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TMI Blog2023 (10) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible for deduction u/s. 80G of the Act. Whether the deduction restricted u/s. 37(1) for an expenditure while computing the income of the assessee is also restricted u/s. 80G - Under the Income Tax once the Gross total income is computed the assessee is allowed deduction under chapter VIA of the Act of the certain payments and section 80G comes under that Chapter. Thus, the deduction is allowed after the income is computed under chapter VIA. Thus, the point of disallowance u/s. 37(1) and donation is considered as deduction even if the same is disallowed while computing the total income of the assessee and the same is the case here. Thus, the point of disallowance and deduction are different. Thus, for claiming deduction u/s. 80G of the Act even if the payment is not considering while computing the income of the as per provision of section 37(1) in this case. The bench notes that section 80G(2)(iiihk) and (iiihl) specific excluded as it is evident from the extract of section 80G of the Act. Except for contribution u/s. 80G towards Bharat Kosh and Clean Ganga fund, all other payments are eligible for donation u/s. 80G as it clear from the provision of the Act. Therefore, we are of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6. On the facts and circumstances of the case, Ld AO and NaFC failed in appreciating that obligations to incur expenditure on CSR activities flows from the Companies Act, and has no linkage what so ever with Section 80G of the Act except to the extent provided in clause (a) (iiihk) and (a) (iiihl) of Sub Section 2 to Section 80G of the Income Tax Act. 7. On the facts and circumstances of the case NaFC has erred in not allowing relief from interest under Section 234B 234C of the Act. 3. The fact as culled out from the records is that the assessee company is a closely held company, having interest income from funds available to the company, which is being assessed under the head income from other sources . The assessee company has filed its return of income for the assessment year 2020-21 on 09.10.2020 declaring total income at Rs. 22,43,54,110/- and income u/s 115JB of Rs. 24,45,44,184/-. The case was selected for complete scrutiny assessment under the E-assessment Scheme on the issue 1. As per new schedule AL-1, the company has invested substantial part of its funds in assets like Residential House, land or building, capital contribution to other entities, loans and advances, mot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t filed the return of income on 09.10.2020 declaring total income at Rs. 22,43,54,110/- and income u/s 115JB of Rs.24,45,44,184/- The return was processed under section 143(1) of the Income-tax Act, 1961 and the case was subsequently selected for Complete Scrutiny. While assessing the case under consideration, the AO has disallowed the claim of deduction u/s 80G to the tune of Rs. 17,16,540/- and issued order u/s 143(3) tune of r.w.s. 144B of the Act on 16.09.2022 assessing the total income at Rs.22,60,70,650/- 6.2 Feeling aggrieved and dissatisfied with the aforesaid decision and order of the AO, the appellant has preferred the instant appeal. 7. It is contended by the appellant that being a closely held company having income from funds available to the company which is being assessed under the head Income from Other Source . During the FY 2019-20 relevant to AY 2020-21, the appellant had made donation to the tune of Rs.7,50,00,000/- to Shri Ratanial Kanwarlal Patni Foundation which was qualified as Corporate Social Responsibility (CSR) expenditure under section 135 of the Companies Act, 2013. The appellant had added back the amount of Rs.7,50,00,000/- as per Explanation 2 to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, it is clear that the primary requisite of admissibility of deduction under section 80G is that the sums paid must be a donation. This aspect of law came to be expounded, by the Hon'ble Andhra Pradesh High Court in PVG Raju, Raja of Vizianagaran v Commissioner of Expenditure-Tax 1972 86 ITR 267 AP in the following words: 5. We shall, therefore, first advert to the question whether the items of expenditure sought to be exempted under Section 50) are or are not donations within the meaning of Section 50) of the Act. The, term donation has not been denned in the Act. Hence, we may refer to the meaning of donation as given in the Concise Oxford Dictionary and Corpus Juris Secundum. 'Donation/thing presented, gift, esp. of money given to institution.... (The Concise Oxford Dictionary, page 357), 6. Donation means' an act which the owner of a thing voluntary transfers the title and possession of the same from himself to another without any consideration; a gift or grant in gratuity...' (Corpus Juris Secundum, Vol.28, page 53). 