2025 (4) TMI 537 - AT - Income Tax

Disallowance of Deduction w/s 80G qua the CSR expenditure - HELD THAT - We find the Pune Bench of the Tribunal in the case of Advik Hi Tech (P.) Ltd. 2024 (10) TMI 1648 - ITAT PUNE has held that the deduction claimed by the assessee u/s 80G on account of Corporate Social Responsibility (CSR) deserves to be allowed. Thus we hold that the AO is not justified in denying the claim of deduction u/s 80G - Decided in favour of assessee. Addition u/s 41(1) - unilaterally written off by the vendors - HELD THAT - As we find the additional evidences filed by the assessee go to the root of the matter. We therefore admit the same and restore the matter to the file of the AO with a direction to verify the same and pass an appropriate order as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The second issue raised by the assessee is accordingly allowed for statistical purposes. Disallowing credit of taxes adjusted against the interest charged u/s 115P - since the interest charged allegedly for non-payment of DDT has not been deleted and raised the demand of tax erroneously in the final order the Ld. Counsel for the assessee submitted that the same may be deleted - HELD THAT - We deem it proper to restore this issue to the file of the Assessing Officer with a direction to verify the record and rectify the demand of tax after providing due opportunity of being heard to the assessee. The fourth issue raised by the assessee is accordingly allowed for statistical purposes.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

I. Whether the disallowance of deduction under section 80G of the Income Tax Act, 1961, in respect of Corporate Social Responsibility (CSR) expenditure amounting to Rs. 1,57,55,750/- was justified.

II. Whether the addition under section 41(1) of the Act of Rs. 6,66,765/- due to unilateral write-off by vendors was appropriate.

III. Whether the Dispute Resolution Panel (DRP) erred in not addressing the variations incorporated in the recomputed total income in the draft assessment order.

IV. Whether the non-allowance of credit of taxes adjusted against the interest charged under section 115P of Rs. 1,97,07,060/- was correct.

ISSUE-WISE DETAILED ANALYSIS

I. Disallowance of Deduction under Section 80G

- Legal Framework and Precedents: The relevant legal framework involves section 80G of the Income Tax Act, which allows deductions for donations to certain funds and institutions. The Tribunal referenced decisions from other cases, such as Advik Hi Tech (P.) Ltd. vs. DCIT and Credit Suisse Services (India) Private Limited, which supported the allowance of deductions for CSR expenses under section 80G.

- Court's Interpretation and Reasoning: The Tribunal found that the deduction claimed by the assessee under section 80G for CSR expenses should be allowed. It referenced previous decisions that established the principle that CSR expenses, if eligible under section 80G, should not be disallowed merely because they are CSR-related.

- Application of Law to Facts: The Tribunal applied the principle from the cited precedents and directed the Assessing Officer to allow the deduction under section 80G, provided the conditions for the deduction are met.

- Conclusion: The Tribunal allowed the appeal on this issue, directing the allowance of the deduction under section 80G.

II. Addition under Section 41(1)

- Legal Framework and Precedents: Section 41(1) of the Act pertains to the remission or cessation of trading liabilities, which can be taxed as income. The Tribunal considered the unilateral write-off by vendors and the subsequent addition by the Assessing Officer.

- Court's Interpretation and Reasoning: The Tribunal admitted additional evidence provided by the assessee, which included confirmations from vendors explaining the reasons for the write-off. The Tribunal found that this evidence was crucial for a fair decision.

- Application of Law to Facts: The Tribunal restored the matter to the Assessing Officer for verification of the additional evidence and to pass an appropriate order based on the facts and law.

- Conclusion: The issue was allowed for statistical purposes, with instructions for further verification by the Assessing Officer.

III. DRP's Non-Adjudication on Variations

- Legal Framework and Precedents: The jurisdiction of the DRP under section 144C(8) was considered, which allows it to address variations in the draft assessment order.

- Court's Interpretation and Reasoning: The Tribunal noted that the assessee had already received due relief from the Assessing Officer, rendering this issue academic.

- Conclusion: The issue was dismissed as "not pressed" since it was academic in nature.

IV. Non-Allowance of Credit of Taxes under Section 115P

- Legal Framework and Precedents: The issue involved the adjustment of taxes against interest charged under section 115P. The Tribunal considered the directions given by the DRP and the subsequent actions of the Assessing Officer.

- Court's Interpretation and Reasoning: The Tribunal directed the Assessing Officer to verify the records and rectify the demand of tax, providing a fair opportunity for the assessee to be heard.

- Conclusion: The issue was allowed for statistical purposes, with instructions for the Assessing Officer to verify and rectify the tax demand.

SIGNIFICANT HOLDINGS

- The Tribunal upheld the principle that CSR expenses, if eligible under section 80G, should be allowed as deductions, following the precedent set by previous Tribunal decisions.

- The Tribunal emphasized the importance of admitting additional evidence when it goes to the root of the matter, ensuring a fair decision-making process.

- The Tribunal reinforced the necessity for the Assessing Officer to verify claims and rectify errors, ensuring compliance with the law and fairness to the assessee.

- The appeal was partly allowed for statistical purposes, with specific directions for further actions by the Assessing Officer on certain issues.