9911796707
TMI Blog2024 (7) TMI 1585X X X X Extracts X X X X X X X X Extracts X X X X ..... PRAKASH KANT, AM The captioned appeal by the Revenue and cross objection by the assessee are directed against order dated 23.02.2024 passed by the Ld. Commissioner of Income-tax (Appeals) - National Faceless Appeal Centre, Delhi [in short 'the Ld. CIT(A)'] for assessment year 2016-17. 2. The grounds raised by the Revenue in its appeal are reproduced as under: "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right holding that the assessee shall be eligible for deduction u/s 80G without appreciating the fact that Corporate Social Responsibility ('CSR) under mandatory requirement of the Companies Act, 2013"? 3. Briefly stated, facts of the case are that assessment u/s 143(3) of the Income-tax Act, 1961 (in short 'the Act') was completed on 27.12.2018 wherein the returned income filed by the assessee was accepted. Subsequently, the case was reopened by way of issue of notice u/s 148 of the Act dated 26.02.2021. In response, the assessee filed return of income on 23.04.2021 declaring total income at Rs.598,63,34,620/-. In the reassessment completed u/s 147 r.w.s. 144B of the Act dated 24.03.2023, the Assessing Officer made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanatory memorandum to Finance Act No. 2, 2014, introducing Explanation 2 to Section 37 (1) which prohibited the allowability of CSR expenditure as business expenditure. The memorandum clearly states that CSR expenditure described in sections 30 to 36 of the Income-tax Act, 1961 shall be allowed. Legislators never intended to deny deductions for CSR expenditure outright; it is only not allowable under section 37(1). As the amendment in section 37(1) does not apply to sections 30 to 36 of the Act, the same would not apply to section 80G of the Act. Thus, appellant shall be allowed to claim a deduction under section 80G of the Income Tax Act, 1961 to the extent of eligibility.. It is further viewed that jurisdictional Hon'ble Mumbai ITAT in the case of M/s. Reliance Industries Ltd. V.DCIT[2023](ITA NO.2587 & 2588/MUM/2022) has followed the decision rendered by Mumbai ITAT in the case of Naik Sea foods P Ltd V.Pr. CIT-2(ITA NO.490/MUM/2021). In the case of Naik Sea foods P Ltd (supra), the co-ordinate bench has followed the decision rendered by Bangalore bench of Tribunal in the case of M/s FNF India P Ltd (ITA No. 1565/Bang/2019 dated 05-01-2021), which in turn followed the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion'. Further, clarification regarding impact of Explanation 2 to section 37(1) of the Income Tax Act int 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 Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... responsibility, not eligible for deduction u/s80G. 1. 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 ate claimed while computing "Total Taxable income" in the hands of assessee. The point of claim under these provisions are different. 2. 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 ". 3. For claiming benefit under section 80G, deductions are considered at the stage of computing "Total taxable income". Even if any payments under section 80G forms part of CSR payments(keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected to verify conditions necessary to claim deductión u/s.80G of the Act and grant deduction to the extent of eligibility. Accordingly, this ground stands allowed for statistical purposes." 5.1 We find that the Ld. CIT(A) has followed the decision of the Coordinate Bench on the issue in dispute. Further, we find that the assessee has fulfilled all the conditions for deduction u/s 80G of the Act in respect of deduction claimed. We also note there is no specific bar in section 80G of the Act for claiming deduction in respect of CSR expenditure if an assessee otherwise fulfill all the requirement of section 80G of the Act. In view of the above, respectfully following the finding of the Co-ordinate Bench of ITAT on the issue in dispute referred by the Ld. CIT(A), we uphold the finding of the Ld. CIT(A) on the issue in dispute. The ground of appeal of the Revenue is accordingly dismissed. 6. The ground raised by the assessee being in support of order of the Ld. CIT(A) and since we have already upheld the finding of the Ld. CIT(A) and dismissed the appeal of the Revenue, the ground raised by the assessee is rendered academic. Accordingly, we are not required to adjudicate u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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