Supreme Court stays order holding physical service dates override electronic portal service dates for GST appeal limitations.

ORDER

Bijyananda Pruseth, Accountant Member. – These appeals filed by the assessee and revenue emanate from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the Commissioner of Income-Tax, National Faceless Appeal Centre (in short, ‘CIT(A)’), Delhi, dated 10.7.2025 for the assessment year (AY) 2020-21. Since facts are same, with consent of both parties, the appeals were heard together and a common order is passed for the sake of convenience and brevity.

2. The grounds of appeal raised by the assessee in ITA No.5544/Mum/2025 are as under:

1. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as the (‘Ld. CIT(A)’) and the Ld. Assessing officer (hereinafter referred to as the ‘Ld. AO’) erred in rejecting the additional claim made by the Appellant during the assessment proceedings in respect of nontaxation of foreign exchange gains on fair value change of the derivative instruments, which were inadvertently not claimed in the income tax return.

2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) and the Ld. AO erred in rejecting the ‘without prejudice claim of the Appellant that if the claim of Rs.109,50,68,169 (as per ground no. 1 above) is not allowed, then in consistent with the stand of the Ld. CIT(A) and the Ld. AO, loss of Rs. 1,50,19,15,854 arising on revaluation of borrowings in foreign currency, which has been disallowed by the Appellant in the computation of income should be allowed as deduction.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in observing that no detailed working or reconciliation of claim of Rs. 109,50,68,169 was produced by the Appellant, without appreciating that detailed working of claim, including ‘without prejudice’ claim (as per ground nos. 1 and 2 above) along with factual documents, were already filed before the Ld. AO and the Ld. CIT(A).

4. On the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the disallowance of club expenses of Rs.56,60,768 under section 37 of the Act, made by the Ld. AO, on the basis that such expenses were not in the nature of business expenses.

5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) and the Ld. AO erred in disallowing club expenses, without appreciating that out of the total club expense of Rs.56,60,768 incurred by the Appellant, expenses of Rs.28,45,088 were reimbursed to the Appellant and was credited to the profit & loss account, duly offering the same to tax.

6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the disallowance of entire club expenses of Rs.56,60,768, even though the findings of the Ld. AO in the assessment order clearly indicated the intention to disallow only cost for club services and facilities aggregating to Rs.6,68,136.

7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in observing that Appellant has placed invoices and vouchers of club expenses, corporate resolution or policy, statements of recovery from group companies etc. for the first time before the Ld. CIT(A), without appreciating that all details filed before the Ld. CIT(A) were already filed and referred by the Ld. AO in the assessment order.

8. On the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in upholding the disallowance of deduction claimed under section 80G of the Act amounting to Rs.17,72,14,027, made by the Ld. AO.

9. On the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in not considering the legal principle that the provisions of section 37 and section 80G are independent and that the donations (which also qualified as CSR spent) were disallowed by the Appellant pursuant to the Explanation 2 to section 37(1) of the Act.

10. On the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in upholding the disallowance of deduction claimed on the basis that deduction under section 80G of the Act is allowed only to those voluntary contributions made by the assessee over and above its Corporate Social Responsibility.

11. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in observing that Appellant has placed donation receipts and registration certificates of charitable institutions such as NIIT Foundation and United Way Mumbai for the first time before the Ld. CIT(A), without appreciating that all factual documents relating to deduction under section 80G filed before the Ld. CIT(A) were already on record before Ld. AO and no additional evidence was filed before the Ld. CIT(A).

12. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not granting the claim for deduction under section 80JJAA of the Act amounting to Rs.22,91,58,817.

13. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not directing the Ld. AO to re-compute the deduction allowable under section 36(1)(vila) of the Act on the total assessed income.

14. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO in granting credit for taxes deducted at source of Rs.1,78,11,95,493 as against Rs.1,78,13,97,761 (as claimed by the Appellant in the revised return of income basis Form 26AS), leading to short grant for TDS credit of Rs.2,02,268.

15. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not directing the Ld. AO to re-compute the interest under section 234C charged of Rs.1,57,27,770, as against Rs.69,58,386 as per return of income, leading to levy of excess interest of Rs.87,69,384.

16. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not directing the Ld. AO to rectify the amount of business profits mentioned at Rs.21,40,05,64,249, as against Rs.21,39,15,76,001, in the computation sheet (forming part of assessment order), leading to computation of tax on a higher amount of business profits.

