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TMI Blog2023 (12) TMI 1090X X X X Extracts X X X X X X X X Extracts X X X X ..... at expenditure. This same Memorandum also added that if CSR expenditure is of the nature which is covered by specific deductions contained in Sections 30 to 36, the expenditure by virtue of being governed by a specific provision (of Income tax) shall be granted a deduction if the conditions prescribed are satisfied. No specific tax exemptions have been extended to CSR expenditure. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. Thus we hold that no deduction u/s. 80G is allowable on the amount incurred for the purpose of Corporate Social Responsibility. - Shri Kul Bharat, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. Vishal Goel, CA For the Revenue : Sh. Rohit Anand, Sr. DR ORDER PER DR. B. R. R. KUMAR:- The present appeal has been filed by the assessee against the order of Assessing Officer dated 26.02.2022 for the AY 2017-18. 2. The assessee has raised the following grounds of appeal are as under:- 1. On facts and circumstances of the case and in law, the Ld. AO has erred in assessing the total income of the Appellant at INR 28,43,51,922 as against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational or the aassessee or the Company ) is a 100% subsidiary of Agilent Technologies International Europe, BV which in turn is a wholly owned subsidiary of Agilent Technologies Inc. The assessee is engaged in the provision of IT services ITeS to its AEs. In the ITeS segment, the assessee renders finance back office support services in the nature of internal financial transaction processing, sales accounting processing and vendor payables management. In the IT segment, the assessee undertakes development of modules as well as parts of modules for software being used by its overseas group entities in their products. The Company also undertakes testing of modules developed by it and renders maintenance support services. Rental Receipt: 4. This ground relates to the addition of Rs. 2,84,09,050/- on account of rental receipt from house property as reported in form 26AS of the assessee. A questionnaire in this regard was issued by the AO through u/s 142(1) dated 03.02.2021. After considering the response of the assessee the AO observed as under; On perusal of Form 26AS it is found that assessee has received rental income of Rs. 6,34,45,795/- on account of Rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o verify and give effect to the order of ld. DRP immediately. Section 80G/CSR: 8. The assessee contributed Rs. 65,73,742/- on account of CSR funds and paid to charitable trust for which it has claimed deduction u/s 80G of Rs. 63,89,992/-. The Amount of donations out of CSR funds and deduction claimed u/s 80G is as under: Nature of deduction Amount of contribution Amount of deduction available Contribution to prime minister s national relief fund 62,06,242 62,06,242 Contribution to united way of Mumbai 3,67,500 3,83,750 9. It was argued that while the amendment restricts the disallowability of CSR from business expenditure, it is allowed as deduction u/s 80G if paid to any charitable institution. Reliance in this regard is placed on Goldman Sachs Services Put Ltd v JCIT, special Range, Bangalore IT(TP)A/No. 2355/Bang/2019 dated 15/06/20201, FNF Indin Pot Ltd vs. ACIT (ITA No. 1565/Bang/2019) and First American (India) Put Ltd o ACIT, Bangalore ITA No. 1762/Bang/2019 dated 29/04/2020 as well as on the Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entials of a gift. Thus a gift must be without a consideration, but a donation may be for a consideration; and a gift must be entirely executed, while a donation need not be. The term 'donation' is more aptly used to describe that which is given to a public cause or charity than to indicate a bounty to an individual. (Corpus Juris Secundum, vol. 38, page 783). [Emphasis Supplied] 4.5.4 The aforesaid view of the High Court was ratified by the Hon'ble Supreme Court in Commissioner of Expenditure-Tax 0 PVG Raju, Raja of Vizianagaram [1976 SCR (1)1017], wherein VR Krishnaiyer J, speaking for the Court, observed, thus: When a person gives money to another without any material return, he donates that sum. An act by which the owner of a thing voluntarily transfers the title and possession of the same from himself to another, without any consideration, is a donation. A gift or gratuitous payment is, in simple English, a donation. We do not require lexicographic learning nor precedential erudition to understand the meaning of what many people do every day, viz., giving donations to some fund or other, or to some person or other. Political donations are not only com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter VIA of the IT Act, 1961 with a heading Deductions to be made in computing total income . Clause (2) to 5. 80G lays down that the sums in relation to which deduction shall be allowed are, inter alia, any sum paid by the assessee as donation to any fund or institution to which S. 80G applies. The assessee has furnished a copy of certificate from the concerned CIT, that exemption under S. 80G is applicable to donation made to the Manipal Institute of Technology. We have now to see further, whether the amount of Rs. 2 lakhs given by the assessee to Manipal Institute of Technology can be called as donation . 29. The word donation has not been defined in the IT Act. It was not defined under the Expenditure-tax Act, 1958 either, but the Supreme Court has explained its meaning in Commr. Of Expenditure-tax vs. P. V. G. Raju (supra). The Act levied tax on expenditure of an assessee but certain exemption was provided in respect of any expenditure incurred by the assessee by way of a donation. The relevant part of S. 5 of the Expenditure-tax Act, 1958 is reproduced below: '5. No expenditure-tax shall be payable under this Act in respect of any such expenditure as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refer any of their engineering problems to the Manipal Institutes of Technology to find a solution. The engineering college will charge the actual cost thereof and the development work done in this regard will be the exclusive property of the industry which has sponsored the project. 2. The Manipal Institute of Technology will provide all the testing facilities at a very nominal cost. 3. The Manipal Institute of Technology will conduct short courses in continuing education for the benefit of the engineers and the personnel of the benefactor industries. 4. They can recommend first class students who have aptitude for admission to engineering course.' 32. In view of the above, we are of the opinion that the sum of Rs. 2 lakhs does not qualify as a donation at all, and was only a grant for a quid pro quo for a material return. In view of this, even if the Manipal Institute of Technology holds a certificate of exemption under S. 80G, the sum of Rs. 2 lakhs will not be entitled to a benefit under S. 80G, since it is not a donation . [Emphasis Supplied] 4.5.7 In view of the test of voluntariness laid down by the Apex Court in PVG cited supra, the Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture per se. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. While no specific tax exemptions have been extended to expenditure incurred on CSR, spending on several activities like Prime Minister's Relief Fund, scientific research, rural development projects, skill development projects, agriculture extension projects etc, which fund place in Schedule VII, already enjoys exemptions under different sections of the Income-tax Act, 1961. 4.5.11 The Panel, however, is of the opinion that the aforesaid circular of the Ministry of Corporate Affairs, even though cognizant of the fact that no specific tax exemptions are extended to CSR expenditure, only illustrates the tax benefits and cannot be taken as the pronouncement of law on the subject of same being treated as donation in terms of section 80G, more so when it runs afoul of the dicta laid down by the Apex Court in PVR cited Supra. 12. Heard the arguments of both the parties and perused the material available on record. 13. The provisions of Section 37(1) of Income Tax Act 1961, as under: Any expenditure (not being expenditure of the nature described in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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