CSR Donations Eligibility for Section 80G Deduction: ITAT Quashes PCIT Revision Order in Hapag Lloyd Matter [Read Order]
The PCIT challenged the 80G deduction claimed on CSR expenses of Rs.17.69 lakh, but the Tribunal noted that the donee’s approval was valid and there was no bar under the Act, observing that allowance of the deduction was at most a debatable issue.
The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the Principal Commissioner of Income Tax ( PCIT )’s revision order in Hapag Lloyd matter and restored the assessment, holding that Corporate Social Responsibility ( CSR ) donations to an entity with valid section 80G of Income Tax Act,1961, approval were eligible for deduction.
Hapag Lloyd India Private Limited,appellant-assessee, filed its income tax return on 13.02.2021, declaring income of Rs.10,73,72,390/-. The return was selected for scrutiny, and the Assessing Officer (AO ) sought additional details from the assessee. After examining the information provided, the AO completed the assessment under sections 143(3) read with 144B on 05.09.2022, accepting the declared income.
After completing the assessment, the PCIT reviewed the records and found that CSR expenses of Rs.35,58,401/-, though debited to the profit and loss account, had been added back in computing income. The assessee had claimed 50% of this amount, Rs.17,69,201/-, as a deduction under section 80G. The PCIT observed that CSR expenses were not allowable under section 37(1), and therefore the deduction under section 80G should not have been permitted.
He also noted that a sundry balance of Rs.84,742/-, written back as per the audit report, should have been added to income under section 41(1), but the AO had not done so. Considering these omissions, the PCIT held the assessment order to be erroneous and prejudicial to the Revenue and issued a show-cause notice under section 263.
The assessee objected to the revision. Upon review, the PCIT found that the sundry balance had already been added back and dropped that issue, but held the 80G deduction to be incorrect. He set aside the assessment order, directing the AO to modify it in line with his observations and initiate penalty proceedings under the Act.
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The two member bench comprising Saktijit Dey(Vice President) and Arun Khodpia (Accountant Member) considered the submissions and records. The issue was whether donations towards CSR expenses to an entity with valid section 80G approval could be claimed as a deduction.
The donee’s approval was not disputed, and there was no bar under section 80G for such donations. Therefore, there was no error in the AO’s allowance of the deduction, which was at most a debatable issue.
The tribunal noted that co-ordinate benches had settled this issue in several cases, including RPG Life Sciences, Elan Pharma, Stulz-CHSPL, and Vistex Asia Pacific. It held that the exercise of power under section 263 was invalid, quashed the revision order, and restored the assessment.
Accordingly the appeal was allowed.
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