENIED TO ASSESSEE FOR PURPOSE OF COMPUTING TAXABLE INCOME IN THE HANDS OF ASSESSEE. 8. REFERRING TO SECTION 80 G (2) (IIIHK) AND (IIIHL), LD.AR SUBMITTED THAT, THESE ARE SPECIFIC EXCLUSION OF CERTAIN PAYME NTS WHICH ARE CATOGARISED BY LEGISLATURE AS PART OF CSR RESPONSIB ILITY, NOT ELIGIBLE FOR EXEMPTION U/S 80G OF THE ACT. HE SUBMI TTED THAT EXCEPT FOR CONTRIBUTION UNDER SECTION 80 G TOWARDS SUCH BHARAT KOSH AND CLEAN GANGA FUND (BEING 80G(2)(IIIHK) & (I IIHL), ALL OTHER PAYMENTS ARE ELIGIBLE FOR 80 G DEDUCTIONS. 9. ON THE CONTRARY, LD.SR.DR SUBMITTED THAT FINANCE BI LL, 2014 INSERTED EXPLANATION 2 IN SECTION 37(1) TO CLARIFY THAT, ANY EXPENDITURE INCURRED BY AN ASSESSEE ON THE ACTIVITI ES RELATING TO CSR REFERRED TO IN SECTION 135 OF THE COMPANIES ACT, 2013 SHALL NOT BE DEEMED TO BE AN EXPENDITURE INCURRED B Y ASSESSEE THE PURPOSE OF BUSINESS OR PROFESSION AND, THEREFOR E, NO DEDUCTION WOULD BE ALLOWED FOR SUCH EXPENDITURE. HE SUBMITTED PAGE 4 OF 10 ITA NO.1693/BANG/2019 A. Y : 2016 17 THAT, EXPENDITURE INCURRED BY ASSESSEE TOWARDS FULF ILMENT OF CSR RESPONSIBILITY AND THEREFORE HAS BEEN RIGHTLY DENIE D BY AUTHORITIES BELOW. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 10. SECTION 135 OF COMPANIES ACT, 2013 REQUIRES COMPANI ES 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 FO R PURPOSES OF SUB- SECTION (1) OF SECTION 37, ANY EXPENDITURE INCURRED BY AN ASSESSEE ON THE ACTIVITIES RELATING TO CORPORATE SO CIAL RESPONSIBILITY REFERRED TO IN SECTION 135 OF THE CO MPANIES ACT, 2013 SHALL NOT BE DEEMED TO BE AN EXPENDITURE INCUR RED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFES SION. 11. THIS AMENDMENT WILL TAKE EFFECT FROM 1/04/2015 AND WILL, ACCORDINGLY, APPLY TO ASSESSMENT YEAR 2015-16 AND S UBSEQUENT YEARS. 12. THUS, CSR EXPENDITURE IS TO BE DISALLOWED BY NEW EXPLANATION 2 TO SECTION 37(1), WHILE COMPUTING INCOME UNDER THE HEAD INCOME FORM BUSINESS AND PROFESSION . FURTHER, CLARIFICATION REGARDING IMPACT 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 AC T PROVIDE THAT DEDUCTION FOR ANY EXPENDITURE, WHICH IS NOT MENTIONED SPECIFI CALLY 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 BUSINES S OR PROFESSION. AS THE CSR EXPENDITURE (BEING AN APPLICATION OF INCOME) IS NOT INCURRED FOR THE PURPOSES OF CARRYING ON BUSINESS, SUCH EXPENDITURE CANNOT BE ALLOWED UNDER THE EXISTING PROVISIONS OF SECTION 37 OF THE INCOME-TAX ACT. PAGE 5 OF 10 ITA NO.1693/BANG/2019 A. Y : 2016 17 THEREFORE, IN ORDER TO PROVIDE CERTAINTY ON THIS IS SUE, IT IS PROPOSED TO CLARIFY 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, 20 13 SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS A ND, HENCE, SHALL NOT BE ALLOWED AS DEDUCTION UNDER SECTION 37. HOWEVER, THE CSR EXPENDITURE WHICH IS OF THE NATURE DESCRIBED IN SECTION 30 TO S ECTION 36 OF THE ACT SHALL BE ALLOWED DEDUCTION UNDER THOSE SECTIONS SUBJECT T O FULFILMENT OF CONDITIONS, IF ANY, SPECIFIED THEREIN.' 13. FROM THE ABOVE IT IS CLEAR THAT UNDER INCOME TAX A CT, CERTAIN PROVISIONS EXPLICITLY STATE THAT DEDUCTIONS FOR EXPENDITURE WOULD BE ALLOWED WHILE COMPUTING INCOME UNDER THE H EAD, INCOME FROM BUSINESS AND PROFESSION TO THOSE, WHO PURSUE CORPORATE SOCIAL RESPONSIBILITY PROJECTS UNDER FOLL OWING SECTIONS. SECTION 30 PROVIDES DEDUCTION ON REPAIRS, MUNICIPAL TAX AND INSURANCE PREMIUMS. SECTION 31, PROVIDES DEDUCTION ON REPAIRS AND INSU RANCE OF PLANT, MACHINERY AND FURNITURE SECTION 32 PROVIDES FOR DEPRECIATION ON TANGIBLE AS SETS LIKE BUILDING, MACHINERY, PLANT, FURNITURE AND ALSO ON I NTANGIBLE 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 SCIE NTIFIC RESEARCH AND KNOWLEDGE EXTENSION IN NATURAL AND APP LIED SCIENCES UNDER AGRICULTURE, ANIMAL HUSBANDRY AND FI SHERIES. PAYMENT