PANAMA PETROCHEM LIMITED,MUMBAI V. DEPUTY COMMISSIONER OF INCOME-TAX, MUMBAI

ITA 1715/MUM/2025

AI Insights

The case involves Panama Petrochem Limited, which appealed against the revision order of the PCIT that directed the AO to disallow a deduction claimed under section 80G of the Income Tax Act. The deduction was initially allowed by the AO, recognizing the donation as eligible under section 80G despite it being claimed as CSR expenditure. The PCIT's revision was based on the grounds that the same amount claimed as CSR could not be allowed again as a deduction under section 80G. The Tribunal, referencing the Supreme Court's decision in Malabar Industrial Company, held that the PCIT's order was not valid as the AO's decision was based on one of the two possible views, which does not constitute an 'error'.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314094 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2020-2021
• Other Referred Cases: Savit Oil Technologies Ltd. Vs. ACIT, Blue Cross Labs (P) Ltd. Vs. PCIT-3, First American (P) Ltd. Vs. ACIT, National Seeds Corporation Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.A. DHYANI
• Assessee Lawyers: CHAITANYA JOSHI; VINAYAK BHAT
• Keywords: Business expenditure
• Section: 143(3); 263; 37(1); 80G

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “C” Bench, Mumbai. Before Shri Sandeep Gosain (JM) & Shri Omkareshwar Chidara (AM) ITA No. 1715/MUM/2025 (Assessment Year : 2020-21) Panama Petrochem Limited 401, Aza House, 24 Turner Road, Bandra West Mumbai-400 050. Vs. PCIT-8 Room No. 611 Aayakar Bhavan M.K. Road Mumbai-400 020. PAN : AACCP4358D Appellant Respondent Assessee by : Shri Chaitanya Joshi & Shri Vinayak Bhat Revenue by : Shri R.A. Dhyani Date of Hearing : 22/04/2025 Date of pronouncement : 05/05/2025 O R D E R Per Omkareshwar Chidara (AM) :- The only issue raised by the appellant company in the above captioned appeal is that the order passed by Ld. PCIT under section 263 of the I.T. Act with respect to allowing the deduction under section 80G of the Act by the Ld. AO, is bad in law. The relevant grounds of appeal are reproduced below :- 1. Ground No. 1: Revision order passed by the Ld. PCIT under section 263 of the I.T. Act against the assessment order passed under section 143(3) r.w.s. 144B of the Act dated 26.09.2022 is bad in law. 1.1 On the facts and in The circumstances of the case and in law, the Id. PCIT erred in invoking the revision proceedings and consequently passing the order, directing the Id. AO in revising the assessment order u/s. 143(3) r.w.s. 144B alleging it to be erroneous and prejudicial to the interest of the revenue. 1.2 The appellant prays that the revision order passed by the Id. PCIT u/s. 263 of the Act be quashed. WITHOUT PREJUDICE TO GROUND NO. 1; Panama Petrochem Ltd. 2 2. Ground No. 2: Disallowance of Deduction of Rs. 10,50,000/- claimed u/s. 80G of the Act: 2.1 On the facts and in the circumstances of the case and in law, the ld. PCIT erred in directing the ld. AO to disallow the deduction of Rs. 10,50,000/- claimed under section 80G of the Act. 2.2 The appellant prays that the disallowance under section 80G of the Act be deleted. 2. In this case, Ld. AO has allowed the deduction under section 80G of the Act claimed by appellant company, the donation given to a school, which was approved for 80G purposes by the Commission of Income Tax. The Ld. PCIT has passed an order under section 263 of the Act adjudicating that the donation given by appellant is not allowable under section 80G of the Act because the same amount was already claimed as Corporate Social Responsibility (CSR) expenditure, which is mandatory in nature as per the provisions of Companies Act. The Ld. PCIT quoted Explanation 2 to section 37(1) of the I.T. Act which come into effect from 1.4.2015, says CSR expenditure incurred by the appellant cannot be allowed as business expenditure. As the Ld. AO has allowed this expenditure as deduction under section 80G of the Act, Ld. PCIT held that the same is bad in law. The Ld. PCIT has directed Ld. AO to pass an order afresh. 3. Aggrieved by the Revision Order passed by Ld. PCIT, the present appeal was filed. The Ld. AR of the appellant has argued before the ITAT that there is no prohibition in claiming the deduction under section 80G of the Act, even though the same was claimed as CSR expenditure also. The Ld. AR has relied on the following decisions of the Coordinate Benches :- a) Savit Oil Technologies Ltd. Vs. ACIT (ITA No. 1258/Mum/2023)(Mum-Trib) b) Blue Cross Labs (P) Ltd. Vs. PCIT-3 (ITA No. 1806/Mum/2023) (Mum-Trib) c) First American (P) Ltd. Vs. ACIT (ITA No. 1762/Bang/2019(Bang-Tri) d) National Seeds Corporation Ltd. Vs. ACIT (ITA No. 6794/Del/2014)(Del- Trib) Panama Petrochem Ltd. 3 3.1. The Ld. AR of the appellant company has submitted that the Ld. AO considered all his submissions at the time of passing the order under section 143(3) of the Act and correctly allowed the deduction under section 80G of the Act. Hence, it was pleaded that the order of Ld. PCIT may be quashed and the order of Ld. AO may be upheld. 5. The Ld. DR relied on the order of Ld. PCIT, passed under section 263 of the Act and argued that the CSR expenditure claimed cannot be again allowed as a deduction under section 80G of the Act and hence the order of Ld. AO is incorrect and hence the Revision order of Ld. PCIT under section 263 is correct and valid. 6. Heard both sides. In the case of Malabar Industrial Company Vs. Ld. CIT(A) (243 ITR 83)(SC), Hon'ble Supreme Court has held that for a valid order under section 263 of the Act, twin conditions of “error” and “prejudicial to the interest of Revenue” should be satisfied. While explaining the meaning of “Error”, Hon'ble Supreme Court has held that if the AO followed one of the two possible views, then the same cannot be termed as “Error”. In the present case, it is observed that there are plethora of decisions in favour of the appellant as relied on by appellant holding that in the present circumstances, donation under section 80G of the act is eligible for deduction even though the same was claimed under CSR expenditure, as mentioned by Ld. AR of the appellant. So, both the conditions, “Error” and “prejudicial to the interest of Revenue” are not fulfilled in this case to pass a valid order under section 263 of the Act. Hence, following the ratio of Hon'ble Supreme Court in the case of Malabar Industrial Company(supra), it is held that the order of PCIT under section 263 of the Act is bad in law and hence quashed. Panama Petrochem Ltd. 4 7. The appeal of appellant company is allowed. Order pronounced in the open Court on 05/05/2025. Sd/- Sd/- (SANDEEP GOSAIN) (OMKARESHWAR CHIDARA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 05/05/2025 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai PS "