Viterra India Private Limited Vs PCIT (ITAT Mumbai)
Summary: The Mumbai Bench of the Income Tax Appellate Tribunal allowed Viterra India Private Limited’s appeal for Assessment Year 2020-21 and quashed the PCIT’s revision under section 263 concerning a deduction of Rs.1,43,06,000 under section 80G for donations forming part of Corporate Social Responsibility expenditure. The assessee had filed its return on 15 February 2021 declaring income of Rs.119,21,61,190. Scrutiny assessment under section 143(3), completed on 27 September 2023, determined income at Rs.132,31,15,730 after other disallowances. CSR contributions totalled Rs.1,86,11,000 and had already been added back while computing business income under Explanation 2 to section 37(1). The separate section 80G claim comprised Rs.1,00,01,000 contributed to the PM CARES Fund, claimed at 100%, and Rs.43,05,000, representing 50% of Rs.86,10,000 contributed to six institutions.
The PCIT considered that mandatory CSR spending under section 135 of the Companies Act, 2013 lacked the voluntariness associated with donations and that allowing section 80G relief would neutralise the section 37(1) disallowance. He also considered the Assessing Officer’s enquiry insufficient because obtaining donation receipts did not establish examination of the legal interplay between the provisions. Invoking Explanation 2 to section 263, he directed a fresh assessment. The assessee disputed both the jurisdictional premise and the substantive disallowance. It relied on the assessment record, which showed a Chapter VI-A query under section 142(1), disclosure of donation-wise details and donees’ names, addresses and PANs, followed by a specific show-cause notice proposing disallowance of the entire deduction for want of receipts. The claim was accepted after the assessee supplied its explanation and supporting receipts.
The departmental representative acknowledged the queries and responses but argued that the record did not establish conscious verification of each donee’s approval, the payment mode under section 80G(5D), the qualifying limit under section 80G(4), or eligibility for 100% deduction. The Tribunal held that these were relevant conditions, but neither the PCIT nor the departmental note identified any actual defect: no invalid approval, prohibited cash payment exceeding Rs.2,000, incorrect qualifying limit or erroneous categorisation was demonstrated. A specific proposed disallowance followed by evidence and acceptance established enquiry; absence of an elaborate discussion in the assessment order could not erase that enquiry. Nirmal Bang Securities (P.) Ltd. v. Pr. CIT, relied upon by the Revenue, was distinguished because the present record went beyond merely seeking information without examining it.
On merits, the Tribunal held that Explanation 2 to section 37(1) operates in computing business income under Chapter IV-D, whereas section 80G independently permits deductions from gross total income under Chapter VI-A, subject to its conditions. Since CSR expenditure had been added back, there was no double deduction. The express CSR exclusions for the Swachh Bharat Kosh and Clean Ganga Fund could not be expanded into a universal prohibition. Although section 135 mandates the quantum of CSR spending, it does not ordinarily compel payment to one predetermined institution. A payment without material return or quid pro quo, bearing the character of a donation and satisfying section 80G, could not be denied deduction by importing an additional voluntariness requirement.
The Tribunal relied on the consistent approach in Blue Dart Express Limited, Hemani Industries Ltd., ICICI Securities Ltd. and Juniper Networks India Pvt. Ltd. It held that section 263 is corrective and cannot support an exploratory reassessment in the hope of discovering a disallowance. A further hearing opportunity could not cure absent jurisdictional conditions. As the Assessing Officer had specifically examined the claim and adopted a legally sustainable view, the twin requirements of error and prejudice were not met. The revisionary order was quashed, the assessment order restored and the assessee’s appeal allowed.
Cases Discussed
- Juniper Networks India Pvt. Ltd. v. Pr. CIT — ITA No.6137/Mum/2026, decided on 3 September 2026 (ITAT Mumbai). Relied upon as the most recent coordinate Bench decision supporting independent consideration of eligible CSR donations under section 80G.
- ICICI Securities Ltd. v. PCIT — 217 ITD 81, ITA No.3766/Mum/2025, decided on 6 January 2026 (ITAT Mumbai). Relied upon for the independent operation of section 80G despite the business expenditure restriction on CSR spending.
- Hemani Industries Ltd. v. Pr. CIT — 214 ITD 520, ITA No.2963/Mum/2025, decided on 21 August 2025 (ITAT Mumbai). Relied upon in support of the legally sustainable view adopted by the Assessing Officer.
