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2024 (9) TMI 284 - AT - Income TaxRevision u/s 263 - as per CIT AO erred in allowing deduction u/s. 80G of the Act on donations which were part of the expenditure incurred on account of CSR - HELD THAT - Merely for reason that the PCIT does not agree with the view taken by the AO the assessment order does not become erroneous. In the present case a view taken by the AO in allowing deduction u/s. 80G of the Act on donations which were part of the expenditure incurred on account of CSR is backed by various decisions of the Tribunal. Thus AO has taken a view which has been approved by the Tribunal. The satisfaction of twin conditions set out in section 263 of the Act i.e. the order is (i) erroneous; and (ii) prejudicial to the interest of Revenue are sine qua non for excercising revisional jurisdiction. If any of the above said conditions are not satisfied the revisional jurisdictional u/s. 263 of the Act cannot be invoked. In the instant case the PCIT has erred in holding that the assessment order is erroneous. Thus the impugned order is without jurisdiction hence quashed. Assessee appeal allowed.
Issues Involved:
1. Invocation of revisional jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Allowability of deduction under Section 80G for donations made as part of Corporate Social Responsibility (CSR) expenditure. Issue-wise Detailed Analysis: 1. Invocation of Revisional Jurisdiction under Section 263 of the Income Tax Act, 1961: The appellant contended that the Principal Commissioner of Income Tax (PCIT) erred in invoking revisional jurisdiction under Section 263 of the Income Tax Act, 1961, without satisfying the two mandatory conditions laid down under the said section. The conditions are that the order should be both "erroneous" and "prejudicial to the interest of Revenue." The appellant's counsel argued that the assessment order dated 25.06.2021, passed under Sections 143(3) read with Sections 144C(3) and 144B of the Act, was not erroneous. The Assessing Officer (AO) had examined the claim of deduction under Section 80G during the assessment proceedings and accepted it after due verification. The PCIT's assertion that the AO did not make proper enquiries or verification was factually incorrect, as evidenced by the AO's notice under Section 142(1) and the assessee's detailed reply. The Tribunal found that the AO had indeed enquired about the deduction claim under Section 80G and had allowed it after considering the assessee's explanations and supporting case laws. Therefore, the PCIT's claim that the AO's order was erroneous and lacked proper enquiry was unfounded. The Tribunal concluded that the PCIT's invocation of revisional jurisdiction under Section 263 was arbitrary and lacked application of mind, making the impugned order bad in law. 2. Allowability of Deduction under Section 80G for Donations Made as Part of CSR Expenditure: The appellant claimed a deduction under Section 80G for donations amounting to Rs. 3,21,43,427/- made as part of CSR expenditure. The PCIT held that such a deduction was not allowable, as CSR expenses are not deductible under Section 37(1) of the Act due to Explanation 2, which explicitly prohibits CSR expenses from being considered as business expenditure. The Tribunal referred to past decisions, including the case of JMS Mining P Ltd. vs. PCIT, where it was consistently held that while CSR expenses are not deductible under Section 37(1), any part of CSR contributions that qualify under Chapter VI-A, including Section 80G, can be claimed as a deduction. The Tribunal emphasized that the prohibition under Explanation 2 to Section 37(1) applies only to business income computation and does not extend to deductions under other provisions like Section 80G. The Tribunal noted that the donations made by the assessee to registered charitable trusts, which were eligible under Section 80G, were correctly allowed by the AO. The Tribunal further illustrated this with examples, showing that donations to certain funds like the Prime Minister's National Relief Fund are fully deductible, while donations to other registered charitable trusts are 50% deductible under Section 80G, even if classified as CSR expenditure. The Tribunal concluded that the AO's action of allowing the deduction under Section 80G was a plausible view and aligned with the Tribunal's decisions. The PCIT's disagreement with the AO's view did not render the assessment order erroneous. Therefore, the conditions for invoking Section 263 were not met, and the PCIT's order was quashed. Conclusion: The Tribunal held that the PCIT erred in exercising jurisdiction under Section 263 of the Act, as the AO's order was neither erroneous nor prejudicial to the interest of Revenue. The appeal of the assessee was allowed, and the impugned order was quashed. Order Pronouncement: The order was pronounced in the open court on Friday, the 30th day of August, 2024.
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