ITAT Mumbai Quashes PCIT's Order Against NTT Global Networks; Allows ₹92.32 Lakh Deduction for CSR Donations Under Section 80G [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) in its recent ruling allowed the appeal of NTT Global Networks Pvt. Ltd., quashing the revisionary order of the Principal Commissioner of Income Tax (PCIT) which had denied deductions claimed towards Corporate Social Responsibility (CSR) donations under Section 80G of the Income Tax Act, 1961.

The appellant NTT Global Networks Pvt Ltd, 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.

The Assessing Officer (AO) after duly considering the submission of the assessee, completed the assessment and made no variation to the returned income. Subsequently the PCIT invoked revisionary jurisdiction under Section 263 on grounds that the assessment order was erroneous and prejudicial to the interests of revenue.

The PCIT noted that the 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 the PCIT, such CSR expenses were not allowable under Section 37(1) and thus the deduction under Section 80G was also not permissible.

The appellant specifically argued that the PCIT erred in holding only voluntary donations are eligible under Section 80G, whereas the law does not prescribe such a condition.

The appellant submitted that the AO had raised explicit queries during assessment proceedings regarding the deduction and the 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.

The appellant 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.

The Departmental Representative submitted that Section 37(1) of the Act disallowed CSR expenses which are not wholly and exclusively for the purpose of business.

Further reliance was placed on the decision of the coordinate bench in the case of Agilent Technologies (International) (P.) Ltd. vs. ACIT/NFA (2024) where it was held that CSR expenses are not allowed as business expenditure under section 37(1) of the Act.

The bench comprising Vikram Singh Yadav (Accountant Member) and Kavitha Rajagopal (Judicial Member) observed that the AO had inquired into the issue by verifying the relevant documentary evidence and had taken a plausible view that the assessee was entitled to claim deduction for all donations made up to 30.06.2020 for FY 2019-20.

The Tribunal emphasized that for Section 263 to apply the assessment order must be both erroneous and prejudicial to the interests of the revenue and in the current case the twin condition was not met.

The Tribunal cited the CBDT circular dated 31.03.2021 and the TOLA, 2020, which specifically extended the deadline for donations under Section 80G for FY 2019-20 to 30 June 2020, making the April 2020 donation eligible.

Accordingly, the appeal was allowed.

The appellant was represented by Bhadresh Doshi, while the Department was represented by Leyaqat Ali Aafaqui.

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