CSR Donations Qualify for Section 80G Deduction Despite Section 37 Disallowance: ITAT Ahmedabad

Sequel Logistics Private Limited Vs PCIT (ITAT Ahmedabad)

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT), in Sequel Logistics Private Limited Vs PCIT, quashed the revision order dated 27 March 2024 passed by the Principal Commissioner of Income Tax-3, Ahmedabad, under Section 263 of the Income-tax Act, 1961, for Assessment Year 2017-18. The dispute concerned the assessee’s claim of deduction under Section 80G amounting to Rs.16,25,500, representing 50% of its Corporate Social Responsibility (CSR) contribution of Rs.32,51,000 to H.N. Safal Foundation. The Tribunal held that the Assessing Officer had examined the deduction claim during assessment proceedings, obtained documentary evidence and adopted a legally plausible view in allowing it. Consequently, the assessment order could not be characterised as erroneous and prejudicial to the interests of the Revenue merely because the Principal Commissioner disagreed with the deduction. The Tribunal also relied on judicial precedents recognising that the restriction on deduction of CSR expenditure as business expenditure under Explanation 2 to Section 37(1) does not automatically prohibit a deduction under Section 80G where its independent statutory conditions are fulfilled.

Background and Assessment Proceedings

Sequel Logistics Private Limited was engaged in the business of providing logistics services. For AY 2017-18, the company filed its revised return of income on 31 March 2018, declaring total income of Rs.14,51,78,023. The return was subjected to scrutiny, and the Assessing Officer passed an assessment order on 7 June 2021 under Section 147 read with Section 144 of the Income-tax Act, accepting the returned income.

During the relevant year, the company had incurred CSR expenditure of Rs.32,51,000, which was debited to its profit and loss account. The expenditure was added back while computing taxable business income. However, the company separately claimed a deduction of Rs.16,25,500 under Section 80G, representing 50% of the contribution made to H.N. Safal Foundation.

The assessee maintained that the recipient foundation possessed a valid approval certificate issued by the Director of Income Tax (Exemption) and was recognised as an eligible institution for deduction under Section 80G.

Principal Commissioner’s Revision Under Section 263

On examining the assessment records, the Principal Commissioner observed that CSR expenditure constituted an application of income and was not incurred wholly and exclusively for the purposes of carrying on business. In the Principal Commissioner’s view, the amount was therefore not eligible for deduction under Section 80G.

Proceeding on that understanding, the Principal Commissioner issued a show-cause notice proposing revision of the assessment order. The assessee responded that the Assessing Officer had already examined the deduction during assessment proceedings and had allowed it after considering the supporting documents.

Notwithstanding these submissions, the Principal Commissioner set aside the assessment order through the revision order dated 27 March 2024. The Assessing Officer was directed to undertake a fresh assessment and compute any addition arising from the Section 80G claim. The revision order also directed consideration of applicable interest under Sections 234A, 234B and 234C and initiation of penalty proceedings in accordance with law, after providing an adequate opportunity of hearing.

Assessee’s Arguments Before the Tribunal

The assessee challenged the revision on the grounds that the assessment order was neither erroneous nor prejudicial to the Revenue and that the Principal Commissioner had failed to appreciate the distinction between business expenditure disallowed under Section 37(1) and eligible donations deductible under Section 80G.

Appearing for the assessee, Ms. Nisha Ojha submitted that the Assessing Officer had specifically examined the deduction claimed under Chapter VI-A and had obtained the relevant supporting evidence. The donation had been made to H.N. Safal Foundation, which possessed a valid exemption certificate, and the Assessing Officer had taken a permissible view after evaluating the claim.

The assessee relied on decisions including FNF India Private Limited Vs ACIT, Goldman Sachs Services Pvt. Ltd. Vs JCIT, Honda Motorcycle and Scooter India Pvt. Ltd. Vs ACIT and Ericsson India Global Service Ltd Vs DCIT to support the contention that CSR contributions could qualify for deduction under Section 80G.

The Revenue, represented by Shri A.P. Singh, supported the Principal Commissioner’s revision order and requested that it be upheld.

Assessment Records Established Proper Inquiry

The Tribunal examined the assessment records, including the paper book submitted by the assessee. It observed that the Assessing Officer had issued a notice under Section 143(2) dated 30 January 2020, specifically calling for documentary evidence in support of deductions claimed under Chapter VI-A.

In response, the assessee submitted Annexure-G containing a stamped receipt dated 27 March 2017 issued by H.N. Safal Foundation for Rs.32,51,000, together with the foundation’s Section 80G approval certificate dated 15 February 2013 issued by the Director of Income Tax (Exemption).

The Assessing Officer subsequently issued another notice under Section 142(1) dated 4 February 2021, to which the assessee furnished its response. Only thereafter was the assessment order passed on 7 June 2021 allowing the Section 80G deduction.

On these facts, the Tribunal concluded that the Assessing Officer had examined the issue and adopted a plausible view. The Principal Commissioner’s allegation that necessary inquiries had not been conducted was therefore inconsistent with the assessment record.

Supreme Court Principles Governing Revision Under Section 263

The Tribunal relied on the Supreme Court’s decision in Malabar Industrial Co. Ltd. Vs CIT, reported in 243 ITR 83 (SC), which establishes that the exercise of revisional jurisdiction under Section 263 requires satisfaction of two cumulative conditions: the assessment order must be erroneous and it must also be prejudicial to the interests of the Revenue.

The Tribunal explained that an assessment order may be erroneous where it proceeds on an incorrect assumption of facts, an incorrect application of law, a violation of natural justice, a lack of application of mind or a failure to investigate an issue requiring examination.

However, every potential loss of tax revenue does not automatically establish prejudice sufficient to justify revision. Where the Assessing Officer adopts one of the legally permissible courses, or chooses one of two possible views, the Principal Commissioner cannot revise the order merely because another view is preferred, unless the view adopted is unsustainable in law.

Applying these principles, the Tribunal held that the Assessing Officer’s decision to allow the Section 80G deduction after examining the supporting evidence was a plausible view. Accordingly, the conditions for invoking Section 263 were not satisfied.

CSR Expenditure Under Section 37(1) and Deduction Under Section 80G

The Tribunal separately examined the merits of the deduction claim. It referred to decisions of coordinate benches distinguishing the treatment of CSR expenditure under Explanation 2 to Section 37(1) from the deduction available for eligible donations under Section 80G.

Explanation 2 to Section 37(1), inserted by the Finance (No. 2) Act, 2014 with effect from AY 2015-16, excludes expenditure incurred on CSR activities referred to in Section 135 of the Companies Act, 2013, from deduction as business expenditure under Section 37(1).

However, the Tribunal referred to the reasoning in Interglobe Technology Quotient (P.) Ltd. that Section 80G operates independently under Chapter VI-A after the computation of gross total income. Therefore, disallowance of an amount as business expenditure does not, by itself, prohibit its consideration as an eligible donation under Section 80G.

The cited decision also rejected the proposition that CSR contributions must necessarily be excluded from Section 80G merely because CSR expenditure is statutorily mandated. The relevant question is whether the donation satisfies the conditions prescribed under Section 80G, including the eligibility of the recipient institution and the nature of the contribution.

Coordinate Bench Decisions Supporting the Assessee

The Tribunal referred to the Mumbai Bench decision in Alubond Dacs India (P.) Ltd., which recognised that eligible CSR contributions may qualify for deduction under Section 80G notwithstanding their exclusion from business expenditure under Section 37(1). That decision also discussed the specific statutory exclusions applicable to certain contributions, including donations to Swachh Bharat Kosh and Clean Ganga Fund.

Further reliance was placed on JMS Mining (P.) Ltd., where the Kolkata Bench held that the prohibition under Explanation 2 to Section 37(1) could not automatically be imported into Chapter VI-A. Where the Assessing Officer had allowed a Section 80G deduction on CSR contributions after adopting a legally plausible view, revision under Section 263 was held to be unjustified.

The Tribunal also referred to decisions in Societe Generale Securities India (P.) Ltd. and FDC Ltd., which supported the proposition that revision proceedings could not be sustained merely because the Principal Commissioner disagreed with the allowance of eligible CSR donations under Section 80G.

Final Decision and Practical Significance

Having examined the assessment record and the applicable judicial precedents, the ITAT held that the Assessing Officer had conducted the relevant inquiry and had taken a legally plausible view in allowing the assessee’s deduction under Section 80G.

The Tribunal concluded that the Principal Commissioner was not justified in invoking Section 263. It accordingly quashed the revision order dated 27 March 2024 for AY 2017-18 and allowed the assessee’s appeal. The order was pronounced in the open court on 28 October 2024.