3. The grounds of appeal raised by the revenue in ITA No.6119/Mum/2025 are as under:

4. Facts of the case, in brief, are that the assessee is a registered NBFC and is engaged in business of vehicle financing, for purchase of new and pre-owned auto and utility vehicles, construction equipment, SME financing and mutual fund, fixed deposit and personal loan distribution for its customers. It filed the original return of income for AY 2020-21 on 15.02.2021 declaring total income of Rs.21,38,20,37,440/-. Thereafter, the assessee has revised its return of income on 31.03.2021, declaring income of Rs.21,38,20,37,440/-. The case was selected for complete scrutiny. After hearing the assessee, the AO had made certain additions to the total income. The assessee had also made an additional claim for reduction of forex gain arising on the derivative transactions during the course of the assessment proceedings, which was rejected by the AO.

5. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A). The assessee made an additional claim for deduction u/s 80JJAA of the Act. The assessee has also filed additional evidence during the appellate proceedings, which had not been submitted before the AO and requested the CIT(A) to admit the same under Rule 46A of the Income-tax Rules. The CIT(A) did not admit the additional evidence. The CIT(A) has partially allowed the appeal in his order u/s 250 of the Act.

6. Further aggrieved, the assessee has filed the present appeal before the Tribunal. The assessee has raised grounds of appeal on all issues, which were decided against it. The revenue has also filed appeal on the issue of deletion of penalty u/s 270A of the Act. The assessee has also made an application for admission of additional evidence in respect of a claim of deduction u/s 80JJAA. The assessee has also filed a paper book, including the submissions and documents filed before the lower level authorities. As far as additional evidence in relation to the deduction u/s 80JJAA is concerned, the assessee submitted that the document at Sr. No. 18, provides employment details of employees, which had been already filed with the CIT(A), except for Universal Account Number (UAN) of employees. The last column of UAN of employees has been added to the earlier details submitted before the CIT(A), in order to rebut the finding of the CIT(A) that the assessee has not provided any third-party evidence (PF Authorities) in relation the claim of deduction u/s 80JJAA of the Act. The assessee submitted that the additional evidence would further support the claim of the assessee and, therefore, the same should be admitted. We shall take up the request for admission of additional evidence in respect of deduction u/s 80JJAA of the Act, while dealing with the ground No. 12.

7. Ground Nos. 1 to 3 pertain to the rejection of the claim of forex gains, made during the course of the assessment proceedings. The facts of the case are that for the purpose of lending business, the assessee had availed borrowings in foreign currency, i.e. External Commercial Borrowing (‘ECB’) or Foreign Currency Non Repatriable (‘FCNR’) Borrowings, as permissible under the extant RBI guidelines, from various Banks and Institutions. To protect itself from the fluctuation in the rate of foreign currency, the assessee had entered into forward exchange contracts (derivative contracts), usually with the same Banks /Institutions. The borrowings in foreign currency were used for the purpose of lending and hence, were revenue in nature. The purpose of the forward exchange contracts was purely to hedge the foreign exchange exposure in respect of the borrowings. The borrowings in foreign currency are entered in the books of account at the prevailing exchange rates on the day of borrowing. At the year-end, i.e.,31^st March, the borrowings in foreign currency are reinstated in the books at prevailing exchange rate and the loss or gain, as the case may be, is routed through the P&L account.

7.1 During the subject year, the assessee had incurred a loss of Rs.1,50,19,15,854/-on account of reinstatement of the borrowings in foreign currency as on 31.03.2020 and the same was debited to the P&L account under the head ‘Finance Costs’ (Interest on borrowings). Similarly, on reinstatement of the derivative exchange contracts as on 31.03.2020, there were gains of Rs.1,09,50,68,169/-, which were included in the total amount of Rs.1,19,72,85,169/-, shown under the head ‘Net loss /gain’ in fair value of derivative financial instruments, under the head ‘Finance Costs’. The ld. AR submitted that during the assessment proceedings, the assessee had filed the details of the loss and gain on the borrowings in foreign currency and derivative contracts. The assessee had added back (i.e. disallowed) the notional loss of Rs.1,50,19,15,854/- arising on the revaluation of the borrowings in foreign currency. However, the assessee inadvertently did not reduce the amount of notional foreign exchange gain of Rs.1,09,50,68,169/-from the derivative contracts. Accordingly, an additional claim was made by assessee before the AO.