- Nirmal Bang Securities (P.) Ltd. v. Pr. CIT — [2025] 177 taxmann.com 149 (ITAT Mumbai). Cited by the Revenue and distinguished: the assessment record here demonstrated a specific proposed disallowance, followed by supporting evidence and acceptance.
- Blue Dart Express Limited v. PCIT — ITA No.1101/Mum/2024, decided on 3 September 2024 (ITAT Mumbai). Relied upon for allowing independent examination of the section 80G claim and rejecting revision of a legally sustainable assessment view.
Alternative SEO Titles
1. CSR Donations Remain Eligible Under Section 80G Subject to Conditions: ITAT Mumbai
2. Specific Enquiry Into CSR Donations Defeats Section 263 Revision: ITAT Mumbai
3. Section 37 CSR Disallowance Does Not Bar Section 80G Relief: ITAT Mumbai
4. No Identified Donation Defect: ITAT Mumbai Quashes Section 263 Revision
5. Section 263 Cannot Authorise Exploratory Enquiry Into Examined CSR Donations: ITAT Mumbai
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeal has been preferred by the assessee against the impugned order passed by the learned Principal Commissioner of Income-tax (Central), Mumbai-1 (“learned PCIT”) in exercise of his revisionary jurisdiction under section 263 of the Income-tax Act, 1961 (“the Act”), for the assessment year 2020-21. In substance, the assessee has challenged the assumption of jurisdiction under section 263 and the consequential setting aside of the assessment order dated 27.09.2023 passed under section 143(3), principally on the issue of deduction of Rs.1,43,06,000 claimed under section 80G in respect of donations which also formed part of the Corporate Social Responsibility expenditure incurred by the assessee.
2. The brief facts, as culled out from the assessment record and the material placed before us, are that the assessee filed its return of income on 15.02.2021 declaring a total income of Rs.119,21,61,190. The case was selected for scrutiny under CASS and the assessment was completed under section 143(3) vide order dated 27.09.2023, determining the total income at Rs.132,31,15,730 after making, inter alia, disallowances on account of surcharge and education cess, change in accounting policy, certain purchases and penalty expenditure. During the relevant previous year, the assessee had made contributions aggregating to Rs.1,86,11,000 which formed part of its CSR expenditure. The CSR expenditure was added back while computing the business income in conformity with Explanation 2 to section 37(1). Out of the aforesaid contributions, an amount of Rs.1,00,01,000 was contributed to the PM CARES Fund and claimed as eligible for deduction at 100%, whereas contributions aggregating to Rs.86,10,000 were made to six institutions, against which deduction of Rs.43,05,000 was claimed at 50%. Thus, the aggregate deduction claimed under section 80G amounted to Rs.1,43,06,000.
3. On examination of the assessment record, the learned PCIT observed that although the CSR expenditure had been disallowed under section 37(1), the Assessing Officer had allowed the corresponding deduction of Rs.1,43,06,000 under section 80G without recording any discussion in the assessment order. According to the learned PCIT, expenditure incurred pursuant to the statutory obligation contained in section 135 of the Companies Act, 2013 lacked the element of voluntariness ordinarily associated with a donation and, therefore, could not qualify for deduction under section 80G. He further observed that allowing such deduction would indirectly neutralise the disallowance mandated by Explanation 2 to section 37(1), thereby conferring a tax benefit contrary to the legislative intent. On this premise, a show-cause notice under section 263 was issued to the assessee.
4. In response, the assessee submitted that the claim under section 80G had been specifically examined during the assessment proceedings. In the notice issued under section 142(1) dated 24.11.2021, the Assessing Officer had called for details of deductions claimed under Chapter VI-A, in response to which the assessee furnished the details of CSR expenditure and donations, copies of which are placed at pages 180 to 187 of the paper book. The schedule of deduction under section 80G reflected the claim of Rs.43,05,000 at 50% and Rs.1,00,01,000 at 100%, while Annexure 2(D), placed at page 191, contained the names, addresses and PANs of the respective donees and the amounts contributed to them. Thereafter, in the final show-cause notice issued during the assessment proceedings, the Assessing Officer specifically recorded that receipts supporting the deduction of Rs.1,43,06,000 had not been furnished and called upon the assessee to explain why the entire deduction should not be disallowed. In response, the assessee furnished a detailed reply along with the donation receipts and supporting particulars, placed at pages 192 to 198, with the receipts appearing from page 243 onwards. The computation of income containing the claim under section 80G is placed at page 125 of the paper book. It was accordingly contended that this was not a case where the claim had escaped the notice of the Assessing Officer or had been allowed without enquiry; rather, the Assessing Officer had raised a specific objection proposing disallowance of the entire claim, examined the reply and supporting evidence and thereafter accepted it.
