Mandatory Corporate Social Responsibility spending not deductible under Section 80G or Section 37; only specific sections 30-36 expenses may qualify

ITAT (DELHI - AT) held that amounts spent for Corporate Social Responsibility are not allowable as deductions under section 80G. CSR obligations imposed by Companies Act, 2013 and clarified by Finance Act, 2014 are treated as non-business expenditure and are not deductible under section 37; no special tax exemption for CSR was introduced. The tribunal noted that only expenditures falling within specific deductible provisions (e.g., sections 30-36) may be allowed if conditions are met, but mandatory CSR outlays do not qualify for deduction under section 80G.

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Issues Involved:
1. Addition of INR 52,87,150 as rental income.
2. Rejection of deduction claim under section 80G of the Act - INR 63,89,992.
3. Charging of interest under section 234A and 234D of the Act.
4. Initiation of penalty proceedings under section 270A of the Act.

Issue-Wise Summary:

Addition of INR 52,87,150 as Rental Income:
The assessee contested the addition of INR 52,87,150 to the taxable income, arguing it resulted in double taxation of rental income already offered to tax. The AO added INR 2,84,09,050 based on Form 26AS, but the assessee clarified that INR 2,64,25,750 was due to erroneous reporting in the e-TDS return, and INR 19,73,300 had already been offered to tax in the previous year. The DRP directed verification of the revised Form 26AS and prior year tax offerings. The tribunal upheld the DRP's direction for the AO to verify and give effect to the order.

Rejection of Deduction Claim under Section 80G of the Act - INR 63,89,992:
The assessee claimed a deduction of INR 63,89,992 for CSR contributions under section 80G. The AO and DRP rejected the claim, interpreting that CSR expenses, being mandatory under the Companies Act 2013, do not qualify as voluntary donations necessary for section 80G deductions. The DRP relied on the Supreme Court's ruling in PVG Raju, emphasizing that donations must be voluntary. The tribunal concurred, holding that CSR expenses do not qualify for section 80G deductions, as they fail the test of voluntariness.

Charging of Interest under Section 234A and 234D of the Act:
The assessee challenged the interest charged under sections 234A and 234D. The tribunal did not provide specific details on this issue in the summary but implicitly upheld the AO's decision by not overturning it.

Initiation of Penalty Proceedings under Section 270A of the Act:
The assessee disputed the initiation of penalty proceedings under section 270A for misreporting income. The tribunal did not provide specific details on this issue in the summary but implicitly upheld the AO's decision by not overturning it.

Conclusion:
The appeal was partly allowed, with the tribunal directing the AO to verify the rental income issue while upholding the rejection of the section 80G deduction claim for CSR contributions. Interest charges and penalty proceedings were implicitly upheld.

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