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AI Drafter ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether donation made towards CSR expenditure, after being added back in the computation of income, could still qualify for deduction under Section 80G of the Income-tax Act, 1961.
Analysis: The donation was treated as CSR expenditure under the Companies Act, but it was not claimed as a business deduction and had already been added back in the computation of income. The only deduction claimed was under Section 80G at 50% of the donation amount. The Tribunal followed its earlier view that the restriction in Explanation (2) to Section 37 of the Income-tax Act, 1961 operates only for business-income computation and does not create a blanket bar under Chapter VI-A. It also noted that Parliament had imposed specific restrictions only for certain CSR-linked donations, and no general prohibition exists in Section 80G for otherwise eligible donations.
Conclusion: The assessee was entitled to deduction under Section 80G on the CSR-related donation, and the disallowance was unsustainable.
Final Conclusion: The assessment order and the DRP's view were set aside, and the deduction claim under Section 80G was directed to be allowed.
Ratio Decidendi: CSR-related donations do not lose eligibility for deduction under Section 80G merely because they arise from CSR expenditure, if the amount is otherwise an eligible donation and no specific statutory prohibition applies.
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