9911796707
TMI Blog2024 (9) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order is erroneous. Thus, the impugned order is without jurisdiction, hence, quashed. Assessee appeal allowed. - Shri Vikas Awasthy, Judicial Member And Shri Naveen Chandra, Accountant Member For the Appellant : Shri Nageshwar Rao, Advocate For the Respondent : Ms. Ritu Sharma, CIT-DR ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Principal Commissioner of Income Tax, Delhi (1), dated 21.03.2024, for AY 2016-17. 2. Shri Nageshwar Rao appearing on behalf of the assessee submitted that the PCIT has erred in invoking revisional jurisdiction u/s. 263 of the Income tax Act, 1961(hereinafter referred to as the Act ) without satisfying the two mandatory conditions laid down under the said section. The PCIT has erred in holding that the assessment order dated 25.06.2021 passed u/s. 143(3) r.w.s 144C(3) r.w.s 144B of the Act is erroneous. 3. Narrating facts of the case, the ld. Counsel submitted that the assessee had incurred expenditure to the tune of Rs. 5,20,00,000/-under Corporate Social Responsibility (CSR). The assessee in its book disallowed the said expenditure. The aforesaid expenditure included some donations which were eligible fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 7. In the cases of JMS Mining P Ltd. vs. PCIT (supra) the coordinate bench has considered this issue. In the said case, the AO had accepted deduction claimed by the assessee u/s. 80G of the Act, in respect of donations made under CSR. The PCIT in exercise of revisional jurisdiction u/s. 263 of the Act held that allowing of such deduction u/s. 80G of the Act by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of Revenue. Hence, the PCIT initiated revisional proceedings. The PCIT in order passed u/s. 263 of the Act held the assessment order erroneous and prejudicial to the interest of Revenue. On appeal to the Tribunal, the coordinate bench examined this issue and held as under:- 15. Keeping the aforesaid judicial dictum in mind let us examine the legal issue raised by the assessee against the impugned action of the Ld. PCIT to exercise the revisional jurisdiction u/s 263 of the Act. So we have to see whether the Ld. PCIT was correct in finding fault with the order of the AO. For that we have to examine and find out whether the issue/fault on the basis of which the Ld. PCIT has interfered with the order of the A.O dated 03.12.2018 was err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee to the Assessing Officer has been already reproduced (supra). From a perusal of the same it is clear that the A.O had enquired about this specific claim of the assessee i.e. deduction of CSR expenses amounting to Rs. 1.35 crores under Chapter VIA and from the perusal of the reply of the assessee it is clear that the assessee has given explanation as to how the assessee had claimed such a deduction along with case laws (supra). Thereafter considering the same only the A.O has allowed the deduction claim and thereby allowed the claim of 50% of the claim u/s. 80G of the Act. In such a scenario, the Ld. PCIT s findings/allegation that the A.O has not made any enquiry/verification on this issue is factually incorrect. And therefore, his assertion that clause (a) of Explanation 2 to Section 263 is attracted is clearly erroneous. From the query raised by the AO on this issue and the reply given by the assessee we are of the opinion that the A.O. has discharged his dual role of an investigator as well as an adjudicator. The Ld. PCIT s action of brushing aside the reply given by the assessee and his finding that the A.O has not verified/enquired into the issue smacks of arbitrarines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said CSR contribution comprised of donation made to registered charitable trust, it was legally entitled to claim deduction under Section 80G of the Act to arrive at the Total Income in terms of Chapter VI of the Act, and AO has allowed it, which action of AO has been found fault by Ld PCIT, which issue need to be examined. For examining the same let us look in to the relevant provisions which we need to be taken in to consideration. 20. The provisions of Section 135(5) of the Companies Act, 2013 read as under: The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy: 21. Let us also look at section 80G of the Act (relevant portions) which reads as under: Section 80G : Deduction in respect of donation to certain funds, charitable institution, etc. .. (1) In computing the total income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y seen in this Section. So the Parliament has expressed its intention clearly by bringing in restriction in respect of expenditure classified by an assessee company while claiming deduction u/s. 80G of the Act i.e. CSR expenditure related to Swachh Bharat Kosh and Clean Ganga Fund. So if an assessee makes some donation to these projects and include/classify it as CSR expenditure while claiming deduction u/s. 80G of the Act then it will be allowed only the amount that is other than the sums spent by the assessee in pursuance of CSR u/s. 135 of the Companies Act. In other words, if an assessee company spends only the mandatory expenditure of 2% of net profit for CSR activity, which includes the amount of donation to Swach Bharat Kosh Clean Ganga Fund (iiihk) and (iiihi) of clause (a) of sub-section (2) of section 80G of the Act, then deduction u/s. 80G of the Act is not allowable, which can be illustrated by giving certain examples (infra). However, in a case scenario, wherein the assessee expends the mandatory expenditure and gives donation to these two projects i.e. over and above the mandatory CSR expenditure u/s. 135 of Companies Act, that sum donated to Swach Bharat Kosh Clean G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard area where the factory is located. Tax Treatment: The entire CSR expenditure of Rs. 2 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act. Situation 2 : The company has contributed Rs. 3 crores to Swach Bharat Kosh. Tax Treatment: The entire CSR expenditure of Rs. 3 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act. In terms of Section 135(5) of the Act read with Section 80G(iiihk) only the excess sum paid amounting to Rs. 1 crores [ 3 crores - 2% of 100 crores] can be availed as deduction u/s 80G of the Act. Situation 3 : The company has contributed Rs. l crore to Swach Bharat Kosh and Rs. 1 crore to any other charitable trust registered u/s 80G(5) of the Act. Tax Treatment: The entire CSR expenditure of Rs. 2 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act. In terms of Section 135(5) of the Act read with Section 80G(iiihk) the donation of Rs. l crores made to Swach Bharat Kosh is not eligible for deduction u/s 80G of the Act. The company can claim deduction of fifty percent of the donation of Rs. 1 crores paid to any other registered charit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctional fact as well as law is absent for invoking revisional jurisdiction. Therefore, the usurpation of jurisdiction by Ld. PCIT u/s 263 of the Act is bad in law and therefore need to be quashed and we order accordingly. [Emphasized by us] 8. We find that the facts in the instant case are similar to the aforesaid case. Thus, for parity of reasons, we hold that the PCIT has erred in exercising his jurisdiction u/s. 263 of the Act. Merely, for reason that the PCIT does not agree with the view taken by the AO, the assessment order does not become erroneous. In the present case a view taken by the AO in allowing deduction u/s. 80G of the Act on donations which were part of the expenditure incurred on account of CSR is backed by various decisions of the Tribunal. Thus, the AO has taken a view which has been approved by the Tribunal. The satisfaction of twin conditions set out in section 263 of the Act i.e. the order is (i) erroneous; and (ii) prejudicial to the interest of Revenue are sine qua non for excercising revisional jurisdiction. If, any of the above said conditions are not satisfied, the revisional jurisdictional u/s. 263 of the Act cannot be invoked. In the instant case the P ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
