2020 (5) TMI 378 - AT - Income Tax

ITAT Bangalore: Clarification on Deductions under Sections 80G vs. 30-36

The Appellate Tribunal ITAT Bangalore allowed the appeal filed by the assessee, emphasizing the distinction between deductions under section 80G for ... Deduction u/s 80G - amount paid to trust - AO disallowed claim as the amount was forming part of CSR expenses debited to profit and loss account - HELD THAT:- AR submitted that all payments forming part of CSR does 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 for computing “Total taxable income”, which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing ‘Total Taxable Income”. If 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. Authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act. We are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. - Decided in favour of assessee for statistical purposes. Issues:1. Eligibility of deduction of donation under section 80G of the Income-tax Act.2. Treatment of donation as part of CSR expenses.3. Qualification of amount paid to trust under section 80G(2)(iv) as a donation.Issue 1: Eligibility of deduction of donation under section 80G of the Income-tax Act:The appellant filed an appeal against the order passed by the Ld.CIT (A) denying the deduction of a donation amounting to INR 8,40,000 under section 80G of the Act. The Ld.AO disallowed the deduction on the grounds that the donation was part of CSR expenses debited to the profit and loss account, making it ineligible for deduction under section 80G. The Ld.CIT (A) upheld the disallowance stating that the payment needed to be voluntary to qualify as a donation. The appellant contended that the sum paid was eligible for deduction under section 80G and not part of CSR expenses. The Tribunal observed that the expenditure under section 80G is claimed while computing 'Total Taxable Income,' distinct from the provisions under sections 30 to 36 claimed for 'Income from Business and Profession.' The Tribunal held that the appellant should not be denied the benefit of the claim under Chapter VI A, subject to fulfilling necessary conditions, and remitted the issue back to the Ld.AO for verification.Issue 2: Treatment of donation as part of CSR expenses:The Ld.AO disallowed the donation amount in the hands of the assessee, considering it as part of CSR expenses. The Tribunal noted that while CSR expenses are disallowed under Explanation 2 to section 37(1) for computing income under 'Income from Business and Profession,' the claim under section 80G is considered for computing 'Total Taxable Income.' The Tribunal emphasized that denying the benefit of the claim under Chapter VI A due to CSR payments would lead to double disallowance, which was not the legislative intent. Therefore, the Tribunal held that the authorities erred in denying the claim of the assessee under section 80G and directed the Ld.AO to verify the conditions necessary for claiming the deduction.Issue 3: Qualification of amount paid to trust under section 80G(2)(iv) as a donation:The Ld.CIT (A) held that the amount paid to the trust under section 80G(2)(iv) did not qualify as a donation under section 80G of the Act. The appellant argued that all payments forming part of CSR do not form part of the profit and loss account for computing 'Income from Business and Profession.' The Tribunal agreed with the appellant, stating that the authorities had not verified the nature of payments qualifying for exemption under section 80G and the quantum of eligibility as per section 80G(1) of the Act. Consequently, the Tribunal remitted the issue back to the Ld.AO for further verification and directed the grant of deduction to the extent of eligibility.In conclusion, the Appellate Tribunal ITAT Bangalore allowed the appeal filed by the assessee, emphasizing the distinction between deductions under section 80G for computing 'Total Taxable Income' and provisions under sections 30 to 36 for 'Income from Business and Profession.' The Tribunal directed the Ld.AO to verify the conditions necessary for claiming the deduction under section 80G and grant the deduction to the extent of eligibility.