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2025 Supreme(Online)(ITAT) 6459
INCOME TAX APPELLATE TRIBUNAL (MUMBAI BENCH)
RAJ KUMAR CHAUHAN, J
Millennium Developers Pvt. Ltd. – Appellant
Versus
PCIT-3 – Respondent
ITA NO. 1847/MUM/2024 (A.Y: 2017-18)
For the Appellants/Petitioners: Shri B. V. Jhaveri
For the Respondents: Shri Anurag Tripathi
Deduction for CSR expenditure is disallowable under Section 80G, as it does not constitute a business expense, nullifying claims for such deductions reviewed under Section 263.
Headnote:(A) Income Tax Act, 1961 - Section 253 and Section 80G - Deduction claimed on CSR expenditure - PCIT set aside AO's order finding it erroneous and prejudicial to revenue interests for not examining CSR donations - Claim of Rs.50,86,981/-, purportedly u/s 80G, is disallowed as it pertains to non-allowable CSR expenditure, leading to scrutiny - The court emphasized that CSR expenditure cannot be treated as a business expense and should not be eligible for tax deductions despite any claims made by the assessee. (Paras 1-2, 3-12, 18-22)
(B) Authority and Jurisdiction - The power under section 263 can be exercised only if the original order is found to be erroneous and prejudicial to revenue - The court noted that AO had conducted enough inquiries to evaluate the claim, rendering the PCIT’s intervention unwarranted. The assessment order was not contrary to law. (Paras 7-9)
| Table of Content |
|---|
| 1. introduction of appeal and factual background. (Para 1 , 2) |
| 2. pcit's observations on ao's order and errors. (Para 3 , 10 , 11 , 12 , 13) |
| 3. assessee's grounds for appeal against pcit's order. (Para 4 , 5 , 6) |
| 4. court's reasoning on the appeal and error assessment. (Para 18 , 21) |
| 5. final decision on the appeal. (Para 22) |
ORDER
PER RAJ KUMAR CHAUHAN (J.M.):
1. This appeal is filed by the appellant/assessee against the order dated 21.03.2024 of Learned Principal Commissioner of Income Tax, Mumbai [hereinafter referred to as the “PCIT”], passed under section 253 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the A.Y. 2017-18 wherein Ld. PCIT set aside the order of AO and directed to disallow the deduction u/s 80G of the Act in respect of donation claimed out of CSR expenditure.
2. The brief facts of the case are that, the assessee company is engaged in real estate business. The assessee filed its return of income for AY 2017- 18 on 31.10.2017 declaring total income of Rs. 9,66,52,230/- under normal provision and Rs. 10,13,32,715 u/s 115JB of the Act. The case was selected for scrutiny u/s 147 of the Act on the ground that assessee had debited an amount of Rs. 1,39,00,000/- towards Corporate Social Responsibility (CSR) and had claimed deduction of Rs. 50,86,981/-. It was stated that the expenditure has been incurred towards CSR which is not allowable expenditure u/s 37(1) of the Act. Notice u/s 148 of the Income tax Act, 1961 was issued on 30.03.2021. Subsequently notice u/s 142(1) of the Act was issued on 17.06.2021. Further, notice u/s 142(1) was issued on 25.11.2021 along with questionnaire seeking compliance on 02.12.2021. In response to the said notice assessee filed submission on 02.12.2021 wherein they have given details of expenditure incurred on CSR to the tune of Rs. 1,39,00,000/-. Assessee further submitted that he has not claimed deduction for CSR expenditure of Rs. 1,39,00,000/- from its business profit, but he has claimed deduction of Rs. 50,86,981/- u/s 80G of the Act. The same was Verified from the income computation given by the assessee and the return filed by the assessee wherein assessee has submitted donation receipt from Gondia Education Society and The Indian Council for Mental Health. The same was cross verified with the bank statement of the assessee. In view of the above examination and submission filed by the assessee, in light of the reason for reopening the case, return Income is accepted.
3. Ld. PCIT has proceeded to examine the matter u/s 263 of the Act and observed that AO has accepted the contention of assessee without examining the allowability of deduction u/s 80G of the Act with reference to CSR expenditure. Ld. PCIT was of the opinion that the FAO has grossly neglected the fact that the assessee has claimed deduction u/s 80G of the Act on the expenses made on CSR activity. It is further observed that the AO has failed to examine the allowability of deduction u/s 80G of the Act on the donations made through CSR expenditure. It was concluded that the order of AO is therefore deemed to be erroneous as it is prejudicial to the interest of revenue. Hence, Ld. PCIT set aside the order of AO.
4. Aggrieved with the order of Ld. PCIT assessee preferred the present appeal before us raising the following grounds:
1. The Pr.C.I.T. erred in holding that the order of the FAO passed u/s. 144 read with sec.147 read with sec. 144B of the Act dated 17th January 2022 is erroneous and prejudicial to the interest of the Revenue.
2. The Pr.C.I.T. erred in observing as under:
Further the assessee has claimed the said expenditure in the guise of donation and claimed deduction on it. Though it is a disallowable expenditure, the assessee company claimed the same as a deduction u/s. 80G and the FAO in the order section 144 rws 144B r.w.s. 148 has allowed it. Therefore, the order of the FAO, u/s. 144 rws 147 rws 144B dated 17.01.2022 is erroneous in so far as it is prejudicial to the inte
