The Income Tax Appellate Tribunal (ITAT) redirected the issue to the Assessing
Officer (AO) as the authorities have erred in denying a claim under Section 80G of
the Income Tax Act, 1961 by observing that the CSR payments eligible under the said
provision shall be deducted at the time of computation of the head “Profit and Gain
from Business and Profession”. The Assessee, First American (India) Pvt. Ltd. is a
company engaged in the business of BPO operations, software services and developing,
designing, and selling IT infrastructure. The assessee filed its return of income
and subsequently, the return was revised. The case was selected for scrutiny and
notice under Section 143(2) and 142(1) along with the questionnaire was issued to
the assessee. In response to statutory notices, representative of assessee appeared
before AO.
AO from details furnished by assessee observed that assessee claimed deduction under
Section 80 G of the Act towards donation paid. AO was of the opinion that the claim
made under section 80 G of the Act, was not allowable as the amount was forming part
of CSR expenses debited to profit and loss account. AO thus disallowed the deduction
claimed u/s 80G of the Act. Aggrieved by the addition made by Ld.AO, assessee
preferred appeal before CIT (A) and disallowance made by AO was upheld. The
petitioner contended that all payments forming part of CSR do not form part of
profit and loss account for computing Income under the head, “Income from Business
and Profession”. It has been submitted that some payments forming part of CSR were
claimed as deduction under Section 80G of the Act, for computing “Total taxable
income”, which has been disallowed by authorities below. The tribunal consists of an
Accountant Member B.R. Baskaran and a Judicial Member Beena Pillai held that
assessee cannot be denied the benefit of a claim under Chapter VI A, which is
considered for computing ‘Total Taxable Income”. If the assessee is denied this
benefit, merely because such payment forms part of CSR, would lead to double
disallowance, which is not the intention of Legislature. “For claiming benefit under
section 80G, deductions are considered at the stage of computing “Total taxable
income”. Even if any payments under section 80G forms part of CSR payments( keeping
in mind ineligible deduction expressly provided u/s.80G), the same would already
stand excluded while computing, Income under the head, “Income from Business and
Profession”. The effect of such disallowance would lead to an increase in business
income. Thereafter benefit accruing to the assessee under Chapter VIA for computing
“Total Taxable Income” cannot be denied to the assessee, subject to fulfillment of
necessary conditions therein,” the Tribunal said.