M/S. BLUE CROSS LABORATORIES PVT. LTD., MUMBAI V. PCIT, MUMBAI-3 , MUMBAI

ITA 1806/MUM/2023

AI Insights

The case involves Blue Cross Laboratories Pvt. Ltd., which appealed against the order of the Principal Commissioner of Income Tax-3 (PCIT-3) under section 263 of the Income Tax Act, 1961. The PCIT-3 had set aside the assessment order passed under section 143(3) for the assessment year 2018-19, which had allowed certain deductions related to Corporate Social Responsibility (CSR) expenditures and donations under section 80G. The Tribunal examined whether the PCIT-3 was justified in invoking section 263, which allows for revising an assessment order if it is found to be erroneous and prejudicial to the interests of the revenue. The Tribunal concluded that the original assessment had adequately considered the CSR expenditures and the deductions claimed under section 80G, thus setting aside the PCIT-3's order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125089 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-08-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 18-05-2023
• Other Referred Cases: CIT v/s Gabriel India Ltd. (203 ITR 108) (Bom. HC), CIT v/s Mr. Jayeek Nag (ITA No. 408 of 2014), Moil v/s CIT (396 ITR 244) (Bom HC), CIT v/s Krishna Capbox Pvt. Ltd. (372 ITR 310) (All. HC), (B) Naik Sea Food Pvt. Ltd. v/s PCIT [ ITA No. 490/Mum/2020]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S. SRIBIVASU
• Assessee Lawyers: VIDHI SALOT; KRUPA R. GANDHI
• Keywords: Revision of order; Bad and doubtful debts; Set aside
• Section: 37; 263; 143(3); 142(1); 37(1); 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE ABY T VARKEY, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No. 1806/MUM/2023 (A.Y. 2018-19) Blue Cross Laboratories Pvt. Ltd. 1, Ground Floor, Peninsula Chambers, Peninsula Corporate Park, G. K. Marg, Mumbai-400013 Vs. PCIT-3 Room No. 612, 6 th Floor, Aayakar Bhavan, M. K. Road, Mumbai-400020 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACB1549G Appellant .. Respondent Appellant by : Ms. Krupa R. Gandhi & Ms. Vidhi Salot, ARs Respondent by : Shri. S. Sribivasu, DR. Date of Hearing 07.08.2023 Date of Pronouncement 30.08.2023 आदेश / O R D E R PER AMARJIT SINGH :- 1. The present appeal filed by the assessee is directed against the order passed u/s 263 of the Income Tax Act, 1961 ([hereinafter “the Act”] by the Learned Principal Commissioner of Income-3 [hereinafter „the Ld. PCIT‟] dated 31.03.2023 for A.Y. 2018-19. 2. The grounds of appeal of the assessee as under: P a g e | 2 ITA No. 1806/Mum/2023 AY 2018-19 M/s Blue Cross Laboratories Pvt. Ltd. Vs PCIT-3 GROUND NO. 1: IMPUGNED ORDER PASSED BY INVOKING PROVISIONS OF SECTION 263 OF THE ACT IS BAD IN LAW: 1. On the facts and circumstances of the case and in law, Hon'ble Pr. CIT erred in invoking the provisions of section 263 of the Act and setting aside the assessment order passed u/s 143(3) of the Act as erroneous and prejudicial to the interest of the revenue and directing the AO to verify the contentions of the Appellant on disallowance of Corporate Social Responsibility (“CSR") expenditure in the return and to disallow the deduction u/s 80G on donations out of CSR expenditure. 2. The Appellant prays that it be held that the impugned order is neither erroneous nor prejudicial to the interests of the revenue. WITHOUT PREJUDICE TO GROUND NO. I: GROUND NO. II: ADDITION OF EXPENDITURE INCURRED ON CSR AMOUNTING TO RS. 3,30,86,000/- U/S 37 OF THE ACT: 1. On the facts and circumstances of the case and in law, Hon'ble Pr. CIT erred in directing the AO to verify the contention that the expenditure incurred on CSR amounting to Rs. 3,30,86,000/- was added back u/s 37 in the return of income. 2. The Appellant prays that the direction of Pr. CIT to the AO to verify addition of Rs. 3,30,86,000/- as above be deleted as the Appellant had disallowed the said amount in the return of income. WITHOUT PREJUDICE TO GROUND NO. I: GROUND NO. III: DISALLOWANCE OF DEDUCTION OF RS. 1,51,88,545/- U/S 80G OF THE ACT: P a g e | 3 ITA No. 1806/Mum/2023 AY 2018-19 M/s Blue Cross Laboratories Pvt. Ltd. Vs PCIT-3 1. On the facts and circumstances of the case and in law, the Ld. Pr. CIT erred directing the AO to disallow deduction of Rs. 1,51,88,545/- claimed u/s 80G of the Act, out of CSR expenditure. 