CSR donations may still qualify for section 80G deduction despite disallowance as business expenditure, with computation issues remanded.

CSR donations disallowed as business expenditure under section 37(1) are not automatically barred from deduction under section 80G, because the two provisions operate in different fields and section 80G depends on whether the payment is an eligible donation under Chapter VI-A. The mandatory character of CSR spending under the Companies Act does not by itself defeat the deduction if the statutory conditions of section 80G are met. A separate issue on interest and fee computation was treated as requiring verification, so the assessment was to be recomputed by the assessing authority after hearing the assessee.

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Issues: (i) Whether donations made towards corporate social responsibility, though disallowed as business expenditure, are eligible for deduction under section 80G; (ii) Whether the interest and fee computation in the assessment order required fresh determination.

Issue (i): Whether donations made towards corporate social responsibility, though disallowed as business expenditure, are eligible for deduction under section 80G.

Analysis: The disallowance under section 37(1) read with Explanation 2 is directed at treating CSR expenditure as not allowable as business expenditure, but that does not control the separate scheme of section 80G in Chapter VI-A. Deduction under section 80G operates at the stage of computing total income and applies where the payment qualifies as a donation to an eligible institution. The mandatory character of CSR under section 135 of the Companies Act, 2013 does not by itself negate deduction if the other requirements of section 80G are satisfied.

Conclusion: The issue was decided in favour of the assessee, and deduction under section 80G could not be denied merely because the payment formed part of CSR expenditure.

Issue (ii): Whether the interest and fee computation in the assessment order required fresh determination.

Analysis: The computation sheet reflected an apparent discrepancy in the interest and fee subtotal, and the matter was accepted as involving a possible clerical mistake. In these circumstances, the proper course was to restore the issue to the assessing authority for verification and recomputation according to law after hearing the assessee.

Conclusion: The issue was remanded to the assessing authority for fresh adjudication.

Final Conclusion: The appeal succeeded on the substantive deduction issue and was restored in part on the computation issue, resulting in partial relief to the assessee.

Ratio Decidendi: Disallowance of CSR expenditure as business expenditure does not bar a separate deduction claim under section 80G, because the two provisions operate in different fields and deduction under section 80G depends on the character of the payment as an eligible donation, not on its disallowability under section 37(1).

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