CSR Expenses could also be eligible for deduction U/S 80G, provided conditions are fulfilled: ITAT
M/s. Rustomjee Realty Private Limited (ITA no.1585/M um./2023)
- 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 to an extent of Rs. 5,55,000 under section 80G of the Act.
- The AO vide order dated 26/09/2022 held that the amount has not been paid by the assessee voluntarily to become eligible for entity specified under section 80G of the Act. However, the same has been paid by the assessee as a mandatory requirement as per section 135 of the Companies Act, 2013 to spend a certain amount for specified activities.
- The CSR expenses are not allowed under section 37 of the Act pursuant to insertion of Explanation-2 to section 37 vide Finance Act, 2014 with effect from 01/04/2015.
- The AO had rejected the assesses claim without verifying the nature of contributions and observed that it is not a donation, and was not spent voluntarily for the eligibility of claim u/s 80G of the Act but due to legal obligation prescribed u/s 135 r.w. Schedule VII of companies Act, 2013.
ITAT Mumbai held as below:
- The contributions made u/s 135(5) of the companies Act are also eligible for deduction u/s 80G of Income Tax Act subject to assessee satisfying the requisite conditions prescribed for deduction u/s 80G of the Act.
- In the present case the AO has not dealt on these aspects, prima facie, considered the contributions as not voluntary but a legal obligation and has accepted the genuineness of the contributions.
- Accordingly, the disallowance made by the A.O of Rs.5,50,000 is deleted. Accordingly, this Ground of Appeal is allowed.
The copy of the order is as under: