Deduction u/s 80G can be claimed irrespective of the fact that amount donated is attributable to CSR Expense
Facts of the case:
The Assessee company incurred CSR expenses amounting to Rs. 1,35,00,000 in the form of donation to charitable trust.
This amount towards CSR expenses was expended by way of donation to a charitable trust.
The Assessee claimed deduction of Rs. 67,50,000/- (50% of Rs. 1,35,00,000/-) under section 80G on account of donation made to charitable trust, included in the CSR expense.
The Principal Commissioner of Income Tax disallowed such claim of assessee stating that when there is an express prohibition u/s 37 of the Income Tax Act, 1961 for CSR expenditure, deduction u/s 80G could not be allowed.
Applicable provision
Section 37 provides for deduction of expenditure. According to the provisions laid under section 37 of the Income Tax Act, 1961 (Act), any expenditure incurred on CSR activities shall not be allowed as a business expenditure.
Section 80G: There are certain restriction in Section 80G with respect to donation to two funds i.e., Swachh Bharat Kosh and Clean Ganga Fund. If any CSR expense is incurred in respect of these two funds which has been classified as CSR expense, then deduction u/s 80G cannot be claimed for donation to these two funds, other than that there are no other restrictions
Decision of the Kolkata ITAT Bench:
ITAT held that the prohibition in Section 37 of the Act cannot be extended or imported to CSR contributions which is otherwise eligible for deduction under other provision or Chapter of the Act. There is specific restriction in Section 80G and only the donation made to those funds cannot be claimed as deduction. Any eligible donation (even if classified as CSR expense) can be claimed as deduction u/s 80G if the donation is made to funds other than those mentioned above.
Comments
Since the legislature has specifically provided for two specific exceptions in section 80G, then it is the implied intent of the Legislature to permit deduction under section 80G in respect of CSR contributions made to all other eligible funds/organizations.
