NTT Global Networks Private Limited Vs PCIT (ITAT Mumbai)
Conclusion: Revisionary order of PCIT under section 263 which had denied deductions claimed towards Corporate Social Responsibility (CSR) donations under Section 80G was not justifies as AO had inquired into the issue by verifying the relevant documentary evidence and had taken a plausible view that assessee was entitled to claim deduction for all donations made up to 30.06.2020 for FY 2019-20.
Held: Assessee-company was engaged in providing remote IT infrastructure management services to its parent company had filed its return of income declaring total income of ₹25,44,40,690. The case was selected for complete scrutiny under Computer Assisted Scrutiny Selection (CASS) for issues including the claim of deductions under Chapter VI-A. AO completed the assessment and made no variation to the returned income. Subsequently PCIT invoked revisionary jurisdiction under Section 263 noting that assessee had debited ₹51,00,000 as CSR expenditure for Financial Year (FY) 2019-20 and ₹41,25,000 on 11.04.2020 for FY 2020-21 but claimed the total ₹92,32,500 deduction in Assessment Year (AY) 2020-21. According to PCIT, such CSR expenses were not allowable under Section 37(1) and thus the deduction under Section 80G was also not permissible. Assessee specifically argued that PCIT erred in holding only voluntary donations were eligible under Section 80G, whereas the law did not prescribe such a condition. Assessee submitted that AO had raised explicit queries during assessment proceedings regarding the deduction and assessee had responded in detail citing the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020 (TOLA), which extended the time limit for making donations under Section 80G for FY 2019-20 to 30.06.2020. Assessee further contended that all conditions under Section 80G were fulfilled and there was no prohibition on claiming deduction for CSR donations if they qualified under Section 80G. Subsequently asserted that the twin conditions under Section 263 were absent as the AO had conducted due inquiry. Revenue contended that Section 37(1) disallowed CSR expenses which were not wholly and exclusively for the purpose of business. It was held that CIT’s order which was on CSR expenditure which according to PCIT was mandatory in nature as per the provisions of Section 135 and did not tantamount to an expenditure incurred wholly and exclusively for the purpose of business as per Explanation 2 to Section 37(1) and the same would not amount to the voluntary donation u/s. 80G. In the case of the Agilent Technologies (International) (P.) Ltd. , there were catena of decisions of the jurisdictional coordinate benches which had decided this issue in favour of the assessee which AO was bound to follow as precedent. Hence, AO had taken one of the views that CSR expenditure was eligible deduction u/s. 80G. Thus, the assessment order was neither erroneous nor prejudicial to the interest of the revenue and the revisionary jurisdiction invoked by PCIT u/s. 263 did not hold merit and therefore not sustainable and liable to be quashed.