7.2 The assessee had also made a ‘Without prejudice’ claim that if the AO is of the view that the notional gain on revaluation of derivative contracts of Rs. 1,09,50,68,169 should be taxed, then the assessee be allowed the deduction for loss of Rs. 1,50,19,15,854 arising on revaluation of borrowings in foreign currency, which has been disallowed by the assessee itself in the computation of income. However, the AO rejected the claim of the assessee, relying on the decision in the case of Goetze (India) Ltd. v. CIT  284 ITR 323 (SC).

7.3 The CIT(A) upheld the view taken by the AO. The CIT(A) observed that the AO was within his power to refuse the admission of the additional claim in absence of the revised return. Further, the CIT(A) observed that failure to revise its return despite awareness of the notional nature of the gain and applicable standards raises legitimate concerns about the intention and prudence of disclosure. The CIT(A) observed that the derivative treatment was disclosed in the tax audit report and the accounting method adopted is not new to the assessee. The CIT(A) accepted that the judicial position on mark-to-market gains / losses under Ind AS is not settled and some Tribunals have accepted such gains as non-taxable if not realized, while others have emphasized ICDS applicability and mercantile basis. The CIT(A) observed that no detailed working or evidentiary reconciliation of how the gains of Rs.109.50 Cr. were calculated was given at the time of assessment or appellate proceedings. The alternate without prejudice claim of the assessee was rejected on the ground that the assessee cannot disown its own treatment.

8. During the course of the hearing before us, the Ld. AR submitted that all the details in relation to the forex gains and losses were submitted to AO during the assessment proceedings. Further, the CIT(A) had power to accept new grounds / claims raised for the first time, either suo-moto or at the invitation of parties. For this, reliance was placed upon various decisions, including National Thermal Power Co. Ltd. v. CIT 229 ITR 383 (SC),Jute Corpn. of India Ltd. v. CIT /[1991] 187 ITR 688 (SC), CIT v. Pruthvi Brokers & Shareholders 349 ITR 336 (Bombay), ITO v. Raj Maitry & Eskon Developer  (Mumbai – Trib.), etc. Before the CIT(A), the assessee also relied upon the Circular no. 14(XL-35) dated April 11, 1955, wherein it has been stated that the appropriate reliefs which the taxpayers are entitled, but, which they have omitted to claim for some reason or the other, should be brought to the notice of the taxpayer and should be allowed.

8.1 The Ld. AR submitted that, in line with the Department’s contentions, the assessee has not been claiming the deduction for the year end revalued forex loss on ECB/FCNR and forex derivatives and on the same basis, the revalued forex gains on ECB/ FCNR and forex derivatives are not offered to tax. This is on the reasoning that it is notional in nature. As far as omission to make a claim in the original return of income, the assessee submitted that in the earlier years, the assessee used to account for yearend revalued loss on ECB / forex derivatives in Common GL Code No. 50925 till AY 201920 and from AY 2020-21, the assessee has bifurcated the booking of revalued forex loss in two GL Codes- 50925 for ECB and GL Code 50927 for forex derivatives. Inadvertently, while filing the original return of income and tax audit report, the data in relation to GL Code 50927 for forex derivatives was missed by the assessee. Accordingly, at the time of assessment proceedings, the relevant details of the losses and the gains were submitted to the AO vide letter dated 23.03. 2022. The revised tax audit report was submitted online on 18.08.2022 along with the details and an explanatory note for such revision, revised computation of total income and sample of the forex derivative contracts. These documents have been also submitted before the CIT(A) and the Tribunal. In rebuttals to the CIT(A) observations, the Ld. AR submitted that if the gain is not reduced in the computation of income, it would amount to taxation of notional income. Further, in relation to the CIT(A) observations that Ind AS is not settled across all appellate fora, Ld. AR submitted that assessee company has consistently followed the tax department’s view of disallowing the notional loss and not offering notional gains.

8.2 In this regard, we had called for the details from the assessee for 5 years (i.e., AY 2018-19 to AY 2022-23) during the course of the hearing. The assessee vide letter dated 30.04.2026 has submitted such details, along with the TAR, computation of total income, relevant extracts of the ledger accounts, etc. The Ld. AR submitted that they have been consistently following the tax department approach of not claiming the loss and not offering to tax the notional gains. Accordingly, the notional gains on forex derivatives should not be considered as taxable.

8.3 The Ld. Sr. DR relied upon the CIT(A) order and contended that such additional claims of the assessee should not be entertained for the reasons given by the CIT(A).

