2022 (7) TMI 1519 - AT - Income Tax

Revision u/s 263 - admissibility of donations claimed u/s 80G - According to the assessee, it suo moto disallowed the CSR expenditure but claimed it u/s 80G of the Act because the trust and institutions to which the amounts were paid, were already enjoying benefits of registration u/s Section 80G, thus donations made by it will qualify for claim of deduction u/s 80G - CIT did not agree with the contentions made by the assessee on the ground that, expenditure incurred by the assessee are not allowable u/s 37 of the Act and there is distinction between CSR expenditure vis- -vis donations made by the assessee and assessee cannot claim this expenditure incurred under CSR by taking benefit of Section 80G HELD THAT - Pr. CIT has not recorded any finding that the recipients were not enjoying registration u/s 80G of the Act, neither this fact was verified by him. His reasoning is from the angle that there is distinction between the expenditure claimed under CSR expenditure vis- -vis donation made u/s 80G of the Act. I We are of the view that, for taking action u/s 263 of the Act, twin conditions should be fulfilled i.e., the order should be erroneous inasmuch as it causes prejudice to the revenue. From the finding of the ld. Pr. CIT, it appears that the ld. Pr. CIT has erred in construing the position of law. The Hon ble Delhi High Court in the case of DG Housing Projects Ltd. 2012 (3) TMI 227 - DELHI HIGH COURT has held that the ld. Commissioner should not simply relegate the point that the assessment order is erroneous to the AO. The ld. Commissioner, after analyzing the record, ought to have recorded a categorical finding and provided valid reasons as to how the assessment order is erroneous. Commissioner should have recorded a finding about the error that had crept in which required action u/s 263 of the Act. There is no such finding at the end of the ld. Commissioner that recipients were not enjoying registration u/s 80G and that this fact was not enquired into by the Assessing Officer. Therefore, in the absence of this finding, we are of the view that the impugned order is not sustainable and hence the same is quashed. Appeal of assessee allowed.

Summary

Issues Involved:
1. Exercise of powers u/s 263 of the Income Tax Act, 1961.
2. Admissibility of donations claimed u/s 80G of the Act.

Summary:

Exercise of Powers u/s 263 of the Income Tax Act, 1961:
The appeal was directed against the order of the Principal Commissioner of Income Tax (Pr. CIT) passed u/s 263 of the Income Tax Act, 1961 for the Assessment Year 2017-18. The Pr. CIT exercised the powers u/s 263, remitting the issue regarding the admissibility of donations claimed u/s 80G of the Act for re-verification by the Assessing Officer. The Pr. CIT issued a showcause notice, observing that the assessee had claimed a deduction of Rs.3,75,000/- u/s 80G on CSR expenditure, which is not allowable u/s 37 of the Act. The assessee contended that CSR expenditures were deductible u/s 80G, citing various judicial precedents supporting their claim.

Admissibility of Donations Claimed u/s 80G of the Act:
The assessee claimed that donations made to trusts and institutions enjoying benefits of registration u/s 80G qualify for deduction u/s 80G, even if they are CSR expenditures. The Pr. CIT argued that CSR expenditures are obligatory under Company Law, whereas donations u/s 80G are voluntary. The Pr. CIT directed the Assessing Officer to verify the claim. The Tribunal noted that the Pr. CIT did not verify whether the recipients were registered u/s 80G and failed to provide valid reasons for considering the assessment order erroneous.

Judgment:
The Tribunal emphasized that for action u/s 263, the order must be erroneous and prejudicial to the revenue. The Pr. CIT did not record a finding that the recipients were not registered u/s 80G, nor did he verify this fact. The Tribunal cited the Hon'ble Delhi High Court's ruling in DG Housing Projects Ltd., stating that the Pr. CIT should have recorded a categorical finding about the error. Therefore, the Tribunal quashed the order passed u/s 263 by the Pr. CIT, allowing the appeal of the assessee.