CSR donations eligible for Section 80G relief if statutory conditions are met; prior business-stage disallowance alone does not bar deduction.

Payments made as corporate social responsibility (CSR) expenditure are not automatically excluded from Chapter VIA donations relief; where donations satisfy the statutory conditions for charitable-donation deductions, they remain claimable notwithstanding prior disallowance as a business expense under Explanation 2 to section 37(1). The analysis distinguishes computation stages for business income and Chapter VIA deductions, warns against double disallowance, and requires the tax officer to verify factual and documentary compliance with the conditions for the donation deduction before denying relief.

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Issues: Whether corporate social responsibility (CSR) expenditure which has been disallowed as business expense under Explanation 2 to Section 37(1) of the Income-tax Act, 1961 is nevertheless eligible for deduction under Section 80G of the Income-tax Act, 1961 when the payments are made to entities/funds eligible under Section 80G.

Analysis: The Tribunal examined whether a statutory prohibition exists preventing a taxpayer from claiming Chapter VIA deduction (section 80G) for donations that are part of CSR expenditure and which have been disallowed under Explanation 2 to section 37(1). The Tribunal reviewed the scheme of assessment and the separate stages at which business expenses and Chapter VIA deductions are considered, noting that disallowance under Explanation 2 to section 37(1) affects computation of business income while deductions under Chapter VIA are considered in computing total taxable income. The Tribunal also considered legislative exclusions expressly provided for specific funds and the consistent view of coordinate Benches of the Tribunal and other judicial precedents which hold that where the payments satisfy the conditions of Section 80G, the claim under Section 80G cannot be denied solely because the payments formed part of CSR expenditure. The Tribunal observed that denying section 80G relief on account of prior disallowance at the business income stage would result in a double disallowance contrary to legislative intent, and directed verification by the Assessing Officer of factual and documentary compliance with Section 80G conditions where necessary.

Conclusion: The Tribunal held that there is no statutory bar to claiming deduction under Section 80G of the Income-tax Act, 1961 in respect of CSR expenditure provided the payments satisfy the conditions prescribed for Section 80G; the Revenue's grounds are dismissed and the appeal is dismissed.

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