Livlong Insurance Brokers Limited Vs PCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, partly allowed the assessee’s appeal against an order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income-tax Act, 1961 for Assessment Year 2020-21. The revision proceedings concerned two issues: deduction under Section 80G in respect of Corporate Social Responsibility (CSR) expenditure and deduction of Employee Stock Option Plan (ESOP) expenses.
Regarding the Section 80G deduction, the PCIT held that the assessment order was erroneous and prejudicial to the interests of the Revenue because the Assessing Officer (AO) had allegedly failed to examine the assessee’s claim of deduction under Section 80G for 50% of its CSR expenditure. According to the PCIT, CSR expenditure is mandatory under Section 135 of the Companies Act, 2013, and therefore lacks the element of voluntariness required for donations under Section 80G. Consequently, the PCIT invoked Section 263 and directed the AO to modify the assessment by disallowing the deduction.
The assessee contended that the issue had been specifically raised during the assessment proceedings and that it had informed the AO that no deduction had been claimed under Section 37 for CSR expenditure, while deduction under Section 80G had been claimed separately. The assessee argued that the AO had examined the issue, accepted the explanation, and consciously allowed the claim.
