Deduction under Section 80G applies to donations made as CSR if statutory conditions for the charitable deduction are satisfied.

Donations made to institutions meeting the statutory conditions for charitable donation deduction under Chapter VI-A remain eligible for deduction even where the same payments discharge Corporate Social Responsibility obligations and are disallowed as business expenditure under Explanation 2 to section 37(1). Explanation 2 operates to bar CSR spending as a business expense but does not expressly negate separate Chapter VI-A relief; therefore, where the donee satisfies the statutory approval and payment conditions for the Chapter VI-A deduction, the deduction must be allowed and related additions or disallowances reversed.

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Issues: Whether a donation made in discharge of corporate social responsibility (CSR) obligations (and disallowed as business expenditure under Explanation 2 to section 37(1) of the Income-tax Act, 1961) can nevertheless qualify for deduction under section 80G of the Income-tax Act, 1961 where the donee institution satisfies the conditions of section 80G.

Analysis: The Tribunal examined the interplay between Explanation 2 to section 37(1) and Chapter VI-A, particularly section 80G and its sub provisions. The Court noted that Explanation 2 to section 37(1) operates to disallow CSR expenditure as a business deduction but does not, by its language, expressly restrict or override specific deductions provided in Chapter VI-A. The decision relied on consistent precedents of coordinate benches of the Ahmedabad Tribunal which held that Chapter VI-A deductions operate independently and that donations meeting the statutory conditions of section 80G (including approval under section 80G(5) and payment through banking channels, and not falling within exclusions in section 80G(2)) are eligible for deduction even if they also discharge CSR obligations under section 135 of the Companies Act, 2013. Applying these principles to the facts where the assessee had not claimed the amount as a business deduction but sought deduction under section 80G and the donees were duly approved under section 80G(5), the Tribunal found no statutory bar to allow the section 80G deduction.

Conclusion: Deduction under section 80G of the Income-tax Act, 1961 is allowable for donations that satisfy the statutory requirements of section 80G even if those donations were made in discharge of CSR obligations and disallowed as business expenditure under Explanation 2 to section 37(1). The disallowance by the Assessing Officer and its confirmation by the CIT(A) are set aside; the addition of Rs.2,88,00,000 is deleted and the Department's appeal is dismissed (in favour of the assessee).

Ratio Decidendi: Explanation 2 to section 37(1) of the Income-tax Act, 1961 bars CSR expenditure as a business deduction but does not, in itself, negate or restrict separate deductions under Chapter VI-A; where statutory conditions of section 80G are satisfied, section 80G deduction must be allowed.

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