5. On the legal admissibility of the deduction, the assessee submitted before the learned PCIT that Explanation 2 to section 37(1) merely prohibits allowance of CSR expenditure as business expenditure and does not impose any embargo upon its admissibility under another specific provision of the Act. Section 135 of the Companies Act mandates the quantum of CSR expenditure but does not ordinarily mandate that the expenditure must be incurred by making a contribution to any particular institution. Within the framework of Schedule VII, an assessee retains the discretion to choose the activity, mode of implementation and recipient institution. Section 80G does not prescribe, as an additional condition, that a donation must be voluntary in the restricted sense contemplated by the learned PCIT. The statute expressly excludes CSR contributions only in respect of specified funds, namely, the Swachh Bharat Kosh and the Clean Ganga Fund, and no such exclusion exists in respect of contributions made to other eligible institutions or to the PM CARES Fund. It was thus submitted that the Assessing Officer had adopted a legally sustainable view after due enquiry, which could not be displaced in exercise of revisionary jurisdiction.
6. The learned PCIT, however, rejected the explanation. He held that the Assessing Officer had confined himself merely to calling for and obtaining donation receipts and other factual particulars without examining the legal interplay between Explanation 2 to section 37(1), section 80G and the mandatory character of CSR expenditure under section 135 of the Companies Act. According to him, mere seeking of information, without thereafter examining the same and recording a conscious conclusion, could not be equated with an enquiry. He accordingly held that the assessment order had been passed without the enquiry and verification which ought to have been made and, by invoking Explanation 2 to section 263, set aside the assessment order with a direction to the Assessing Officer to complete the assessment de novo after undertaking the necessary verification and enquiries.
7. Before us, the learned counsel for the assessee reiterated that the Assessing Officer had raised a specific query concerning the deduction under section 80G, had thereafter proposed its disallowance for want of supporting receipts and allowed the claim only after the assessee furnished a detailed explanation, donation-wise particulars and supporting receipts. He submitted that the premise adopted by the learned PCIT was not any identified factual defect in the documents furnished by the assessee, but the legal proposition that a contribution forming part of CSR expenditure could not qualify as a voluntary donation and that an amount disallowed under section 37(1) could not thereafter be considered under section 80G. This proposition, according to the learned counsel, stands concluded in favour of the assessee by a consistent line of decisions, including Blue Dart Express Limited v. PCIT [IT Appeal No.1101/Mum/2024, dated 03.09.2024]; Hemani Industries Ltd. v. Pr. CIT 214 ITD 520 (Mumbai – Trib.); ICICI Securities Ltd. v. PCIT 217 ITD 81 (Mumbai – Trib.); and Juniper Networks India Pvt. Ltd. v. Pr. CIT [IT Appeal No.6137 (Mum) of 2026].
8. The learned CIT-DR, on the other hand, strongly relied upon the impugned order and also filed a detailed written note dated 17.09.2026. The learned CIT-DR fairly acknowledged that the Assessing Officer had called for the details of deduction under Chapter VI-A, that the assessee had furnished the details of CSR expenditure and donations, and that the Assessing Officer had subsequently called for receipts and supporting documents relating specifically to the deduction under section 80G. His contention, however, was that the mere calling for and furnishing of information did not establish that the statutory conditions governing the deduction had been consciously verified. It was submitted that the record did not demonstrate whether the Assessing Officer had examined the subsistence of the approval under section 80G in the hands of each donee on the relevant date, the mode of payment in the light of section 80G(5D), the qualifying limit prescribed under section 80G(4), or whether the contributions claimed at 100% fell within the specified statutory categories. Reliance was placed upon paragraph 38 of the impugned order and upon the decision of the Tribunal in Nirmal Bang Securities (P.) Ltd. v. Pr. CIT [2025] 177 (Mumbai – Trib.), to contend that this was a case of absence of necessary enquiry and not merely one involving adoption of a possible view.
