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2024 (6) TMI 1134 - AT - Income TaxDisallowance for deduction of CSR expenses u/s. 80G - CIT(A) failed to consider the reply and judicial pronouncements submitted by the assessee company - AO based this disallowance on the grounds that the nature of CSR expenses being a statutory obligation u/s135 of the Companies Act 2013 differs significantly from voluntary donations eligible for 80G deduction - HELD THAT - The assessee company had uploaded its reply/submissions on the e-portal of the CIT(Appeals) pursuant to the notice of hearing that was issued by the latter on 18.01.2024. As the rar/zip pdfs that were uploaded by the assessee company were damaged therefore the CIT(Appeals) vide his letter directed the assessee company to upload simple PDF format files so that further necessary action could be taken. In compliance the assessee company once again uploaded the PDF file of its earlier reply. On a perusal of the reply filed by the assessee company it transpires that it had relied upon certain judicial pronouncements wherein it was held that the CSR expenses are eligible for deduction u/s. 80G of the Act. As the CIT(Appeals) had failed to consider both the aforesaid reply uploaded by the assessee company and also the judicial pronouncements that were pressed into service in support of its aforesaid claim therefore in our considered view the matter in all fairness requires to be restored to the file of the CIT(Appeals) for fresh adjudication. CIT(Appeals) is directed to redecide the appeal after considering the reply of the assessee company along with the judicial pronouncements that it had pressed into service in support of its aforesaid claim i.e. CSR expenses are eligible for deduction u/s. 80G of the Act. Appeal of the assessee company is allowed for statistical purposes.
Issues Involved:
1. Whether the Commissioner of Income Tax (Appeals) erred in upholding the assessment order without considering detailed submissions. 2. Whether the Assessing Officer (AO) ignored detailed submissions and case laws against the show cause notice. 3. Whether the AO erred in not appreciating the absence of a prescribed form for re-computation of total income. 4. Whether the AO erred in disallowing the claim of donation paid under Section 80G and initiating penalty proceedings. Issue-wise Detailed Analysis: 1. Whether the Commissioner of Income Tax (Appeals) erred in upholding the assessment order without considering detailed submissions: The assessee company contended that the Commissioner of Income Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, erred in upholding the assessment order passed by the Assessment Unit-Income Tax Department without considering the detailed submissions made by the appellant. The CIT(A) upheld the assessment order, leading to the addition being deemed unjustified, unwarranted, and uncalled for. The CIT(A) found no infirmity in the view taken by the AO and upheld the disallowance of the assessee's claim for deduction of CSR expenses under Section 80G of the Income Tax Act. 2. Whether the Assessing Officer (AO) ignored detailed submissions and case laws against the show cause notice: The assessee argued that the AO ignored detailed submissions made against the show cause notice and rejected the same by reiterating reasons raised in the show cause notice. The AO failed to appreciate the case laws quoted by the appellant and ignored the MCA circular submitted against the show cause notice. The AO was of the view that CSR expenses, being a statutory obligation under Section 135 of the Companies Act, 2013, differ significantly from voluntary donations eligible for Section 80G deduction. The AO disallowed the deduction under Section 80G, determining the income at Rs. 183,13,97,086/-. 3. Whether the AO erred in not appreciating the absence of a prescribed form for re-computation of total income: The assessee contended that the prescribed form for filing re-computation was not available till the date of passing the order. In the absence of the form, the assessee could not apply for total income, leading to the AO making additions to the total income and initiating penalty proceedings for underreporting of income. The penalty initiated by the AO was deemed unjustified, unwarranted, and uncalled for. 4. Whether the AO erred in disallowing the claim of donation paid under Section 80G and initiating penalty proceedings: The AO disallowed the claim of donation paid under Section 80G by ignoring submissions, judicial decisions, and the MCA circular. The AO argued that CSR expenditure is an application of income and cannot be considered as incurred wholly and exclusively for the purpose of carrying on business as envisaged in Section 37 of the Act. The CIT(A) concurred with the AO's stance, emphasizing the distinction between CSR expenses, which are obligatory and represent a charge on profit, and Section 80G donations, which are voluntary. The CIT(A) upheld the addition of Rs. 1,15,50,000/- on account of disallowance of deduction claimed under Section 80G. Conclusion: The Tribunal found that the CIT(A) failed to consider the reply and judicial pronouncements submitted by the assessee company. The matter was restored to the file of the CIT(A) for fresh adjudication, directing the CIT(A) to redecide the appeal after considering the reply of the assessee company and the judicial pronouncements supporting the claim that CSR expenses are eligible for deduction under Section 80G. The appeal of the assessee company was allowed for statistical purposes, and the CIT(A) was instructed to afford a reasonable opportunity of being heard to the assessee company.
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