Credit Suisse Securities (India) Private Limited Vs PCIT (ITAT Mumbai)
CSR May Be Compulsory, But 80G Deduction Is Not Automatically Forbidden — PCIT Cannot Use Section 263 Merely Because Another View Is Possible
Summary: The Mumbai ITAT quashed revisionary proceedings u/s 263 involving the increasingly important controversy of deduction u/s 80G for donations forming part of CSR expenditure. The Tribunal held that where the AO had specifically examined the claim during scrutiny & the eligibility of CSR expenditure for deduction u/s 80G was itself a highly debatable issue supported by several Tribunal decisions, the AO’s acceptance of the claim constituted a plausible view. A mere difference of opinion between the PCIT & AO could not render the assessment order erroneous & prejudicial to the interests of Revenue.
Facts — CSR Disallowed u/s 37(1), But 80G Deduction Claimed Separately
The assessee, Credit Suisse Securities (India) Pvt. Ltd., was engaged primarily in stock broking, sub-broking & related activities. For AY 2020-21, it filed its return declaring total income of ₹515.26 crore. Its case was selected for scrutiny under CASS & assessment was completed u/s 143(3) r.w.s. 144B on 27.09.2023.
The assessee had debited CSR expenditure of ₹7,59,81,082 to its P&L account. While computing business income, it added back the CSR expenditure u/s 37(1). However, in respect of eligible payments/donations, it separately claimed deduction of ₹3,68,45,882 u/s 80G.
This distinction became the centre of the dispute — the assessee was not claiming CSR expenditure as a business deduction u/s 37(1); after adding it back, it claimed deduction u/s 80G in respect of eligible donations.
PCIT — AO Failed to Examine the 80G Claim
The PCIT considered that the AO had not properly examined whether CSR payments could qualify for deduction u/s 80G. According to the PCIT, in the absence of necessary details, allowing deduction of CSR-related donations resulted in an erroneous assessment.
The PCIT therefore invoked revisionary jurisdiction u/s 263, treated the assessment order as erroneous & prejudicial to the interests of Revenue & set it aside.
The assessee challenged the revision before the ITAT.
Assessee — AO Had Specifically Raised the Issue During Scrutiny
A crucial factual aspect emerged before the Tribunal.
The assessee demonstrated that the AO had issued a notice u/s 142(1) dated 02.08.2023, specifically raising the issue concerning deduction u/s 80G. The assessee furnished an online explanation on 07.08.2023 & subsequently, through a detailed letter dated 14.08.2023, explained the treatment of CSR expenditure vis-à-vis deduction u/s 80G.
The e-proceedings acknowledgement & correspondence were placed before the Tribunal. Thus, according to the assessee, this was not a case where the AO had simply overlooked the claim. The issue had actually been raised, explained & examined during assessment proceedings.
CSR & Section 80G — Divergent Judicial Views
The assessee relied heavily upon the Mumbai ITAT decision in Polynova Industries Ltd. v. DCIT, ITA No. 2982/Mum/2025, order dated 19.06.2025.
That decision had expressly recognised the existence of divergent Tribunal views on whether CSR expenditure could qualify for deduction u/s 80G.
The Bangalore ITAT in FNF India Pvt. Ltd. & Kolkata ITAT in JMS Mining Pvt. Ltd. had upheld deduction u/s 80G in respect of CSR expenditure. On the other hand, the Delhi ITAT in Agilent Technologies (International) Pvt. Ltd. had taken a contrary view & disallowed the claim.
This divergence itself became important for deciding whether section 263 could validly be invoked.
Two Possible Views — Section 263 Cannot Become an Appeal in Disguise
In Polynova Industries, the Tribunal had observed that where two divergent yet plausible interpretations of law exist & the AO adopts one of them which is supported by judicial precedent, the assessment order cannot be branded erroneous merely because the PCIT prefers the other interpretation.
The Tribunal referred to the principle flowing from CIT v. Max India Ltd. [2007] 295 ITR 282 (SC) — where two views are reasonably possible & the AO has adopted one such view, the Commissioner’s preference for another view does not justify revision u/s 263.
ITAT — AO Had Examined the Claim; Explanation 2 to Section 263 Could Not Be Invoked
The Mumbai ITAT found that the issue concerning deduction u/s 80G had actually been examined by the AO during the original assessment proceedings.
The applicability of section 80G to CSR payments had been explained by the assessee pursuant to the notice u/s 142(1). Consequently, the Tribunal found no lapse in the AO’s verification & held that invocation of Explanation 2 to section 263 by the PCIT was unjustified.
This was therefore not a case of “lack of enquiry.” The PCIT was essentially dissatisfied with the conclusion reached by the AO after enquiry.
CSR Deduction u/s 80G Is a Highly Debatable Issue
The Tribunal went further & specifically described the issue as “highly debatable.”
It noted that coordinate Benches had taken a view permitting deduction u/s 80G for CSR expenditure, referring to WNS Global Services (P.) Ltd. v. Assessment Unit, NFAC [2025] 174 taxmann.com 1031 (Mumbai-Trib.), Motilal Oswal Securities Ltd., Allegis Services India Pvt. Ltd. & JMS Mining Pvt. Ltd.