2. The Appellant prays that the direction of Hon'ble Pr. CIT to the AO to disallow deduction u/s 80G amounting to Rs. 1,51,88,545/- be deleted. 3. The fact in brief is that the return of income declaring total income at ₹ 1,83,18,55,790/- was filed on 04.10.2018. The case of the assessee was subject to scrutiny assessment and assessment order u/s 143(3) of the Act was passed on 26.03.2021 assessing the total income at ₹ 1,89,78,83,694/- 4. Subsequently, the Ld. PCIT on examination of the assessment record noticed that an amount of ₹ 3,30,86,000/- as expenditure towards corporate social responsibility (CSR) and an amount of ₹ 50,000/- as loss on doubtful debts were debited to the profit and loss account under the head other expenses. However, in the income tax return filed by the assessee the assessee has shown CSR expenditure as ₹50,376/- and allowance for doubtful debt at ₹3,30,85,839/- under the head other expenses at item no. 38 in the profit and loss account as a part of the return of income. The Ld. PCIT also noticed that the assessee has further claimed deduction of ₹1,51,88,545/- u/s 80G of the IT Act. P a g e | 4 ITA No. 1806/Mum/2023 AY 2018-19 M/s Blue Cross Laboratories Pvt. Ltd. Vs PCIT-3 5. Accordingly, a show cause notice dated 19.03.2021 was issued to the assessee. In response the assessee submitted that there was a typographical error for showing an amount of ₹50,376/- under the corporate social responsibility expenditure. The assessee has also explained that it has not claimed CSR expenditure u/s 37(1) of the Act as a deduction out of its income. 6. However, the Ld. PCIT observed that the AO has allowed deduction u/s 80G on the CSR expenditure incurred by the assessee, therefore, the assessment order passed u/s 143(3) dated 26.03.2021 is erroneous in so far as it is prejudicial to the interest of the revenue. The assessee has submitted that the AO had already examined the submission of the assessee and allowed the deduction u/s 80G of the IT Act. However, the Ld. PCIT has not agreed with the submission of the assessee and stated that the deduction u/s 80G on donations given as a part of CSR expenditure were not eligible for deduction. Therefore, the Ld. PCIT has set aside the issue to the AO to verify the contention of the assessee that CSR expenditure was already disallowed in the return of income and also directed to disallow the deduction u/s 80G of the Act, in respect of the donation claimed out of CSR expenditure. P a g e | 5 ITA No. 1806/Mum/2023 AY 2018-19 M/s Blue Cross Laboratories Pvt. Ltd. Vs PCIT-3 7. During the course of appellate proceedings before us, the Ld. Counsel vehemently contented that during the course of assessment proceedings the AO has examined the issue of CSR expenditure and deduction u/s 80G claimed with respect to donations forming part of CSR expenditure and only thereafter deduction was allowed. The Ld. Counsel also submitted that the assessee is otherwise entitled for deduction u/s 80G in respect of donation made to eligible institutions/trusts when supported by the donation receipts. In this regard, the Ld. Counsel has filed paper book comprising details and copies of documents furnished before the AO during the course of assessment proceedings pertaining to claim of deduction u/s 80G of the IT Act and detail of CSR expenditure which was not claimed as deduction out of the income of the assessee. 