TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 362
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....Ld. AO is bad in law and needs to be cancelled. 2. Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law, the learned PCIT erred in continuing with the same proceedings u/s.263 even after dropping the only reason cited in the show cause notice for setting aside the assessment order, only for the other purpose of determining whether the donations made are voluntary or statutory. 3. Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law, the learned PCIT erred in setting aside the assessment holding that only voluntary donations are eligible for deduction u/s. 80G and not the CSR donations that are made as per statutory requirement. 4. The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing." 2. The brief facts in this case are that the assessment in the case of the assessee was completed u/s.143(3) r.w.s. 144B of the Act, dated 10.09.2022, wherein the returned income declared by the assessee has been accepted by the Ld. AO, as assessed income. 3. Subsequently, the case of....
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....r ruled that payments made under statutory obligations do not qualify as donations. In the present case, the CSR payments made under Section 135 of the Companies Act, 2013. do not fulfill the essential criterion of voluntariness, rendering them ineligible for deduction under Section 80G of the Act. Further, the assessee relies upon the decision of the Jurisdictional High Court in the case of Castrol India Ltd. v/s Dy. CIT. On perusal of this order, it is observed that the Hon'ble Bombay High Court allowed the assessee's appeal by relying upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd. (2010) 2 SCC 723, holding that a mere change of opinion cannot be a ground for reopening a concluded assessment. However, the Hon'ble Bombay High Court's ruling did not address the merits of disallowing deductions under Section 80G for CSR-related donations per se. Hence, the ratio decidendi laid down in Castrol India Ltd. v/s Dy. CIT (Bom) is not applicable in the present case. Therefore, the assessee's contention is not tenable. Accordingly, the Tribunal orders cited by the assessee are not applicabl....
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....onations under Section 80G.This submission seeks to elucidate the Revenue's stance through a comprehensive examination of the legislative framework, principles of statutory interpretation, and judicial precedents, which collectively reinforce that CSR expenses, even if categorized as donations, cannot qualify for deduction under Section 80G. 7.4 CSR Contributions to Swachh Bharat Kosh and Clean Ganga Fund: While contributions to the Swachh Bharat Kosh and Clean Ganga Fund are recognized as eligible for deductions under Section 80G, this eligibility is confined to voluntary contributions However, when these contributions are made as part of the statutory CSR obligations under Section 135 of the Companies Act. 2013, they cease to qualify as voluntary donations. CSR expenses are mandated by law, and as such, they lack the essential characteristic of voluntariness, which is a core requirement for claiming deductions under Section 80G. Allowing CSR-related contributions to these funds to be treated as deductible donations would violate the statutory disallowance set forth in Explanation 2 to Section 37(1) of the Income Tax Act. This would effectively nullify the le....
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....ompliance with statutory provisions. • Allowing deductions under Section 80G for CSR expenses would lead to double benefits-once by allowing it as a deduction and again by fulfilling a statutory obligation. • Claim of deduction by the assessee with regard to CSR expenses and allowance of such expenditure will result into wastage of entire effort of the legislature to treat CSR expenditure as appropriation of profit after tax. It will be against the spirit of law and the intention of the legislature. • The Income Tax Act through Explanation 2 to Section 37(1), already disallows CSR expenses from business income, reinforcing the position that they do not qualify for deductions under other provisions. In view of the above, I am of the considered opinion that the assessment order passed by the Assessing Officer u/s.143(3) r.w.s 144B of the Act dated 04.03.2025, is erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, the said assessment order passed by the Assessing Officer is set-aside on the issue of claim of deduction under section 8OG of the Act of CSR expense. The AO is directed to make an enquiry in t....
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....G are satisfied, the assessee would be entitled to claim deduction u/s. 80G in respect of eligible donations which forms part of the amount sanctioned towards CSR activities. This issue is thoroughly discussed by the ITAT Mumbai 'G" Bench in the case of ACIT Vs. Sikka Ports & Terminals Ltd. (2025) 173 Taxmann.com 366 (Mum-Trib), wherein the Tribunal has observed as follows: "5. We heard the parties and perused the material on records. The assessee during the year disallowed a sum of Rs. 33,85,00,000 under section 37 of the Act towards the CSR Spend in compliance with section 135 of the Act. Since the institutions to which the said amounts are given are registered under section 80G of the Act, the assessee claimed 50% i.e.16,92,50,000 of the same as deduction. The argument of the revenue is that the payment are made to comply with the mandate under the Companies Act, and therefore it cannot be treated as donations which are "voluntary" payments. The further argument of the revenue is that when the statute has denied the direct claim of the CSR spend under section 37, the assessee claiming the deduction indirectly under section 80G is against the intention of the legislature....