7. However, the expression donation is not equivalent to gift and it is of wider import. The distinction between donation and gift has been su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untariness. In the case on hand, the payment made as a part of legal compliance of Corporate Social Responsibility requirements under the Companies Act 2013, cannot be said to be payment on for the purpose of granting a voluntary payment so as to constitute a donation deduction under section 80G. 9. For what has been outlined above and for the reasons stated above, it is held that on the pertaining facts and circumstances of the case, the appellant would not be entitled to claim deduction of Rs.17,16,540/- u/s 80G of the Act. In short, the sum of Rs.17,16,540/- does not qualify as a donation at all and even if the Shri Ratanial Kanwarlal Patni Foundation holds a certificate of exemption under section 80G of the Income-tax Act, 1961, the sum to the tune of Rs.17,16,540/- has not been entitled to a benefit under section 80G of the Income-tax Act, 1961 since it is not a donation. The action of the AO is, therefore, confirmed and the appeal raised by the appellant is dismissed. 10. The ground no. 2 is general as well as consequential in nature. Accordingly, no further adjudication is required. TAX DEPAR In the result, the appeal of the appellant is dismissed. 11. In the result, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under Section 80G of the Act when payment has been made to the eligible entities listed in Section 80G of the Act. iii. Fetters of voluntary and involuntary nature of payments to section 80G of the income tax Act applied by the lower authorities are without sanction of law and gross abuse of executive powers when no such fetters have been imposed by the legislature. Iv Obligations to incur expenditure on CSR activities flows from the Companies Act, and has no linkage what so ever with Section 80G of the Act except to the extent provided in clause (a)(iiihk) and (a) (iiihl) of Sub Section 2 to Section 80G of the Income Tax Act. It is also submitted that the disputed issue is no more res integra and various Benches of the Hon ble Tribunal have decided the issue in unequivocal terms. The appellant places reliance on the following decisions in this regard: Decision of the Hon ble ITAT Bangalore in the case of First American (India) Pvt Ltd Vs ACIT ITA 1762/Bang/2019 dated 29.04.2020. The Hon ble Bench held as under; 15. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, Income from Business and Profession , where as monies sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under Section 80G of the Act In the financial year 2014-15, the assessee has incurred expenditure of Rs.4,72,00,024/- to meet the CSR (Corporate Social Responsibility) as per Policy formulated under Section 135 of the Companies Act, 2013. Out of the said amount, a sum of Rs.2,25,21,500 qualified for deduction under Section 80G of the Act and therefore the assessee claimed of 50% of amount being Rs.1,12,60,750/- as deduction under Section 80G of the Act. The TPO/A.O. has disallowed substantial portion of donation under Section 80G of the Act on the ground that donations were not in the nature of voluntary contribution as required under CSR Policy. Further the Assessing Officer has allowed the contribution to PM National Relief Fund under Section 80G of the Act as it was a direct contribution to the Government. No other inferences were raised by 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 alternativel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act are also eligible for deduction u/s. 80G of Income Tax Act subject to assessee 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 assessee 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 assessee should be provided adequate opportunity of IT(TP)A No.2355/Bang/2019 hearing and shall co-operate in submitting the information and we allow the ground of appeal of the assessee for statistical purposes. Bangalore Bench of the Hon ble Tribunal in the case of Allegis Services (India) vs. CIT in ITA No. 1693/Bang/2019 pronounced on 29.04.2020 has held as under: . In present facts of case, Ld.AR submitted that all payments forming part of CSR does not form part of profit and loss account for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the CSR expenditure under section 37(1) of the Act, and its claim is only restricted to section 80G of the Act. We find that a similar issue has come up for consideration before various coordinate benches of the Tribunal. We find that in Allegis Services (India) Private Ltd. V/s ACIT, in ITA No. 1693/Bang./2019, the deduction in respect of CSR expenditure under section 80G of the Act was denied by the Revenue on a similar basis as in the present case. While deciding the issue in favour of the taxpayer, the coordinate bench of the Tribunal, vide order dated 29/04/2020, observed as under:- We have perused submissions advanced by both sides in light of records placed before