MAHANSARIA ENTERPRISES PVT LTD,MUMBAI V. PR. CIT, MUMBAI-5, MUMBAI

ITA 2158/MUM/2025

AI Insights

The case involves Mahansaria Enterprises Private Limited, which appealed against the order of the PCIT under section 263 of the Income Tax Act, 1961, concerning the assessment year 2020-21. The PCIT had set aside the AO's assessment order, claiming it was erroneous and prejudicial to the interest of the revenue because the AO allowed a deduction under section 80G for CSR expenditures, which the PCIT contended were not allowable under section 37(1) of the Act. The Tribunal examined whether the AO's order was erroneous and whether the PCIT was justified in setting it aside.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633529 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Other Referred Cases: PVG Raju, Raja of Vizianagaram [1976 SCR (1) 1017], South India Corporation (Pvt.) Ltd. V/s. Secretary, Board of Revenue, Trivandrum & Anr. [AIR 1964 SC 207], Agilent Technologies (International) (P.) Ltd. vs. ACIT [2024] 160 taxmann.com 238 (Delhi \\u2013 Trib.), Blue Dart Express Limited v. PCIT (ITA No.1101/Mum/2024 dated 03.09.2024)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYAPRAKASH R.SINGH
• Assessee Lawyers: VIPUL JOSHI; PRASHANT BHUMARE; WAY OF
• Keywords: Set aside; Business income; Difference of opinion; Change of opinion; Business expenditure; Gift; Capital expenditure; Assessment record; Charitable institution; Revision of order
• Section: 143(3); 142(1); 263; 37; 28; 15; 37(1); 80G

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “B” BENCH : MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 2158/Mum/2025 Assessment Year : 2020-21 Mahansaria Enterprises Private Limited, 301-304, 3rd Floor, Peninsula Chambers, Peninsula Corporate Park, G.K. Marg, Lower Parel West, Mumbai-400026 PAN : AAACY1568L vs. The Principal Commissioner of Income Tax (PCIT), Room No. 515, 5th Floor, Aayakar Bhavan, Maharshi Karve Road, Mumbai-400020 (Appellant) (Respondent) For Assessee : Shri Vipul Joshi, Adv. & Prashant Bhumare For Revenue : Shri Satyaprakash R. Singh, CIT-DR Date of Hearing : 14-05-2025 Date of Pronouncement : 11-06-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Ld. Principal Commissioner of Income Tax, Mumbai-5 [„Ld.PCIT‟] u/s. 263 of the Income Tax Act, 1961 („the Act‟), dated 17-03-2025, pertaining to Assessment Year (AY) 2020-21, wherein the assessee has taken the following grounds of appeal: “1. The PCIT erred in observing that the assessment order passed by the AO under section 143(3) r.w.s. 144B of the Act was erroneous and prejudicial to the interest of revenue and thereby setting aside the order. 2 ITA No. 2158/Mum/2025 2. The PCIT erred in passing revision order under section 263 of the Act by disallowing deduction under section 80G in respect of expenditure incurred towards CSR, without appreciating the fact that revision proceeding under section 263 of the Act stands dropped by several decision of Tribunals, including decision of Mumbai Tribunal. 3. The PCIT erred in not appreciating the fact that the issue of allowability of deduction under section 80G was examined by the AO during the course of assessment proceedings and accordingly, the appellant's case does not fall under Explanation 2 to section 263. 4. The PCIT failed to appreciate that one possible view taken by the AO could not be substituted by another alternative possible view of the PCIT in revision proceedings. 5. The PCIT erred in not appreciating the fact that issue relating to allowability of deduction under section 80G in respect of expenditure incurred towards CSR stands decided in favour of the taxpayer by several decisions of Tribunals, including Mumbai Tribunal and therefore, revision proceedings was mere change of opinion. 6. The PCIT erred in disallowing deduction under section 80G on entire expenditure incurred towards CSR of Rs. 3,52,06,000 as against Rs. 1,04,93,845/-, amount of CSR which the appellant was required to spent during the year under consideration. 7. The PCIT erred in observing that the Commissioner is not necessarily required to give a final conclusion of the issue on hand and directing the AO to modify the assessment by passing a speaking order. 8. The PCIT erred in directing the AO to initiate the penalty proceedings as per the provisions of the Act. 9. The Appellant craves leave to add or amend any or all of the above grounds of appeal, if necessary.” 2. Briefly the facts of the case are that the assessee filed its original return of income on 15-02-2021. The case was selected for scrutiny through CASS under complete scrutiny category and the assessment was completed u/s. 143(3) r.w.s. 144B of the Act vide order dt. 22-09-2022, determining the total income at Rs. 42,10,23,271/- as against the returned income of Rs. 41,00,71,160/-. Thereafter the assessment records 3 ITA No. 2158/Mum/2025 were called for and examined by the Ld. PCIT. It was noticed by him that the assessee has debited a sum of Rs. 3,52,06,000/- towards Corporate Social Responsibility (CSR) expenses, which were added back in the computation of income and at the same time, the assessee has claimed deduction of Rs. 2,62,06,000/- u/s. 80G of the Act. As per the Ld. PCIT, the said expenditure has been incurred towards CSR, which is not allowable expenditure u/s. 37(1) of the Act, the deduction claimed u/s. 80G of the Act cannot be allowed and it was accordingly held that the assessment order so passed by the AO is erroneous and prejudicial to the interest of the Revenue, within the meaning of section 263 of the Act and a show cause was issued to the assessee on 06-03-2025. 