Expenses under CSR activities may be claimed under 80G of IT Act





First American (India) Private Limited Vs Asst. CIT (ITAT Bangalore) ITA No.1762/Bang/2019



Facts of the Case: - Assessee is a company engaged in the business of BPO operations, software services and developing, designing and selling of IT infrastructure to support the business processes of its group companies.


Assessee filed its return of income on 15/10/2016 declaring income of Rs.61,10,73,110/ Subsequently return was revised on 30/03/2018 declaring income of Rs.58,67,90,780/-. The case was selected for scrutiny and notice under section 143 (2) and 142 (1) along with questionnaire was issued to assessee. From the details furnished by the assessee Tax officer observed that assessee claimed deduction amounting to Rs.90,81,516/- under section 80 G of the Act towards donation paid. Tax officer was of the opinion that claim made under section 80 G of the Act, was not allowable as amount was forming part of CSR expenses debited to profit and loss account and hence disallowed it. Aggrieved by the disallowance, Assessee filed an appeal before CIT


Tribunal Ruling


Tribunal observed CSR expenses are required to be incurred by companies in terms of section 135 of the Companies Act 2013(CA Act 2013) and the deduction under section 37(1) of the Income Tax Act is not available in light of Explanation 2 to section 37(1) of the Income Tax Act(IT Act). In the present case, the tax officer has rejected the taxpayer’s claim under section 80G of the Income Tax Act without verifying the nature of contributions and observed that it is not a donation, and was not spent voluntarily for the eligibility of claim under section 80G of the IT Act but due to legal obligation prescribed under section 135 of the Companies Act 2013. Further, after examining section 80G of the IT Act, the Tribunal observed that in respect of following donations, it is specifically provided that if they are incurred in pursuance of CSR, deduction under section 80G of the Income Tax Act will not be available. They are Swachh Bharat Kosh & Clean Ganga Fund.


Tribunal observed that while these two exceptions are provided in Section 80G of the IT Act, it can be inferred that the other contributions made under section 135(5) of the CA 2013 are also eligible for deduction section 80G of the IT Act subject to taxpayer satisfying the requisite conditions prescribed for deduction under section 80G of the IT Act. As the tax officer did not deal with these aspects and merely considered the contributions as not voluntary but a legal obligation under CSR policy, the Tribunal remanded back to the tax officer for a fresh examination and verification of facts, subject to taxpayer satisfying requirements of section 80G of the IT Act.


Conclusion :-While the Tribunal has remanded the issue to the tax officer for fresh examination, it has made an important observation that CSR spend, even though made under a legal obligation under section 135 of CA 2013, can be claimed as deduction under section 80G of the IT Act (except for Swachh Bharat Kosh and Clean Ganga Fund) subject to fulfilment of conditions prescribed for section 80G of the IT Act