8. On the other hand the Learned Departmental Representative (hereinafter „the Ld. DR‟) supported the order passed u/s 263 of the Act by the Ld. PCIT. 9. Heard both the sides and perused the materials on record. In the income tax return the assessee claimed deduction u/s 80G of the Act amounting to ₹1,51,88,545/- being 50% of ₹3,03,77,089/- which was part of CSR expenditure. In the paper book the Ld. Counsel has placed audited financial statements for P a g e | 6 ITA No. 1806/Mum/2023 AY 2018-19 M/s Blue Cross Laboratories Pvt. Ltd. Vs PCIT-3 Financial Year [F.Y.] 2017-18 and it is seen that in the profit and loss account the assessee has debited CSR expenditure at ₹330.86 lacs. However, it is noticed that in the income tax return filed by the assessee, it has added back CSR expenditure of ₹330.86 lacs while computing income under the head profit and gains from business. We have perused the copy of notice u/s 142(1) of the Act dated 17.11.2019 placed in the paper book and noticed that during the course of assessment proceedings the AO asked the assessee as per the question no. 5 of annexure 2 to provide details of deduction exemption claimed and explain availability of the same under the Income Tax Act. In response to the notice the assessee has made detailed submission before the AO vide letter dated 20.07.2020 wherein it has given the details of eligible donations u/s 80G of the Act along with documentary proof. It is noticed that the assessee has submitted the details of donations along with receipts placed at page No. 222 to 266 of the paper book and on the receipt the required details i.e. PAN, Regd. No., Income Tax exemption u/s 80G of the Act and other required particulars, were furnished. Further, the AO has issued notice u/s 142(1) of the Act on 31.12.2020 and as per the question no. 5 of the annexure the AO has categorically asked the assessee to provide further details of the donee organizations P a g e | 7 ITA No. 1806/Mum/2023 AY 2018-19 M/s Blue Cross Laboratories Pvt. Ltd. Vs PCIT-3 along with their eligibility u/s 80G of the Act. Further, vide submission dated 24.03.2021 in response to the show cause notice dated 19.03.2021 issued by the AO, the assessee explained that the CSR expenditure debited in the profit and loss account has already been disallowed by the AO as per the Income Computation and Discloser Standard (ICDS) shown in point A-34 of scheduled BP and computation of income from business or profession in the return of income for the year under consideration. During the course of appellate proceedings before us, the Ld. Counsel has also filed paper book comprising copies of various judicial pronouncements on the issue that the section 263 of the Act cannot be invoked when assessment order passed after making inquiries and mere non discussion thereof in assessment order could not lead that the AO did not apply his mind. In this regard the Ld. Counsel referred decisions of Hon‟ble High Courts in case of CIT v/s Gabriel India Ltd. (203 ITR 108) (Bom. HC), CIT v/s Mr. Jayeek Nag (ITA No. 408 of 2014), Moil v/s CIT (396 ITR 244) (Bom HC), CIT v/s Krishna Capbox Pvt. Ltd. (372 ITR 310) (All. HC) 10. The Ld. Counsel has also referred decision of ITAT Mumbai In the case of (B) Naik Sea Food Pvt. Ltd. v/s PCIT [ ITA No. 490/Mum/2020] on the proposition that expenditure incurred P a g e | 8 ITA No. 1806/Mum/2023 AY 2018-19 M/s Blue Cross Laboratories Pvt. Ltd. Vs PCIT-3 on CSR is claimed as deduction for the purpose of section 80G and allowed by the AO then section 263 cannot be invoked. 11. The various submission filed by the assessee during the course of assessment proceedings in response to the notices issued by the AO particularly on the issue on which provisions of section 263 of the Act invoked by the Ld. PCIT as discussed supra demonstrate that the AO has considered the claim of deduction u/s 80G on the expenditure which was part of CSR expenditure and also examined the issue that the assessee has added back the CSR expenditure in its return of income. Therefore, we consider that the order passed by the Ld. PCIT u/s 263 is not justified. Therefore, we set aside the order passed u/s 263 of the Act and allow the grounds of appeal of the assessee. 12. In the result the appeal filed by the assessee is allowed. Order Pronounced in Open Court on 30.08.2023 Sd/- Sd/- (ABY T VARKEY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Mumbai Date 30.08.2023 ANIKET SINGH RAJPUT/STENO P a g e | 9 ITA No. 1806/Mum/2023 AY 2018-19 M/s Blue Cross Laboratories Pvt. Ltd. Vs PCIT-3 आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अतधकरण/ ITAT, Bench, Mumbai.