TaxTMI 
TaxTMI 
2026 (3) TMI 631
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.... as against the returned income of INR 32,18,72,940 and also raising the consequential tax demand of INR 12,89,040. 1.2 On the facts, and in the circumstances of the case and in law, the Appellant prays, that the tax demand levied by the Ld. AO be deleted as the same is erroneous, unwarranted, bad in law and liable to be deleted. 2. Ground No. 2: Disallowance of deduction of INR 50,50,000 claimed under section 80G of the Act on account of CSR expenditure 2.1 On the Facts and in the circumstances of the case, and in law, the Ld. AO and Ld. NFAC has erred on facts and in law in disallowing the deduction claimed under section 80G of the Act to the extent of INR 50,50,000 alleging that the expenses incurred on account of Corporate Social Responsibility ("CSR") are not eligible for deduction under section 80G of the Act. 2.2 On the facts and circumstances of the case and in law, the Ld. NFAC has erred in affirming the findings of the Ld. AO that the Appellant failed to furnish additional concrete documentary evidence during the appellate proceedings, even though necessary relevant receipts and supporting document have been furnished by the Appellant. ....
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....he penalty proceeding initiated on account of alleged under reporting in consequence of misreporting of income as the same is erroneous, unwarranted, bad in law and liable to the deleted. The Appellant craves leave to add to, or alter, by deletion, substitution, modification or otherwise, the above grounds of appeal, at any time before or at, the time of hearing of the appeal." 3. Ground No.1 raised by the assessee is general in nature which needs no adjudication. 4. Ground No.2 raised by the assessee is regarding disallowance of deduction of Rs. 50,50,000/- claimed u/s. 80G of the Act on account of CSR expenditure. 5. At the outset, ld. Counsel for the assessee submitted that assessee has donated Rs. 50,50,000/- to Prime Minister Relief Fund and Rs. 25.00 lakh to Maharashtra Chief Minister's Relief Fund. The said donation forms part of CSR expenditure and assessee has claimed deduction u/s. 80G of the Act. For such claim, assessee placed reliance on the following decisions : 1. Advik Hi Tech (P.) Ltd. v. Deputy Commissioner of Income-tax [2024] 168 taxmann.com 587 (Pune - Trib.) 2. Dana Anand India (P.) Ltd. v. Deputy Commissioner of Income-tax ....
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....r a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director. (2) The Board's report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee. (3) The Corporate Social Responsibility Committee shall- (a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII; (b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and (c) monitor the Corporate Social Responsibility Policy of the company from time to time. (4) The Board of every company referred to in sub-section (1) shall,- (a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place i....
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....ation of natural resources and maintaining quality of soil, air and water [including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga); (v) protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts; (vi) measures for the benefit of armed forces veterans, war widows and their dependents, (Central Armed Police Forces (CAPE) and Central Para Military Forces (CPMF) veterans, and their dependents including windows]; (vii) training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports; (viii) contribution to the Prime Minister's National Relief Fund or [Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; [(ix) (a) Contribution to incubators or re....
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....mpanies for undertaking projects or programs or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules. (4) Subject to the provisions of subsection (5) of section 135 of the Act, the CSR projects or programs or activities undertaken in India only shall amount to CSR expenditure. (5) The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with section 135 of the Act. (6) Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through Institutions with established track records of at least three financial years but such expenditure shall not exceed five percent of total CSR expenditure of the company in one financial year. (7) Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity. 7.3. Thereafter The Ministry of Corporate Affairs, vide General Circular No. 21/2014 dated 18.0....
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....national organisations for designing, monitoring and evaluation of the CSR projects or programmes as per its CSR policy as well as for capacity building of their own personnel for CSR. (4) A company may also collaborate with other companies for undertaking projects or programmes or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programmes in accordance with these rules. (5) The Board of a company shall satisfy itself that the funds so disbursed have been utilised for the purposes and in the manner as approved by it and the Chief Financial Officer or the person responsible for financial management shall certify to the effect. (6) In case of ongoing project, the Board of a Company shall monitor the implementation of the project with reference to the approved timelines and year-wise allocation and shall be competent to make modifications, if any, for smooth implementation of the project within the overall permissible time period. ". 8. A perusal of the afore-reproduced provisions section 135 of the Companies Act, 2013 would reveal that the CSR has not been fa....
