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2021 (7) TMI 907 - AT - Income TaxRevision u/s 263 by CIT - deduction of CSR expenses u/s 80G which the AO has allowed erronouslly as per express prohibition given by Explanation 2 of Sub-section (1) of Section 37 - HELD THAT - We concur with the contention of the assessee that since Parliament intended certain restrictions to only CSR expenditure in respect of two donations included by an assessee as CSR expenditure i.e. Swachh Bharat Kosh and Clean Ganga Fund has impliedly not made any prohibition/restriction in respect of claim of CSR expenses in other cases if it is otherwise eligible under Section 80G. The assessee has made donation by RTGS Through UCO Bank which is received by Shree Charity Trust which was 80G(5)(vi) certificate of the Department. The assessee has also made payment to Pt. Jashraj Music Academy Trust and the approval u/s 80G (5)(vi) of the Act in respect of Pt. Jashraj Music Academy Trust is found given by Director of Income Tax (Exemption). Therefore, since the assessee satisfies the condition u/s. 80G of the Act of the donees, the assessee s claim for deduction of CSR expenses/contribution u/s 80G of the Act was allowed after enquiry by the AO. Thus we are of the opinion that the action of the AO allowing the claim u/s. 80G of the Act is a plausible view - PCIT has not been able to make out a case that on this issue raised by him, the AO's order is erroneous as well as prejudicial to the revenue. So the jurisdictional fact as well as law is absent for invoking revisional jurisdiction. - Decided in favour of assesee.
Issues Involved:
1. Invocation of jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Allowability of deduction under Section 80G for CSR expenses. Issue-Wise Detailed Analysis: 1. Invocation of jurisdiction under Section 263 of the Income Tax Act, 1961: The appeal filed by the Assessee challenges the invocation of jurisdiction by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. The Assessee contends that the essential condition precedent for invoking Section 263, which requires the Assessing Officer’s (AO) order to be erroneous as well as prejudicial to the revenue, was not satisfied. The PCIT had issued a show cause notice (SCN) stating that the AO's order was erroneous for allowing CSR expenses as a deduction under Section 80G, which is prohibited by Explanation 2 of Sub-section (1) of Section 37 of the Act. The Assessee argued that the AO had duly examined the claim during the scrutiny proceedings and allowed the deduction based on the prevailing legal interpretations and Tribunal decisions. The Tribunal referred to the Supreme Court's ruling in Malabar Industries Ltd. vs. CIT, which mandates that both conditions (erroneous and prejudicial to the revenue) must be satisfied for invoking Section 263. The Tribunal found that the AO had indeed inquired into the matter and allowed the deduction after due consideration, making the PCIT's claim of non-enquiry factually incorrect. Therefore, the Tribunal held that the PCIT’s invocation of jurisdiction under Section 263 was without basis and quashed the order. 2. Allowability of deduction under Section 80G for CSR expenses: The Assessee claimed a deduction of ?67,50,000 (50% of ?1,35,00,000) under Section 80G for donations made as part of CSR activities. The AO allowed this deduction, which the PCIT later contested, arguing that CSR expenses are expressly prohibited from being allowed as business expenses under Explanation 2 to Section 37(1). The Assessee countered that while CSR expenses are not deductible under Section 37(1), they are eligible for deduction under Section 80G, provided they meet the conditions specified therein. The Tribunal examined the relevant provisions of Sections 37(1) and 80G of the Act. It noted that Explanation 2 to Section 37(1) only prohibits CSR expenses from being deducted as business expenses, not under other sections like 80G. The Tribunal cited decisions from the Bangalore Tribunal, which supported the view that CSR expenses can qualify for deduction under Section 80G if they meet the necessary conditions. The Tribunal also highlighted that Section 80G contains specific exclusions for donations to Swachh Bharat Kosh and Clean Ganga Fund, implying that other CSR-related donations are eligible for deduction. The Tribunal found that the Assessee's donations were made to institutions approved under Section 80G(5)(vi) and that the AO had correctly allowed the deduction after proper verification. The Tribunal concluded that the AO's order was a plausible view and not erroneous or prejudicial to the revenue. Therefore, the Tribunal held that the PCIT's interference was unwarranted and quashed the order under Section 263. Conclusion: The Tribunal allowed the appeal, quashing the PCIT's order under Section 263, and upheld the AO's decision to allow the deduction under Section 80G for CSR expenses. The order was pronounced on 22nd July 2021.
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