CSR donation deduction under section 80G cannot be denied merely because CSR expense is disallowed u/s 37(1) – Mumbai ITAT quashes revision u/s 263

Seamec Limited Vs DCIT (ITAT Mumbai)

CSR donation deduction under section 80G cannot be denied merely because CSR expense is disallowed u/s 37(1) – Mumbai ITAT quashes revision u/s 263

In a significant ruling, the Mumbai ITAT held that CSR expenditure, though disallowable as business expenditure u/s 37(1), can still qualify for deduction u/s 80G if the statutory conditions of section 80G are satisfied. The Tribunal accordingly quashed the revision order u/s 263 passed by the PCIT against the assessee.

The assessee had incurred CSR expenditure of ₹3.50 lakh by way of donations to charitable institutions and had voluntarily disallowed the same u/s 37(1) while computing business income. However, it claimed eligible deduction of 50% under section 80G while computing total taxable income. The PCIT invoked revisionary jurisdiction u/s 263 holding that CSR payments are mandatory in nature and therefore cannot be treated as “voluntary donations” eligible for deduction u/s 80G.

The PCIT relied heavily on Explanation 2 to section 37(1), CBDT Circular No. 1/2015 and the concept that allowing deduction u/s 80G would indirectly defeat the legislative intent behind disallowance of CSR expenses. It was argued that CSR obligations under section 135 of the Companies Act are statutory mandates and lack the essential element of voluntariness normally associated with donations.

Rejecting the PCIT’s stand, the ITAT observed that the issue is already covered by multiple coordinate bench decisions consistently holding that there is no statutory bar against claiming deduction u/s 80G merely because the expenditure also forms part of CSR obligations. The Tribunal relied upon several decisions including Mahansaria Enterprises Pvt. Ltd., Axis Securities Ltd., Abhay Ispat (India) Pvt. Ltd., ACG Pam Pharma Technologies Pvt. Ltd., and Gallagher Insurance Brokers Pvt. Ltd..

The Tribunal reiterated the distinction between deductions claimed while computing business income under sections 30 to 37 and deductions allowable under Chapter VI-A while computing total taxable income. It observed that once CSR expenditure is already disallowed u/s 37(1), allowing eligible deduction u/s 80G does not amount to double deduction or violation of legislative intent.

The Bench also referred to the Bangalore Tribunal ruling in Allegis Services (India) Pvt. Ltd., wherein it was held that denial of section 80G benefit merely because the payment forms part of CSR would effectively result in double disallowance, which was never intended by the Legislature.

Importantly, the ITAT held that where the AO’s view is supported by existing coordinate bench decisions, the assessment order cannot be treated as “erroneous and prejudicial to the interests of Revenue” merely because the department has challenged such decisions before the High Court. Since no stay had been granted against those Tribunal rulings, they continued to hold the field.

Accordingly, the Tribunal held that the PCIT wrongly exercised revisionary powers u/s 263 and restored the original assessment order allowing deduction u/s 80G in respect of eligible CSR donations.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This is an appeal filed by the assessee against the order of the Learned Principal Commissioner of Income Tax-Mumbai-5 [‘Ld.PCIT’], dated 18-03-2025 passed u/s. 263 of the Income Tax Act, 1961 (‘the Act’), pertaining to Assessment Year (AY) 2020-21.

2. During the course of hearing, the Ld.AR taken us through the findings of the Ld.PCIT, in the impugned order and the contents thereof read as under:

“5. I have perused the facts of the case and submissions made by the assessee. The contention of the assessee that the expenditure on Corporate Social Responsibility (CSR) can be claimed as deduction under section 80G of the Act for any donation made cannot be accepted for the following reasons:-

5.1 Section 37(1) of the Act allows for deduction of business expenses provided they are incurred “wholly and exclusively” for the purposes of business. Explanation 2 to Section 37(1), introduced through the Finance (No.2) Act, 2014, specifically disallows CSR expenses noting that these expenses are not considered business-related and thus cannot be deducted. This provision underscores the legislative intent to impose CSR obligations without tax relief. CSR expenditures were never intended to provide fiscal advantages to companies but to ensure they fulfill their statutory obligations under Section 135 of the Companies Act, 2013. The legislative intent of introduction of Explanation 2 to Section 37(1) of the Act, introduced through the Finance (No. 2) Act, 2014, is elaborated in the Explanatory Notes to the Finance Bill 2014 (CBDT Circular No. 1/2015 dated 21.01.2015) which is reproduced below.

“CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing the taxable income of the company. Moreover, the objective of CSR is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold. If such expenses are allowed as tax deduction, this would result in subsidizing of around one-third of such expenses by the Government by way of tax expenditure.”

From the above, it is clear that the CSR expenditure is not to be allowed as deduction in any form to avoid subsidizing of CSR expenditure by government and therefore claim of the assessee and the contention of the assessee regarding allowability of CSR expenditure under section 80G is against the basic intent of the provision. It is trite law that what cannot be allowed in view of specific provisions cannot be allowed indirectly unless specifically provided in the Act.

5.2 Section 80G of the Act provides tax deductions for voluntary donations made to specified charitable institutions or funds. The core purpose of this section is to encourage philanthropy and voluntary social contributions. The issue at hand is whether mandatory CSR contributions can be reclassified as donations under this section. It is imperative to note that Section 80G was designed to incentivize purely voluntary donations, not statutorily mandated CSR obligations. Allowing CSR expenditures to qualify u/s 80G of the Act would undermine the legislative intent behind the disallowance introduced in Section 37(1) of the Act. CSR expenses are mandated by law, and as such they lack the essential characteristic of voluntariness which is a core requirement for claiming deductions u/s. 80G of the Act. The essence of a donation, as confirmed by several judicial precedents, is its voluntary nature, which is absent in the case of CSR expenditures. The Hon’ble Supreme Court in the case of PVG Raju, Raja of Vizianagaram [1976 SCR (1) 1017) has special that donations refer to payments made voluntarily, without coercion or legal obligation. This principle is directly applicable here since CSR payments are mandated by law. The payments made by the assessee towards CSR, therefore, cannot be construed as voluntary donations eligible for deductions u/s 80G of the Act. While contributions to the Swachh Bharat Kosh and Clean Ganga Fund are recognized as eligible for deductions u/s 80G of the Act, this eligibility is confined to voluntary contributions. However when these contributions are made as part of the statutory CSR obligations under Section 135 r. w. Schedule VII of the Companies Act. 2013, they cease to qualify as voluntary donations. The exclusion for deduction u/s 80G of the Act for Prime Minister’s National Relief Fund, Swachh Bharat Kosh, Clean Ganga Fund or other specified funds does not necessarily mean that all other donations made out of CSR expenditures are entitled for claim u/s. 80G of the Act. These exceptions are provided for claiming deduction u/s. 80G of the Act, hence it cannot be inferred that the amount spent under section 135(5) of the Companies Act, 2013, the assessee is also eligible for deduction u/s. 80G of the Act even though the assessee may be satisfying the requisite conditions prescribed for deduction u/s. 80G of the Act.

5.3 The provisions of Sections 37(1) (including Explanation 2) and Section 80G of the Act must be read harmoniously Allowing CSR expenditures to be deductible u/s B80G of the Act would render Explanation 2 to Section 37(1) of the Act nugatory and would effectively nullify the specific disallowance legislated by the Parliament. The principle of harmonious construction requires that statutes be interpreted in a manner that gives effect to all provisions without rendering any part redundant. The Hon’ble Supreme Court in the case of South India Corporation (Pvt.) Ltd. V/s. Secretary. Board of Revenue, Trivandrum & Anr. (AIR 1964 SC 207] haslaid down the principle that statutes must be read as a whole and construction must be adopted that gives effect to all parts of the statute. The principle of harmonious construction mandates that provisions must be interpreted to avoid conflicts and each part of the statute should be given meaningful effect. Accordingly, allowing CSR expenditures to be claimed u/s. 80G of the Act would negate the specific statutory disallowance u/s. 37(1) of the Act and result in unintended tax benefits which would be inconsistent with the legislative framework governing CSR and tax deductions. The intention of the legislature was never to allow deduction u/s 80G of the Act for CSR expenditure carried out else it would result in subsidizing the CSR expenditure.

