Section 80G Deduction on CSR Expenditure and Double Disallowance Under Section 40(a)(i) and 40(a)(ia) — ITAT Mumbai Remands Issues for Fresh Adjudication
Case Overview
Case: ACIT Vs Maersk Line India Pvt. Ltd.
Forum: Income Tax Appellate Tribunal, Mumbai
Assessment Year: 2020-21
Order Date: 05/03/2026
The Mumbai Bench of the Income Tax Appellate Tribunal ruled on a Revenue-preferred appeal arising from the order dated 17.07.2025 passed by the Commissioner of Income Tax (Appeals) – 52, Mumbai under Section 250 of the Income Tax Act, 1961. The appeal involved three principal controversies — disallowances made under Section 40(a)(i) and Section 40(a)(ia) of the Income Tax Act, 1961, and the eligibility of Corporate Social Responsibility (CSR) expenditure for deduction under Section 80G of the Income Tax Act, 1961.
Background of the Assessee
Maersk Line India Pvt. Ltd. is engaged in rendering shipping agency services within India to its parent entity, Maersk A/S, Denmark. The assessee also provides support services to various other parties. For Assessment Year 2020-21, the assessee filed its return of income on 15.02.2021, declaring total income of ₹14,38,01,310. The return was selected for scrutiny, and statutory notices under Section 143(2) and Section 142(1) of the Income Tax Act, 1961 were duly issued and served.
Issue No. 1 — Disallowances Under Section 40(a)(i) and Section 40(a)(ia)
Factual Matrix
During the scrutiny assessment, the Assessing Officer (AO) observed that the assessee had claimed deductions of ₹2,26,24,534 and ₹2,81,527, representing amounts that had been previously disallowed in Assessment Year 2019-20 under Section 40(a)(i) and Section 40(a)(ia) respectively.
The assessee's explanation was rooted in its accounting policy. It consistently created provisions for expenses on a monthly basis and reversed those provisions on the first day of the following month. Provisions outstanding as on 31.03.2019 (i.e., the financial year 2018-19) were reversed on 01.04.2019 in the financial year 2019-20. Since the payees in respect of year-end provisions were unidentified at the time of creation, TDS could not be deducted. To address this, the assessee had suo motu disallowed:
- 30% of the provision totalling ₹7,54,15,117 (i.e., ₹2,26,24,534) under
Section 40(a)(ia), and - 100% of ₹2,81,527 under
Section 40(a)(i)
in Assessment Year 2019-20. In the year under consideration, upon reversal of those provisions, the assessee claimed these amounts back as deductions, contending that TDS had since been deducted and deposited and that any fresh disallowance would result in double disallowance — once at the stage of provision and again upon reversal.
AO's Rejection
The AO relied on the tax audit report for Assessment Year 2019-20, which reflected "NOPAN1234A" in the PAN column for the payees. Treating this as evidence of PAN non-availability, the AO invoked Section 206AA of the Income Tax Act, 1961 and held that TDS ought to have been deducted at 20%. On this basis, the AO denied the deductions claimed.
CIT(A)'s Direction
The CIT(A) directed the AO to grant:
- 100% relief on the disallowance made under
Section 40(a)(i), and - 30% relief on the disallowance under
Section 40(a)(ia)
Aggrieved by this direction, the Revenue approached the Tribunal.
Tribunal's Analysis and Ruling
The Tribunal examined the scope of Section 206AA of the Income Tax Act, 1961 and observed that its applicability is contingent upon two conditions being present simultaneously:
- Tax must be deductible at source on a payment; and
- The payee must fail to furnish a PAN to the deductor.