CSR Donation to Gujarat CM Swachchta Nidhi Eligible for Section 80G Deduction: ITAT [Read Order]

The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) has held that Corporate Social Responsibility (CSR) donations made to the Mukhyamantri Shree Swachchta Nidhi, Gujarat are eligible for deduction under Section 80G Of the Income Tax Act, 1961.

The decision was delivered in response to an appeal filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi, pertaining to the Assessment Year 2020-21.

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The assessee had originally filed its return of income on 20.01.2021, declaring total income of ₹493.41 crores. During scrutiny assessment, the Assessing Officer disallowed ₹1.78 crores claimed as a deduction under Section 80G, treating it as ineligible on the grounds that the contribution pertained to CSR expenditure. The assessment was finalized under Section 143(3) of the Act on 19.09.2022, determining the total income at ₹495.20 crores.

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Aggrieved by the disallowance, the assessee filed an appeal. The issue revolved around whether the donation of ₹3.57 crores made to the Gujarat CM Swachchta Nidhi as part of CSR obligations though already disallowed under Section 37 while computing business income could still be eligible for deduction under Section 80G. The assessee had claimed a 50% deduction of this donation amounting to ₹1.78 crores under Section 80G in its return.

The assessee's counsel, Vishal Kalra, argued that Section 80G(2)(a)(iiihk) and (iiihl) of the Act specifically restrict deductions only for CSR donations made to Swachh Bharat Kosh and Clean Ganga Fund, both Central Government initiatives. However, there is no such restriction for contributions to state-level funds like the Mukhyamantri Shree Swachchta Nidhi, Gujarat. To support his arguments, the AR relied on relevant judicial precedents, including the decision in Power Mech Projects Ltd. vs. DCIT.

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The bench of T R Senthilkumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member), after considering both sides, held that there was no general prohibition in the Income Tax Act that barred CSR contributions from being eligible for deduction under Section 80G.

It found that the assessee had waived the CSR amount under Section 37 but claimed it under Section 80G because the fund fell under deduction. The Tribunal stressed that Section 80G and Section 37 stand independently, and that deductions under Section 80G are permitted if the receiving fund is not excluded under the provision.

The ITAT also cited the ruling in PCIT vs. Gujarat State Fertilizers & Chemicals Ltd., where it was held that donations for CSR made to eligible funds could be claimed under Section 80G despite being disallowed under Section 37. Since Mukhyamantri Shree Swachchta Nidhi, Gujarat is not among the specifically excluded funds, the Tribunal concluded that the assessee was rightfully entitled to the deduction.

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To Read the full text of the Order CLICK HERE

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