3. In response to the show cause, the Ld.AR attended the proceedings and filed written submissions which were considered, but not found acceptable to the Ld. PCIT and it was held by the Ld. PCIT that the assessee is not eligible for deduction u/s. 80G of the Act and since the AO has allowed the same, the order so passed by the AO was held as erroneous and prejudicial to the interest of the Revenue and the AO was directed to modify the assessment by passing a speaking order in terms of the reasoning adopted by the Ld. PCIT. 4. We refer to the findings of the ld PCIT which are contained in para 5 of the impugned order, which read as under: “5. I have perused the facts of the case and submissions made by the assessee. The contention of the assessee that the expenditure on Corporate Social Responsibility (CSR) can be claimed as deduction under section 80Gof the Act for any donation made cannot be accepted for the following reasons: 5.1. Section 37(1) of the Act allows for deduction of business expenses provided they are incurred \"wholly and exclusively\" for the purposes of 4 ITA No. 2158/Mum/2025 business. Explanation to Section 37(1), introduced through the Finance (No.2) Act, 2014, specifically disallows CSR expenses, noting that these expenses are not considered business-related and thus cannot be deducted. This provision underscores the legislative intent to impose CSR obligations without tax relief. CSR expenditures were never intended to provide fiscal advantages to companies but to ensure they fulfill their statutory obligations under Section 135 of the Companies Act, 2013. The legislative intent of introduction of Explanation 2 to Section 37(1) of the Act, introduced through the Finance (No. 2) Act, 2014, is elaborated in the Explanatory Notes to the Finance Bill 2014 (CBDT Circular No.1/2015 dated 21.01.2015) which is reproduced below:- \"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/tumover/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.\" From the above, it is clear that the CSR expenditure is not to be allowed as deduction in any form to avoid subsidizing of CSR expenditure by government and therefore claim of the assessee and the contention of the assessee regarding allowability of CSR expenditure under section 80G is against the basic intent of the provision. It is trite law that what cannot be allowed in view of specific provisions cannot be allowed indirectly unless specifically provided in the Act. 5.2. Section 80G of the Act provides tax deductions for voluntary donations made to specified charitable institutions or funds. The core purpose of this section is to encourage philanthropy and voluntary social contributions. The issue at hand is whether mandatory CSR contributions can be reclassified as donations under this section. It is imperative to note that Section 80G was designed to incentivize purely voluntary donations, not statutorily mandated CSR obligations. Allowing CSR expenditures to qualify under Section 80G would undermine the legislative intent behind the disallowance introduced in Section 37(1). CSR expenses are mandated by law, and as such, they lack the essential characteristic of voluntariness, which is a core requirement for claiming deductions under Section 80G. The essence of a donation, as confirmed by several judicial precedents, is its voluntary nature, which is absent in the case of CSR expenditures. The Hon'ble Supreme Court in the case of PVG Raju, Raja of Vizianagaram [1976 SCR (1) 1017] has specifically held that donations refer to payments made voluntarily, without coercion or legal obligation. This principle is directly applicable here since CSR payments are mandated by law. The 5 ITA No. 2158/Mum/2025 payments made by the assessee towards CSR, therefore, cannot be construed as 80G. While contributions to the Swachh Bharat Kosh and Clean Ganga Fund are recognized as eligible for deductions under Section 80G, this eligibility is confined to voluntary contributions. However, when these contributions are made as part of the statutory CSR obligations under Section 135 r.w. Schedule VII of the Companies Act, 2013, they cease to qualify as voluntary donations. The exclusion for deduction u/s 80G of the Act for Prime Minister's National Relief Fund, Swachh Bharat Kosh, Clean Ganga Fund or other specified funds does not necessarily mean that all other donations made out of CSR expenditures are entitled for claim u/s. 80G of the Act. These exceptions are provided for claiming deduction under Section 80G of the Act, hence it cannot be inferred that the amount spent under section 135(5) of the Companies Act, 2013, the assessee is also eligible for deduction u/s. 80G of the Act even though the assessee may be satisfying the requisite conditions prescribed for deduction u/s 80G of the Act. 5.3. The provisions of Sections 37(1) (including Explanation 2) and Section 80G of the Act must be read harmoniously. Allowing CSR expenditures to be deductible under Section 80G of the Act would render Explanation 2 to Section 37(1) of the Act nugatory and would effectively nullify the specific disallowance legislated by the Parliament. The principle of harmonious construction requires that statutes be interpreted in a manner that gives effect to all provisions without rendering any part redundant. The Hon'ble Supreme Court in the case of South India Corporation (Pvt.) Ltd. V/s. Secretary, Board of Revenue, Trivandrum & Anr. [AIR 1964 SC 207] has laid down the principle that statutes must be read as a whole and construction must be adopted that gives effect to all parts of the statute. The principle of harmonious construction mandates that provisions must be interpreted to avoid conflicts and each part of the statute should be given meaningful effect. Accordingly, allowing CSR expenditures to be claimed under Section 80G of the Act would negate the specific statutory disallowance under Section 37(1) of the Act and result in unintended tax benefits which would be inconsistent with the legislative framework governing CSR and tax deductions. The intention of the legislature was never to allow deduction u/s 80G of the Act for CSR expenditure carried out, else it would result in subsidizing the CSR expenditure. 