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TMI Blog2024 (6) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 37(1) and claim of deduction under section 80G of the Act. As with regard to the reasoning that CSR expenditure are not voluntary but mandatory in nature due to penal consequences, we are of considered view that voluntary nature of donation is by nature of fact that it is not on the basis of any reciprocal promise of donee. CSR expenditures are also without any reciprocal commitment from beneficiary being philanthropic in nature. The Act permits deduction of donations as per Section 80G of the Act, even though, assessee is not gaining any benefit out of any reciprocity from donee. Similar is the case of CSR expenditure. Thus the reasoning of Tax Authority, the CSR expenditure is mandatory, does not justify disallowance of these expenditures u/s 80G, if other conditions of section 80G are fulfilled. There is no allegation of Revenue that other conditions of Section 80G are not fulfilled. We, thus sustain the ground. Not allowing credit of TDS - HELD THAT:- DR could not dispute the fact that the aforesaid issue now stands covered in favour of the applicant vide order dated 07.06.2022 passed by Tribunal in the case of applicant's group company, viz Inter Globe Enterpris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in passing the impugned order without granting personal hearing (either physically or virtually) to the appellant which is not only violative of settled principles of natural justice but also express provisions of section 250 of the Income Tax Act, 1961 (the Act') and the faceless appeal scheme. 1.2. That the CIT(A) erred on facts and in law in making adverse observations (not forming part of assessment order) and changing the complexion of the case without any prior notice/ opportunity, in gross violation of provisions of section 251(2) of the Act. 1.3. That the CIT(A) erred in not quashing the assessment order dated 22.09.2022 passed without providing opportunity of personal hearing, in violation of mandatory scheme of section 144B of the Act and in gross violation of principles of natural justice. Re: Disallowance of deduction claimed under section 80G of the Act 2 That on the facts and circumstances of the case and in law. the CIT(A) erred in confirming the disallowance of deduction of Rs. 1,37,94,870 claimed under section 80G of the Act, being 50% of the eligible amount of donations made during the relevant previous year. 2.1. That the CIT(A) erred in denying deduction t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.2019 55,00,000 27,50,000 Yes 3. 18.03.2020 20,00,000 1,00,000 Yes 4. 17.06.2020 1,10,00,000 55,00,000 No 5. 20.12.2019 Uththaan PAN-AAJU0183G 13,12,500 6,65,250 Yes 6. 14.05.2020 12,89,400 6,44,700 Yes 7. 07.05.2020 End Poverty PAN-AATE3346B 9,87,840 4,93,290 No TOTAL 2,75,89,740 1,37,94,870 4.1 Admittedly the donations made as part of CSR expenditure were suo-motu disallowed by the appellant under section 37(1) of the Act. However, the assessing officer disallowed the entire deduction claimed by the appellant on the ground that donations forming part of CSR expenditure is not allowable as deduction under section 80G of the Act. The CIT(A) though rightly observed that donations to the extent of Rs. 1,19,87,840, being total of S.No. 4 7, in above column, were not paid as part of CSR expense, however, the CIT(A) confirmed the disallowance on the ground that the same were made beyond 31.03.2020. Similarly, donation of Rs. 12,89,400 made to Uththaan, referred above at S.No.6, after 31.3.2020 was disallowed by the CIT(A) on the ground that payment was made beyond the end of financial year (without prejudice to eligibility of CSR expenditure. 4.2 Here itself we will like to observe tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head Income from Business or Profession . 16. For claiming benefit under section 80G, deductions are considered at the stage of computing Total Taxable Income . Even if any payment under section 80G forms part of CSR payment (Keeping in mind ineligible deduction expressly provided u/s 80G), the same would already stand excluded while computing, Income under the head Income from Business or Profession , The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to appellant under Chapter VIA for computing Total Taxable Income cannot be denied to appellant, subject to fulfilment of necessary conditions therein. 17. We therefore do not agree with the arguments advanced by Ld Sr DR. 18. In our view, appellant cannot be denied the benefit of claim under chapter VIA, which is considered for computing Total Taxable Income . If appellant is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 135 of the Companies Act, 2013) (18 of 2013) Where these two exceptions are provided in Section 80G of the Act, it can be inferred that the other contributions made us. 135(5) of the Companies Act are also eligible for deduction u/s 80G of Income Tax Act subject to appellant satisfying the requisite conditions prescribed for deduction u/s 80G of the Act. In the present case the A.O. has not dealt on these aspects, prima facie, considered the contributions as not voluntary but a legal obligation and has accepted the genuineness of the contributions. We are of the opinion that the matter has to be considered for examination and verification of facts subject to the appellant satisfying the requirements of claim u/s 80G of the Act. Accordingly, we restore the entire disputed issues to the file of A.O. for fresh examination and verification as discussed above and the appellant should be provided adequate opportunity of hearing and shall co-operate in submitting the information and we allow the ground of appeal of the appellant for statistical purposes. (emphasis supplied) 6.2 Ld. Counsel has then relied a co-ordinate Delhi bench of Tribunal decision in the case of Honda Motorcycle and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions listed in the tabulation