CSR Expenditure Is Mandatory, Does Not Justify Disallowance Of Section 80G Deduction: ITAT

 

Interglobe Technology Quotient Private Limited, (ITA no. 95/Del/2024)

Grounds:

1.  That on the facts and circumstances of the case and in law. the CIT(A) erred in confirming the disallowance of deduction of Rs. 1,37,94,870 claimed under section 80G of the Act, being 50% of the eligible amount of donations made during the relevant previous year.

2.  That the CIT(A) further erred in confirming the disallowance to the extent of Rs.78,00,950 (claimed qua donations aggregating to Rs.1,56,01,900) on the ground that the underlying expenditure was not in the nature of donation, rather the same represented mandatory contribution towards Corporate Social Responsibility (CSR)

ITAT Delhi held as under:

1.  Admittedly the donations made as part of CSR expenditure were suo-motu disallowed by the appellant under section 37(1) of the Act.

2.  However, the assessing officer disallowed the entire deduction claimed by the appellant on the ground that donations forming part of CSR expenditure is not allowable as deduction under section 80G of the Act.

3.  Intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head “Income from Business or Profession”.

4.  For claiming benefit under section 80G, deductions are considered at the stage of computing “Total Taxable Income”. Even if any payment under section 80G forms part of CSR payment (Keeping in mind ineligible deduction expressly provided u/s 80G), the same would already stand excluded while computing, Income under the head “Income from Business or Profession”.

5.  The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to appellant under Chapter VIA for computing “Total Taxable Income” cannot be denied to appellant, subject to fulfilment of necessary conditions therein.

6.  In our view, appellant cannot be denied the benefit of claim under chapter VIA, which is considered for computing “Total Taxable Income”. If appellant is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of legislature. Accordingly, ground raised by appellant stands allowed

The copy of the order is as under:

1716873752-ITA 95 of 2024 InterGlobe Technology Quotient P Ltd