5.4. CSR expenditure has to be mandatorily incurred by certain specified companies as per provisions of Section 135 of the Companies Act. Accordingly, it is a statutory obligation cast upon certain companies to share certain portion of profits to the activities towards social responsibilities. It is for this reason that this expenditure was clarified to be an expenditure not incurred fully and wholly for the purpose of business through Explanation 2 to the section 37(1) of the Act. Further, Ministry of Corporate Affairs Circular No. 01/2016 dated 12.01.2016 clarifies that no specific tax exemptions have been extended to CSR expenditures. The Circular explicitly reinforces that CSR expenditures are not eligible for tax 6 ITA No. 2158/Mum/2025 deductions as business expenditures under Section 37(1) of the Act and by extension should not qualify as voluntary donations under Section 80G of the Act. The expression \"shall ensure\" used in Section 135(5) of the Companies Act, 2013 clearly implies that there is a mandate to spend 2% of average net profits of the preceding three years on CSR activity. 5.5. As regards the judicial pronouncements cited by the assessee, it is stated that appeals filed by the Department before the Hon'ble Bombay High Court on this issue are pending for adjudication in the following cases:- S r Name of the Assessee PAN ITAT Order No. High Court Lodging No. 1 Blue Cross Laboratories Pvt. Ltd. AAACB1549G 1806/Mum/202 3 ITXAL/30782/20 24 2 Worley Services Industries Pvt. Ltd. AAACH0456J 554/Mum/2024 ITXAL/4392/202 5 Since the issue is sub-judice before the jurisdictional Bombay High Court, the contention of the assessee cannot be accepted. 6. The submissions of the assessee that the issue of allowability of deduction u/s. 80G of the Act for CSR payments had been examined by the AO during the course of assessment proceedings and that any change in that view during the proceedings u/s 263 of the Act would amount to 'change of opinion', have been considered carefully but are not found to be acceptable for the following reasons: …..….. ……….. 6.1.4. In view of the above, it is clear that the decision of the AO in the present case is erroneous on merits and that he has accepted the submissions made by the assessee without a demur. Hence action uls 263 of the Act is warranted in this case. 7. From the above, it is clear that the assessee has made CSR expenses amounting to Rs.3,52,06,000/- and disallowed the same in the computation of income u/s 37(1) of the Act. Further the assessee has claimed the said expenditure in the guise of donation and claimed deduction on it. Though it is a disallowable expenditure, the assessee company claimed the same as a deduction u/s 80G of the Act and the AO in the order dated 22.09.2022 passed under section 143(3) r.w.s. 1448 of the Act has allowed it. Therefore, the order of the AO, u/s 143(3) r.w.s. 7 ITA No. 2158/Mum/2025 144B of the Act dated 22.09.2022 is erroneous in so far as it is prejudicial to the interest of the revenue. ……… ………. 10. Considering the above facts and circumstances, it is held that the assessment order dated 22.09.2022 passed u/s.143(3) r.w.s. 144B of the Act is erroneous in so far as it is prejudicial to the interests of the revenue within the meaning of Section 263 of the Act. Accordingly, Assessing Officer is directed to modify the assessment by passing a speaking order and also initiate penalty proceedings as per provisions of the Act.” 5. Against the aforesaid findings of the Ld.PCIT, the assessee is in appeal before us. 6. During the course of hearing, the Ld.AR submitted that the assessee company is engaged in the business of holding long term strategic stake in operating companies, investing in real estate, investing in mutual funds, bonds, investing in renewable power generation business, etc. It was submitted that as a part of its regular business activities, the assessee had given donations to various institutions amounting to Rs. 3,52,06,000/- as part of its CSR under the Companies Act, 2013. It was submitted that as the said expenditure was not allowable expenditure under the provisions of section 37(1) of the Act, the assessee-company while computing the taxable income under the provisions of the Act has added back the said amount and has not claimed any deduction while computing its income, which has been offered to tax. At the same time it was submitted that since the said donations were eligible u/s. 80G of the Act, the assessee- company has claimed an amount of Rs. 2,62,06,000/- u/s. 80G of the Act. 7. It was further submitted that the case of the assessee was selected for complete scrutiny and one of the reasons for selection of the case relates to examination of deduction from total income under Chapter-VIA of the Act 8 ITA No. 2158/Mum/2025 and business expenses. It was submitted that during the course of assessment proceedings, the