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TMI Blog2024 (12) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of income was selected for scrutiny and notice under section 143(2) of the Act, was issued on 29.06.2021. The AO issued notice under section 142(1) of the Act, directing the assessee to justify the claim of deduction under section 80G of the Act. The assessee, vide its submissions dated 14.09.2023 and 21.09.2023, explained the eligibility of deduction under section 80G of the Act (copies of the submissions filed by the assessee are placed on record at pages 32 to 46 and 50 to 59 of the Paper Book). The AO rejected the submissions of the assessee and passed Draft Assessment Order (DAO) on 26.09.2023. 4. Aggrieved by the DAO, assessee filed its objections before the Dispute Resolution Panel (DRP) on 25.10.2023. The DRP rejected the assessee's objections and confirmed the disallowance under section 80G of the Act, vide its directions dated 04.06.2024. Pursuant to the DRP's directions, the impugned FAO was passed. 5. Aggrieved by the FAO, assessee has filed the present appeal before the Tribunal raising the following grounds: A. General grounds: 1. That on the facts and in circumstances of the case and in law, the final assessment order under section 143(3) read with section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report in Form 3CA-3CD, the notices issued by the AO and the DRP, party wise details of the donations made to the institutions having 80G registration, the certificate issued by the donees, etc. 7. The learned AR submitted that the sole reason for denying the benefit of deduction under section 80G of the Act was that the CSR expenditure is a compulsory expenditure incurred as per the Companies Act and not a voluntary donation. It was submitted that on identical facts, the Bangalore Bench of the Tribunal in the case of Allegis Services (India) Pvt. Ltd., Vs. ACIT in ITA No.1693/Bang/2019 (Order dated 29.04.2020) and in the case of FNF India (P) Ltd., Vs. ACIT reported in [2021] 133 taxmann.com 251 (Bangalore - Trib.) had decided the issue in favour of the assessee. The learned AR further submitted that the matter need not be restored to the files of the AO without any allegations of the AO or DRP that assessee has not satisfied any conditions specified under section 80G of the Act. Lastly, it was contended that the donation receipts were verified by the tax auditor and its eligibility has been certified in Form 3CD. In support of her contention, the learned AR relied on the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other CSR expenses to be used for 80G, is also misplaced. It is to be underlined that the two schemes mentioned above are specifically barred, but, it does not automatically imply that other CSR expenses are allowed to be used for 80G. The issue has to be seen in the context of the basic intent and purpose of the CSR expenses and the donations u/s 80G. As discussed above, one is a mandatory expense whereas the other is a voluntary donation with the basic intent of charity. Therefore, assessee's contention in this regard was found to be untenable and thus the deduction u/s 80 G amounting to Rs 11,223,296/- was proposed to be disallowed. Penalty proceedings u/s 270A were also proposed to be initiated on this issue for under reporting of income which is in consequence of misreporting thereof." 10. Disallowance under section 37 of the Act operates under Chapter IV-D of the Act while computing income under head "Profits and Gains from Business / Profession". Expenses prescribed under sections 32 to 36 of the Act are not allowed for deduction under section 37 of the Act if it is not incurred for the purpose of business. Finance Bill, 2014, introduced explanation to section 37 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 1/04/2015 and will, accordingly, apply to assessment year 2015-16 and subsequent years. 12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head 'Income form Business and Profession'. Further, clarification regarding impact of Explanation 2 to section 37(1) of the Income Tax Act in Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as under: "The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditure cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction are also available under Section 80G for all those sums that do not fall under section 80G(1)(i). Under Section 80G(2) (iiihk) and (iiihl) there are specific exclusion of certain payments, that are part of CSR responsibility, not eligible for deduction u/s80G. 14. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession", where as monies spent under section 80G are claimed while computing "Total Taxable income" in the A. Y : 2016 - 17 hands of assessee. The point of claim under these provisions are different. 15. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction 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 and Profession". 16. For claiming benefit under section 80G, deductions are considered at the stage of computi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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