CSR Funds utilizations and Its Tax Implication

[PRIYAM KHAMBHATA]

Respected Sir

During the FY 2024-25, one of my Client, Charitable Institutions, registered Under Section 8 Company, who is received CSR Funds from another Charitable Institution A. My client has been utilized such CSR Funds as per the objects and given Utilization Certificates.

My Client has received Notice 133(6) from Income tax Department, in connection with scrutiny assessment u/s. 143(3) of the another Charitable Institution A, Now my question is that is there any violation to receive CSR Funds from another Charitable Institution or sub letting CSR funds to another charitable Institution for utilization

Please guide me.

AI Summary

CSR fund utilisation requires eligible implementation, documented project arrangements, utilisation evidence and careful controls over onward transfers to charitable institutions.
CSR funds received by a Section 8 charitable institution are generally permissible where the recipient is an eligible implementing agency and directly applies them to an approved project within permissible CSR activities and its charitable objects. Proper approvals, project arrangements, expenditure records, beneficiary details and utilisation evidence are required. Onward transfer to another institution requires a documented implementation arrangement, recipient eligibility, authority for transfer, monitoring and proof of actual utilisation; charitable status alone is insufficient. An assessment information notice verifies the payment and utilisation trail and does not itself establish a violation.