The ruling highlights two distinct principles. First, CSR expenditure disallowed as business expenditure under Explanation 2 to Section 37(1) may nevertheless qualify for deduction under Section 80G where the statutory eligibility conditions are satisfied. Secondly, an assessment order passed after examination of the relevant documents and adoption of a legally permissible view cannot ordinarily be revised under Section 263 merely because the Principal Commissioner holds a different interpretation.

For companies claiming deductions on eligible CSR donations, the decision emphasises the importance of maintaining donation receipts, valid Section 80G approval evidence and assessment-stage correspondence demonstrating that the Assessing Officer considered the claim.

Cases Discussed

• FNF India Private Limited Vs Assistant Commissioner of Income Tax, (2021) SCC OnLine ITAT 1277, ITAT — Relied upon by the assessee in support of deduction under Section 80G for eligible CSR contributions.
• Goldman Sachs Services Pvt. Ltd. Vs Joint Commissioner of Income Tax, (2020) SCC OnLine ITAT 4373, ITAT — Cited by the assessee regarding deductibility of CSR donations under Section 80G.
• Honda Motorcycle and Scooter India Pvt. Ltd. Vs Assistant Commissioner of Income Tax, (2023) SCC OnLine ITAT 614, ITAT — Relied upon by the assessee to support its claim for Section 80G deduction.
• Ericsson India Global Service Ltd Vs DCIT, ITA No. 1150/Del/2022, ITAT Delhi — Cited by the assessee in support of the deduction claim.
• Malabar Industrial Co. Ltd. Vs CIT, (2000) 243 ITR 83 (SC), Supreme Court — Followed on the twin requirements of an erroneous order and prejudice to the interests of the Revenue under Section 263.
• Interglobe Technology Quotient (P.) Ltd., ITAT Delhi — Relied upon for the distinction between CSR expenditure disallowed under Section 37(1) and eligible donations deductible under Section 80G.
• Alubond Dacs India (P.) Ltd., ITAT Mumbai — Relied upon for allowing eligible CSR donations under Section 80G subject to satisfaction of statutory conditions.
• JMS Mining (P.) Ltd., ITAT Kolkata — Relied upon for holding that the Section 37(1) restriction does not automatically exclude eligible Section 80G deductions and that revision under Section 263 was unjustified where the Assessing Officer had adopted a plausible view.
• Societe Generale Securities India (P.) Ltd., ITAT Mumbai — Relied upon regarding the sustainability of Section 80G deduction on CSR contributions and the limits of revision under Section 263.
• FDC Ltd., ITAT Mumbai — Relied upon regarding Section 80G deduction on CSR expenditure and the validity of revision proceedings.
• PVG Raju, citation and forum not specified in the supplied order — Referred to within the quoted decision in Alubond Dacs India (P.) Ltd. and distinguished on the question of voluntariness of donations.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

This appeal is filed by the Assessee as against the Revision order dated 27.03.2024 passed by the Principal Commissioner of Income Tax-3, Ahmedabad arising out of the assessment order passed under section 147 r.w.s. 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18.

2. Brief facts of the case is that the assessee is a Company engaged in the business of Logistic Services. For the Asst. Year 2017-18, the assessee filed its Revised Return of Income on 31-03-2018 declaring total income of Rs.14,51,78,023/-. The return was taken up for scrutiny assessment after calling for various information and evidences and assessment order was passed on 07-06-2021 accepting the returned income.

3. Perusal of the above assessment order, Ld. PCIT found that the assessee had claimed expenditure of Rs.32,51,000/- as Corporate Social Responsibility (CSR) expenditure in the P & L account. This amount was added back the in the computation of income but 50% of the same namely Rs. 16,25,500/- claimed as deduction u/s. 80G of the Act Since CSR expenditure being an application of income is not incurred wholly and exclusively for the purpose of carrying on business, is not allowable as deduction u/s. 80G of the Act. Thus the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. Hence a show cause notice was issued to the assessee as to why not to revise the assessment order to deny the claim of deduction u/s. 80G on the CSR expenses.

3.1. In reply the assessee made a detailed submission brining the fact that the A.O. during the assessment proceedings thoroughly considered the issue in detail and allowed the deduction u/s. 80G of the Act. Thus the assessment order is neither erroneous nor prejudicial to the interest of Revenue and therefore requested to drop the proceedings. However the Ld. PCIT set aside the reassessment order and directed the Ld. A.O. to pass fresh assessment order and compute addition if any arising out of the deduction claim u/s. 80G of the Act and also charge interest u/s. 234A/B/C as applicable and initiate penalty proceedings as per law by giving adequate opportunity of hearing to the assessee.