details/information/documentation were called for by the AO from time to time which includes specific queries concerning the donations made u/s. 80G of the Act as well as CSR expenses. In this regard, the assessee filed necessary submissions and duly complied all these notices issued by the AO and our reference was drawn to the letter dt. 14-07-2021, wherein the assessee has submitted the details of all donations along with supporting documents, notices u/s. 142(1) of the Act dt. 20-10-2021, wherein specific query was made by the AO on the issue of claim of deduction u/s. 80G of the Act, letter dt. 03-11- 2021 wherein the assessee submitted the requisite details, notice dt. 15- 12-2021, wherein the specific queries were raised with respect to CSR expenses of Rs. 3.52 crores, letter dt. 21-12-2021 wherein the assessee submitted the break-up of the expenses along with supporting documents and it was also brought to the notice of the AO that these expenses were added back while computing the income and deduction under Chapter-VIA of the Act has been claimed. Thereafter notice dt. 21-03-2022 wherein the AO again sought various details and letter dt. 24-03-2022, wherein the assessee submitted the requisite details. Thereafter, notice for proposed addition of Rs. 15.50 lacs u/s. 80G of the Act was issued by the AO followed by video conference on 02-09-2022, wherein the issue of deduction u/s. 80G of the Act was also discussed, letter dt. 05-09-2022, wherein the assessee filed written submissions and explanation with regard to the claim of deduction u/s. 80G of the Act. It was accordingly submitted that it was only after proper enquiry and verification, including the aspect of CSR expenses vis-à-vis the claim u/s. 80G of the Act, the AO passed the assessment order u/s. 143(3) of the Act and our reference was drawn to the assessment order, wherein the AO has discussed the matter 9 ITA No. 2158/Mum/2025 relating to claim of deduction u/s. 80G of the Act and it was finally allowed by him. 8. It was further submitted that thereafter, a show cause u/s. 263 of the Act was issued by the Ld.PCIT, proposing to revise the assessment order. It was submitted that in the show cause notice, it can be observed that the same is cryptic and does not even whisper about any lack of enquiry/inadequate enquiry on the part of the AO and it just simply states that the CSR expenses are not allowable u/s. 37(1) of the Act, the assessment order so passed by the AO is erroneous. 9. It was submitted that the assessee filed exhaustive submissions vide its submission dt. 11-03-2025 before the Ld.PCIT in which the assessee in detail dealt with various factual and legal aspects and a summary of the submissions reads as under: “(i) Invited attention of the PCIT towards various communication exchanged between the Appellant and the A.O. on the aspect of CSR expenses and the claim u/s 80 G of the Act, signifying the fact that the claim allowed by the A.O. after due verification. (ii) Referred six judgments on the very aspect of validity of exercise of revision power vis a vis CSR expenses. (iii) Referred various judgments on merits of the case, directly covering the case of the Appellant. (iv) Referred Circular No. 1 of 2016 issued by the Ministry of Corporate Affairs (MCA) dated 12.01.2016 to the effect that the claim of donation under Chapter VI A of the Act is not barred. (v) Analysed the legislative background behind insertion Explanation 2 to section 37 (1) of the Act, which clarified that even a claim of deduction u/s 30 to 36 is not barred. (vi) Analysed the legislative history of section 80G of the Act, which showed that whenever a claim of deduction via a vis a specific donation, which was 10 ITA No. 2158/Mum/2025 a part of CSR obligation, was desired to be barred, such donation is specifically enumerated. (vii) Analysed the legal position on the aspect of exercise of power u/s 263 of the Act, where the A.O. has simply adopted one possible legal view after due inquiry. (viii) Drew attention, alternatively, that even otherwise, the CSR obligation for the year was only to the extent of Rs. 1.04 crores, against which the Appellant had donated Rs. 3.52 crores.” 10. It was submitted that without appreciating the submissions so filed by the assessee, the Ld.PCIT passed the impugned order and it can be observed from the said order that none of the basic facts and the legal position was denied/disputed or controverted by the Ld.PCIT. It was submitted that the preliminary jurisdictional objection as raised by the assessee that the assessment order was not erroneous in as much as the AO had applied his mind while allowing the claim by adopting one of the possible views was not even disputed/controverted by the Ld.PCIT. It was submitted that in any case as per the prevailing legal position, this was the only possible view and there was no contrary view at the relevant point of time. It was submitted that the Ld.PCIT has not denied or disputed that the AO had made adequate enquiries and the view adopted by the AO was impossible or far starched. It was further submitted that the Ld.PCIT did not deal with various factual and legal aspects, as raised by the assessee, he did not even refer to various case law cited by the assessee, much less dealing with them judicially and judiciously. 