5.4 CSR expenditure has to be mandatorily incurred by certain specified companies as per provisions of Section 135 of the Companies Act. Accordingly, it is a statutory obligation cast upon certain companies to share certain portion of profits to the activities towards social responsibilities. It is for this reason that this expenditure was clarified to be an expenditure not incurred fully and wholly for the purpose of business through Explanation 2 to the Section 37(1) of the Act. Further, Ministry of Corporate Affairs Circular No. 01/2016 dated 12.01.2016 clarifies that no specific tax exemptions have been extended to CSR expenditures. The Circular explicitly reinforces that CSR expenditures are not eligible for tax deductions as business expenditures under Section 37(1) of the Act and by extension should not qualify as voluntary donations u/s 80G of the Act. The expression “shall ensure” used in Section 135(5) of the Companies Act, 2013 clearly implies that there is a mandate to spend 2% of average net profits of the preceding three years on CSR activity.

5.5 As regards the judicial pronouncements cited by the assessee, it is stated that appeals filed by the Department before the Hon’ble Bombay High Court on this issue are pending for adjudication in the following cases:-

Since the issue is sub-judice before the jurisdictional Bombay High Court, the contention of the assessee cannot be accepted.

6. In none of the asseessee’s submission before the assessing officer also, the assessee made any reference to this issue and argued that the donations being part of CSR expenditure are still eligible for deduction u/s 80G of the Act. So, it cannot be inferred that the Assessing Officer has applied his mind on this aspect. In any case, the assessing officer’s failure to consider this issue despite it being in contravention of the provisions of the Act in view of the Explanation 2 to Section 37(1) of the Act read with Explanatory notes to the Finance Bill 2014, caused erroneous allowance of deduction u/s 80G and made the order prejudicial to the interests of revenue.

7. From the above, it is clear that the assessee has made CSR expenses to the extent of Rs.3,50,000/- and disallowed the same in the computation if income u/s 37(1) of the Act. Further the assessee has claimed the said expenditure in the guise of donation and claimed deduction on it. Though it is a disallowable expenditure, the assessee company claimed the same as a deduction u/s 80G and the AO in the order dated 19.09.2022 passed u/s 143(3) r.w.s. 144B of the Act has allowed it. Therefore, the order of the AO, u/s. 143(3) r.w.s. 144B of the Act dated 19.09.2022 is erroneous in so far as it is prejudicial to the interests of the revenue.

10. Considering the above facts and circumstances, it is held that the assessment order dated 19.09.2022 passed u/s 143 (3) r.w.s. 144B of the Act is erroneous in so far as it is prejudicial to the interests of the revenue within the meaning of Section 263 of the Act. Accordingly, Assessing Officer is directed to modify the assessment by passing a speaking order and also initiate penalty proceedings as per provisions of the Act.”

3. In this regard it was submitted that as far as the claim of deduction u/s. 80G of the Act is concerned, the Ld. PCIT has himself stated that there are decisions of the Co-ordinate Benches of the Tribunal, wherein the CSR expenses have been held eligible for deduction u/s. 80G of the Act. It was submitted that the appeal against the two decisions of the Tribunal referred by the Ld.PCIT are still at the admission stage and as per the latest case status, the same are not yet admitted. It was submitted that in any case, merely for the fact that the matter is pending adjudication before the Hon‟ble Bombay High Court, the order so passed by the AO cannot be held as erroneous where the same is in consonance with the decisions of the Jurisdictional Tribunal.

4. Further, our reference was drawn to the decisions of the Co-ordinate Benches in the case of Mahansaria Enterprises (P.) Ltd. vs. PCIT (2025) 175 com 885 (Mumbai-Trib), Axis Securities Ltd. vs. PCIT (2025) 175 taxmann.com 982 (Mumbai-Trib), ACG Pam Pharma Technologies Private Limited vs. PCIT-4, ITA No. 2734/Mum/2025, dt. 01-07-2025, Gallagher Insurance Brokers Private Limited vs. The PCIT, ITA No. 3778/Mum/2025, dt. 05-08-2025 and Abhay Ispat (India) Pvt. Ltd. vs. PCIT, ITA No. 3575/Mum/2025, dt. 05-08-2025 wherein it has been consistently held by the Co-ordinate Benches that there is no bar on claim of the CSR expenditure u/s. 80G of the Act. It was accordingly submitted that the findings of the Ld.PCIT deserve to be set aside as the assessment order so passed by the AO cannot be held to be erroneous in so far as it is prejudicial to the interest of the Revenue.