9. We have heard both parties and perused the materials on record. We have also deliberated on the decisions relied upon by the Ld. AR. The assessee has been consistently following the tax treatment of not claiming the notional loss and at the same time, not offering the notional gains, which are arising on account of re-statement of the ECB/forex derivative contracts as on the year end. This has been also established by showing the documentary evidences by the assessee for five years. The assessee has also provided the contract-wise details of notional gains, along with the ledgers, for the year under consideration. Bona fides of the inadvertent omission to claim this deduction in the return of income have been satisfactorily explained by the assessee. The Department has been consistently disallowing notional loss and not bringing to tax notional gains on such forex contracts. In our considered view, applying the rule of consistency, when there is no change in law, the claim of the assessee for excluding notional gain from total income merits acceptance. The ratio of the decisions in cases of National Thermal Power Co. Ltd. (supra), Jute Corporation of India Ltd. (supra) and Pruthvi Brokers & Shareholders Pvt. Ltd. (supra) also support claim of the assessee regarding admission of fresh claim, inadvertently not made in the original return, during the appellate proceedings. The claim is, accordingly, allowed. However, since the details of Rs.109,58,68,169/- have not been examined by the AO, we set-aside the matter to the AO for the limited purpose of verifying the details after giving opportunity of hearing to assessee and allow the deduction for notional gains thereafter.

9.1 The ground of appeal of the assessee is allowed for statistical purposes.

10. Ground Nos. 4 to 7 pertain to the disallowance of club expenses of Rs.56,60,768/. The facts of the case are that these club expenses include accrued initial membership charges of Rs.49,92,632/- and cost of facilities used towards club of Rs.6,68,136/-. The assessee has a policy to pay for the initial one-time membership fee for the corporate membership (valid for a period of 5-10 years). Amount of Rs.49,92,632/- was debited to the P&L account towards the one-time corporate membership fee for its employees, being the amount accrued for AY 2020-21.

10.1 The assessee bears the cost of membership facility and does not bear any personal expenses of the employee. The employees bear the cost of the facilities availed by themselves, except in case of employee of the grade L1S or above i.e., Managing Director, Executive Director, etc., for whom the assessee also bears the cost of facilities. The assessee has also provided the copy of the club usage policy. The assessee has recovered the amount of corporate membership fee of Rs.28,45,088/-from Mahindra & Mahindra Limited and Mahindra Rural Housing Finance Limited qua their employees respectively. These reimbursements of club expenses of Rs.28,45,088/- have been credited to P&L account and offered to tax.

10.2 In relation to cost of facilities at club of Rs.6,68,136/-, it is submitted that the allowance of club membership and facilities for MD and CFO, were approved vide respective resolution by the Board of Directors.

10.3 Upon verifying the bills, it was noted by the AO that there are certain personal expenses which are incurred by the employees and the same cannot be considered for business purpose. Further, the assessee had determined perquisite value and deducted tax at source as per applicable Rules on allowable business expenses u/s 37(1) of the Act. The AO observed that the claim of the assessee that the expenditure was for meeting with client is not proved and therefore, disallowed the same. The CIT(A) upheld the view taken by the AO and observed that no logbooks, event records or guest invitee trails are submitted by the assessee to reinforce that expenses were wholly and exclusively incurred for business purposes. Therefore, the expenses are predominantly personal in nature.

11. The assessee submitted that the corporate membership of different clubs and Associations entitles the senior level employees to meet the members in some of the city clubs to give them certain social status and it also helps in brand building and develop cordial business relationships with business partners. The assessee submitted that a company cannot have any personal expenses and therefore, there is no question of personal expenditure being debited to the P&L account. The club expenses in form of corporate membership fee are merely perquisite/facilities provided to employee and incurred wholly and exclusively for business and allowable u/s 37(1) of the Act. The assessee has relied upon various decisions to support its claim that the club expense is allowable u/s 37(1) of the Act, such as, CIT v. United Glass Mfg. Co. Ltd.  (SC)/[Civil Appeal no. 6447 of 2012, dated 12.09.2012], CIT (Large Tax Payer Unit), Centre-1, Mumbai v. Lubrizol India Ltd.  (Bombay), DCIT v. Deloitte Touche Tohmatsu [IT Appeal No. 3017 (Mum) of 2016, dated 27-4-2018] (ITAT, Mumbai), etc.

11.1 Without prejudice, the assessee submitted that from the findings of the AO in the assessment order, it is clear that the intention was to only disallow the cost for club services and facilities aggregating to Rs.6,68,136/- and not the entire club expenses of Rs.56,60,768/-.