TO APPROVED UNIVERSITIES/RESEARCH INSTITUTI ONS OR PAGE 6 OF 10 ITA NO.1693/BANG/2019 A. Y : 2016 17 COMPANY ALSO QUALIFIES FOR DEDUCTION. IN-HOUSE R&D IS ELIGIBLE FOR DEDUCTION, UNDER THIS SECTION. SECTION 35CCD PROVIDES DEDUCTION FOR SKILL DEVELOP MENT PROJECTS, WHICH CONSTITUTE THE FLAGSHIP MISSION OF THE PRESENT GOVERNMENT. SECTION 36 PROVIDES DEDUCTION REGARDING INSURANCE P REMIUM ON STOCK, HEALTH OF EMPLOYEES, LOANS OR COMMISSION FOR EMPLOYEES, INTEREST ON BORROWED CAPITAL, EMPLOYER CONTRIBUTION TO PROVIDENT FUND, GRATUITY AND PAYMEN T OF SECURITY TRANSACTION TAX. INCOME TAX ACT, UNDER SECTION 80G, FORMING PART OF CHAPTER VIA, PROVIDES FOR DEDUCTIONS FOR COMPUTING TAXABLE INCOM E AS UNDER: SECTION 80G(2) PROVIDES FOR SUMS EXPENDED BY AN ASS ESSEE AS DONATIONS AGAINST WHICH DEDUCTION IS AVAILABLE. A) CERTAIN DONATIONS, GIVE 100% DEDUCTION, WITHOUT ANY QUALIFYING LIMIT LIKE PRIME MINISTER'S NATIONAL REL IEF FUND, NATIONAL DEFENCE FUND, NATIONAL ILLNESS ASSISTANCE FUND ETC., SPECIFIED UNDER SECTION 80G(1)(I) B) DONATIONS WITH 50% DEDUCTION ARE ALSO AVAILABLE UNDER SECTION 80G FOR ALL THOSE SUMS THAT DO NOT FA LL UNDER SECTION 80G(1)(I). UNDER SECTION 80G(2) (IIIHK) AND (IIIHL) THERE ARE SPECIFIC EXCLUSION OF CERTAIN PAYMENTS, THAT ARE PART OF CSR RESPONSIB ILITY, NOT ELIGIBLE FOR DEDUCTION U/S80G. 14. IN OUR VIEW, EXPENDITURE INCURRED UNDER SECTION 30 TO 36 ARE CLAIMED WHILE COMPUTING INCOME UNDER THE HEAD, INCOME FORM BUSINESS AND PROFESSION , WHERE AS MONIES SPENT UNDER SECTION 80G ARE CLAIMED WHILE COMPUTING TOTAL TAXABLE INCOME IN THE PAGE 7 OF 10 ITA NO.1693/BANG/2019 A. Y : 2016 17 HANDS OF ASSESSEE. THE POINT OF CLAIM UNDER THESE P ROVISIONS ARE DIFFERENT. 15. FURTHER, INTENTION OF LEGISLATURE IS VERY CLEAR AN D UNAMBIGUOUS, SINCE EXPENDITURE INCURRED UNDER SECTI ON 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 A BOVE SECTIONS TO BE EXEMPT, AS LONG AS IT SATISFIES NECESSARY CON DITIONS UNDER SECTION 30 TO 36 OF THE ACT, FOR COMPUTING INCOME U NDER 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 PROV IDED U/S.80G), THE SAME WOULD ALREADY STAND EXCLUDED WHI LE COMPUTING, INCOME UNDER THE HEAD, INCOME FORM BUSINESS AND PROFESSION . THE EFFECT OF SUCH DISALLOWANCE WOULD LEAD TO INCREASE IN BUSINESS INCOME. THEREAFTER BENEFIT ACC RUING TO ASSESSEE UNDER CHAPTER VIA FOR COMPUTING TOTAL TAXABLE INCOME CANNOT BE DENIED TO ASSESSEE, SUBJECT TO FULFILLMEN T 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 AN D 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 SECTION PAGE 8 OF 10 ITA NO.1693/BANG/2019 A. Y : 2016 17 80G 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 FO RMS PART OF CSR, WOULD LEAD TO DOUBLE DISALLOWANCE, WHICH IS NO T THE INTENTION OF LEGISLATURE. 19. ON THE BASIS OF ABOVE DISCUSSION, IN OUR VIEW, AUT HORITIES BELOW HAVE ERRED IN DENYING CLAIM OF ASSESSEE UNDER SECTION 80G OF THE ACT. WE ALSO NOTE THAT AUTHORITIES BELOW HA VE NOT VERIFIED NATURE OF PAYMENTS QUALIFYING EXEMPTION UNDER SECTI ON 80G OF THE ACT AND QUANTUM OF ELIGIBILITY AS PER SECTION 8 0G(1) OF THE ACT. 20. UNDER SUCH CIRCUMSTANCES, WE ARE REMITTING THE ISS UE BACK TO LD.AO FOR VERIFYING CONDITIONS NECESSARY TO CLAI M DEDUCTION UNDER SECTION 80G OF THE ACT. ASSESSEE IS DIRECTED TO FILE ALL REQUISITE DETAILS IN ORDER TO SUBSTANTIATE ITS CALI M BEFORE LD.AO. LD.AO IS THEN DIRECTED TO GRANT DEDUCTION TO THE EX TENT OF ELIGIBILITY. ACCORDINGLY GROUNDS RAISED BY ASSESSEE STANDS ALLOW ED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2020 SD/- SD/- (B. R. BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 29 TH APRIL, 2020. /VMS/* PAGE 9 OF 10 ITA NO.1693/BANG/2019 A. Y : 2016 17 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE
Mehul