5. Per contra, the Ld. DR is heard, who has relied on the order passed by the Ld.PCIT and in particular, our reference was drawn to the findings of the Ld.PCIT in para 6 of the impugned order where he has held that “none of the asseessee’s submission before the Assessing officer, the assessee made any reference to this issue and argued that the donations being part of CSR expenditure are still eligible for deduction u/s 80G of the Act. So, it cannot be inferred that the Assessing Officer has applied his mind on this aspect. In any case, the assessing officer’s failure to consider this issue despite it being in contravention of the provisions of the Act in view of the Explanation 2 to Section 37(1) of the Act read with Explanatory notes to the Finance Bill 2014, caused erroneous allowance of deduction u/s 80G and made the order prejudicial to the interests of revenue.” It was accordingly submitted that where the matter relating to claim of deduction u/s 80G has not been examined by the AO, the order so passed by him is clearly erroneous and prejudicial to the interest of the Revenue.

6. We have heard the rival contentions and perused the material available on record. As far as the claim of CSR expenses as deduction u/s. 80G of the Act, we find that the matter is no more res integra and we refer to the recent decision of the Co-ordinate Bench of the Tribunal in the case of Abhay Ispat (India) Pvt. Ltd. vs. PCIT (supra), wherein the relevant findings read as under:

“9. We have considered the submissions of both sides and perused the material available on record. In the present case, the assessee incurred expenditure of ₹ 1,55,000/- towards CSR and disallowed the same while computing its income under the head “income from business” in terms of provisions of Explanation – 2 to section 37(1) of the Act. However, while computing the deduction under section 80G of the Act, the assessee claimed a deduction of ₹ 77,500/- (50% of ₹ 1,55,000/-) being the CSR expenditure covered under the provisions of section 80G of the Act. Thus, undisputedly, the assessee has not claimed the CSR expenditure under section 37(1) of the Act, and its claim is only restricted to section 80G of the Act. It is evident from the record that the learned PCIT, on the basis that the said expenditure was incurred voluntarily and therefore cannot be called a donation, initiated the revisionary proceedings under section 263 of the Act. We find that while disagreeing with the submissions of the assessee and setting aside the assessment order, the learned PCIT, vide impugned order, placed reliance upon the decision of the Delhi Bench of the Tribunal in Agilent technologies (International) Pvt. Ltd. and held that for a payment to be considered for deduction under section 80G of the Act, the same should be voluntary in nature, unlike in the present case where the payment was made in compliance of the provisions of the Companies Act, 2013.

10. We find that the Coordinate Bench of the Tribunal in CIT vs. Sikka Ports and Terminals Ltd., reported in (2025) 173 com 366 (Mum – Trib), after considering the decision placed reliance upon by the learned PCIT in Agilent Technologies (International) Pvt. Ltd. (supra), observed as follows: –

“7. Therefore to examine if CSR spending of the assessee would be a donation it is essential to examine whether the donations given by the assessee to M/s. Reliance Foundation and M/s Shyam Kothari Foundation without any material return and without any consideration and whether it was a grant for quid pro quo. It is not the case of the revenue that the assessee has made contributions to these institutions with an intention get something in return. The only contention of the revenue is that the contributions are made as part of a mandate and not voluntary. However, the Hon’ble Supreme Court in the above case has laid down the basic principle that a payment made without any material return and without any consideration and not for quid pro quo is a donation. Therefore in our considered view, the payment made whether voluntarily or as part of a mandate does not negate the intention of the contribution made. The reliance placed by the Id DR on the decision of Agilent Technologies (International) Pvt. Ltd (supra) is factually distinguishable. The DRP whose order was upheld in the said case, had placed reliance on the decision of the Hon’ble High Court in the case of DCIT v. Hindustan Darr Oliver Ltd. (1994) 45 TTJ Mumbai 552 where the payment made was held as not a donation since it was found that the intention behind making the donation was to get reserved seats in the college run by the institute to whom the payments are made as part of SR spending. As already mentioned, the revenue is not contending that the assessee in the present case has made payments to get something material in return.”

