AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 1464
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....ents of the grounds are more in the nature of peripheral arguments on the sole issue contested by the assessee in this appeal. 3. Brief facts of the case are that assessee filed its return of income on 29.09.2016, reporting total income at Rs. 6,83,43,310/-. Ld. AO observed that assessee had made Corporate Social Responsibility (CSR) expenses, which accordingly to him are not allowable as business expenses. Assessee had suo moto disallowed the same by adding it back while computing its total income reported in return of income filed. However, the same expenditure which was disallowed/added back while computing the total income, it was claimed as deduction under section 80G of the Act falling within Chapter-VIA towards donation made by it to the Prime Minister's Relief Fund approved under section 80G of the Act, eligible for 100% deduction. Assessee thus, claimed deduction of Rs. 22,94,274/- under section 80G for the donation made by it. Ld. AO disallowed the claim so made by the assessee, which was confirmed by CIT(A) in the first appeal. It is important to take note that facts relating to incurring of CSR expenditure and claiming of deduction to the Prime Minister Relief Fund u....
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....tedly, expenditure incurred towards CSR is specifically prohibited from being allowed as deduction towards business expenditure by insertion of Explanation 2 to Section 37(1) of the Act by Finance Act, 2014 w.e.f 01.04.2015. However, there is no such Ericsson India Global Services Pvt. Ltd. v. DCIT corresponding amendment to section 80G of the Act. Only condition for claiming deduction under section 80G of the Act as per the existing provision is the institute to which donation is made must have been registered under section 80G of the Act. Once the aforesaid condition is fulfilled, the donor is entitled to avail the deduction. This is also the view expressed by the Coordinate Bench in case of Honda Motorcycle and Scooter India Pvt. Ltd. (supra). The relevant observation are as under: "17. Apropos the issue of disallowance u/s. 80G of the Income-tax Act, 1961 (for short 'the Act'): The assessee made certain donation to approved institutions or funds and claimed 50% of the total donation made as deduction u/s. 80G. This amount also formed part of the CSR initiative of the assessee company which amounts to INR 22,81,29,964/-. It is observed that the assessee has duly....
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.... b) Advik Hi Tech (P.) Ltd. v. DCIT [2024] 168 taxmann.com 587 (Pune - Trib.) c) Optum Global Solutions (India) (P.) Ltd. v. DCIT [2023] 154 taxmann.com 651 (Hyderabad - Trib.) d) Power Mech Projects Ltd. vs. DCIT [2023] 156 taxmann.com 575 (Hyderabad - Trib.) e) Alubound Dacs India (P.) Ltd. v. DCIT [2024] 163 taxmann.com 536 (Mumbai - Trib.) f) FDC Ltd. v. PCIT [2023] 157 taxmann.com 387 (Mumbai - Trib.) 4.2. We also refer to the decision of co-ordinate bench of ITAT Mumbai in the case of ACIT vs. Blue Dart Express Ltd. in ITA No. 1101/Mum/2024), where the Tribunal observed as under: "9. We have heard both the parties and also perused the relevant material referred to before us. First of all from the perusal of the re-assessment order which is the subject matter of revision u/s. 263 by the ld. PCIT, we find that this was one of the ground for reopening and ld. AO has raised specific query as noted above on exactly same issue. The assessee has given its detailed reply and after examining those replies, the ld. AO has allowed the deduction u/s. 80G holding that assessee has already disallowed CSR expenses u/s. 37(1), and ther....
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....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 contributions made to these Funds mentioned in Section 80G(2)(a)(iiihk) and (iiihl) only. It is an undisputed fact that the assessee has not claimed any deduction against the aforesaid clauses of 80G (2)(a) of the Act and as such entire donation claimed by the assessee is allowable u/s. 80G. The Ministry of Corporate Affairs ("MCA") has issued "FAQs" through General circular no. 01/2016 dated January 12, 2016 (FAQ No. 6) and has clarified on the issue as follows: "Question No. 6: What tax benefits can be availed under CSR? Answer: No specific tax exemptions have been extended to CSR expenditure per se. The Finance Act, 2014 also cl....
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....t the contribution should be voluntary and that the CSR spend is an application of income which is eligible for deduction from the gross total income of the assessee as per the provisions of section 80G. • 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 with effect from 1-4-2015 • The "Explanatory Notes to the provisions of Finance (No.2) Act, 2014" issued by the Central Board of Direct Taxes vide its Circular No.01/2015 dated 21-1-2015 explaining the aforesaid amendment, clarifies that 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 and that 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 expenditure. However, it is pertinent to note that though, the expenditure incurred towards CSRs is not an expenditure incurred for ....
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....scribed 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. Therefore, there is merit in the submission of the assessee that though the quantum of CSR spend is mandatory there is no mandate on how amount is to be spent or to whom the contribution is to be made. Accordingly the act of the assessee to choose to Reliance Foundation and Shyam Kothari Foundation which are eligible to accept donations under section 80G is voluntary and is not mandated by section 135 of the Companies Act 2013. Further from the perusal of CSR Rules as applicable in assessee's case, it is noticed that the monitoring of the CSR spend is to ensure that the same is as per the CSR policy of the company and it does not provide for monitoring the utilization of the funds by the third party donees. In any case the donations made for a specific cause does not result in denial of deduction which is otherwise allowable as per the provisions of section ....