Therefore, the view taken by the AO had to be regarded as a plausible view.
The PCIT might equally hold another plausible view, but that merely produced a difference of opinion. Such difference could not satisfy the jurisdictional requirement that the assessment order must be both erroneous & prejudicial to the interests of Revenue.
Section 263 Order Quashed — Original Assessment Restored
Following Polynova Industries Ltd., the Tribunal held that a mere difference of opinion between the AO & PCIT could not render the assessment erroneous & prejudicial to Revenue.
Accordingly, the ITAT set aside the PCIT’s order u/s 263 & restored the original assessment order passed by the AO. The assessee’s appeal was allowed.
Author’s Comment
This decision is important on two distinct fronts.
First, it strengthens the line of Tribunal decisions recognising that the restriction on CSR expenditure u/s 37(1) does not necessarily translate into a blanket prohibition against deduction u/s 80G. Where a CSR payment independently satisfies the conditions of section 80G, there is judicial support for claiming the deduction after adding back the expenditure while computing business income.
Secondly — & technically this is the stronger ratio of the present decision — the case concerns jurisdiction u/s 263. The Tribunal did not merely say that the assessee’s interpretation was preferable. It held that the issue had been specifically examined by the AO & was supported by judicial precedents. Therefore, even assuming another interpretation was possible, section 263 could not be used to substitute the PCIT’s view for a plausible view already adopted by the AO.
One caution remains important: the ruling should not be read as declaring that every CSR payment automatically qualifies u/s 80G. Eligibility continues to depend upon the nature of the payment, the recipient & satisfaction of the statutory conditions of section 80G.
But for section 263 purposes, the proposition is powerful: when the AO has asked the question, examined the answer & chosen one of two judicially supported views, the PCIT cannot reopen the exam merely because he prefers the other answer.
Cases Discussed
- Polynova Industries Limited Vs DCIT, ITA No. 2982/Mum/2025
- FNF India Pvt. Ltd. Vs ACIT
- JMS Mining Pvt. Ltd. Vs PCIT
- Agilent Technologies (International) Pvt. Ltd. Vs ACIT/NFAC
- CIT Vs Max India Ltd. [2007] 295 ITR 282 (SC)
- WNS Global Services (P.) Ltd. Vs Assessment Unit, NFAC
- Motilal Oswal Securities Ltd.
- Allegis Services India Pvt. Ltd.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, MUMBAI
The instant appeal of the assessee filed against the order of the Ld. Principal Commissioner of Income Tax, Mumbai – 4 [for brevity “Ld. PCIT”], order passed under Section 263 of the Income Tax Act, 1961 (for brevity ‘the Act’), for Assessment Year 2020-21, date of order 24.03.2026. The impugned order emanated from the order of the Assessment Unit, Income Tax Department (for brevity ‘Ld. AO’), order passed under Section 143(3) r.w.s. 144B of the Act, date of order 27.09.2023.
2. The brief facts of the case are that the assessee filed the return by declaring total income Rs. 515,26,37,570/-. The assessee is primarily engaged in stock brokers, sub-brokers and related activities. Subsequently, the assessee’s case was selected for scrutiny under CASS for different reasons. The assessee had complied with the notices issued by the Ld. AO from time to time. Finally, the assessment was completed u/s. 143(3) of the Act. Later, it was observed that the assessee had debited in Profit & Loss Account under the head “CSR Expenses” amount to Rs. 7,59,81,082/-. While computing the income under the head “income from business”. It has added the said expense debited in P & L A/c u/s. 37(1) of the Act. However, against the said payment, the assessee company had claimed deduction u/s. 80G of the Act. The Ld. PCIT observed that the provision of Section 80G of the Act, sub-section (1), provides that the sums specified in sub-section (2) of Section 80G of the Act are eligible for deduction at the rate of 100% or 50%, depending upon the entity to which the sum is paid. Section 80G(2) of the Act deals with various sums which are referred to in sub-section (1) of Section 80G of the Act. Further, it is seen that the assessee has claimed deduction u/s. 80G amounting to Rs. 3,68,45,882/-. In the absence of the details, CSR and donation was claimed u/s. 80G which is treated as erroneous by the Ld. PCIT. The Ld. PCIT observed that the Ld. AO had not considered the issue in the impugned assessment order. So, by invoking the provisions of Section 263 of the Act, the Ld. PCIT by exercising the revisional jurisdiction has set aside the impugned assessment order as erroneous and prejudicial to the interest of the revenue. Being aggrieved on the revisional order, the assessee filed an appeal before us.
3. The Ld. AR argued and filed a paper book comprising pages 1 to 62, which has been placed on record. The Ld. AR contended that during the assessment proceedings, the Ld. AO had issued the notice u/s. 142(1) dated 02.08.2023 and subsequently, raised the issue about the claim of deduction u/s. 80G of the Act. In compliance with the notice, the assessee filed the explanation on dated 07.08.2023 online. The copy of the “e-Proceedings Response Acknowledgement” is duly placed on record. The Ld. AR argued that the assessee had by a letter dated 14.08.2023, further explained the assessee’s claim related to CSR vis-à-vis 80G in the computation of income. The claim of 80G vis-à-vis CSR expenditure is a debatable issue, and various coordinate benches of ITAT had considered the claim of CSR expenses u/s. 80G. So, the issue is already decided in favour of the assessee by the different coordinate benches of ITAT.
