Societe Generale Securities India Pvt. Ltd. Vs PCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai examined the validity of revisionary proceedings initiated under Section 263 of the Income-tax Act, 1961, concerning deduction claimed under Section 80G on Corporate Social Responsibility (CSR) expenditure. The assessee had filed its return declaring total income and was subjected to scrutiny assessment, which was completed under Section 143(3) without making any disallowance in respect of the claim under Section 80G.
Subsequently, the Principal Commissioner of Income Tax (PCIT) invoked Section 263 on the ground that the Assessing Officer (AO) failed to conduct adequate enquiries regarding the allowability of CSR expenditure claimed as deduction under Section 80G. The PCIT held that the assessment order was erroneous and prejudicial to the interests of the Revenue and directed the AO to re-examine and disallow the claim.
The Tribunal first examined whether the assumption of jurisdiction under Section 263 was valid. It noted that the AO had issued notices under Section 142(1) specifically calling for details on the issue of CSR expenditure and the assessee had furnished responses. Therefore, the Tribunal observed that the AO had indeed conducted enquiries on the relevant issue.
On merits, the Tribunal considered the legal position regarding CSR expenditure. It acknowledged that Explanation 2 to Section 37(1) disallows CSR expenditure as business expenditure while computing business income. However, the assessee had already complied with this provision by disallowing CSR expenditure suo motu in its computation of business income.
