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TMI Blog2022 (12) TMI 1436X X X X Extracts X X X X X X X X Extracts X X X X ..... essment Order, passed by the AO was not in conformity with the directions issued by the DRP and is therefore, set aside, being contrary provisions of Section 144C(13) of the Act. The issue is remanded back to the file of AO with the directions to pass the Final Assessment Order in conformity with the directions issued by the DRP. Appeal allowed. - SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AND SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER For the Appellant : Shri Anish Thakkar, Shri Pranay Gandhi For the Respondent : Ms. Megha Bhargav ORDER Per Rahul Chaudhary, Judicial Member: 1. The present appeal is directed against Final Assessment Order dated, 27.07.2022, passed under Section 143(3) read with Section 144C(13) read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as the Act‟] as per directions issued by CIT (Dispute Resolution Panel-3), Mumbai-2 (hereinafter referred to as the DRP‟) under Section 144C(5) of the Act pertaining to the Assessment Year 2018-19. 2. The Appellant has raised following grounds of appeals: General Ground 1. erred in assessing the total income for the captioned AY at Rs. 49,31,60,128 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment Order giving the same reasoning as adopted by the Assessing Officer in the Draft Assessment Order which stood rejected by the DRP. Elaborating upon the aforesaid submission, the Ld. Authorised Representative for the Appellant submitted that during the relevant previous year the Appellant had incurred INR 65,96,000/- towards Corporate Social Responsibility (CSR). Out of the aforesaid CSR Expenses, the Appellant had claimed deduction in the return of income for CSR Expenses aggregating to INR 28,72,578/- incurred by way of making donations to Section 80G entities. The Assessing Officer had proposed disallowance of the aforesaid amount in the Draft Assessment Order for the reason that the Assessing Officer was of the view that the aforesaid donations were made under the mandate to spent 2% of average net profit of the preceding three years on CSR activity contained in Section 135 of the Companies Act, 2013, and therefore, lacked the element of charity which was necessary for claiming deduction under Section 80G of the Act. However, the DRP had granted relief to the Appellant by holding that the Appellant was entitled to claim deduction under Section 80G of the Act in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,37,500/- 2,18,750/- Total 54,45,156/- 28,72,578/- 8. In the Draft Assessment Order, the Assessing Officer had proposed disallowance of the aforesaid amount of INR 28,72,578/- claimed as deduction under Section 80G of the Act. While disposing of the objections of the Appellant against the aforesaid proposed disallowance, the DRP directed as under: 6.2 Findings: 6.2.1 The assessee has claimed deduction of donation u/s 80G of the Act to the tune of Rs 28,72,578/-, in respect of payments made to Udaan India Foundation (Rs.43,07,656/-). Rotary Club of Mumbai-Lakers Charitable Trust (Rs 10,00,000/-) and United Way Mumbai (Rs.4,37.500/-), which were in the nature of CSR expenses. The AO has observed that the assessee has incurred CSR expenditure of Rs 65,96,000/-, which included the above payments totalling Rs.57,45,156/. The assessee has added back the amount of CSR expenditure to the total income, but has claimed deduction u/s.80G of the Act in respect of the above payments. The AO has held that deduction u/s.80G is not allowable on payments made by the assessee towards C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO/A.O. in respect of other donations which are equally eligible for deduction under Section 80G of the Act. The learned Authorized Representative submitted that the donations or expenditure has been incurred wholly and exclusively for the purpose of business and eligible for deduction under Section 37 of the Act and alternatively under Section 80G of the Act. We found the DRP has dealt at page 81 of the order and observed that, the claims are in the nature of CSR Policy expenditure and hence does not qualify for deduction under Section 80G of the Act. The learned Authorized Representative demonstrated in Paper Book Vol II at pages 882 883 the list of deductions claimed under Section 80G of the Act with a statement of donees along with PAN and address and donation receipts. Further the donation receipts are self- explanatory and are eligible for deduction under Section 80G of the Act. We find that the CSR expenses are required to be incurred by companies as per Section 135 of the Companies Act and the deduction u/s. 37(1) of the Act, is not available from Assessment Year 2015-16 as per the Explanation 2 to Section 37(1) of the Act inserted by the Finance Act No.2. 2014. Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, it is clear that after considering the position taken by the Assessing Officer and the objections raised by the Appellant, the DRP concluded that even though deduction for CSR Expenses was not allowable under Section 37 of the Act (in view of the Explanation 2 to Section 37 of the Act inserted by the Finance Act, 2014, with effect from 01.04.2015), there was no bar for allowance of the same under Section 80G of the Act (except for the donations made to the Swach Bharat Kosh and the Clean Ganga Fund), provided all the other conditions of Sec. 80G are fulfilled. Therefore, the DRP issued specific direction to allow deduction for INR.28,72,578/- under Section 80G of the Act after verifying whether the other conditions specified under Section 80G were fulfilled. As per mandate of Section 144C(13) of the Act, upon receipt of directions issued by DRP the Assessing Officer was required to complete the assessment in conformity with the directions issued by the DRP. We hold that the Final Assessment Order, dated 27.07.2022, passed by the Assessing Officer was not in conformity with the directions issued by the DRP and is therefore, set aside, being contrary provisions of Section 144 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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