4. The Ld. AR further argued that the Ld. PCIT, by invoking the provisions of Section 263, had issued the notice u/s. 263 and asked to comply the claim of expense u/s. 80G of the Act. The copy of the notice and the reply of the assessee are duly annexed in APB, pages 10 to 25. The Ld. AR invited our attention specifically to the letter dated 14.08.2023, filed in response to the notice dated 02.08.2023 before the Ld. AO, where the assessee had duly explained the entire issue.
5. The Ld. AR contended that the identical issue was duly adjudicated and considered in favour of the assessee by the Coordinate Bench of ITAT, Mumbai in the case of Polynova Industries Limited vs. DCIT, ITA No. 2982/Mum/2025, date of pronouncement 19.06.2025. The observations of the Coordinate Bench contained in the following paragraphs are reproduced as below:
“6.5 With regard to the second aspect, namely, the eligibility of CSR expenditure for deduction under section 80G of the Act, we find that divergent views have been expressed by various Benches of the Income-tax Appellate Tribunal. The Bangalore Bench, in FNF India Private Limited v. ACIT (supra), and the Kolkata Bench, in JMS Mining Private Limited v. PCIT (supra), have upheld the claim of deduction under section 80G in respect of CSR expenditure. Conversely, the Delhi Bench in Agilent Technologies (International) Pvt. Ltd. v. ACIT (supra) has taken a contrary view and disallowed such claim.
6.6 The decision of the Kolkata Bench of the Tribunal in JMS Mining Private Limited (supra) assumes particular significance, as it arose in an identical factual context involving the exercise of revisionary jurisdiction under section 263 of the Act. In that case, the Tribunal unequivocally held that the Assessing Officer’s view allowing the deduction under section 80G in respect of CSR expenditure was both plausible and legally sustainable. Consequently, the revisionary order passed under section 263 was quashed.
6.7 In view of the existence of two divergent yet plausible interpretations of law, and the fact that the Assessing Officer has adopted one such view, which finds support in judicial precedents, it cannot be held that the assessment order is erroneous or prejudicial to the interests of the Revenue. In this context, reference may be made to the decision of this Court in CIT v. Max India Ltd. [(2007) 295 ITR 282 (SC)], wherein it was authoritatively laid down that where two views are reasonably possible on a particular issue, and the Assessing Officer has taken one such view, the mere preference of the Commissioner for an alternative interpretation does not justify the invocation of revisionary jurisdiction under section 263 of the Act.
6.8 Accordingly, in view of the above discussion, we hold that the assessment order passed by the Assessing Officer does not fall within the scope of section 263 of the Act. The impugned order passed by the learned PCIT is therefore liable to be set aside, and is hereby quashed.”
6. The Ld. DR argued and stood in favour of the revisional order but was unable to provide any contrary judgment in response to the submissions of the Ld. AR.
7. We heard the rival submissions and considered the documents available on the record. On careful consideration, we find that the issue was duly examined by the Ld. AO in the impugned assessment order, wherein the claim for deduction under section 80G of the Act was verified. Therefore, no lapse is found in the verification of the interest income claimed as deductible under section 80G of the Act. So, the imposition of Explanation 2 of section 263 of the Act by the Ld. PCIT is unjustified. The applicability of the CSR expenses towards 80G was explained by pursing the notice U/s 142(1) of the Act. We have given a thoughtful consideration to the order of the Ld. PCIT. We are of the considered view that the issue raised by the Ld. PCIT is a highly debatable issue as the Co-ordinate Benches of the Tribunal have taken a consistent view that CSR expenditure can be claimed as expenditure u/s 80G of the Act in the cases of WNS Global Services (P) Ltd vs. Assessment unit, NFAC reported in [2025] 174 taxmann.com 1031 (Mumbai-Trib), Motilal Oswal Securities Ltd. (ITA No.1795/Mum/2023, order dated 18.08.2023), Allegis Services India Pvt. Ltd. (ITA No. 1693/Bang/2019) and JMS Mining Pvt. Ltd. [130 taxmann.com 118 (Kolkata Trib.)]. As the issue is highly debatable, any view taken by the Ld. AO during the course of original assessment proceeding has to be considered as a plausible view and the view taken by the Ld. PCIT, howsoever plausible, is nothing but a change of opinion for which jurisdiction u/s 263 of the Act cannot be assumed. In light of the above discussion & respectfully relied on the order of Polynova Industries Limited (supra), it is clear that a mere difference of opinion between the Ld. AO and the Ld. PCIT cannot render the assessment order erroneous and prejudicial to the interests of the revenue. Considering the facts of the case in totality, we set aside the order of the Ld. PCIT and restore the order of the Ld. AO.
8. In the result, the appeal of the assessee bearing ITA No.5695/Mum/2026 is allowed.
Order pronounced in the open court on 03rd day of September 2026.