are enjoying exemption u/s 80G of the Act and accordingly, assessee would be entitled for deduction u/s 80G of the Act thereon, irrespective of the fact that it is made as part of CSR obligations. The assessee in the instant case had duly complied the provisions of Companies Act, 2013 read with CSR rules thereon and as per the provisions of the Income Tax Act had also voluntarily disallowed the CSR expenditure while computing the taxable income. Since, the donee institutions are eligible institutions enjoying exemption u/s 80G of the Act, the assessee has claimed deduction u/s 80G of the Act which is also provided in the statute itself to the assessee. Hence, denial of deduction u/s 80G of the Act to the assessee would result in gross injustice. We direct the ld AO to grant deduction u/s 80G of the Act to the assessee. Accordingly, the ground No. 6 to 6.6 raised by the assessee are allowed. (emphasis supplied) 6.4 He has also made reference to Hyderabad Bench of the Tribunal decision in the case of Optum Global Solutions (India) (P) Ltd vs DCIT: [2023] 203 ITD 14 (Hyd Trib.) that where assessee satisfied conditions of section 80G, the assessee shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed part of the spend towards CSR. Accordingly, we hold Ground No. 2 in favour of the assessee. (emphasis supplied) 6.5 Reliance was also placed on the decision of Mumbai Bench of the Tribunal in the case of Synergia Lifesciences Pvt Ltd vs DCIT: ITA No. 938/Mum/2023 (Mum Trib), which has relied on the decision of Bangalore bench of the Tribunal in the case of Allegis (supra) and held that the claim for deduction under section 80G of the Act in respect of CSR expenses cannot be denied . The Tribunal, however, remitted the issue to the file of the assessing officer with the directions to allow deduction under section 80G of the Act is the conditions specified therein are satisfied. He also cited the following decisions for the same proposition of law. - FNF India Private Limited vs ACIT: 133 taxmann.com 251 (Bang Trib.) - Infinera India (P.) Ltd vs. JCIT: 194 ITD 463 (Bang Trib.) - First American (India) Private Limited: ITA No. 1762/Bang/2019 (Bang. Trib) - Sling Media (P) Ltd vs. DCIT: 194 ITD 1 (Bang Trib.) - JMS Mining (P.) Ltd vs PCIT: 130 taxmann.com 118 (Kol Trib.) - DCIT vs. Peerless General Finance Investment Co Ltd: 112 taxmann.com 410 (Kol Trib.) - Diamond Beverages Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under section 37(1) of the IT Act. The intent of Parliament in bringing the aforesaid provision is given in the Explanatory Memorandum to the Finance (No.2) Bill, 2014 and is reproduced as under ; CSR expenditure, being an application of income , is not incurred wholly and exclusively for the purposes of carrying on business, As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for .computing the taxable income of the company, Moreover, the objective of CSR is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold. If such expenses are allowed as tax deduction, this would result in subsidizing of around one-third of such expenses by the Government by way of tax expenditure. (emphasis supplied) 7.4 The aforesaid explanatory memorandum categorically expresses the legislative intent and the rationale of disallowance of CSR expenditure referred to in section 135 of the Companies Act, that such expenditure is application of income and not incurred for the purposes of business. We are of conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year end, the revenue is recognized by the appellant in March, however, the TDS is deducted by the recipient in the next financial year when the payment is made. As a consequence, though the revenue is offered to tax in the preceding financial year, the credit of tax deducted thereon gets reflected in the next financial year. In such a situation, in terms of section 199 of the Act read with Rule 37BA(3)(ii) of the Income Tax Rules, 1962 ('the Rules'), the applicant claims credit of the taxes in the year in which the income is offered to tax. In this background, it is submitted that during the year under consideration, the appellant rendered certain data processing and IT enabled services to M/s. Travelport International Operations Limited ('TravelPort'). Revenue from the services rendered to the said party to the extent of Rs. 38,75,00,274 was offered to tax in the year under consideration (refer pages 44, 132 and 163 of PB). However, the tax on the said amount was deducted and deposited by TravelPort in the next financial year i.e., 2020-21, relevant to assessment year 2021-22 (refer page 154 of PB). Accordingly, TDS credit of Rs. 3,87,50,028 was reflecting in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtunity to furnish the details. In the light of provisions of section 199 of the Act read with Rule 37BA of the rules, We are of considered view that since the income corresponding to the credit was offered to tax in the year under consideration i.e., assessment year 2020-21, the credit of taxes deducted thereon was also to be granted in the same year. 9.2 Further more Ld. DR could not dispute the fact that the aforesaid issue now stands covered in favour of the applicant vide order dated 07.06.2022 passed by Tribunal in the case of applicant's group company, viz InterGlobe Enterprises Ltd vs. ACIT: ITA 6580/Del/2019 for assessment year 2016-17 wherein the Co-ordinate bench has categorically held that the credit of TDS should be allowed in the same year in which the income has been claimed to have accrued / arisen and included for determination of taxable income. Relevant extract of the order of the Tribunal is reproduced as under: 5. We have carefully considered the rival submissions. It is the case of the assessee that when the issue of availability of TDS credit in the appropriate assessment year is examined in the light of Section 199(3) r.w. Rule 37BA(3) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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