An internal audit objection has produced a s.263 notice saying CSR spending is not voluntary and so is not a 'donation' at all for s.80G. Does that argument let the Commissioner revise my assessment?
No, not while the point remains genuinely open. The Tribunal held that the eligibility of CSR expenditure for s.80G is a question on which Benches differ — the Bangalore and Kolkata Benches allow it, the Delhi Bench in Agilent Technologies disallows it — so an Assessing Officer who allows it has adopted one of two reasonably possible views and the s.263 jurisdiction does not arise.
Decided by the ITAT (Shri Om Prakash Kant, Accountant Member and Shri Raj Kumar Chauhan, Judicial Member) on 2025-06-19, reported as ITA No. 2982/MUM/2025; Assessment Year 2020-21. It bears on section 80G, section 80G(1), section 80G(2), section 37(1), section 263, section 143(1), section 143(3), section 142(1), section 144B of the Income Tax Act 1961, in Revision & Rectification, Deductions & Disallowances and Assessment & Scrutiny matters.
This is the entry that carries the Revenue's case, and it sets it out fully: that s.135 of the Companies Act makes CSR a statutory obligation and not a voluntary contribution, that Commissioner of Expenditure Tax v P.V.G. Raju holds only voluntary contributions are donations, that MCA Circular 1/2016 says CSR enjoys no specific tax exemption, and that the express exclusion of the Swachh Bharat Kosh and the Clean Ganga Fund shows Parliament meant to exclude CSR generally. Those arguments were not answered on the merits — the Tribunal decided the case on the two-views rule instead. So a practitioner should not read this as a merits win; read it as authority that the claim cannot be revised away under s.263, and as the best available statement of what the department will argue at assessment.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee company filed its return for AY 2020-21 on 20 January 2021 declaring Rs 14,68,94,980, which was processed under s.143(1) at Rs 14,69,27,010, and a scrutiny assessment under s.143(3) read with s.144B was completed on 27 September 2022 accepting that income. It had incurred Rs 5,00,000 of CSR expenditure, paid to the Desh Bandhu and Manju Gupta Family Trust, disallowed it under Explanation 2 to s.37(1) while computing business income, and claimed fifty per cent of it under s.80G. Both the CSR expenditure and the s.80G claim were disclosed in Form 3CD. During the assessment the officer had issued a notice under s.142(1) dated 6 December 2021 asking for a table of CSR payees with 80G certificates and asking why the 80G deduction should not be disallowed; the assessee replied on 28 December 2021 with the donation receipt, the donee's certificate, the CSR policy, the CSR committee minutes and the decisions in FNF India and JMS Mining. An internal audit objection was then raised. The Principal Commissioner called for the records, invoked Explanation 2 to s.263, and by order dated 22 March 2025 held the assessment erroneous and prejudicial and set it aside for fresh enquiry, relying on the statutory nature of the s.135 obligation, on Commissioner of Expenditure Tax v P.V.G. Raju of Vizianagaram [(1967) 1 SCR 1017], on the Delhi Bench decision in Agilent Technologies (International) Pvt. Ltd. v. ACIT, and on MCA Circular No. 1/2016.
The appeal was allowed and the s.263 order quashed (paras 6.8 and 7). On the enquiry limb, the record of the s.142(1) query and the detailed reply showed the Assessing Officer had examined the matter, so Explanation 2 to s.263 could not be invoked (paras 6.2 and 6.4). On the legal limb, the Tribunal recorded that divergent views have been expressed by its own Benches — Bangalore in FNF India and Kolkata in JMS Mining allowing the s.80G claim on CSR expenditure, Delhi in Agilent Technologies disallowing it — and that where two plausible interpretations exist and the officer adopts one of them the assessment is neither erroneous nor prejudicial (paras 6.5 and 6.7).
The Bench began from Malabar Industrial Co. Ltd. v. CIT and the cumulative requirement that the order be both erroneous and prejudicial (para 6). It identified the two grounds on which the Principal Commissioner had proceeded — Explanation 2 to s.263 for want of enquiry, and an error of law in allowing the deduction (para 6.1). It disposed of the first on the record, reproducing the actual s.142(1) query and the assessee's reply (paras 6.2 and 6.3). On the second it did not resolve the merits: it noted the Bench conflict (para 6.5), singled out JMS Mining as decided in an identical s.263 setting where the Assessing Officer's view was held plausible and the revision quashed (para 6.6), and applied the two-views rule from CIT v Max India Ltd (para 6.7). Counsel had also relied in rejoinder on V-Con Integrated Solutions Private Limited (2025) 173 taxmann.com 774 (SC) for the proposition that a Commissioner remitting for superficial investigation must record the abject failure of the Assessing Officer and establish both error and prejudice (para 5).
