Section 80G Deduction Allowable On CSR Expenditure: ITAT

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the deduction under Section 80G of the Income Tax Act is allowable on the expenditure in respect of corporate social responsibility (CSR).

The bench of Kavitha Rajagopal (Judicial Member) and Om Prakash Kant (Accountant Member) has observed that the amendment brought about by the Finance Act, 2015, to Section 80G of the Act, which inserted the subclauses (iiihk) and (iiihl) to be the exception for qualifying a donation for claiming under Section 80G of the Income Tax Act, could also be an evidencing factor to substantiate that CSR expenditures that fall under the nature specified in Sections 30 to 36 of the Income Tax Act are allowable deductions under Section 80G.

Section 80G of the Income Tax Act is a provision that allows taxpayers to claim deductions on donations made to eligible charitable institutions and funds. The purpose of this section is to incentivize philanthropy and support organizations engaged in social, cultural, or economic development activities.

The appellant/assessee company is in the business of manufacturing, processing, trading, and supplying aluminum composite panel sheets for interior and exterior applications. It filed its return of income, declaring total income, and it was processed, where the total income was computed at Rs. 26,29,86,460/- after making the addition or disallowance.

The assessee then filed a rectification application, which the assessee claims was not disposed of till date. The assessee's case was selected for scrutiny, and notices under sections 143(2) and 142(1) were duly issued and served upon the assessee.

The Assessing Officer passed the assessment order where the AO made a disallowance under Section 80G, which is 50% of the total donation paid by the assessee towards CSR. In an appeal before the first appellate authority, the addition was upheld by the CIT (A).

The assessee contended that the CIT (A) has not adjudicated the addition to the income assessed in spite of a specific ground raised by the assessee and has also challenged the disallowance made under Section 80G of the Income Tax Act.

The assessee contended that there has been an express bar in claiming the said expenses u/s. 37(1) of the Act and also on subclauses (iiihk) and (iiihl) of Section 80G(2)(a) of the Act pertaining to Swatch Bharat Kosh and Clean Ganga Fund, where donations made pursuant to CSR are not allowable deductions. The test of voluntariness is irrelevant in claiming deduction under § 80G of the Act, where there are no criteria specified by the Act. The assessee relied on a catena of decisions where the donation towards CSR has been allowed u/s. 80G.

The department contended that donations to CSR expenses are not voluntary in nature and are a compliance to be made by the assessee as per Section 135 of the Companies Act, 2013. Any payment has to be voluntary in order to be termed a 'donation'.

The tribunal held that the assessee is entitled to the deduction claimed under § 80G of the Act towards the CSR expenditure incurred by it.

The tribunal directed the A.O. to allow the claim of the assessee, subject to the condition that the assessee has satisfied the other requirements warranted under § 80G of the Income Tax Act.

Counsel For Appellant: Simoni Chouhan

Counsel For Respondent: Manoj Kumar Sinha

Case Title: M/s. Alubound Dacs India Private Limited Versus Dy. CIT

Case No.: IT A No.3663/Mum/2023

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