9. We have heard the rival submissions, examined the impugned order, the assessment record and the material placed in the paper book, and have also considered the detailed written note filed by the learned CIT-DR. At the outset, certain facts are indisputable. The assessee added back the CSR expenditure while computing its business income and did not claim its deduction under section 37(1). The deduction of Rs.1,43,06,000 was separately claimed under section 80G from the gross total income under Chapter VI-A, comprising Rs.1,00,01,000 claimed at 100% in respect of contribution to the PM CARES Fund and Rs.43,05,000, being 50% of contributions aggregating to Rs.86,10,000 made to six institutions. There is, therefore, no question of the assessee having secured a double deduction of the same amount under section 37(1) as well as section 80G.
10. The assessment record also does not support the conclusion that the deduction was allowed without enquiry. The Assessing Officer initially called for details of deductions claimed under Chapter VI-A, in response to which the assessee furnished the schedule of donations, the names, PANs and addresses of the donees, the amounts contributed and the basis upon which deduction was claimed at 50% or 100%. More importantly, the Assessing Officer thereafter issued a specific show-cause notice recording that receipts in support of the deduction of Rs.1,43,06,000 had not been submitted and expressly proposed disallowance of the entire claim. This was not a routine or generic query, but a direct challenge to the evidentiary foundation of the deduction. The assessee responded by furnishing the relevant receipts and supporting particulars, where after the Assessing Officer completed the assessment without making the proposed disallowance. Once the Assessing Officer had identified the precise claim, called for supporting evidence, proposed its disallowance for want of such evidence and, upon receiving the assessee’s response and receipts, accepted it, it cannot be held that he had not looked into the matter at all. The conclusion may not have been elaborately recorded in the assessment order, but absence of elaborate reasons cannot efface the enquiry demonstrably undertaken from the assessment record.
11. The learned CIT-DR has contended that, notwithstanding this enquiry, the Assessing Officer ought to have separately recorded his verification regarding the validity of each donee’s approval, mode of payment, qualifying limit under section 80G(4) and categorisation of the respective contributions. There can be no quarrel with the proposition that these conditions are relevant to the allowability of deduction under section 80G. However, for sustaining revision under section 263, it is not sufficient to enumerate, after completion of the assessment, every possible facet upon which a more elaborate verification could have been conducted. The revisional authority must identify a specific error in the assessment order arising from the material on record and demonstrate the prejudice caused thereby. Neither the impugned order nor the written submissions of the learned CIT-DR point out that any particular donee lacked a valid approval, that any donation exceeding Rs.2,000 was made in cash, that the qualifying limit was incorrectly computed, or that any amount claimed at 100% did not fall within the statutorily eligible category. No defect has been identified in the receipts, particulars of the donees, mode of payment or computation furnished by the assessee. What has been canvassed is merely that the record does not contain an express narration by the Assessing Officer of each step of verification. Such absence cannot convert an enquiry actually conducted into a case of no enquiry.
12. Explanation 2 to section 263 does not dispense with the foundational requirement that the assessment order must be erroneous insofar as it is prejudicial to the interests of the Revenue. Clause (a) thereof applies where the order is passed without making enquiries or verification which should have been made; it does not confer upon the revisional authority an unfettered power to direct a second enquiry merely because, in his estimation, the enquiry already made could have been conducted more elaborately or recorded in greater detail. There is a material distinction between a case where the Assessing Officer does not notice an issue, or calls for information but does not thereafter examine it, and a case where he specifically proposes disallowance of the claim, receives a detailed response with documentary evidence and thereafter refrains from making the proposed disallowance. The present case belongs to the latter category. The reliance upon Nirmal Bang Securities (P.) Ltd. v. PCIT (supra) is therefore misplaced. The principle applied therein was that mere seeking of information, without looking into it or forming any view thereon, does not amount to an enquiry. Here, the Assessing Officer noticed the precise deduction, recorded the absence of supporting receipts, proposed disallowance of the entire amount and thereafter considered the assessee’s reply accompanied by the receipts and supporting particulars. The factual substratum is thus materially different.
