Deduction under Section 80G for CSR Donations and Other Key ITAT Findings in Reliance Retail Limited Vs ACIT

This article analyses the decision of the ITAT Mumbai in Reliance Retail Limited Vs ACIT (Assessment Year 2019–20), focusing on three critical aspects of income-tax law:

  • Whether donations forming part of Corporate Social Responsibility (CSR) expenditure under the Companies Act 2013 can still qualify for deduction under Section 80G of the Income Tax Act 1961
  • The conditions for making disallowance under Section 14A read with Rule 8D
  • Eligibility and mechanics of deduction under Section 80JJAA and the treatment of certain other disallowances

Since the source is a full judicial order, this write-up provides a structured summary of key findings and reasoning, rather than a verbatim restatement.

1. Background of the Case

1.1 Assessee’s business and returns

The assessee is a large company engaged in trading and merchandising of goods and allied services. For Assessment Year 2019–20, the assessee:

  • Filed its original return on 30.11.2019 declaring total income of Rs. 4556,20,76,520/-
  • Subsequently filed a revised return on 29.07.2020 declaring total income of Rs. 4567,49,77,390/-

The case was taken up for scrutiny. Notices under Section 143(2) and Section 142(1) were issued at various points in time.

1.2 Reference to Transfer Pricing Officer and completion of assessment

  • The case was referred to the Transfer Pricing Officer (TPO) under Section 92CA on 16.07.2020
  • The TPO passed an order on 27.01.2022 proposing no adjustment to the arm’s length price
  • The assessment was then completed under Section 143(3) read with Section 144B on 27.09.2022

In the assessment, several additions and disallowances were made, including:

  • Disallowance of deduction under Section 80G
  • Restriction of deduction under Section 80JJAA
  • Disallowance under Section 14A read with Rule 8D
  • Addition on account of creditors written back
  • Treatment of AJIO marketing expenditure as capital in nature

The assessee obtained partial relief from the CIT(A), following which both the assessee and the Revenue filed cross appeals before the ITAT.

The assessee initially challenged the validity of the assessment itself, contending that the order dated 27.09.2022 was time-barred under Section 153.

  • According to the assessee, the limitation for completion of assessment, even after considering the extended period due to the TPO proceedings, expired on 31.03.2022
  • The assessee also argued that notices issued under Section 142(1) after this date were invalid

The CIT(A), however, held that:

  • Considering the extensions granted on account of the Covid-19 pandemic and the extended time consequent to reference to the TPO,
  • The assessment completed on 27.09.2022 was within the extended time limit, which ended on 30.09.2022

The Tribunal proceeded on the basis that the assessment was not barred by limitation, upholding the CIT(A)’s approach on the time-limit aspect, and then evaluated the substantive additions and disallowances.

3. Deduction under Section 80JJAA: Claim for Three Years

3.1 Nature of claim and AO’s restriction

The assessee claimed deduction under Section 80JJAA of Rs. 12,31,53,732/-, comprising:

  • Rs. 5,94,89,516/- relating to AY 2019–20, and
  • Rs. 6,36,64,216/- pertaining to earlier Assessment Years 2017–18 and 2018–19

The Assessing Officer (AO):

  • Allowed only Rs. 5,94,89,560/- relating to the current year, and
  • Disallowed Rs. 6,36,64,216/-, on the ground that the portion relating to earlier years could not be claimed in AY 2019–20

3.2 Assessee’s submissions

The assessee argued that:

  • Section 80JJAA(1) provides that 30% of “additional employee cost” is deductible for three Assessment Years, including:
    1. The year in which the new employment is provided; and