IN THE INCOME-TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORESHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER &

SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 195/MUM/2025 (A.Y. 2020-21)

ITA No. 216/MUM/2025 (A.Y. 2018-19)

Joint Commissioner of Income v/s. Tata Capital Housing Tax OSD ,Circle – 131, Room बनाम Finance Limited,11^th Floor, No. 540, 5^th Floor, Aayakar Tower A, Peninsula Business Bhavan, Maharishi Karve Marg, Park, Ganpatrao Kadam Marine Lines Mumbai 400020, Marg, Lower Parel, Mumbai Maharashtra 400 013, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AADCT0491L Appellant/अपीलार्थी .. Respondent/प्रतिवादी

Appellant by : Shri Niraj Sheth,AR Respondent by : Shri Hemanshu Joshi (Sr. DR)

Date of Hearing 11.03.2025 Date of Pronouncement 18.03.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :-

The above captioned two appeals have been filed by the Revenue against the orders by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to the orders passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the AYs [A.Y.] 2018-19 and 2020-21. Since the issues are common and the appeals were heard together, they are being taken up for adjudication vide this composite order for the sake of brevity.

2. The grounds of appeals of the Revenue are as under:

ITA No. 195/MUM/2025(A.Y. 2020-21) ITA No. 216/MUM/2025(A.Y. 2018-19)

3. In both the appeals, issues being common relating to deduction u/s 80G w.r.t. Corporate Social Responsibility (henceforth ‘CSR’),the Revenue has claimed that the ld.CIT(A) erred in allowing deduction u/s 80G of the Act without verifying compliance with provisions of the Act and also allowing CSR expenses u/s 80G undermining the legislative intent of Explanation 2 to section 37(1) of the Act which expressly disallows CSR expenses as business deductions.

4. Brief facts of the case are that the assessee claimed certain deduction u/s 80G of the Act. The details of the donations made during the year under consideration on which deduction u/s. 80G has been claimed are tabulated in the assessment orders. The said amount of donation(s) made were eligible for deduction u/s. 80G(1)(ii) of the Act and therefore, the assessee had claimed a deduction of 50% of the said amount while computing the total income for the year. During the year under consideration, the assessee had incurred certain expenditure CSR expenditure and the same had been disallowed in terms of Explanation 2 to Section 37(1) of the Act, while computing total income under the Act. During the course of the assessment proceedings, the Assessing Officer, inter-alia asked it to show cause as to why deduction u/s. 80G of the Act the amount spent towards CSR should not be disallowed. In response thereto, the assessee stated that the donations made during the year were eligible for deduction u/s. 80G of the Act. Copies of receipts of donations made and the approval received by the entities from the Competent Authority and extracts of bank statements were submitted to the Assessing Officer. It was pleaded that the Legislature does not prohibit donations made pursuant to CSR, to be ineligible for claiming deduction u/s. 80G of the Act. However, the ld.AO rejected the contention on the ground that the said amount had not been paid by the assessee voluntarily to become eligible for entity specified under Section 80G of the Act. But the same was paid by the assessee as a mandatory requirement as per Section 135 of the Companies Act, 2013 to spend certain amount for specified activities as per. The expression “shall ensure” used in Section 135(5) of the Companies Act 2013 clearly implies that there is a mandate to spend 2% of average net profits of the preceding three years on CSR activity. Thus, the requirement to spend amount is perceived by the legislature to be mandatory in nature and not voluntary. According to the AO, the assessee could also have very well