S. 80G: Donation-Deduction-Corporate Social Responsibility (CSR) expenditure-Donation made as part of CSR obligation to an institution approved under section 80G is eligible for deduction-Disallowance under Explanation 2 to section 37(1) does not bar deduction under Chapter VI-A. [S . 37(1), Companies Act, 2013, S. 135]
The assessee incurred Corporate Social Responsibility (CSR) expenditure in compliance with section 135 of the Companies Act, 2013 and claimed deduction under section 80G in respect of donations made to institutions duly approved under the said provision. The Assessing Officer disallowed the claim on the ground that CSR expenditure is mandatory in nature and lacks the element of voluntariness required for a donation. The CIT(A) confirmed the disallowance. On appeal, the Tribunal held that Explanation 2 to section 37(1) merely prohibits the deduction of CSR expenditure as business expenditure and does not prohibit deduction under section 80G. Section 80G itself excludes only contributions made to the Swachh Bharat Kosh and Clean Ganga Fund forming part of CSR expenditure, and no other restriction can be imported into the provision. Since the Revenue had not disputed the genuineness of the donations or the eligibility of the donee institutions under section 80G, the assessee was entitled to the deduction. The Assessing Officer was directed to allow the claim after routine verification of the quantum and fulfilment of procedural conditions. (AY. 2018-19 & 2020-21)( ITA Nos. 180 & 181/Mum/2026, dated 18-05-2026.)
JM Financial Credit Solutions Ltd. v. DCIT www.itatonline.org .
[Coram : Hon’ble Shri Sandeep Singh Karhail, JM and Hon’ble Shri Jagadish, AM]