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....e donor company has to ensure that the expenditure is incurred on the CSR activity and that too on the specified projects and programs as approved by the company. 8.1. The CSR Amendment Rules, 2021 at the first instance reiterate that CSR activity can be carried out by the company itself, or through a registered public trust or a registered society, registered under sections 12A and 80G of the Income Tax Act, 1961. However, it is further provided that every such entity, who intends to undertake any CSR activity, shall register itself with the Central Government by filing the form CSR-1 electronically with the Registrar of the Companies. It is further provided that the Board of the company shall satisfy itself that the funds so disbursed have been utilised for the purposes and in the manner as approved by it. 8.2. The crux of the above discussion is that it is not the donation simpliciter rather, there is a responsibility upon the company to ensure that the CSR expenditure is actually incurred, that too, in the specified projects and programs. Under the 2021, Rules, even the recipient institution/trust is also required to register itself with the Registrar of Compa....
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....onsibility (CSR) Under the Companies Act, 2013 certain companies (which have net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or a net profit of Rs. 5 crore or more during any financial year) are required to spend certain percentage of their profit on activities relating to Corporate Social Responsibility (CSR). Under the existing provisions of the Act expenditure incurred wholly and exclusively for the purposes of the business is only allowed as a deduction for computing taxable business income. 13.2 CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing the taxable income of the company. Moreover, the objective of CSR is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold. If such expenses are allowed as tax deduction, this would result in subsidizing of around one-third of such expenses by the Government by way of tax e....
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....nt provisions of section 30 to 36 or any explanatory notes thereto. 9.3. At this stage it will be relevant to reproduce the relevant provisions of section 35 of the Act: ] "Expenditure on scientific research. 35.(1) In respect of expenditure on scientific research, the following deductions shall be allowed- (i) any expenditure (not being in the nature of capital expenditure) laid out or expended on scientific research related to the business. [Explanation. - Where any such expenditure has been laid out or expended before the commencement of the business (not being expenditure laid out or expended before the 1st day of April, 1973) on payment of any salary [defined in Explanation 2 below sub-section (5) of section 40A to an employee engaged in such scientific research or on the purchase of materials used in such scientific research, the aggregate of the expenditure so laid out or expended within the three years immediately preceding the commencement of the business shall, to the extent it is certified by the prescribed authority (See rule 6(1). The prescribed authority under rule 6(1) is Director General (Income-tax Exemptions) in concurr....
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....Official Gazette, by the Central Government." .... ----- [(2AA) Where the assessee pays any sum to a National Laboratory or a University or an Indian Institute of Technology or a specified person with a specific direction that the said sum shall be used for scientific research undertaken under a programme approved in this behalf by the prescribed authority, then- (a) there shall be allowed a deduction of a sum equal to one and one-half times the sum so paid ; and (b) no deduction in respect of such sum shall be allowed under any other provision of this Act:" -----. 9.3. A perusal of the above reproduced provisions of section 35 of the Act would reveal that a deduction, even in some cases more than 100% of the contribution, is allowed, if it is made to a research association, or to a university or to a college or other institution to be used for scientific research and to or to national laboratory or to an Indian Institute of technology etc. which are approved under section 35 of the Act and subject to the fulfilment of prescribed conditions. 9.4. It is very much surprising that the CBDT circular explaining the amendment brought ....
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...., as the case may be, sums of such nature plus fifty per cent of the balance of such aggregate; and] (ii) in any other case, an amount equal to fifty per cent of the aggregate of the sums specified in sub-section (2).] (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) any sums paid by the assessee in the previous year as donations to- i) the National Defence Fund set up by the Central Government; or (ii) the Jawaharlal Nehru Memorial Fund referred to in the Deed of Declaration of Trust adopted by the National Committee at its meeting held on the 17th day of August, 1964; or (iii) the Prime Minister's Drought Relief Fund; or 22[(iia) the Prime Minister's National Relief Fund; or (iiiaa) the Prime Minister's Armenia Earthquake Relief Fund, or (iiiab) the Africa (Public Contributions-India) Fund, or] (iiib) the National Children's Fund; or] (iiic) the Indira Gandhi Memorial Trust, the deed of declaration in respect whereof was registered at New Delhi on the 21st day of February, 1985; or] (iiid) the Rajiv Gandhi Foundation, the deed of decla....