11. Further, we find that in Allegis Services (India) Private Ltd. V/s ACIT, in ITA No. 1693/Bang./2019, the deduction in respect of CSR expenditure under section 80G of the Act was objected to on a similar basis as in the present case. While deciding the issue in favour of the taxpayer, the Bangalore Bench of the Tribunal, vide order dated 29/04/2020, observed as follows: –

“We have perused submissions advanced by both sides in light of records placed before us.

10. Section 135 of Companies Act, 2013 requires companies with CSR obligations, with effect from 01/04/2014. Finance (No.2) Act, 2014 inserted new Explanation 2 to sub- section (1) of section 37, so as to clarify that for purposes of sub- section (1) of section 37, any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.

11. This amendment will take effect from 1/04/2015 and will, accordingly, apply to assessment year 2015-16 and subsequent years.

12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head Income Business and Profession. Further, clarification regarding of Explanation 2 to section 37(1) of the Income Tax Act in Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as under:

“The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditure cannot be allowed under the existing provisions of section 37 of the Income-tax Act.

Therefore, in order to provide certainty on this issue, it is proposed to clare that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein.”

13. From the above it is clear that under Income tax Act, certain provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, ‘Income from Business and Profession” to those, who pursue corporate social responsibility projects under following sections.

• • • Section 30 provides deduction on repairs, municipal tax and insurance premiums.
    • Section 31, provides deduction on repairs and insurance of plant, machinery and furniture.
    • Section 32 provides for depreciation on tangible assets like building, machinery, plant, furniture and also on intangible assets like know-how, patents, trademarks, licenses.
    • Section 33 allows development rebate on machinery, plants and ships.
    • Section 34 states conditions for depreciation and development rebate.
    • Section 35 grants deduction on expenditure for scientific research and knowledge extension in natural and applied sciences under agriculture, animal husbandry and fisheries. Payment to approved universities/research institutions or company also qualifies for deduction.
    • In-house R&D is eligible for deduction, under this section.
    • Section 35CCD provides deduction for skill development projects, which constitute the flagship mission of the present Government.
    • Section 36 provides deduction regarding insurance premium on stock, health of employees, loans or commission for employees, interest on borrowed capital, employer contribution to provident fund, gratuity and payment of security transaction tax.

Income Tax Act, under section 80G, forming part of Chapter VIA, provides for deductions for computing taxable income as under:

• • • Section 80G(2) provides for sums expended by an assessee asdonations against which deduction is available.

a) Certain donations, give 100% deduction, without any qualifying limit like Prime Minister’s National Relief Fund, National Defence Fund, National Illness Assistance Fund etc., specified under section 80G(1)(i).

b) Donations with 50% deduction are also availableunder Section 80G for all those sums that do not fallunder section 80G(1)(i). Under Section 80G(2) (iiihk) and (iiihl) there are specific exclusion of certain payments, that are part of CSR responsibility, not eligible for deduction u/s 80G.

14. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, ‘Income form Business and Profession”, whereas monies spent under section 80G are claimed while computing “Total Taxable income” in the hands of assessee. The point of claim under these provisions are different.

15. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, “Income from Business and Profession”.

16. For claiming benefit under section 80G, deductions are considered at the stage of computing “Total taxable income”. Even if any payments under section 80G forms part of CSR payments keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, “Income form Business and Profession”. The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing “Total Taxable Income” cannot be denied to assessee, subject to fulfillment of necessary conditions therein.

17. We therefore do not agree with arguments advanced by Ld. Sr.DR.

18. In present facts of case, Ld. AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, “Income from Business and Profession”. It has been submitted that some payments forming part of CSR were claimed as deduction under section80G of the Act, for computing “Total taxable income”, which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing Total Taxable Income”. If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature.

19. On the basis of above discussion, in our view, authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act.

20. Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate its claim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility.”

12. We find that the issue of the allowability of CSR expenditure under section 80G of the Act has been decided in favour of the taxpayer in various other decisions, as relied upon by the assessee in its submissions before the learned PCIT. Therefore, at the outset, it is evident that without going into the question whether there was an examination by the AO during the assessment proceedings, this issue itself is debatable in nature and thus is outside the purview of revisionary powers of the learned PCIT under section 263 of the Act.

