Polynova Industries Limited Vs DCIT (ITAT Mumbai)
Summary: The assessee challenged the revision order dated 22.03.2025 passed by the Principal Commissioner of Income Tax, Mumbai-6 under section 263 of the Income-tax Act, 1961. The assessment for AY 2020-21 had allowed the assessee’s claim of deduction under section 80G in respect of ₹5,00,000 spent towards Corporate Social Responsibility (CSR), after the assessee had already disallowed the CSR expenditure while computing business income.
The assessee contended that the Assessing Officer had specifically examined the CSR expenditure and the corresponding section 80G claim during scrutiny proceedings. The assessee had disclosed the CSR expenditure and section 80G claim in its computation and tax audit report, responded to a specific query under section 142(1), and furnished supporting documents, including donation receipts and section 80G certificates. It also relied upon judicial precedents holding that CSR expenditure disallowed while computing business income could nevertheless qualify for deduction under section 80G, subject to fulfilment of the conditions prescribed under that provision.
The PCIT, however, held that the assessment order was erroneous and prejudicial to the interests of the Revenue. According to the PCIT, CSR expenditure was a statutory obligation under section 135 of the Companies Act, 2013 and therefore lacked the element of voluntariness necessary for a donation. Reliance was placed on Commissioner of Expenditure Tax v. P.V.G. Raju of Vizianagaram, the Delhi ITAT decision in Agilent Technologies (International) Pvt. Ltd. v. ACIT, and the statutory exclusions relating to the Swachh Bharat Kosh and Clean Ganga Fund.