11. It was submitted that as far as the legal aspects are concerned, it is not denied/disputed that the case of the assessee is fully covered by the catena of judgments, including the judgment rendered by Mumbai Benches of the Tribunal and the only reason given by the Ld.PCIT for not following the same is that the Department has preferred appeal against 11 ITA No. 2158/Mum/2025 such judgments before the Hon‟ble Bombay High Court. It was further submitted that the Ld. PCIT not just set aside the assessment order, but also directing the AO to initiate penalty proceedings which is beyond scope of the jurisdiction u/s. 263 of the Act. 12. Further, reference was drawn to the decision of the Co-ordinate Benches of the Tribunal in following cases: i. Alubound Dacs India Private Limited vs. DCIT [(Ι.Τ.Α. No 3663/Mum/2023)] ii. DCIT v/s. Motilal Oswal Securities Ltd. [(Ι.Τ.Α. No 1795 & 1796 Mum/2023)] iii. Naik Seafoods Pvt Ltd. v/s. PCIT [(Ι.Τ.Α. Νο 490/Mum/2021)] iv. FDC Ltd. v/s. PCIT [(2023) 157 Taxmann.com 387 (Mum.)] v. Societe Generale Securities India (P.) Ltd. vs. PCIT [(2023) 157 taxmann.com 533 (Mum - Trib)] vi. Synergia Lifesciences Pvt. Ltd vs. DCIT [(I.T.A. No 938/Mum/2023)] vii. Sikka Ports & Terminals Limited vs. PCIT [(Ι.Τ.Α. No 1865/Mum/2024)] viii. Worley Services India Pvt Ltd. vs. PCIT [(I.T.A. No 554/Mum/2024)] ix. Sequel Logistics Private Ltd. vs. PCIT [(Ι.Τ.Α. No 1114/Ahd/2024)] x. American Express (India) P. Ltd. v. PCIT [(2024) 208 ITD 564 (Delhi - Trib.)] xi. ACIT vs. Sikka Ports and Terminals Ltd [2025] 173 taxmann.com 366 (Mumbai - Trib.)] xii. American Express (India) P. Ltd. vs. PCIT [2024] 166 taxmann.com 91 (Delhi-Trib.) 12 ITA No. 2158/Mum/2025 xiii. Interglobe Technology Quotient (P.) Ltd. vs. ACIT [2024] 163 taxmann.com 542 (Delhi-Trib.) 13. Per contra, the Ld. DR relied on the findings of the Ld.PCIT. The ld PCIT has referred to the explanation 2 to Section 37(1) of the Act, the explanatory notes to the Finance Bill 2014 and Section 135 of the Companies Act to hold that CSR expenditure is not to be allowed as deduction in any form and the same goes against the basic intent of the provisions and what cannot be allowed in view of the specific provisions cannot be allowed indirectly under specifically provided in the Act. He has further held that the payments made by the assessee towards CSR payments are mandated by law and therefore, cannot be construed as voluntary donations eligible for deduction u/s 80G of the Act. Regarding the decisions of the Coordinate Benches relied upon by the assessee during the course of revisionary proceedings, it was submitted that appeals have been filed by the department against the said decisions and the matter is sub-judice before the Hon‟ble Bombay High Court and therefore, reliance placed by the assessee on the said decisions was not found acceptable and the ld PCIT accordingly hold that the order so passed by the AO was erroneous in so far as prejudicial to the interest of the Revenue. Further, he has relied on the decision of Hon‟ble Supreme Court in case of Commissioner of Expenditure – Tax vs. PVG Raju [1975] 101 ITR 465 (SC) as well as the decision of the Co-ordinate Bench of the Tribunal in case of Agilent Technologies (International) (P.) Ltd. vs. ACIT [2024] 160 taxmann.com 238 (Delhi – Trib.). 14. In his rejoinder, the Ld.AR has submitted that both the decisions of the Hon‟ble Supreme Court as well as the decision of the Co-ordinate Bench of the Delhi Tribunal have been considered in case of Interglobe Technology Quotient (P.) Ltd. vs. ACIT (supra) and American Express 13 ITA No. 2158/Mum/2025 (India) P. Ltd. vs. PCIT (supra). Further reference was again drawn to the decision of the Mumbai Bench of the Tribunal in case of Sikka Ports & Terminals Limited vs. PCIT, in ITA No. 1865/Mum/2024, dt. 06-09-2024, wherein the matter has been extensively discussed, taking into consideration the decision in case of Agilent Technologies (International) (P.) Ltd. vs. ACIT (supra). 15. We have heard the rival contentions and perused the material available on record. The issue under consideration relates to whether the AO has erred in allowing expenditure incurred by the assessee by way of its CSR obligation by way of deduction u/s 80G of the Act even though the same has been suo-moto disallowed by the assessee while computing the income under the head „income from business or profession” where admittedly, other conditions for claiming deduction u/s 80G are satisfied in the instant case. 16. We find that the matter is no more res-integra and has been dealt with by various Coordinate Benches and we can gainfully refer to the recent decision of the Coordinate Mumbai Benches in case of ACIT Vs. Sikka Ports and Terminals Ltd (supra), wherein the relevant findings are contained in para Nos. 5 to 13 and the same read as under: “5. We heard the parties and perused the material on records. The assessee during the year disallowed a sum of Rs.33,85,00,000 under section 37 of the Act towards the CSR Spend in compliance with section 135 of the Act. Since the institutions to which the said amounts are given are registered under section 80G of the Act, the assessee claimed 50% i.e. 16,92,50,000 of the same as deduction. The argument of the revenue is that the payment are made to comply with the mandate under the Companies Act, and therefore it cannot be treated as donations which are \"voluntary\" payments. The further argument of the revenue is that when the statute has denied the direct claim of the CSR spend under section 37, the assessee claiming the deduction indirectly under section 80G is against the intention of the legislature and cannot be allowed. The assessee's 14 ITA No. 2158/Mum/2025 contention is that there is no restriction under section 80G to the effect that the contribution should be voluntary and that the CSR spend is an