Case Law Details
Interglobe Technology Quotient Private Limited Vs ACIT (ITAT Delhi)
he case of Interglobe Technology Quotient Private Limited versus ACIT, adjudicated by the Income Tax Appellate Tribunal (ITAT) in Delhi, delves into significant issues concerning CSR expenditure disallowance and the allowance of TDS credit.
1. Treatment of CSR Expenditure under Section 80G: The taxpayer argued that CSR (Corporate Social Responsibility) expenditure should not be disallowed under Section 80G of the Income Tax Act, 1961, merely because it is mandatory. The taxpayer contended that CSR expenditure is akin to charitable donations and fulfills the conditions laid down under Section 80G, as there is no reciprocal promise or benefit to the taxpayer. The Tribunal agreed with the taxpayer, emphasizing that the voluntary nature of donations stems from the absence of any reciprocal promise from the beneficiary. Similarly, CSR expenditure, being philanthropic, does not entail any reciprocal commitment from the beneficiary. Hence, the Tribunal ruled that the mandatory nature of CSR expenditure does not warrant its disallowance under Section 80G, provided other conditions of the section are fulfilled.
2. Allowance of TDS Credit in the Same Year as Income Accrual: The taxpayer contended that according to their accrual system of accounting, revenue is recognized when services are rendered, and bills are raised, irrespective of when the payment is received. Consequently, there might be a timing gap between revenue recognition and TDS deduction by the service recipient. In this case, the revenue from services provided to Travelport was recognized in the preceding financial year, but TDS was deducted and deposited in the subsequent financial year. The taxpayer argued that under Section 199 of the Income Tax Act read with Rule 37BA of the Income Tax Rules, credit for TDS should be allowed in the year in which the income is offered to tax. The Tribunal agreed with the taxpayer’s stance, highlighting that both the income and the TDS deducted thereon were reported and offered for taxation in the same assessment year. Therefore, the Tribunal ruled that the credit for TDS should be allowed in the year when the income accrues and is included in the taxable income, adhering to the provisions of Section 199 and Rule 37BA.
In both issues, the Tribunal sided with the taxpayer, emphasizing the alignment of their actions with the provisions of the Income Tax Act and the Income Tax Rules. Regarding CSR expenditure, the Tribunal reiterated the voluntary nature of such expenditure, akin to charitable donations, and upheld the eligibility for deduction under Section 80G, provided other conditions are met. Similarly, concerning the allowance of TDS credit, the Tribunal upheld the taxpayer’s claim, emphasizing the principle that TDS credit should be aligned with the year in which the income is recognized for taxation purposes, as per Section 199 and Rule 37BA.
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