4. Aggrieved against the Revision order, the assessee is in appeal before us raising the following Grounds of Appeal:

1 The Impugned Order dated 27th March 2024 passed by the Respondent is erroneous, arbitrary, mechanical and contrary to the provisions of Income Tax Act, 1961 and the settled principles of law.

2. The Respondent was not entitled to invoke the jurisdiction under Section 263 of the Income Tax Act, 1961 because the Assessment Order dated 7th June 2021 is not erroneous and the Assessment Order dated 7th June 2021 is in consonance with the settled principles of law.

3. The Respondent has failed to consider the settled principle of law that a payment made towards Corporate Social Responsibility under Section 135 of the Companies Act, 2013 to an entity approved for deduction / exemption under Section 80G of the Income Tax Act, 1961 is allowable to be deducted / exempted from the total taxable income of the Appellant and therefore, the Impugned Order dated 27th March 2024 passed by the Respondent is bad in law.

4. The Impugned Order dated 27 March 2024 passed by the Respondent is erroneous in noting that the Assessing Order did not conduct the necessary inquiries into the assessment of income of the Appellant for the Assessment Year 2017-18.

5. The Impugned Order dated 27th March 2024 passed by the Respondent is a non speaking order since the Respondent has failed to provide proper reasoning for non-consideration the precedents relied upon by the Appellant.

6. The Respondent has erroneously directed the Assessing Officer to conduct fresh inquiries and assessment into the income of the Appellant for the Assessment Year 2017-18 in the Impugned Order dated 27th March 2024.

5. Ld. Counsel Ms. Nisha Ojha appearing for the assessee submitted that the reassessment order passed by the Ld. A.O. is neither erroneous nor prejudicial to the interest of Revenue. Since the Ld. A.O. considered the fact of the case in its entirety, raised queries in respect of the deduction claimed u/s. 80G (Chapter VI-A of the Act) on the CSR expenditure paid to H.N. Safal Foundation, which has valid exemption certificate from DIT(Exemption) and a recognized the Trust as an eligible entity for exemption u/s. 80G of the Act. Further the Ld. A.O. considered the submissions and evidences with respect to the claim and took a plausible view that the claim of deduction u/s. 80G in respect of CSR are allowable expenses. Thus there is no loss to the Revenue on account of allowing such claim.

5.1. On merits of the case, Ld. Counsel submitted that it is well settled law that deduction u/s. 80G in respect of CSR expenses is allowable and placed reliance on the following decisions:

6. Per contra Ld. CIT-DR Shri A.P. Singh appearing for the Revenue supported the Revision order passed by the Ld. PCIT and requested to uphold the same.

7. We have given our thoughtful consideration and perused the materials available on record including the Paper Book and Case Laws filed by the assessee counsel. It is seen from Page No. 43 to 50 of the Paper Book, during the assessment proceedings, the A.O. issued notice u/s. 143(2) dated 30.01.2020 asking various details including documentary evidence in support of the deduction claimed under Chapter VI-A of the Act. In response, the assessee filed the details in Annexure-G namely the stamped receipt from H.N. Safal Foundation dated 27-03-2017 for a sum of Rs.32,51,000/- and u/s. 80G exemption certificate granted by Director of Income Tax (Exemption) dated 15-02-2013. Again the ld. A.O. vide notice u/s. 142(1) dated 04-02-2021 requested the assessee to furnish details, assessee replied to the same. It is thereafter the assessing officer passed the assessment order dated 07-06-2021 and allowed the claim of deduction u/s. 80G in respect of CSR expenses which is a plausible view taken by the Ld. A.O. In the above circumstances, the Ld. PCIT is not correct in invoking Revision proceedings u/s. 263 of the Act.

7.1. The Hon’ble Supreme Court in the case of Malabar Industries Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83 (SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law, or (iii) Assessing Officer’s order is in violation of the principle of natural justice, or (iv) if the order is passed by the Assessing Officer without application of mind. (v) if the AO has not investigated the issue before him; [because AO has to discharge dual role of an investigator as well as that of an adjudicator) then in aforesaid any event the order passed by the Assessing Officer can be termed as erroneous order.

7.2. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries Co. Ltd. (supra) held that this phrase i.e. “prejudicial to the interest of the revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue “unless the view taken by the Assessing Officer is unsustainable in law”. Thus in our considered view following Apex Court ruling the Revision orders passed by Ld. PCIT are not sustainable in law.