13. Even on the substantive legal issue, the foundation of the impugned order is untenable. Explanation 2 to section 37(1) provides that expenditure incurred on activities relating to CSR referred to in section 135 of the Companies Act shall not be deemed to be expenditure incurred for the purposes of business or profession. The restriction operates in the computation of business income under Chapter IV-D. Section 80G, on the other hand, operates under Chapter VI-A and provides a deduction from gross total income where the payment satisfies the conditions prescribed therein. The two provisions operate at different stages of computation and in distinct statutory fields. Once the assessee has added back the CSR expenditure while computing its business income, the eligibility of the corresponding payment under section 80G must be examined independently on the touchstone of the conditions contained in that provision. An expenditure inadmissible under the residuary provision of section 37(1) does not, for that reason alone, become incapable of consideration under another specific provision of the Act.
14. The statutory scheme of section 80G itself militates against the construction adopted by the learned PCIT. In relation to contributions made to the Swachh Bharat Kosh and the Clean Ganga Fund, Parliament has expressly excluded contributions made in pursuance of CSR obligations under section 135(5) of the Companies Act. If every contribution forming part of CSR expenditure were inherently outside the scope of section 80G, there was scarcely any occasion to enact these specific exclusions. Their presence indicates that the disqualification is particular and not universal. Equally, a payment does not necessarily cease to be a donation merely because the assessee is required to incur CSR expenditure of a prescribed quantum. Section 135 of the Companies Act mandates the quantum of CSR expenditure, but does not ordinarily compel an assessee to contribute the amount to one predetermined institution. Subject to the statutory framework, the assessee retains the choice of eligible activity, mode of implementation and recipient institution. Where a payment is made without any material return or quid pro quo, bears the character of a donation and otherwise fulfils the conditions of section 80G, its eligibility cannot be denied by importing an additional requirement of voluntariness which Parliament has not enacted.
15. This precise controversy has been considered by the coordinate Benches in Blue Dart Express Ltd. (supra), Hemani Industries Ltd. (supra), ICICI Securities Ltd.(supra) and, most recently, Juniper Networks India Pvt. Ltd.(supra). The consistent view emerging from these decisions is that Explanation 2 to section 37(1) only denies deduction of CSR expenditure while computing business income and does not constitute a plenary prohibition against deduction under section 80G. Where the assessee has added back the CSR expenditure and thereafter claimed deduction under section 80G in respect of contributions made to eligible institutions, the claim has to be considered independently under section 80G. Where the Assessing Officer has examined the claim and adopted a view consistent with this legal position, such a view cannot be displaced under section 263 merely because the learned PCIT entertains a contrary understanding of the statutory provisions.
16. In the present case, the learned PCIT has not identified any donation which was factually ineligible, any recipient whose approval was invalid, any payment made in a prohibited mode, any error in the qualifying limit, or any incorrect categorisation of a contribution as eligible for 100% deduction. His conclusion rests substantially upon the general proposition that CSR expenditure lacks voluntariness and that an amount disallowed under section 37(1) cannot be allowed under section 80G. That proposition is neither borne out from the statutory language nor consistent with the judicial precedents referred to above. The additional verification points raised in the departmental note cannot cure this fundamental infirmity, particularly when no actual non-compliance has been demonstrated and the assessment record establishes that the claim was specifically examined by the Assessing Officer. Section 263 cannot be employed to set aside a completed assessment merely for undertaking a fresh or more elaborate enquiry in the hope that some basis for disallowance may subsequently emerge. Its power is corrective and not exploratory. Nor does a direction for de novo assessment become valid merely because the assessee is afforded another opportunity of hearing; the jurisdictional conditions must exist before a concluded assessment can be unsettled.
17. Accordingly, we hold that the assessment order dated 27.09.2023 cannot be regarded as erroneous insofar as it is prejudicial to the interests of the Revenue merely because the learned PCIT considered that the enquiry should have been recorded or pursued in some further manner. The Assessing Officer had made a specific enquiry, obtained the relevant particulars and supporting receipts, and adopted a view which was legally sustainable and supported by the consistent decisions of the Tribunal. The twin conditions precedent for assumption of jurisdiction under section 263 are, therefore, not satisfied. Consequently, the impugned order passed under section 263 is quashed and the assessment order passed by the Assessing Officer is restored. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 17/09/2026.