11.2 The assessee also submitted that the reimbursements of club expenses of Rs.28,45,088/- has been credited to the P&L account and offered to tax. Thus, the same needs to be reduced from the total club expenses of Rs.56,60,768/- and for this, the invoices, journal vouchers for amounts recovered from group companies i.e., M&M Ltd. and Mahindra Rural Housing Finance Ltd and the ledger accounts have been submitted, during the course of the assessment proceedings.

11.3 In relation to the findings of the CIT(A), the assessee submitted that the invoices and vouchers of club expenses, corporate resolution and policy, statements of recovery from group companies etc. have been already filed before the AO and the CIT(A). Further, the considering the nature of activities of the assessee, it is essential to meet various business partners and by virtue of having club membership, the employees of the Company including high designated seniors have privilege to use the club to entertain clients and business partners.

12. The Ld. Sr. DR relied on the orders of the lower authorities.

13. We have heard the parties and perused the materials on record. We have also deliberated on the decisions relied upon by the Ld. AR. It is seen from the details of club expenses that the total subscription and membership fees of Rs.49,92,632/- was debited, in addition to the cost of club activities of Rs.6,68,136. We note that out of the total club expenses of Rs.56,60,768/-, the assessee has recovered an amount of Rs.28,45,088/- and, therefore, the net club expenses of Rs.28,15,680/- has been claimed as deduction. From the assessment order, we note that there are certain personal club expenses, which are included in the total club expenses of Rs.28,45,088/-. For this, the assessee has not filed any evidence to show that the expenses are business expenses. We are conscious of the fact that there cannot be any personal expenses in case of a company, but the same needs to be also demonstrated. Hence, in absence of documentary evidence, it would be fair and reasonable to hold that 20% of the cost of club facility expenses of Rs.6,68,136/- are not in the nature of business expenditure. As far as subscription and membership expenses, after reducing the amounts of reimbursements from group companies, are concerned, considering the nature of business carried on by the assessee, we are of considered view that the same are in the nature of business expenses, which are allowable as deduction u/s 37(1) of the Act. In view of this, the grounds of appeal are partly allowed.

14. Ground Nos. 8 to 11 pertain to the disallowance for deduction of Rs. 17,72,14,027/-, u/s 80G qua the Corporate Social Responsibility (CSR) expenses. The facts, in brief, are that the assessee has incurred CSR expenses and donations amounting to Rs.33,92,33,769/-. An amount of Rs.33,92,33,769/- was disallowed u/s 37 of the Act, in the return of income. Out of the total donations, donations eligible for 100% deduction u/s 80G of the Act amounted to Rs.10,00,00,000 and 50% deduction u/s 80G amounted to Rs.15,44,28,054. The assessee has claimed deduction of Rs.17,72,14,027 u/s 80G of the Act in its return of income. However, the AO disallowed the deduction claimed u/s 80G of Rs.17,72,14,027 on the ground that CSR expenditure is mandatorily required to be incurred u/s 135 of the Companies Act, 2013. Further, the AO held that if the deduction is allowed on such mandatory CSR expenses, then it would result in subsidizing these expenses by one-third amount. The CIT(A) upheld the view taken by the AO and agreed that no deduction should be allowed u/s 80G of the Act.

15. The assessee submitted that in the return of income, the total CSR and donation expenses has been disallowed u/s 37(1) of the Act. Further, the Explanation to section 37(1) does not impose any restrictions on deduction under other provisions of the Act. The assessee has also placed reliance upon the number of judicial decisions to support its contention, including the decision of Mumbai Tribunal in the case of Reliance Retail Ltd. v. ACIT  (Mumbai – Trib.), Asstt. CIT v. Maersk Line India (P.) Ltd.  (Mumbai – Trib.), Hubtown Ltd. v. ACIT [IT Appeal No. 1601 (Mum) of 2025, dated 10.12.2025], etc. The assessee submitted that the CIT(A) has inadvertently observed that the donation receipts are not filed. The same were already submitted during the assessment proceedings.

15.1 On the other hand, the Ld.AR has relied upon the observation of the CIT(A) and the AO.

16. We have heard the parties and perused the materials on record including the documents submitted in relation to the claim for deduction u/s 80G of the Act. We note that this issue has been examined by the coordinate Bench in the case of Reliance Retail (cited supra), wherein it has been observed as follows:

“107. After examining the statutory provisions and the contentions of both the parties, we are unable to concur with the view taken by the lower authorities. At the outset, it is necessary to note that Explanation 2 to section 37(1) merely clarifies that expenditure incurred on CSR activities shall not be deemed to be expenditure incurred for the purposes of business or profession and therefore cannot be allowed as deduction while computing income under the head “Profits and gains of business or profession.” The said Explanation does not impose any restriction on deductions allowable under other provisions of the Act. Section 80G, on the other hand, falls under Chapter VI-A and provides for deduction in respect of sums paid as donations to specified funds and institutions while computing total income. Therefore, the two provisions operate in distinct fields.

