Donation towards CSR Allowable u/s 80G of Income Tax Act: ITAT [Read Order]

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) held that the donation made towards Corporate Social Responsibility (CSR) shall be allowable under Section 80G of the Income Tax Act, 1961.

The assessee in the discharge of their obligation towards Corporate Social Responsibility (CSR), contributed a sum of Rs. 44 lakhs to a trust (Power Mech Foundation) which is registered under Section 12A of the Income Tax Act.

According to the assessee, since the expenditure was not allowable under Section 37 of the Income Tax Act, the assessee suo moto disallowed the same while computing the income from business income plans with the requirement of proviso to Section 37(1) of the Income Tax Act. Thereafter, the assessee claimed the contribution under Section 80G of the Income Tax Act.

The authorities rejected the contention of the assessee. According to them, there is no element of voluntariness of this contribution, because it was paid under the compulsion of law under Section 135 of the Companies Act, the assessee is not entitled to claim the contribution as a deduction under Section 80G of the Income Tax Act.

The Authorized Representative submitted that there is no bar on claiming CSR expenditure as a deduction if it falls within the scope of Sections 30 to 36 of the Income Tax Act or qualifies for deduction under Chapter VI-A. CBDT Circular No. 01/2015.

The Departmental Representative submitted that when the assessee spends some amount in discharge of their CSR, such spending cannot be said as voluntary and it is only under the compulsion of law. Since the element of voluntariness is missing in this case, the said spending does not fall in the ambit of Section 80G of the Income Tax Act.

It was further submitted that the assessee cannot claim compliance with the provisions under section 135 of the Companies Act at the same time when such payments are claimed as donations under Section 80G of the Income Tax Act.

The Two-member bench comprising of Rama Kanta Panda (Vice-President) and K. Narasimha Chary (Judicial member) held that the assessee satisfied the conditions of Section 80G of the Income Tax Act, the assessee is entitled to claim deduction under Section 80G of the Income Tax Act in respect of such donations which formed part of the spend towards CSR. Thus, the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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