Deduction for CSR contributions under section 80G upheld where donations meet statutory 80G eligibility; disallowance avoided

Deduction claim under section 80G concerning contributions classified as corporate social responsibility was contested; tribunal applied the principle against double disallowance and held that voluntary payments cannot be denied 80G benefit solely because they also form part of CSR, resulting in allowance of the claim. The tribunal found lower authorities erred by not verifying the nature of payments and the quantum of eligibility under applicable 80G criteria, and remitted consideration of qualifying nature and eligible amount as per statutory entitlement.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether deduction under section 80G can be denied solely because the donations were made out of Corporate Social Responsibility (CSR) expenditure, on the reasoning that CSR is mandatory and therefore not "voluntary".

(ii) Whether, on the facts of the case, the Assessing Officer was justified in disallowing the assessee's claimed deduction under section 80G in respect of donations made to eligible entities as part of CSR.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i)-(ii): Allowability of section 80G deduction for donations made out of CSR funds; correctness of disallowance

Legal framework (as discussed by the Tribunal): The Tribunal addressed the interaction between CSR expenditure and deductions under section 80G, including the distinction between (a) disallowance of CSR expenditure in computation of business income and (b) deduction for eligible donations while computing total income under Chapter VIA. The Tribunal proceeded on the basis that section 80G provides deduction depending on the nature of the recipient and satisfaction of statutory conditions under section 80G.

Interpretation and reasoning: The Tribunal noted that the Assessing Officer disallowed the claim on the ground that donations must be voluntary, whereas CSR spending is mandatory. The Tribunal found it undisputed that the assessee incurred CSR expenditure and claimed deduction under section 80G to the extent of 50% of the eligible amount. The Tribunal applied the reasoning adopted in a coordinate bench decision on similar facts, which treated section 80G deduction as conceptually distinct from computation of business expenditure and held that the mandatory character of CSR does not, by itself, nullify eligibility for section 80G when contributions are made to approved/eligible institutions and the conditions of section 80G are met.

Conclusions: Following the coordinate bench decision relied upon in the order, the Tribunal held that the disallowance of the deduction claimed under section 80G merely because the donations were made out of CSR funds was not justified. The Tribunal set aside the Assessing Officer's order on this point and directed deletion of the disallowance of deduction under section 80G. The assessee's grounds on the section 80G disallowance were allowed, and the appeal was allowed.

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