In view of the existence of two divergent yet plausible interpretations of law, and the fact that the Assessing Officer has adopted one such view, which finds support in judicial precedents, it cannot be held that the assessment order is erroneous or prejudicial to the interests of the Revenue.
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Handle my notice → Ask a CA on WhatsAppNo, not while the point remains genuinely open. The Tribunal held that the eligibility of CSR expenditure for s.80G is a question on which Benches differ — the Bangalore and Kolkata Benches allow it, the Delhi Bench in Agilent Technologies disallows it — so an Assessing Officer who allows it has adopted one of two reasonably possible views and the s.263 jurisdiction does not arise. This was decided by the ITAT (Shri Om Prakash Kant, Accountant Member and Shri Raj Kumar Chauhan, Judicial Member) and bears on section 80G, section 80G(1), section 80G(2), section 37(1), section 263, section 143(1), section 143(3), section 142(1), section 144B of the Income Tax Act 1961. It is reported as ITA No. 2982/MUM/2025; Assessment Year 2020-21. This is the entry that carries the Revenue's case, and it sets it out fully: that s.135 of the Companies Act makes CSR a statutory obligation and not a voluntary contribution, that Commissioner of Expenditure Tax v P.V.G. Raju holds only voluntary contributions are donations, that MCA Circular 1/2016 says CSR enjoys no specific tax exemption, and that the express exclusion of the Swachh Bharat Kosh and the Clean Ganga Fund shows Parliament meant to exclude CSR generally. Those arguments were not answered on the merits — the Tribunal decided the case on the two-views rule instead. So a practitioner should not read this as a merits win; read it as authority that the claim cannot be revised away under s.263, and as the best available statement of what the department will argue at assessment. If it applies to you, the first step is this: Preserve the assessment-stage record: the s.142(1) query on CSR, your reply, the donation receipts and the donee's s.80G certificate. That record is what defeated Explanation 2 to s.263 here.
The assessee company filed its return for AY 2020-21 on 20 January 2021 declaring Rs 14,68,94,980, which was processed under s.143(1) at Rs 14,69,27,010, and a scrutiny assessment under s.143(3) read with s.144B was completed on 27 September 2022 accepting that income. It had incurred Rs 5,00,000 of CSR expenditure, paid to the Desh Bandhu and Manju Gupta Family Trust, disallowed it under Explanation 2 to s.37(1) while computing business income, and claimed fifty per cent of it under s.80G. Both the CSR expenditure and the s.80G claim were disclosed in Form 3CD. During the assessment the officer had issued a notice under s.142(1) dated 6 December 2021 asking for a table of CSR payees with 80G certificates and asking why the 80G deduction should not be disallowed; the assessee replied on 28 December 2021 with the donation receipt, the donee's certificate, the CSR policy, the CSR committee minutes and the decisions in FNF India and JMS Mining. An internal audit objection was then raised. The Principal Commissioner called for the records, invoked Explanation 2 to s.263, and by order dated 22 March 2025 held the assessment erroneous and prejudicial and set it aside for fresh enquiry, relying on the statutory nature of the s.135 obligation, on Commissioner of Expenditure Tax v P.V.G. Raju of Vizianagaram [(1967) 1 SCR 1017], on the Delhi Bench decision in Agilent Technologies (International) Pvt. Ltd. v. ACIT, and on MCA Circular No. 1/2016. The matter was decided on 2025-06-19 by the ITAT (Shri Om Prakash Kant, Accountant Member and Shri Raj Kumar Chauhan, Judicial Member). On those facts the ITAT held as follows. The appeal was allowed and the s.263 order quashed (paras 6.8 and 7). On the enquiry limb, the record of the s.142(1) query and the detailed reply showed the Assessing Officer had examined the matter, so Explanation 2 to s.263 could not be invoked (paras 6.2 and 6.4). On the legal limb, the Tribunal recorded that divergent views have been expressed by its own Benches — Bangalore in FNF India and Kolkata in JMS Mining allowing the s.80G claim on CSR expenditure, Delhi in Agilent Technologies disallowing it — and that where two plausible interpretations exist and the officer adopts one of them the assessment is neither erroneous nor prejudicial (paras 6.5 and 6.7).