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....enevolent Fund or the Air Force Central Welfare Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants, or] (iiihd) the Andhra Pradesh Chief Minister's Cyclone Relief Fun d, 1996; or] (iiihe) the National Illness Assistance Fund, or iiihf) the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund in respect of any State or Union territory, as the case may be: Provided that such Fund is- (a) the only Fund of its kind established in the State or the Union territory, as the case may be: (b) under the overall control of the Chief Secretary or the Department of Finance of the State or the Union territory, as the case may be, (c) administered in such manner as may be specified by the State Government or the Lieutenant Governor, as the case may be; or] (iiihg) the National Sports Fund to be set up by the Central Government; or (iiihh) the National Cultural Fund set up by the Central Government; or] (iiihi) the Fund for Technology Development and Application set up by the Central Government; or ....
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....tral Government may, having regard to the prescribed guidelines, by notification in the Official Gazette, specify in this behalf) for- (1) the development of infrastructure for sports and games; or (ii) the sponsorship of sports and games, in India;) (d) any sums paid by the assessee, during the period beginning on the 26th day of January, 2001 and ending on the 30th day of September, 2001, to any trust, institution or fund to which this section applies for providing relief to the victims of earthquake in Gujarat.] (3) (Omitted by the Finance Act, 1994 w.e.f. 1-4-1994] (4) Where the aggregate of the sums referred to in sub-clauses (iv), (v), 6 [(vi), (via) and (vii)] of clause (a) and in 7 [clauses (b) and (c)] of sub-section (2) exceeds ten per cent of the gross total income (as reduced by any portion thereof on which income-tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), then the amount in excess of ten per cent of the gross total income shall be ignored for the purpose of computing the aggregate of the sums in r....
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.... contention of the ld. DR, that u/s 80G(2)(a) the deduction is admissible on the sum paid by the assessee to the approved institutions as "donations". That the term "donations" refers to a gift usually one of a charitable nature. That the donation is a voluntary transfer of property by the doner to the donee without any exchange of value on the part of the recipient and that the CSR expenditure u/s 135 of the Companies Act, 2013 is a mandatory/statutory obligation and cannot be termed as "donation". Though, on the face of it, there seems to be some force in the aforesaid contention of the ld. DR, however, on deeper analysis of the facts, we find that this contention is not applicable in this case. 12.1. Though, there is a statutory obligation of CSR expenditure u/s 135 of Companies Act 2013, however there are many prescribed modes and activities under Schedule VII of the Companies Act for spending the CSR expenditure, which list is not exhaustive rather inclusive. There is no provision either u/s 135 of the Companies Act or under Schedule VII to the Companies Act or the CSR Rules, requiring mandatory donations to the institutes/funds prescribed under the relevant provision....
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....come exempted under Section 11(1). Therefore, to curb such practice of claiming double deduction, following amendments have been made in the Income Tax Act, 1961 vide the Finance Act, 2021: (i) Under Section 11(1)(d), an insertion has been made that corpus contributions shall be subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified under Section 11(5) specifically for such corpus. (ii) Explanation 4 to Section 11(1) has been inserted which provides that any application of income out of the corpus shall not be treated as application for charitable and religious purposes. However, if such amount is invested or deposited back to the corpus fund and in the prescribed form of investment/deposit, then such amount shall be allowed as application in the previous year in which it is deposited back to corpus. 12.4. These amendments have been made to ensure that the funds donated towards the discharge of CSR should be actually spent for the specific projects/purposes towards CSR activity. However, none of the amendments, except those, wherein, it has been specifically provided suggest that....
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.... both the representatives of the parties) has held that a taxing statute must be interpreted in the light of what is clearly expressed. It cannot imply anything which is not expressed. It cannot import provisions in the statutes so as to supply any assumed deficiency. Reliance in this respect can also be placed on another decision of the Hon'ble Supreme Court in the case of Smt. Tarulata Shyam vs. CIT (1977) 108 ITR 345 (SC) holding that in a tax statute nothing is to be read and nothing is to be implied. That there is no scope of importing in the statute words which are not there. Even it has been held time and again that in interpreting a taxing statute, equitable considerations are out of place. When a taxing statute imposes a financial burden/tax liability even though the same appears to be harsh and not equitable, the courts have held that the fiscal statues are to be interpreted in strict terms and such liability cannot be set aside on the ground of equity or natural justice. The vice-versa is also true. Since, there is no bar to claim deduction under the relevant provisions of section 80G, except wherein so specifically barred i.e. in respect of donation towards Swachh B....