108. In the present case, the assessee has admittedly disallowed the entire CSR expenditure while computing business income, and the claim u/s 80G has been made only while computing total income under Chapter VI-A. In such circumstances, denial of deduction u/s 80G would effectively result in double disallowance, which does not appear to be the legislative intent.

109. A careful reading of section 80G further shows that the legislature has expressly excluded only certain CSR contributions from the ambit of deduction. Specifically, section 80G(2)(a)(iiihk) and 80G(2)(a)(iiihl) provide that contributions made to Swachh Bharat Kosh and Clean Ganga Fund shall not qualify for deduction if such payments are made in pursuance of CSR obligations. The presence of such specific exclusions indicates that the legislature was conscious of CSR-related contributions and deliberately chose to restrict deduction only in respect of the aforesaid funds. If the intention of Parliament was to deny deduction u/s 80G for all CSR-related payments, it would have enacted a general prohibition. The absence of such a restriction clearly supports the assessee’s contention.

110. We also find merit in the submission of the assessee that the mandatory nature of CSR expenditure does not alter the intrinsic character of the payment as a donation, particularly when the payment is made to an eligible charitable institution and no reciprocal benefit is received from the donee. The concept of voluntariness, in the context of donations u/s 80G, must be understood with reference to the absence of quid pro quo and not merely with reference to the statutory framework governing CSR obligations.

111. This view finds support from several judicial precedents relied upon by the assessee. In Interglobe Technology Quotient Pvt. Ltd. v. ACIT 207 ITD 360 (Delhi – Trib.)/(ITA No. 95/Del/2024), the Delhi Tribunal held that the mandatory nature of CSR spending does not disentitle an assessee from claiming deduction u/s 80G where the other statutory conditions are fulfilled. Similarly, in First American (India) (P.) Ltd. v. ACIT [IT Appeal No. 1762 (Bang) 2019, dated 29-4-2020] and Allegis Services (India) (P.) Ltd. v. ACIT [IT Appeal No. 1693 (Bang) of 2019], the Bangalore Bench of the Tribunal held that denial of deduction under Chapter VI-A merely because the payment forms part of CSR expenditure would lead to double disallowance, which is not contemplated by the Act. 112. Further support is derived from decisions such as FNF India (P.) Ltd. v. ACIT  (Bangalore – Trib.), Sling Media Pvt. Ltd. v. DCIT 194 ITD 1 (Bangalore – Trib.), Infinera India (P.) Ltd. v. JCIT 194 ITD 463 (Bangalore – Trib.), National Seeds Corporation Ltd. v. ACIT (Delhi ITAT), and DCIT v. Peerless General Finance & Investment Co. Ltd. (Kolkata ITAT), wherein the Tribunal has consistently taken the view that deductions allowable under Chapter VI-A cannot be denied merely because the expenditure was disallowed while computing business income.

113. The decision of the Co-ordinate Bench in Naik Seafoods Pvt. Ltd. v. Pr. CIT [IT Appeal No. 490 (Mum.) of 2021, dated 26-11-2021] also supports the principle that deductions under Chapter VI-A must be considered independently of the computation of income under other heads, subject to fulfilment of statutory conditions.

114. In the present case, the learned AR has also invited our attention to Paper Book pages 137 to 139, wherein the donation receipts issued by Reliance Foundation have been placed on record. These documents establish that the payment was actually made to an institution duly registered u/s 80G. Importantly, the genuineness of the donation and the eligibility of the donee institution u/s 80G have not been disputed by the Assessing Officer.

115. In view of the above factual and legal position, we are of the considered opinion that the deduction claimed by the assessee u/s 80G cannot be denied merely on the ground that the payment also formed part of CSR expenditure under the Companies Act.

116. Accordingly, we hold that the disallowance of Rs. 10,53,00,000/- made by the Assessing Officer and confirmed by the learned CIT(A) is not sustainable in law. The addition is therefore deleted and Ground No. 4 raised by the assessee is allowed.”

16.1 In view of the above factual and legal positions and following the decision of the coordinated Bench, the deduction claimed by the assessee u/s 80G cannot be denied merely on the ground that the payment also formed part of CSR expenditure under the Companies Act, 2013. However, since the lower tax authorities have not verified the donation receipts, we are remitting the issue back to the AO for the limited purpose of verifying the donations u/s 80G of the Act and allow the deduction as per law.