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....es not negate the intention of the contribution made. The reliance placed by the ld DR on the decision of Agilent Technologies (International) Pvt. Ltd (supra) is factually distinguishable. The DRP whose order was upheld in the said case, had placed reliance on the decision of the Hon'ble High Court in the case of DCIT vs Hindustan Darr Oliver Ltd (1994) 45 TTJ Mumbai 552 where the payment made was held as not a donation since it was found that the intention behind making the donation was to get reserved seats in the college run by the institute to whom the payments are made as part of CSR spending. As already mentioned, the revenue is not contending that the assessee in the present case has made payments to get something material in return. 8. Now coming to the intention of legislature while amending the provisions of section 37 whereby the CSR spend are not allowed to be claimed as a deduction under the said section. Finance (No.2) Act, 2014 brought in the amendment to section 37 by inserting Explanation 2 to the said section w.e.f.01.04.2015. It is relevant to look at the provisions of section 37 of the said Act which read as under "37. (1)Any expenditure (....
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....e, which is not mentioned specifically in section 30 to section 36 of the Income-tax Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditures cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Income-tax Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein. 13.4 Applicability:-This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment....
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....ction 37 of the Act. 11. The next issue is whether the impugned payments are otherwise eligible for deduction under section 80G of the Act. We have already established that the payments made by the assessee are donations and therefore if the other conditions for the deduction under section 80G is are fulfilled then there should not be any restriction for the assessee to claim the deduction. Before holding so we will address the contention of the revenue that the payments made towards CSR spend are monitored and controlled by the assessee and are not voluntary. In this regard it is relevant to note that though there is a statutory obligation of CSR expenditure under section 135 of Companies Act 2013, there are many prescribed modes and activities under Schedule VII of the Companies Act for spending the CSR expenditure, (the list is not exhaustive but inclusive). Further neither section 135 of the Companies Act nor Schedule VII to the Companies Act nor the CSR Rules, mandates donations to the institutes/funds prescribed under section 80G of the Act. Therefore, in our considered view there is merit in the submission of the ld AR that though the quantum of CSR spend is mandato....
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.... amount has been actually spent by the donee on such specific object or purpose (CSR activity) for which it was donated. Therefore, Rule 7 of the CSR Rules, which permitted corpus contributions as eligible CSR expenditure, has been substituted and under the amended CSR Rules of 2021, corpus contributions to any entity shall not be admissible as CSR expenditure. The object and purpose of the aforesaid amendment is to ensure that the expenditure made is actually utilised towards CSR activities. 12. One more point that needs to be considered while deciding the deduction under section 80G for CSR spend is that the restriction on the allowability of the said spend as provided in Explanation 2 to section 37 is for computing the business income under the provision of Section 28-44DB whereas the deduction under section 80G is claimed under Chapter VIA i.e. after computing the Gross Total Income. The provisions of section 80G does not impose any condition that the contribution should be voluntary and therefore when the CSR spend is evaluated independently under the provisions of the Act, in our considered view there is no restriction for the assessee to claim deduction under sectio....
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....complete details of donation and also filed the certificate u/s.80G which was enclosed before the AO. Section 80G(1) of the Act provides that in computing total income of the assessee, they shall be deducted in accordance with the provision of Section, such sum paid by the assessee in the previous year as a donation. Deduction under Chapter VIA provides deduction from the gross total income which is computed after making necessary allowances/ disallowances in accordance with Section 28- 44BB of the Act including Explanation to Section 37(1). Thus, Section 37(1) and Section 80G of the Act are independent and the principles governing what is not allowable u/s. 37(1) have been provided in the section itself. Even in section 80G also, what is not allowable has also been provided under the Act. For instance, Section 80G specifically mentions two clauses, viz., section 80G(2)(a)(iihk) and (iiihl), i.e., contributions towards 'Swacha Bharat Kosh' and 'Clean Ganga Fund', where donation in the nature of CSR Expenditure is not allowable as deduction under section 80G of the Act. Therefore, the disallowances for deduction under section 80G vis-à-vis CSR can be restricted to contributio....
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....ik Seafoods Pvt Ltd Vs. Pr.CIT (ITA No.490/MUM/2021). Accordingly, the grounds raised by the revenue are dismissed." 15. Further, Similar findings have been arrived at by the ITAT, Mumbai 'B', bench in the case of B. Arunkumar Capital & Credit Services Pvt. Ltd., ITA No.2034/MUM/2025vide the recent order dated 25.07.2025, wherein revisional proceedings initiated u/s. 263 of the Act in absence of any conclusive findings to show that there was an intention of material return behind the donation or that the donation was paid quid pro quo. Accordingly, the impugned order u/s 263 was held to be unsustainable and in terms of provisions of the Act which allows the assessee to claim deduction u/s. 80G. 16. In view of the facts & circumstances of the present case, judicial pronouncements referred herein above, we are of the considered view that the reason for which revisionary jurisdiction was invoked by the Pr. CIT, that whether the claim of expenses under CSR cannot be utilized for donation to claim deduction u/s. 80G was bereft of substance, since the issue has been answered by the coordinate benches of this Tribunal in various decisions referred to (supra) and accordin....