13. At this stage, it is relevant to note the following observations of the Hon’ble Bombay High Court in PCIT vs. Postal Gujarat Power Ltd, reported in (2019) 10 com 418 (Bom):-

“9. The Revenue may be correct in contending that, the Assessing Officer had not carried out detailed enquiries with respect to this claim of assessee. However, this by itself would not be sufficient to enable the Commissioner to exercise revisional power. In a given case, as in the present one, if the answer to the legal issue can be had on the basis of the material already on record, there would be no useful purpose in asking the Assessing Officer to carry out the same exercise and come to the same conclusion as the Tribunal in the present case has. In this context, we do not accept the contention of the Counsel for the Revenue that, answer in law had to come from the Assessing Officer and not the Tribunal. He had argued that even if the Tribunal was right in law, since the Assessing Officer had not come to the said conclusion, the order of the Commissioner should not be disturbed. In our opinion, if the Tribunal has come to the correct conclusions in law and said conclusions are based on materials already on record, it would be futile to reinstate the order of the Commissioner, which in turn, would require the Assessing Officer to carry out the same exercise and axiomatically come to the same conclusion. This line, we are adopting, is within the fold of the requirement of the order of Assessing Officer being ‘erroneous. In other words, if it can be demonstrated that the order was not erroneous, the order of revision would, in any case, require an interference. The matter can be looked from slightly different angle. If while examining the order of the A.O. Commissioner notices that, though the A.O. was not examined for claim of the assessee, but the claim itself is legally tenable, would be judicial in exercising and set aside the assessment? The answer may be in the negative”

14. Therefore, in the light of the facts and circumstances of the present case, we are of the considered view that the learned PCIT erred in initiating revisionary proceedings under section 263 of the Act on the issue of deduction claimed under section 80G of the Act in respect of CSR expenses. Accordingly, the impugned order passed by the learned PCIT under section 263 of the Act is quashed, and the grounds raised by the assessee are allowed.”

7. In the instant case as well, admittedly, the Ld.PCIT has stated that there are decisions of the Co-ordinate Benches of the Tribunal where the matter relating to allowability of CSR expenditure u/s 80G has been decided in favour of the tax payers and which has been relied upon by the assessee and in such a situation, the order so passed by the AO cannot be held to be erroneous especially where the same is supported by the decisions of the Jurisdictional Benches of the Tribunal.

8. Further, it is an admitted fact that the assessee has incurred expenses towards CSR amounting to Rs 3,50,000/- which were paid by way of donation to Jagannath Cancer Aid (Rs 1,00,000) and to Shakti Foundation (Rs 2,50,000) during the financial year relevant to impugned assessment year. In its return of income as evident from its computation of income, it has disallowed the said expenditure u/s 37(1) of the Act. Further the assessee has claimed 50% of the said expenditure as eligible for deduction u/s 80G of the Act.

9. It is not the case of the Revenue that the assessee has violated any of the conditions prescribed u/s 80G of the Act or has claimed excess deduction then what has been provided u/s 80G. The limited case of the Revenue is that the expenditure being part of CSR obligation should not be subject matter of claim u/s 80G of the Act though it is otherwise eligible. As we have noted earlier, the similar contention has been raised earlier and has been negated by series of the decisions of the Co-ordinate Benches of the Tribunal. The matter as claimed by the Revenue is currently pending adjudication before the Hon’ble Bombay High Court. However, nothing has been brought to our notice where the earlier decisions of the Coordinate Benches have been stayed by the Hon’ble Bombay High Court. Therefore, the said decisions continue to hold the field and where the claim of the assessee is supported by said decisions and the AO has allowed the said claim, the order so passed by the AO cannot be held as erroneous in nature. The contention of the Ld.DR that the AO has not examined the said claim at all during the course of assessment proceedings would not help the case of the Revenue as the AO even where he had examined the claim, would have come to the same conclusion that the claim of the assessee was legally tenable as we have noted in the facts of the present case and the same cannot therefore be a ground to sustain the impugned order.

10. In light of the same, we are of the considered view that the Ld.PCIT has erred in exercise of his jurisdiction u/s. 263 and the order so passed u/s.263 of the Act by the Ld.PCIT is not sustainable and the same is hereby quashed and that of the AO is sustained and Ground no. 1 of the assessee‟s appeal is allowed.

11. In light of above, ground No. 2 has become academic and the same is dismissed as infructious.

12. In the result, the appeal filed by the assessee is partly allowed.

Order pronounced in the open court on 05-05-2026