8. On merits of the case, whether the CSR expenditure is allowable u/s. 80G of the Act is also no more res integra by a series of decisions by various Co-ordinate Benches of the Tribunal.

8.1. The Delhi Tribunal in the case of Interglobe Technology

Quotient (P.) Ltd. (cited supra) held that mandatory nature of CSR expenditure does not justify disallowance of same u/s. 80G, if other conditions of Section 80G are fulfilled by observing as follows:

“7.3 As we take notice of the fact that Parliament legislated that CSR expenses would not be eligible for deduction as business expenditure under section 37 of the Act by inserting Explanation 2 to section 37(1) vide the Finance (No.2) Act, 2014 (applicable from the assessment year 2015- 16), which provided that any expenditure incurred by an assessee on the activities relating to CSR referred to in section 135 of the CA 2011, shall not be deemed to be an expenditure incurred by an assessee for the purpose of business or profession and shall not be allowed as deduction under section 37(1) of the IT Act. The intent of Parliament in bringing the aforesaid provision is given in the Explanatory Memorandum to the Finance (No.2) Bill, 2014 and is reproduced as under;

“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.”

7.4 The aforesaid explanatory memorandum categorically expresses the legislative intent and the rationale of disallowance of CSR expenditure referred to in section 135 of the Companies Act, that such expenditure is application of income and not incurred for the purposes of business. We are of considered view that this in itself justifies the grant of deduction u/s 80G. As CSR expenditure is application of income of the assessee under the Income Tax Act, that means it continues to form part of the Total income of the assessee. Section 80G(1) of the Act provides that in computing the total income of an assessee, there shall be deducted, in accordance with the provisions of this section, such sum paid by the assessee in the previous year as a donation. Further, section 80G(2) lists down the suns on which deduction shall be allowed to the assessee. Section 80G falls in Chapter VIA, which comes into play only after the gross total income has been computed by applying the computation provisions under various heads of income, including the Explanation 2 to section 37(1) of the Act. Thus, there is no correlation between suo- moto disallowance in section 37(1) and claim of deduction under section 80G of the Act.

7.5 As with regard to the reasoning that CSR expenditure are not voluntary but mandatory in nature due to penal consequences, we are of considered view that voluntary nature of donation is by nature of fact that it is not on the basis of any reciprocal promise of donee. The CSR expenditures are also without any reciprocal commitment from beneficiary being philanthropic in nature. The Act permits deduction of donations as per Section 80G of the Act, even though, assessee is not gaining any benefit out of any reciprocity from donee. Similar is the case of CSR expenditure. Thus the reasoning of learned Tax Authority, the CSR expenditure is mandatory, does not justify disallowance of these expenditures u/s 80G, if other conditions of section 80G are fulfilled. There is no allegation of Revenue that other conditions of Section 80G are not fulfilled. We, thus sustain the ground.”

8.2. The Mumbai Bench of the Tribunal in the case of Alubond Dacs India (P.) Ltd. (cited supra) considered the provisions of Companies Act and I.T. Act and held as follows:

“11. We have heard the rival submissions and perused the materials available on record. The only morn question to be decided here is whether the expenditure towards CSR activities are an allowable deduction us 80G of the Act. The CSR expenses are governed by section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies (CSR) Policy Rules, 2014 where companies having net worth of Rs 500 crores of more or turnover of Rs. 1000 crores or more or net profit of Rs 5 crores of more have to mandatorily comply with the CSR provisions specified us. 135(1) of the Companies Act, 2011. The above mentioned companies are liable to spend atleast 25% of its average net profit for the immediately preceding three financial years on CSR activities. In the present case, the assessee has contributed Rs 30 lacs to various educational and charitable trust for which the assessee has claimed 50% of the total donation paid as deduction u/s. 800 of the Act. Prior to the Finance (No.2) Act, 2014, the said expenditure was claimed as ‘business expenditure’ u/s. 37(1) of the Act where after the insertion of Explanation 2 to section 37(1) of the Act, the CSR expenses referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purpose of business or profession. It is observed that the said expenses pertaining to CSR has been claimed as deduction u/s. 80G of the Act which claim was perennially rejected by the Revenue for the reason that only donations which are voluntary in nature will come under the purview of section 80G of the Act and donation towards CSR was merely a statutory obligation on companies as per section 135 of the Companies Act, 2013. It is pertinent to point out that the intention of the legislature was clear when the same was clarified by the Finance (No.2) Act, 2014 that CSR expenses will not fall under the business expenditure and also there has been an express bar specified in sub clause (iiihk) and (iiihl) of section 80G(2)(a) of the Act that any sum paid by the assessee as donation to Swatch Bharat Kosh and Clean Ganga Fund will not come under the purview of deduction u’s 80G of the Act subject to certain conditions. This justifies the fact that the other donations specified us 80G of the Act would be entitled to deduction provided the conditions stipulated u/s. 80G of the Act are satisfied. In the present case in hand, the contributions made by the assessee would not fall under the two exceptions specified above which clearly mandates that the assessee is entitled to claim deduction for the donations contributed during the year under consideration u/s 80G of the Act. The decision relied upon by the ld. A.O in the case of PVG Raju (supra) is distinguishable on the facts of the present case where there is no requirement of proving the voluntariness of the donation contributed by the assessee for claiming deduction u/s. 80G of the Act. The amendment brought about by Finance Act, 2015 to section 80G of the Act which had inserted the sub clauses (iiihk) and (iiihl) to be the exception for qualifying a donation for claiming us. 80G of the Act could also be an evidencing factor to substantiate that CSR expenditures which falls under the nature specified in section 30 to 36 of the Act are an allowable deduction u/s 80G of the Act.

