CSR Donation to Approved Institution Eligible for Income Tax Deduction Despite Restriction u/s 37: ITAT Allows ₹22.60 Lakh Deduction [Read Order]

The Income Tax Appellate Tribunal (ITAT) held that deduction under Section 80G of the Income Tax Act, 1961 cannot be denied merely because the donation made Ram Bajaj Foundation formed part of Corporate Social Responsibility (CSR) expenditure disallowed under Section 37 of the Act. The Tribunal granted relief of ₹22.60 lakh to the assessee

The issue arose from the order passed by the National Faceless Appeal Centre (NFAC) for the assessment year 2020-21. The assessee, Genesys International Corporation Limited engaged in the business of geographical information services had filed its return declaring nil income after claiming deductions under Sections 10AA, 80JJA and 80G.

During assessment proceedings, the Assessing Officer noted that the assessee had incurred CSR expenditure amounting to ₹50 lakh. While the assessee had not claimed the CSR expenditure as business deduction under Section 37 it claimed deduction of ₹22.60 lakh under Section 80G in respect of donation made to Ram Bajaj Foundation, an institution approved under Section 80G.

The Revenue denied the claim on the ground that CSR expenditure is specifically barred as deduction under Section 37 of the Act. The assessee contended that although CSR expenditure cannot be allowed as business expenditure under Section 37 there is no prohibition under Section 80G for claiming deduction on eligible donations made to approved institutions.

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The Tribunal observed that the embargo contained in Section 37 applies only to business expenditure and does not automatically extend to deductions otherwise available under Chapter VI-A of the Act.

The Bench comprising Saktijit Dey and Girish Agrawal noted that the departmental authorities had not disputed the approval status of the donee institution under Section 80G, nor was there any allegation regarding violation of conditions prescribed under the provision. Therefore, the assessee’s claim could not be denied merely because the payment also constituted CSR expenditure.

Allowing the appeal, the Tribunal directed the Assessing Officer to grant deduction under Section 80G amounting to ₹22,60,837.

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