17. Ground no. 12 pertains to deduction of Rs. 22,91,58,817 u/s 80JJAA of the Act. The facts, in brief, are that the assessee has employed some new qualified employees. However, the assessee had not claimed deduction u/s 80JJAA of the Act, while filing the return of income and also during the assessment proceedings. The assessee made an additional claim of deduction u/s 80JJAA before the CIT(A) for the first time. The details of the deduction are tabulated as follows:

17.1 Before the CIT(A), the assessee furnished an audit report in Form No. 10DA and the employment details, i.e., name and PAN of eligible employees, number of days of employment, amount of gross and monthly salaries paid, appointment letters and Form 16 issued to employees on sample basis, as additional evidence. However, the CIT(A) rejected the claim of the assessee. The CIT(A) observed that Rule 46A does not permit introduction of fresh claims that were never raised before the AO. Also, the assessee has not provided any third-party evidence, like PF registration, etc. The CIT(A) drew support from the ruling of the Hon’ble Karnataka HC in the case of Pr. CIT v. Wipro Ltd. /446 ITR 1 (SC), wherein it has been held that time-bound compliance u/s 80JJAA is mandatory, not directory. The failure to file Form no. 10DA within statutory time and the absence of a claim in the return, render the deduction inadmissible.

18. The assessee submitted that the requirements of section 80JJAA were complied with by the assessee and necessary Form no. 10DA has been also filed, although belatedly. The making of the claim in the return of income, being procedural in nature, must be interpreted liberally, so as to advance substantial justice. The assessee also submitted that it is now well settled that the Appellate Authorities have powers to accept new grounds / claims raised for the first time, either suo-moto or at the instance of assessee. In relation to the observations of the CIT(A) in relation to third-party evidence, the assessee furnished the Universal Account Number (UAN) of eligible employees as additional evidence, for which separate application has been filed with the Tribunal. In relation to the decision of Karnataka HC in the case of Wipro Ltd. (supra), the assessee submitted that since it has fulfilled the primary qualifying condition of employing additional workmen, thereby generating employment, the other conditions regarding filing of audit report and making of the claim in the return of income, being procedural in nature, must be interpreted liberally, so as to advance substantial justice. Reliance was placed on the ruling in the case of Captain Steel India Ltd. v. Dy. CIT  (Kolkata – Trib.), wherein the Tribunal relying upon the decision of Delhi High Court in the case of International Tractors Ltd. v. Dy. CIT (LTU) [2021]  435 ITR 85 (Delhi) and the decision of Karnataka High Court in case of Pr. CIT, Bengaluru v. Karnataka State Co-operative Federation Ltd.  (Karnataka), allowed the claim of deduction u/s 80JJAA made before the appellate authority for the first time. The Tribunal has also considered the ruling of Wipro Ltd. and it was held that the ruling of Wipro Ltd. (supra) was in the context of profit-linked exemptions u/s 10B, but admittedly, section 80JJAA is a deduction, which is allowable to the assessee for the additional employee costs incurred by the assessee and is not in relation to any income earned by the assessee such as, deductions u/s 10A, 10B, 80IA, etc., which are allowed against the income derived by the taxpayer. Therefore, the provisions of section 80JJAA are to be interpreted reasonably, holistically, purposefully and liberally, without being hampered by procedural requirements. Further, reliance was also placed upon certain other decisions: (i) Craftsman Automation (P.) Ltd. v. CIT, Coimbatore (Madras), (ii) L-Cube Innovative Solutions (P.) Ltd. v. CIT (TS-6214- HC- 2021 (Madras)-O), (iii) ACIT v. Balaji Wafers Pvt. Ltd. [IT Appeal No. 428/RJT/2023] (Rajkot Trib.), wherein the deduction u/s 80JJAA was allowed, although no claim was made in the return of income.

18.1 The Ld. AR relied upon the observations of the CIT(A). Further, he argued that the additional claim can be made only in the return of income and not thereafter, as per the provisions of section 80 A(5) of the Act.

