The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) quashes the revision order passed under Section 263 of Income Tax Act,1961, holding that the Assessing Officer (AO) had verified the donations made by the assessee to eligible institutions and allowed deduction under Section 80G, even though the donations were made from Corporate Social Responsibility (CSR) funds.

Dalal And Broacha Stock Broking Pvt. Ltd,appellant-assessee,had filed its return for AY 2020–21 declaring income of ₹12.27 crore. The case was picked for scrutiny due to a large deduction claimed under section 80G. The AO disallowed part of the claim in respect of one donation where approval under section 80G was not furnished.

Later, the Principal Commissioner revised the order under section 263, stating that (i) since the assessee had opted for the concessional tax regime under section 115BAA, no deduction under section 80G was allowable, and (ii) the assessee had claimed deduction on donations made out of CSR expenses, which was not permitted. The Pr. CIT held that allowing such a claim would defeat the intent of the law.

The assessee argued that the donation of ₹38.15 lakh was made to approved institutions and only ₹19.07 lakh was claimed under section 80G. It also submitted that deduction under section 80G was not barred under section 115BAA for AY 2020-21 and cited supporting case laws.

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The tribunal noted that the AO had allowed part of the 80G claim without examining whether donations from CSR expenses qualified for deduction. Since this issue was not looked into, the CIT held the assessment order to be erroneous and prejudicial to the revenue. The order was set aside for fresh examination, prompting the present appeal before the tribunal.

The two member bench comprising Pawan Singh (Judicial Member) and Prabhash Shankar ( Accountant Member) examined the submissions and the orders passed by the lower authorities. It noted that the case was selected for scrutiny due to a large donation claimed under section 80G. The AO had disallowed one donation made to Urvashi Foundations but accepted the others after verifying the details submitted by the assessee.

The appellate tribunal observed that the AO had examined the donations and allowed those made to registered institutions, which implied acceptance of the claim. It also referred to a similar case decided by the Mumbai Bench in Gabriel India, where deduction under section 80G was allowed on donations made from CSR funds, as long as the recipient institutions were registered under section 80G of the Act.

The bench held that while CSR expenses are not allowable under section 37(1), there is no bar on claiming deduction under section 80G if the donations meet the required conditions. In this case, the assessee had submitted receipts from eligible institutions.

Since the AO’s view was supported by various tribunal decisions, the ITAT found no error in the assessment order. It concluded that the conditions for revising the order under section 263 were not satisfied.

Accordingly, the tribunal quashed the revision order and allowed the appeal.

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