us. 10. Section 135 of Companies Act, 2013 requires companies with CSR obligations, with effect from 01/04/2014. Finance (No.2) Act, 2014 inserted new Explanation 2 to sub- section (1) of section 37, so as to clarify that for purposes of sub- section (1) of section 37, any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment rebate. Section 35 grants deduction on expenditure for scientific research and knowledge extension in natural and applied sciences under agriculture, animal husbandry and fisheries. Payment to approved universities/ research institutions or company also qualifies for deduction. In-house R D is eligible for deduction, under this section. Section 35CCD provides deduction for skill development projects, which constitute the flagship mission of the present Government. Section 36 provides deduction regarding insurance premium on stock, health of employees, loans or commission for employees, interest on borrowed capital, and employer contribution to provident fund, gratuity and payment of security transaction tax. Income Tax Act, under section 80G, forming part of Chapter VIA, provides for deductions for computing taxable income as under: Section 80G (2) provides for sums expended by an assessee as donations against which deduction is available. a) Certain donations, give 100% deduction, without any qualifying limit like Prime Minister's National Relief Fund, National Defence Fund, National Illness Assistance Fund etc., specified under section 80G(1)(i). b) Donations with 50% de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d lead to double disallowance, which is not the intention of Legislature. 19. on the basis of above discussion, in our view, authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G (1) of the Act. 20. Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate its claim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility 10. Thus, in view of the above, the claim for deduction under section 80G of the Act in respect of CSR expenses cannot be denied. In the present case, the lower authorities denied the deduction claimed by the assessee under section 80G of the Act without verifying the conditions as laid down in the said section. Therefore, respectfully following the aforesaid decision rendered by the coordinate bench of the Tribunal, we remit this issue to the file of the AO to verify the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower authorities are of the view that a payment to constitute a donation, it must satisfy the test of voluntariness. In the case on hand, the payment made as a part of legal compliance of Corporate Social Responsibility requirements under the Companies Act 2013, cannot be said to be payment on for the purpose of granting a voluntary payment so as to constitute a donation deduction under section 80G. Therefore, the assessee denied the benefit of deduction of Rs.17,16,540/- u/s 80G of the Act. The lower authority thus, held that a sum of Rs.17,16,540/- does not qualify as a donation at all and even if the Shri Ratanial Kanwar Lal Patni Foundation holds a certificate of exemption under section 80G of the Income-tax Act, 1961, the sum to the tune of Rs.17,16,540/- has not been entitled to a benefit under section 80G of the Income-tax Act, 1961 since it is not a donation. 7.1 Thus, the issue before us is limited to the fact that donation made by the assessee out of the CSR obligations as per provision of section 135 of the Companies Act, 2013 can be considered for deduction under chapter VIA u/s. 80G of the Act or not. The amendment made in the section 37(1) restricting the deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (iiiaa) or in sub-clause (iiiab) or in subclause (iiib) or in sub-clause (iiie) or in sub-clause (iiif) or in sub-clause (iiig) or in sub-clause (iiiga) or sub-clause (iiih) or sub-clause (iiiha) or sub-clause (iiihb) or sub-clause (iiihc) or sub-clause (iiihd) or subclause (iiihe) or sub-clause (iiihf) or sub-clause (iiihg) or sub-clause (iiihh) or sub-clause (iiihi) or sub-clause (iiihj) or sub-clause (iiihk) or sub-clause (iiihl) or sub-clause (iiihm) or in sub-clause (vii) of clause (a) or in clause (c) or in clause (d) thereof, an amount equal to the whole of the sum or, as the case may be, sums of such nature plus fifty per cent of the balance of such aggregate; and (ii) in any other case, an amount equal to fifty per cent of the aggregate of the sums specified in sub-section (2). Thus, except for contribution u/s. 80G towards Bharat Kosh and Clean Ganga fund, all other payments are eligible for donation u/s. 80G as it clear from the provision of the Act. Therefore, we are of the considered view that the deduction cannot be denied to the assessee based on the provision of the Act. Similar view is taken by the coordinate bench in the case of First American (India) Private L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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