The Income Tax Appellate Tribunal (ITAT), New Delhi recently granted relief to Cheil India by affirming that Corporate Social Responsibility (CSR) expenses incurred by them in light of contributions towards Clean Ganga Fund and Swacch Bharath Kosh qualify for tax deductions under Section 80G of the Income Tax Act, 1961.
The Income Tax Appeal was filed by Cheil India Private Limited, the regional headquarters for the advertising agency Cheil Worldwide in the South-West Asian region. The Assessee had filed their returns of income on 10.02.2021, which was processed under Section 143(3) of the Income Tax Act, 1961 resulting in disallowance of exemption of Rs.2,57,66,663/- claimed under Section 80G and interest under Section 115P, totaling Rs.5,79,69,120/-.
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The jurisdictional Assessing Officer (AO) initiated penalty proceedings under Section 270A of the Act, which was unsuccessfully appealed before the Commissioner of Income Taxes (Appeals) ( CIT(A) ).
Ananya Kapoor, Tarun Chanana and Shivam Yadav representing the Assessee brought on record a catena of decisions priorly passed by the ITAT and prayed that the ratio in the decisions may be followed in the adjudication of the present case.
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Harpreet Kaur, appearing for the Revenue submitted before ITAT that they could not controvert the submissions of the Assessee since the case is squarely covered in favour of the Appellant-Assessee.
The two-member Bench of the Income Tax Appellate Tribunal, New Delhi constituted by Shamim Yahya, Accountant Member and Sudhir Pareek, Judicial Member laid careful consideration to the decision of the Coordinate Bench of the same Tribunal in the case of M/s Ratna Sagar Pvt. Ltd. vs. ACIT (2024) which relied wholly on the decision in Interglobe Technology Quotient Private Limited Vs ACIT, Circle-10(1), New Delhi (2024).
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The ITAT in Interglobe held that Section 135 of the Companies Act, 2013 required companies to spend a certain percentage of their profits from the preceding three years on CSR activities such as setting up and running of schools and social business projects.
Alternatively, companies may choose to give donations to institutions that are engaged in undertaking such CSR projects, which too shall absolve the corporate entities of their CSR responsibilities.
Observing that any entity who incurs expenditures for CSR activities does not stand to gain any actual reciprocal benefit from such expenditure, the Bench held that the Tax Authorities may not disallow the expenditures under Section 80G of the Act.
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Respecting the precedential nature of the decision in Interglobe, the ITAT set aside the orders of the Revenue, allowing the appeal of the Assessee.
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