CSR-funded donations to approved institutions remain eligible for section 80G deduction absent an express statutory bar.

Donations made to institutions approved under section 80G out of amounts earmarked for corporate social responsibility were held deductible, because Explanation 2 to section 37(1) only disallows CSR expenditure as business expenditure and does not bar deduction under other provisions. Section 80G contains an express exclusion only for donations to Swachh Bharat Kosh and Clean Ganga Fund, so that limited restriction cannot be extended to other approved charitable institutions. On a strict reading of the fiscal provisions, a contribution to an approved institution remained a donation eligible for section 80G deduction.

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Issues: Whether donations made by the assessee to institutions approved under section 80G of the Income-tax Act, 1961, out of amounts earmarked for corporate social responsibility under section 135 of the Companies Act, 2013, are eligible for deduction under section 80G despite the disallowance of CSR expenditure under Explanation 2 to section 37(1) of the Income-tax Act, 1961.

Analysis: The statutory framework shows that CSR is mandated under section 135 of the Companies Act, 2013, and the CSR framework permits spending through specified activities and entities. Explanation 2 to section 37(1) of the Income-tax Act, 1961, only excludes CSR expenditure from deduction as business expenditure under section 37(1). It does not create a general prohibition against deduction under other provisions of the Act. The text of section 80G specifically bars deduction only in respect of donations made in pursuance of CSR to Swachh Bharat Kosh and Clean Ganga Fund under clauses (iiihk) and (iiihl), while no comparable embargo exists for other approved institutions. On a strict reading of the fiscal provisions, such a limited express exclusion cannot be extended to all other 80G donations. The contribution made to an approved charitable institution out of CSR funds was treated as a donation chosen by the assessee, and not as a payment barred by section 80G.

Conclusion: The assessee was entitled to deduction under section 80G in respect of the donations made to approved institutions out of CSR expenditure.

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