The Bench began from Malabar Industrial Co. Ltd. v. CIT and the cumulative requirement that the order be both erroneous and prejudicial (para 6). It identified the two grounds on which the Principal Commissioner had proceeded — Explanation 2 to s.263 for want of enquiry, and an error of law in allowing the deduction (para 6.1). It disposed of the first on the record, reproducing the actual s.142(1) query and the assessee's reply (paras 6.2 and 6.3). On the second it did not resolve the merits: it noted the Bench conflict (para 6.5), singled out JMS Mining as decided in an identical s.263 setting where the Assessing Officer's view was held plausible and the revision quashed (para 6.6), and applied the two-views rule from CIT v Max India Ltd (para 6.7). Counsel had also relied in rejoinder on V-Con Integrated Solutions Private Limited (2025) 173 taxmann.com 774 (SC) for the proposition that a Commissioner remitting for superficial investigation must record the abject failure of the Assessing Officer and establish both error and prejudice (para 5). In the words reproduced by the source cited on this page: "In view of the existence of two divergent yet plausible interpretations of law, and the fact that the Assessing Officer has adopted one such view, which finds support in judicial precedents, it cannot be held that the assessment order is erroneous or prejudicial to the interests of the Revenue." The decision followed or applied JMS Mining Private Limited v. PCIT [2021] 136 taxmann.com 118 (Kol-Trib.) — followed; FNF India Private Limited v. ACIT [(2021) 85 ITR (T) 18 (Bang.)] — relied on; Malabar Industrial Co. Ltd. v. CIT [(2000) 243 ITR 83 (SC)] — applied; CIT v. Max India Ltd. [(2007) 295 ITR 282 (SC)] — applied.
It was decided by the ITAT on 2025-06-19 and is reported as ITA No. 2982/MUM/2025; Assessment Year 2020-21. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 80G, section 80G(1), section 80G(2), section 37(1), section 263, section 143(1), section 143(3), section 142(1), section 144B, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the s.263 order quashed (paras 6.8 and 7). On the enquiry limb, the record of the s.142(1) query and the detailed reply showed the Assessing Officer had examined the matter, so Explanation 2 to s.263 could not be invoked (paras 6.2 and 6.4). On the legal limb, the Tribunal recorded that divergent views have been expressed by its own Benches — Bangalore in FNF India and Kolkata in JMS Mining allowing the s.80G claim on CSR expenditure, Delhi in Agilent Technologies disallowing it — and that where two plausible interpretations exist and the officer adopts one of them the assessment is neither erroneous nor prejudicial (paras 6.5 and 6.7). It arises in Revision & Rectification, Deductions & Disallowances and Assessment & Scrutiny matters, on section 80G, section 80G(1), section 80G(2), section 37(1), section 263, section 143(1), section 143(3), section 142(1), section 144B of the Income Tax Act 1961, and was decided by Shri Om Prakash Kant, Accountant Member and Shri Raj Kumar Chauhan, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Disclose the CSR amount and the corresponding s.80G claim in Form 3CD and in the computation — the Tribunal relied on that disclosure as proof of full and true disclosure. Cite the Bench conflict itself as a ground against revision, and rely on CIT v Max India Ltd for the two-views rule. Do not assume the merits are settled: be ready to meet the voluntariness argument built on P.V.G. Raju and MCA Circular 1/2016 if the point is taken in a regular assessment or appeal rather than under s.263.
Validity check could not be completed. Decided 19 June 2025. No appeal or contrary later decision was traced on this pass. The order itself records at para 6.5 that the Delhi Bench in Agilent Technologies (International) Pvt. Ltd. v. ACIT has held the opposite on the merits of the s.80G claim; that decision could not be retrieved on this pass and is not stated here as anything other than what this order records. Because the split is between Tribunal benches the label 'high courts differ' is not available. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read in full from the plain /doc/ URL; the order has 7 numbered paragraphs, with para 6 carrying sub-paragraphs 6.1 to 6.9 and the disposal at para 7. Paragraph 6.3 reproduces the assessee's letter to the Assessing Officer, which itself quotes paragraphs 22 and 23 of JMS Mining, paragraph 16 of Goldman Sachs and paragraphs 8, 13 and 19 of Allegis Services; those numbers belong to the quoted orders, not to this one. Two defects in the report should be noted: at para 6.7 the Bench describes CIT v Max India Ltd [(2007) 295 ITR 282 (SC)] as 'the decision of this Court', which it is not — the Tribunal is not a Court and Max India is a Supreme Court decision; and at para 6.3 the reproduced letter refers to 'section 135 of the Companies Act, 1956' where the Companies Act 2013 is meant. The ground of appeal and the PCIT's operative direction disagree on the amount: the grounds and the assessee's submissions speak of CSR of Rs 5,00,000 with fifty per cent claimed, while the PCIT's set-aside quoted at para 2.4 names Rs 2,50,000 as the deduction. The Rs 5,00,000 figure is the CSR spend and Rs 2,50,000 the deduction. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the s.263 order quashed (paras 6.8 and 7). On the enquiry limb, the record of the s.142(1) query and the detailed reply showed the Assessing Officer had examined the matter, so Explanation 2 to s.263 could not be invoked (paras 6.2 and 6.4). On the legal limb, the Tribunal recorded that divergent views have been expressed by its own Benches — Bangalore in FNF India and Kolkata in JMS Mining allowing the s.80G claim on CSR expenditure, Delhi in Agilent Technologies disallowing it — and that where two plausible interpretations exist and the officer adopts one of them the assessment is neither erroneous nor prejudicial (paras 6.5 and 6.7).
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