Section 43B and CSR-linked donations: pre-return payments and otherwise eligible 80G donations could not be disallowed.

Section 43B disallowance could not be sustained for bonus, GST payable and employer's provident fund contribution where the liabilities were paid before the due date for filing the return under section 139(1); the earlier deletion of the adjustment had also attained finality, so the statutory condition for disallowance was not met. Donations funded from CSR expenditure were still eligible for deduction under section 80G where the donations otherwise satisfied that provision, because CSR disallowance under section 37(1) does not control section 80G and the Act contains only limited specific CSR-linked exclusions. The Revenue's challenge failed on both issues.

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Issues: (i) Whether disallowance under section 43B of the Income-tax Act, 1961 could be sustained in respect of bonus, GST payable, and employer's contribution to provident fund when the amounts were paid before the due date for filing the return. (ii) Whether donations made out of corporate social responsibility expenditure were eligible for deduction under section 80G of the Income-tax Act, 1961.

Issue (i): Whether disallowance under section 43B of the Income-tax Act, 1961 could be sustained in respect of bonus, GST payable, and employer's contribution to provident fund when the amounts were paid before the due date for filing the return.

Analysis: The disallowance arose from a repeated adjustment in the intimation process, although the tax audit report reflected the relevant liabilities as paid on or before the due date for filing the return under section 139(1). The same adjustment had already been deleted in rectification proceedings and that deletion had attained finality. Once payment before the due date stood established, the statutory condition for disallowance under section 43B was not satisfied.

Conclusion: The disallowance under section 43B was rightly deleted and the Revenue's challenge on this issue failed.

Issue (ii): Whether donations made out of corporate social responsibility expenditure were eligible for deduction under section 80G of the Income-tax Act, 1961.

Analysis: Explanation 2 to section 37(1) disallows CSR expenditure as business expenditure, but section 80G operates in a different statutory field while computing total income. The Act contains specific exclusions only for certain CSR-linked donations under section 80G(2)(a)(iiihk) and section 80G(2)(a)(iiihl). For donations otherwise eligible under section 80G, deduction cannot be denied merely because the source of payment was CSR expenditure, since that would amount to an impermissible double disallowance.

Conclusion: The deduction under section 80G was correctly allowed and the Revenue's challenge on this issue failed.

Final Conclusion: The Revenue's appeal did not succeed on the substantive issues, and the relief granted by the first appellate authority was sustained in full.

Ratio Decidendi: CSR expenditure may be disallowed as business expenditure under section 37(1), but donations otherwise satisfying section 80G cannot be denied deduction merely because they form part of CSR outlay, and payments made before the due date of return filing cannot be disallowed under section 43B.

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