application of income which is eligible for deduction from the gross total income of the assessee as per the provisions of section 80G. 6. The word \"donation\" has not been defined under the Act. However the Hon'ble Supreme Court in the context of Expenditure Tax Act in the case of P.V.G. Raju (supra) has described the meaning of the word \"donation\" in the following words - When a person gives money to another without any material return, he donates that am. An act by which the owner of a thing voluntarily transfers the title and understand the meaning of what many people do every day, viz., giving donations to some fund or other, or to some person or other. Indeed, many rich people out of diverse motives make donations to political parties. The hope of spiritual benefit or political goodwill, the spontaneous affection that benefaction brings, the popularization of a good cause or the prestige that publicized bounty fetches -these and other myriad consequences or feelings may not mar a donation to make it a grant for a quid pro quo. Wholly motiveless donation is rare, but material return alone negates a gift or donation.\" 7. Therefore to examine if CSR spending of the assessee would be a donation it is essential to examine whether the donations given by the assessee to M/s.Reliance Foundation and M/s Shyam Kothari Foundation without any material return and without any consideration and whether it was a grant for quid pro quo. It is not the case of the revenue that the assessee has made contributions to these institutions with an intention get something in return. The only contention of the revenue is that the contributions are made as part of a mandate and not voluntary. However, the Hon'ble Supreme Court in the above case has laid down the basic principle that a payment made without any material return and without any consideration and not for quid pro quo is a donation. Therefore in our considered view, the payment made whether voluntarily or as part of a mandate does not negate the intention of the contribution made. The reliance placed by the Id DR on the decision of Agilent Technologies (International) Pvt. Ltd (supra) is factually distinguishable. The DRP whose order was upheld in the said case, had placed reliance on the decision of the Hon'ble High Court in the case of DCIT v. Hindustan Darr Oliver Ltd (1994) 45 TTJ Mumbai 552 where the payment made was held as not a donation since it was found that the intention behind making the donation was to get reserved seats in the college run by the institute to whom the payments are made as part of CSR spending. As already mentioned, the revenue is not contending that the assessee in the present case has made payments to get something material in return. 8. Now coming to the intention of legislature while amending the provisions of section 37 whereby the CSR spend are not allowed to be claimed as a deduction under the said section. Finance (No.2) Act, 2014 brought in the amendment to section 37 by inserting Explanation 2 to the said section 15 ITA No. 2158/Mum/2025 w.e.f.01.04.2015. It is relevant to look at the provisions of section 37 of the said Act which read as under \"37. (1)Any expenditure (not being expenditure of the nature described in sections 30 to 36 [***] and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head \"Profits and gains of business or profession\". Explanation 2. For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.\" 9. The \"Explanatory Notes to the provisions of Finance (No.2) Act, 2014\" issued by the Central Board of Direct Taxes vide its Circular No.01/2015 dated 21.1.2015 explaining the aforesaid amendment, read as under: \"13. Corporate Social Responsibility (CSR) 13.1 Corporate Social Responsibility (CSR) Under the Companies Act, 2013 certain companies (which have net worth of Rs.500 crore or more, or turnover of Rs.1000 crore or more, or a net profit of Rs. 5 crore or more during any financial year) are required to spend certain percentage of their profit on activities relating to Corporate Social Responsibility (CSR). Under the existing provisions of the Act expenditure incurred wholly and exclusively for the purposes of the business is only allowed as a deduction for computing taxable business income. 13.2 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. 13.3 The provisions of section 37(1) of the Income-tax Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Income-tax Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is 16 ITA No. 2158/Mum/2025 not incurred for the purposes of carrying on business, such expenditures cannot be allowed under the existing provisions of section 37 of the Income- tax Act. Therefore, in order to provide certainty on this issue, 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, 2013 shall not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Income- tax Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein. 13.4 Applicability:-This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years.