The Income Tax Appellate Tribunal (ITAT), Chennai Bench, in a recent ruling, has allowed a deduction under Section 80G of the Income Tax Act for a donation made out of Corporate Social Responsibility (CSR) funds to the Prime Minister’s National Relief Fund (PMNRF). The case pertained to the company, which contributed ₹38.54 lakhs to the PMNRF during the Assessment Year (AY) 2018-19.
The company initially claimed a 100% deduction under Section 80G for this donation, which was denied by the Assessing Officer (AO) and later upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. However, the ITAT ruled in favor of the assessee, striking down the CIT(A) order.
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During the assessment proceedings, the AO disallowed the claim for deduction, arguing that CSR expenditure is not a voluntary contribution but a mandatory requirement under the Companies Act, 2013. According to the AO, allowing such deductions would effectively result in the government subsidizing CSR expenditure, which contradicts the legislative intent. The CIT(A) upheld the AO’s decision, citing a previous ruling by the Delhi ITAT in Agilent Technologies International P. Ltd. (160 Taxmann.com 238), which disallowed similar claims.
The ITAT noted that while Explanation 2 to Section 37(1) of the Income Tax Act explicitly disallows CSR expenses as business expenditure, there is no such restriction for deductions claimed under Sections 30 to 36. It highlighted that CSR contributions can still be eligible for tax benefits under these sections if they meet the specified conditions.
In addition, the Tribunal examined the Finance Act, 2015, which introduced a restriction on CSR donations to the Swachh Bharat Kosh and Clean Ganga Fund from being claimed under Section 80G. However, it found that no such restriction exists for donations made to the PMNRF. Given this distinction, the ITAT ruled that the assessee was entitled to the deduction and directed the AO to allow the claim.
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This decision provides significant relief to corporate taxpayers who make CSR contributions to the PMNRF. It sets a precedent that CSR expenses, when donated to specific government-approved funds, can still qualify for deductions under Section 80G.
The ruling by the bench of Manu Kumar Giri, Judicial Member And Manoj Kumar Aggarwal, Accountant Member aligns with previous ITAT decisions in Interglobe Technology Quotient Pvt. Ltd. (Delhi Tribunal) and Jamnagar Utilities and Power P. Ltd. (Mumbai Tribunal).
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