Chandan Steel Limited Vs PCIT (ITAT Mumbai)
Facts: Assessee filed return declaring income of ₹27.51 Cr. Scrutiny was initiated, specifically to examine Chapter VI-A deductions. AO passed assessment u/s 143(3) r.w.s. 144B accepting returned income.PCIT later invoked revision u/s 263, noting that assessee had debited ₹39.93 lakh towards CSR, added it back in computation, but simultaneously claimed deduction u/s 80G. PCIT held deduction u/s 80G on CSR spend as not allowable, treating AO’s order as erroneous & prejudicial to revenue. Directed AO to re-examine deduction.
Assessee’s Contentions
- CSR expenses disallowed u/s 37, but donations to approved institutions qualify u/s 80G.
- AO had specifically raised queries during scrutiny, assessee submitted donation receipts & 80G certificates, and AO recorded in order that claim was examined.
- Hence, assessment was passed after due enquiry.
- PCIT’s revision was based on audit objection (borrowed satisfaction), without independent application of mind.
- Relied on Mahansaria Enterprises Pvt. Ltd. vs. PCIT [2025] 175 taxmann.com 885 (Mum-Trib) & other ITAT rulings.
Revenue’s Stand
- CSR spends are mandated by law & lack voluntariness, hence cannot qualify as donations u/s 80G.
- AO failed to properly enquire into allowability.
- Cited SC ruling in PVG Raju (Raja of Vizianagaram) [101 ITR 465] where voluntariness was considered essential for a donation.
Tribunal’s Observations/ Decision
- Coordinate Benches (e.g., Sikka Ports, Blue Dart Express, L&T Finance Ltd.) have consistently held that while CSR is disallowed u/s 37, deduction u/s 80G is available if conditions are satisfied.
- Voluntariness test is met if there is no quid pro quo; CSR donations to approved institutions still retain character of donations.
- AO had examined assessee’s claim during scrutiny; hence it was not a case of “no enquiry”.
- PCIT cannot invoke 263 merely because Department’s appeal is pending before HC on similar issues.
- View taken by AO was legally sustainable & supported by ITAT precedents.
- ITAT quashed PCIT’s order u/s 263.
- Assessment order of AO restored.
- Appeal of Assessee allowed.
- CSR spends, though disallowed u/s 37, are eligible for deduction u/s 80G if donations are made to approved institutions. Once AO has examined claim during scrutiny, PCIT cannot revise u/s 263 on audit objections or change of opinion
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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