TaxTMI 
TaxTMI 
2026 (3) TMI 947
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....ted 09.09.2025 passed for A.Y. 2022-23. 2. The Department has taken the following grounds of appeal: "1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in allowing deduction of Rs. 2,88,00,000/- u/s 80G of the Act for amounts compulsorily spent under CSR which would result in an indirect tax benefit, defeating the purpose of Explanation 2 to Section 37(1) of the Act? 2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored." 3. The brief facts of the case are that the assessee, a company, filed its retur....
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....n nature as companies are required to spend 2% of their average profits on CSR activities and therefore such payments cannot be regarded as voluntary donations. The Assessing Officer further observed that CSR expenditure represents application of income and if deduction under section 80G of the Act is allowed, it would amount to indirect allowance of CSR expenditure which has been specifically disallowed under Explanation 2 to section 37(1) of the Act. Accordingly, the Assessing Officer disallowed the deduction claimed under section 80G and made an addition of Rs.2,88,00,000/- while completing the assessment. 5. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(Appeals). The assessee contended before the ....
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.... of the Act if the donee institution satisfies the statutory conditions prescribed under section 80G of the Act. 8. At the outset, we note that the assessee has suo-motu disallowed the CSR expenditure while computing business income under Explanation 2 to section 37(1) of the Act. Therefore, the assessee has not claimed the said expenditure as a deduction under the head "profits and gains of business or profession". The only claim made by the assessee is a deduction under section 80G of the Act in respect of donations made to institutions which are duly approved under section 80G(5) of the Act. The controversy therefore revolves around the interplay between Explanation 2 to section 37(1) of the Act and the deduction available under secti....
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....). The Tribunal held that where the assessee made CSR contribution to another eligible fund which satisfied the conditions of section 80G of the Act, the deduction cannot be denied merely because the payment formed part of CSR expenditure. 11. Further, in Gujarat Mineral Development Corporation Ltd. vs. Principal Commissioner of Income-tax-1 [2025] 176 taxmann.com 227 (Ahmedabad - Trib.), the Ahmedabad Tribunal held that Explanation 2 to section 37(1) of the Act operates independently and is confined only to business expenditure. It cannot be extended to override the specific deductions granted under Chapter VI-A. The Tribunal categorically held that once a donation satisfies the statutory requirements of section 80G of the Act, the dedu....