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TMI Blog2025 (2) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... rred CSR expenses of Rs. 1,38,50,000/- during the year which were suo-motto disallowed in the computation of income by the assessee. However, the assessee has claimed deduction u/s 80G of the Act of Rs. 69,25,000/- being 50% of the donation of such CSR expenses which according to the PCIT has rendered the assessment as erroneous and prejudicial to the interest of the Revenue. Accordingly, the ld. PCIT issued notice u/s 263 of the Act on 02.02.2024, which was not replied by the assessee. Finally, the ld. PCIT set aside the assessment framed by the ld. AO by passing an order u/s 263 of the Act on 31st March, 2024, by directing the ld. AO to modify the assessment to that extent of quantum mentioned in the revisionary order of Rs. 69,25,000/- after allowing a reasonable opportunity of hearing to the assessee. 04. The ld. AR of the assessee vehemently submitted before us that the ld. PCIT invalidly exercise the revisionary jurisdiction u/s 263 of the Act without satisfying the twin conditions as envisaged in Section 263 of the Act i.e. the order has to be erroneous and it has to be prejudicial to the interest of the Revenue. The ld. Counsel of the assessee submitted that the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no (v) and the ibid notice of AO was attached as annexure along with reply given by assessee on this issue for the perusal of Ld. PCIT. The aforesaid query no (v) raised u/s 142(1) of the Act by the A.O and the reply given by the assessee to the Assessing Officer has been already reproduced (supra). From a perusal of the same it is clear that the A.O had enquired about this specific claim of the assessee i.e. deduction of CSR expenses amounting to Rs. 1.35 crores under Chapter VIA and from the perusal of the reply of the assessee it is clear that the assessee has given explanation as to how the assessee had claimed such a deduction along with case laws (supra). Thereafter considering the same only the A.O has allowed the deduction claim and thereby allowed the claim of 50% of the claim u/s. 80G of the Act. In such a scenario, the Ld. PCIT's findings/allegation that the A.O has not made any enquiry/verification on this issue is factually incorrect. And therefore, his assertion that clause (a) of Explanation 2 to Section 263 is attracted is clearly erroneous. From the query raised by the AO on this issue and the reply given by the assessee we are of the opinion that the A.O. has disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an admitted position that the donation of Rs. 1.35 crores was disallowed and suo-moto added back by the assessee in terms of Explanation 2 to Section 37(1) while computing "Income under the head Business". However, according to assessee, since the said CSR contribution comprised of donation made to registered charitable trust, it was legally entitled to claim deduction under Section 80G of the Act to arrive at the "Total Income" in terms of Chapter VI of the Act, and AO has allowed it, which action of AO has been found fault by Ld PCIT, which issue need to be examined. For examining the same let us look in to the relevant provisions which we need to be taken in to consideration. 20. The provisions of Section 135(5) of the Companies Act, 2013 read as under: "The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50% of the donation is allowable expenditure [refer section 80G (1) (ii)]even if the assessee has included the expenditure as CSR Expenditure because there is no prohibition or restriction placed by the Parliament on such a donation even if shown as CSR expenditure. The reason for saying so is that in section 80G of the Act certain restrictions in respect of deduction in respect of two (2) donations are expressly seen in this Section. So the Parliament has expressed its intention clearly by bringing in restriction in respect of expenditure classified by an assessee company while claiming deduction u/s. 80G of the Act i.e. CSR expenditure related to Swachh Bharat Kosh and Clean Ganga Fund. So if an assessee makes some donation to these projects and include/classify it as CSR expenditure while claiming deduction u/s. 80G of the Act then it will be allowed only the amount that is other than the sums spent by the assessee in pursuance of CSR u/s. 135 of the Companies Act. In other words, if an assessee company spends only the mandatory expenditure of 2% of net profit for CSR activity, which includes the amount of donation to Swach Bharat Kosh & Clean Ganga Fund (iiihk) and (iiihi) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olved in each case and also subject to section 80G(4) of the Act: Example: A company has reported eligible net profit u/s 135 of Companies Act, 2013 at Rs. 100 crores. The minimum CSR contribution of 2% under Section 135(5) of the Act works out to be Rs. 2 crores. Situation 1 : The company has been spent the required minimum CSR contribution of Rs 2 crores towards construction of roads & schools in the vicinity of the backward area where the factory is located. Tax Treatment: The entire CSR expenditure of Rs. 2 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act. Situation 2 : The company has contributed Rs. 3 crores to Swach Bharat Kosh. Tax Treatment: The entire CSR expenditure of Rs. 3 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act. In terms of Section 135(5) of the Act read with Section 80G(iiihk) only the excess sum paid amounting to Rs. 1 crores [ 3 crores - 2% of 100 crores] can be availed as deduction u/s 80G of the Act. Situation 3 : The company has contributed Rs. l crore to Swach Bharat Kosh and Rs. 1 crore to any other charitable trust registered u/s 80G(5) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses/contribution u/s 80G of the Act was allowed after enquiry by the AO. Thus we are of the opinion that the action of the AO allowing the claim u/s. 80G of the Act is a plausible view and is in line with the ratio of the decision of Tribunal cited (supra). Therefore we find that the Ld. PCIT has not been able to make out a case that on this issue raised by him, the AO's order is erroneous as well as prejudicial to the revenue. So the jurisdictional fact as well as law is absent for invoking revisional jurisdiction. Therefore, the usurpation of jurisdiction by Ld. PCIT u/s 263 of the Act is bad in law and therefore need to be quashed and we order accordingly. 24. In the result, the appeal of the assessee is allowed." 07. We therefore, respectfully following the decision of the co-ordinate Bench quashed the revisionary proceedings, as well as the order passed u/s 263 of the Act. The appeal of the assessee is allowed. 923/KOL/2024 08. The issue raised in this appeal is similar to one as decided by us in ITA No. 922/KOL/2024 except quantum of deduction. Accordingly, our decision would apply mutatis mutandis to this appeal of assessee in ITA No.923/KOL/2024 as well. Hence, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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