18.2 We have heard the parties and the documents submitted for the claim. We note that this issue has been recently examined in the case of Cube Innovative Solutions (P.) Ltd. v. CIT (TS-6214- HC- 2021 (Madras)-O), wherein it has been observed as follows:

“9. We have considered the submissions of both sides and perused the material available on record. In the present case, it is undisputed that the assessee, for the first time, claimed a deduction u/s 80-JJAA of the Act before the learned CIT(A) in respect of additional employee costs. The learned CIT(A) dismissed the ground raised by the assessee on this issue, by observing as follows: –

10. Thus, the learned CIT(A) denied the claim of deduction u/s 80-JJAA of the Act, on the following basis: –

11. From the perusal of the impugned order, we find that in support of its claim made u/s 80-JJAA of the Act before the learned CIT(A), the assessee furnished the report in Form 10DA dated 30.10.2019, certified by a Chartered Accountant. As per the learned CIT(A), inter alia, the said report was not filed before the prescribed due date under the Act and applicable Rules. During the hearing, the learned AR submitted that, since the claim could not be made at the time of filing the return, the report in Form 10DA could also not be filed within time.

12. From the perusal of Form 10DA, it is pertinent to note that the same has relevance only for the purpose of claiming a deduction u/s 80-JJAA of the Act. Thus, in the present case, even though the Chartered Accountant issued Form 10DA on 30.10.2019 in respect of the claim of deduction u/s 80-JJAA of the Act, there is no material available on record which prevented the assessee from raising a fresh claim and filing Form 10DA before the AO during scrutiny assessment proceedings, which were completed with passing of assessment order on 29.01.2021.

13. At this stage, it is also relevant to note the provisions of section 80A(5) of the Act, which reads as under: –

14. Therefore, as per section 80A(5) of the Act, no deduction shall be allowed to the assessee if a claim of deduction, inter alia, under any provisions of Chapter-VIA under the heading “C.—Deductions in respect of certain incomes” of the Act, is not made by the assessee in his return of income. In the present case, the assessee is seeking a deduction in respect of additional employee costs u/s 80-JJAA of the Act, which forms part of Chapter-VIA under the heading “C.—Deductions in respect of certain incomes” of the Act. Further, undisputedly, the assessee did not make any claim of deduction u/s 80-JJAA of the Act in its return of income filed for the year under consideration, and the said claim was made for the first time before the learned CIT(A). Therefore, without going into any other aspect of the matter in the present case, it is evident that section 80A(5) disentitles the assessee from claiming the deduction u/s 80-JJAA of the Act.

15. Accordingly, the denial of the claim of deduction u/s 80-JJAA of the Act is upheld. As a result, the grounds raised by the assessee are dismissed.”

18.3 Facts of the instant appeal are similar and, hence, following the above decision of the co-ordinate Bench, the claim for deduction u/s 80JJAA is rejected for the reason that it was not made in the return of income filed by the assessee, as mandated by section 80A(5) of the Act. In the result, this ground of appeal by the assessee is dismissed.

19. Ground nos. 13 to 16 pertains to re-computation of deduction u/s 36(1)(viia), short grant for TDS credit, excess interest charged u/s 234C and arithmetical error in computing the amount of business profit. The AR submitted that the CIT(A) has directed to file rectification application with the AO and, accordingly, the assessee has filed a rectification-cum-order giving effect to the AO on 09.02.2026. On the other hand, the Ld. AR relied upon the order of the CIT(A).

20. We have heard the parties. The Ld. CITA has not adjudicated these issues on merits and has directed the assessee to pursue rectification of the mistakes with the AO, which the assessee has done. We direct the AO to dispose of the rectification application filed by the AO, after giving an opportunity of hearing to the assessee. The grounds are allowed for statistical purpose.

21. In the result, the appeal of the assessee is partly allowed.

22. Facts of the case are that the AO has initiated penalty proceedings u/s 270A of the Act, for under reporting of income in relation to the disallowance of deduction claimed u/s 80G of the Act, disallowance of club expenses u/s 37(1) of the Act and disallowance u/s 14A of the Act. The Revenue submitted that the penalty proceedings are separate proceedings to be undertaken by the AO and in the assessment order, the AO has only initiated the proceedings and has not actually levied the penalty. Therefore, the CIT(A) has erred in deleting the penalty proceedings. The assessee relied upon the CIT(A) observation and contended that no penalty should be initiated and the same should be dropped on account of the following:

23. We have heard the parties and the view taken by the CIT(A). In the instant case, the penalty proceedings were only initiated and not levied. Therefore, the ground against the initiation of penalty proceedings is pre-mature. We appreciate the arguments taken by the AR, but, these can be independently taken up during the separate penalty proceedings. Thus, in our view, the CIT(A) was not correct in deleting the penalty proceedings initiated by the AO. The appeal of the department is, accordingly, allowed.