Donation deductibility: CSR-classified contributions remain deductible if they satisfy statutory conditions for charitable deduction.

Donations classified by a corporate as corporate social responsibility (CSR) expenditure retain their character as donations for tax purposes where they satisfy the statutory conditions for charitable deduction; the prohibition on treating CSR as a business expense does not, by itself, negate eligibility for donation deduction. Administrative FAQs and circulars confirm CSR is not a business deduction but do not create a statutory bar to claiming charitable deduction where conditions are met. Operatively, donations to otherwise eligible organisations remain deductible under the charitable deduction regime and the prior disallowance is reversed where statutory conditions are fulfilled.

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Issues: Whether donations made by a company as part of its corporate social responsibility (CSR) expenditure, paid to organisations eligible under the statute, are eligible for deduction under Section 80G of the Income-tax Act, 1961.

Analysis: The statutory and regulatory framework governing CSR (Section 135 of the Companies Act, 2013 and Rule 4(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014) contemplates expenditure through implementing agencies, including entities registered under Section 12A and 80G, and requires board-driven decision-making for CSR projects. Explanation 2 to Section 37(1) of the Income-tax Act, 1961 expressly disallows CSR expenditure as business expenditure, but there is no specific provision in Section 80G of the Income-tax Act, 1961 excluding CSR-funded donations from the scope of deductions available under Section 80G. Administrative FAQs and circulars indicate CSR is not a business deduction and that no special tax exemptions were extended for CSR, but do not create a statutory bar to claiming Section 80G benefits where statutory conditions for that section are satisfied. Absent a legislative exclusion, donations that otherwise meet the conditions of Section 80G retain their character as donations and their eligibility for deduction, notwithstanding their inclusion by the donor as CSR expenditure.

Conclusion: Donations made to organisations otherwise eligible under law, though classified by the donor as CSR expenditure, are eligible for deduction under Section 80G of the Income-tax Act, 1961 if the statutory conditions for Section 80G are fulfilled; the disallowance of the claimed deduction is deleted and the appeal is allowed in favour of the assessee.

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