\" (emphasis supplied) The intention behind insertion of the explanation as explained above is that 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 and that 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. However, it is pertinent to note that in para 13.3 above, it has been mentioned that though, the expenditure incurred towards CSRs is not an expenditure incurred for the purpose of business, if the spend is of the nature described in section 30 to section 36 of the Act deduction shall be allowed under those sections subject to fulfillment of conditions, specified therein. For example if the contribution is made to a scientific research association, or to a university or to a college or other institution to be used for scientific research etc... which are approved under section 35 of the Act as part of CSR spending then deduction can be allowed subject to the fulfillment of conditions prescribed under section 35 of the Act. This explanatory note though self-contradictary i.e. denying deduction under section 37 but allowing the assessee to claim deduction under section 30 to 36, also makes it clear that there is no bar regarding the admissibility of CSR expenditure under any other provision of the Act, except under section 37(1) of the Act. In other words, the intention of the legislature is not to restrict the right of the assessee to claim deduction towards the CSR spend if the payment is otherwise allowable under a specific provision of the Act. Further wherever the intention is to restrict the claim of deduction under any other provisions of the Act the same is explicitly provided for to that effect by the legislature. This view is supported by the Explanatory Memorandum Finance Bill 2015 which brought in the specific restriction for claiming deduction under section 80G of the Act towards the CSR spend towards donation to Swachh Bharat Kosh and Clean Ganga Fund. Therefore we are unable to appreciate the contention that the CSR spend being claimed as a deduction under section 17 ITA No. 2158/Mum/2025 80G of the Act is against the intention of the legislature which restricts the same to be claimed as a deduction under section 37 of the Act. 11. The next issue is whether the impugned payments are otherwise eligible for deduction under section 80G of the Act. We have already established that the payments made by the assessee are donations and therefore if the other conditions for the deduction under section 80G is are fulfilled then there should not be any restriction for the assessee to claim the deduction. Before holding so we will address the contention of the revenue that the payments made towards CSR spend are monitored and controlled by the assessee and are not voluntary. In this regard it is relevant to note that though there is a statutory obligation of CSR expenditure under section 135 of Companies Act 2013, there are many prescribed modes and activities under Schedule VII of the Companies Act for spending the CSR expenditure, (the list is not exhaustive but inclusive). Further neither section 135 of the Companies Act nor Schedule VII to the Companies Act nor the CSR Rules, mandates donations to the institutes/funds prescribed under section 80G of the Act. Therefore, in our considered view there is merit in the submission of the ld AR that though the quantum of CSR spend is mandatory there is no mandate on how amount is to be spent or to whom the contribution is to be made. Accordingly the act of the assessee to choose to M/s.Reliance Foundation and M/s Shyam Kothari Foundation which are eligible to accept donations under section 80G of the Act is voluntary and is not mandated under section 135 of the Companies Act 2013. Further from the perusal of CSR applicable in assessee's case, we notice that the monitoring of the CSR spend is to ensure that the same is as per the CSR policy of the company and it does not provide for monitoring the utilization of the funds by the third party donees. In any case the donations made for a specific cause does not result denial of deduction which is otherwise allowable as per the provisions of section 80G of the Act. The Kolkata Bench of the Tribunal in the case of L&T Finance Ltd v. DCIT [2024] 167 taxmann.com 503 (Kolkata Trib.), has elaborately discussed the allowability of CSR spend as a deduction under section 80G of the Act and it is relevant to take note of the following observations made regarding monitoring of CSR spend by the donor i.e.assessee - 12.2. The contribution made by a company toward the discharge of it's CSR to a registered charitable institution, in our view, is akin to corpus donations. Section 11(1)(d) of the Income Tax Act speaks of the specific or corpus, donations, although it has not been defined under Income Tax Act, 1961. Corpus donations are donations wherein, the donor makes the donations to the donee for a specific purpose or object. Prior to the amendment made by amended CSR Rules of 2021, Rule 7 of the erstwhile CSR Rules permitted corpus contributions to charitable institutions as cligible CSR expenditure. Further, the Ministry of Corporate Affairs vide Circular No.21/2014 dated 18th June 2014 had also clarified that contribution to Corpus of a Trust/ society/ section 8 companies etc. will 18 ITA No. 2158/Mum/2025 qualify as CSR expenditure, if such a donee institution or the said corpus has been created exclusively for a purpose related to the activities provided under the CSR framework. However, under the old rules, the mechanism to monitor and ensure that such donation has been actually spent on CSR activity was missing. The donor company would get absolved of its liability of CSR by just donating to the eligible trust/society/company, without ensuring that the amount has been actually spent by the donee on such specific object or purpose (CSR activity) for which it was donated. Therefore, Rule 7 of the CSR Rules, which permitted corpus contributions as eligible CSR expenditure, has been substituted and under the amended CSR Rules of 2021, corpus contributions to any entity shall not be admissible as CSR expenditure. The object and purpose of the aforesaid amendment is to ensure that the expenditure made is actually utilised towards CSR activities. 