ITAT upholds deletion of disallowance of deduction claimed u/s 80G of I.T Act in respect of CSR expenses [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench, upheld the deletion of disallowance of the deduction claimed under Section 80G of the Income Tax Act, 1961, in respect of Corporate Social Responsibility (CSR) expenses.

The assessee, Rustomjee Realty Private Limited, is engaged in the business of construction and development of real estate. After filing the return of income, the assessee's case was selected for scrutiny.

During the assessment proceedings, it was observed that the assessee incurred expenditure amounting to Rs. 11,00,000 on account of CSR. However, the assessee claimed a deduction of Rs. 5,55,000 under Section 80G of the Income Tax Act. The Assessing Officer (AO) held that the amount had not been paid voluntarily by the assessee to become eligible for an entity specified under Section 80G of the Income Tax Act. However, it was paid by the assessee as a mandatory requirement under Section 135 of the Companies Act, 2013, to spend a certain amount on specified activities.

The AO further held that the sums paid by the assessee could not be considered as a donation for the purpose of Section 80G of the Act, as the element of charity was missing. Accordingly, the AO disallowed the claim of deduction under Section 80G of the Act towards CSR expenditure. The assessee appealed to the CIT(A), who deleted the disallowance. Subsequently, the revenue filed a second appeal before the tribunal.

The tribunal observed that CSR expenses, although not allowed under Section 37 of the Act due to the insertion of Explanation-2 to Section 37 by the Finance Act, 2014, with effect from 01/04/2015, are allowable under Section 80G of the Income Tax Act.

After reviewing the facts and records, the two-member bench of Om Prakash Kant (Accountant Member) and Sandeep Singh Karhail (Judicial Member) upheld the deletion of disallowance of the deduction claimed under Section 80G of the Income Tax Act in respect of CSR expenses.

Therefore, the bench dismissed the revenue appeal. Sanyogita Nagpal, Counsel, appeared for Revenue, and Naresh Kumar, Counsel, appeared for the assessee.

To Read the full text of the Order CLICK HERE

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