CSR Donations Eligible for Section 80G Deduction; Section 263 Revision Quashed: ITAT Mumbai

Savex Technologies Pvt. Ltd. Vs PCIT (ITAT Mumbai)

Summary: ITAT Mumbai allowed the appeal of Savex Technologies Pvt. Ltd. for AY 2020-21 and quashed the PCIT’s revision order under Section 263 concerning deduction under Section 80G for Corporate Social Responsibility (CSR) donations. The assessee had incurred CSR expenditure of Rs.2,78,16,000/- and had suo moto disallowed the entire amount under Section 37(1) while computing business income. It nevertheless claimed Rs.1,39,08,000/-, being 50% of the eligible donations, as deduction under Section 80G. During scrutiny, the AO specifically called for party-wise donation details, donation receipts, bank statements and Section 80G registration certificates and thereafter completed the assessment under Section 143(3) read with Section 144B without making any addition.

The PCIT subsequently held that CSR expenditure, being a statutory obligation and application of income, could not qualify for Section 80G deduction and directed the AO to disallow the claim. The Tribunal held that the issue was no longer res integra and followed Mahansaria Enterprises Pvt. Ltd. vs PCIT and ACIT vs Sikka Ports and Terminals Ltd.. It noted that Sikka Ports had already considered the Explanatory note to Finance Bill, 2014 as well as Revenue’s contention that mandatory CSR payments lack the voluntary character of donations. The Tribunal further held that the PCIT could not disregard binding Tribunal decisions merely because Revenue had challenged them before the High Court; until reversed or set aside, such decisions continued to bind the authorities. Accordingly, the Section 263 order was quashed and the assessee’s appeal was allowed.