12. On the above observation, we deem it fit to hold that the assessee is entitled to deduction claimed u/s. 80G of the Act towards the CSR expenditure incurred by it. We, therefore, direct the Id. A.O, to allow the claim of the assessee subject to the condition that the assessee has satisfied the other requirements warranted u/s.80G of the Act. Hence, ground no. 2 raised by the assessee is allowed.”

8.3. The Kolkata Bench of the Tribunal in the case of JMS Mining (P.) Ltd (cited supra) held that invocation of revision proceedings under section 263 itself unjustified in denying deduction u/s. 80G on CSR expenditure by observing as follows:

“Section 80G, read with section 263, of the Income-tax Act, 1961- Deductions – Donations to certain funds, charitable institutions, etc. (Revision) – Assessment year 2016-17-Assessee- company was a mining service provider engaged in business of management and operation of mines – It claimed deduction under section 80G in respect of donation of certain amount made to Shree Charity Fund and a sum of certain amount given to Pt. Jasraj Music Academy Trust as contribution towards corporate social responsibility (CSR) – Assessing Officer allowed same – Principal Commissioner invoked revision jurisdiction under section 263 on ground that action of Assessing Officer in allowing such claim of assessee for deduction under section 80G was erroneous because CSR expenditure could not be allowed as per express prohibition laid down in Explanation 2 of section 37(1) Whether Explanation 2 to section 37(1) which denies deduction for CSR expenses by way of business expenditure is applicable only to extent of computing ‘business income’ under Chapter IV-D and; it could not be extended or imported to CSR contributions which was otherwise eligible for deduction under Chapter VI, to say, donations made to charitable trusts registered under section 80G-Held, yes Whether, therefore, since said donation on account of CSR was made by assessee to charitable trusts which were duly registered under section 80G(5)(vi), assessee was entitled to claim deduction under section 80G in respect of such contribution – Held, yes – Whether since action of Assessing Officer in allowing claim under section 80G was a plausible view, impugned invocation of revision jurisdiction under section 263 was unjustified-Held, yes [Para 23] [In favour of assessee) Section 37(1), of the Income-tax Act, 1961 Business expenditure Allowability of (Explanation 2) – Assessment year 2016-17 – Whether corporate social responsibility (CSR) expenses which are required to be mandatorily incurred by assessee-company as per section 135 of Companies Act are not entitled to deduction under section 37(1) by virtue of fetter placed by Explanation 2 to section 37(1), which was inserted by Finance (No. 2) Act, 2014-Held, yes [Para 23] [In favour of assessee]”

8.4. Similarly Mumbai Bench of the Tribunal in the case of Societe Generale Securities India (P.) Ltd. and FDC Ltd. held that Revision proceedings are not justified on the claim of deduction under section 80G on CSR expenditure.

9. Respectfully following the above judicial precedents, we have no hesitation in quashing the Revision order dated 27-03-2024 passed by Ld. PCIT for the Asst. Years 2017-18 and thereby allow the grounds of appeal raised by the assessee.

10. In the result, the appeal filed by the assessee is hereby allowed.

Order pronounced in the open court on 28-10-2024