12. One more point that needs to be considered while deciding the deduction under section 80G for CSR spend is that the restriction on the allowability of the said spend as provided in Explanation 2 to section 37 is for computing the business income under the provision of Section 28-44DB whereas the deduction under section 80G is claimed under Chapter VIA ie. after computing the Gross Total Income. The provisions of section 80G does not impose any condition that the contribution should be voluntary and therefore when the CSR spend is evaluated independently under the provisions of the Act, in our considered view there is no restriction for the assessee to claim deduction under section 80G provided the CSR spend meets the conditions specified therein. In other words, the provisions of section 37 computation provision whereas section 80G is a beneficial provision which allows deduction towards payments made by the assessee for charitable purposes and therefore these two sections are independent each other. Let us assume a situation when a company which is not required to comply with the provisions of section 135 of the Companies Act 2013 makes a donation or a company makes donations in excess of 2% even then the payment may get disallowed under section 37 but in that case the revenue would not impose any restriction to evaluate the payment for claiming deduction under section 80G. If the same analogy is applied to the CSR spend in our view the assessee should be able to claim deduction under section 80G if the other conditions are fulfilled. Denying the claim for the reason that there is a specific mention under section 37 for disallowance and that the payments are made in compliance with section 135 of the Companies Act in our view is not legally tenable unless there is an explicit provision for e.g. contributions towards 'Swacha Bharat Kosh' and 'Clean Ganga Fund'. This view of ours is supported by the decision of the coordinate bench of the Tribunal in the case of Blue Dart Express Limited v. PCIT (ITA No.1101/Mum/2024 dated 03.09.2024) where in the context of revision under section 263 of the Act, the bench has considered the issue of allowing deduction under section 80G towards CSR spend and held that - 19 ITA No. 2158/Mum/2025 10. On merits also, we find that view of Id. 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 precondition 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 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-a-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 \"FAQ through General circular no. 01/2016 dated January 12, 2016 (FAO 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.\" 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 20 ITA No. 2158/Mum/2025 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 Id. 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. 13. In view these discussions and considering the judicial precedence in this regard, we are of the view that there is no infirmity in the order of the CIT(A) in allowing the deduction under section 80G to the assessee towards donations made to M/s. Reliance Foundation and M/s.Shyam Kothari Foundation by placing reliance on the decision of the coordinate bench in the case of M/s. Naik Seafoods Pvt Ltd v. Pr.CIT (ITA No.490/MUM/2021). Accordingly the grounds raised by the revenue are dismissed.” 17. We find that contention advanced by the ld PCIT wherein he has referred to the explanation 2 to Section 37(1) of the Act, the explanatory notes to the Finance Bill 2014 and Section 135 of the Companies Act to hold that CSR expenditure is not to be allowed as deduction in any form and the same goes against the basic intent of the provisions and what cannot be allowed in view of the specific provisions cannot be allowed indirectly under specifically provided in the Act and secondly, where he has held that the payments made by the assessee towards CSR payments are mandated by law and therefore, cannot be construed as voluntary donations eligible for deduction u/s 80G of the Act have been adequately addressed by the Coordinate Bench in the aforesaid decision. In the instant case, we find that ld PCIT has also fairly admitted that though there are decisions of the Coordinate Benches in favour of the assessee, since the department has filed appeal and the matter is sub-judice before the Hon‟ble Bombay High Court, he is setting aside the assessment order. We therefore find that where the view adopted by the AO is supported by various decisions of the Coordinate Benches including the Jurisdictional 21 ITA No. 2158/Mum/2025 Benches, how such a view can be held as erroneous in nature is beyond our comprehension. 18. We further find that AO has made detailed enquiries and verification in respect of claim of deduction u/s 80G on the CSR expenditure incurred by the assessee during the year under consideration and only after such enquiry and verification, claim of deduction has been allowed by him. 19. In light of the same, we are of the considered view that the ld PCIT has erred in exercise of his jurisdiction u/s 263 and the order so passed u/s 263 of the Act by the Id. PCIT is not sustainable and the same is hereby quashed and that of the AO is sustained. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 11-06-2025 Sd/- Sd/- [RAHUL CHAUDHARY] [VIKRAM SINGH YADAV] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 11-06-2025 TNMM Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 22 ITA No. 2158/Mum/2025 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai "