2024 (12) TMI 1522 - AT - Income Tax

Denial of Deduction u/s 80G - contribution towards Prime Minister s National Relief Fund - assessee spent an amount towards CSR expenditure but disallowed the same in statement of total income - HELD THAT - Though deduction has been granted for donation to these funds however it has specifically been made clear that any sum spent in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act 2013 towards these funds will not be eligible for deduction from the total income of the donor. We find that there is no such restriction for donation out of CSR funds to Prime Minister s National Relief Fund. We are of the considered opinion that the impugned deduction u/s 80G would be available to the assessee. AR has cited many decisions of Tribunal taking a view favorable to the assessee which include Interglobe Technology Quotient Pvt. Ltd. 2024 (6) TMI 8 - ITAT DELHI as well as Jamnagar Utilities and Power P. Ltd. 2024 (7) TMI 1585 - ITAT MUMBAI - Therefore we take similar view in preference to view expressed in the earlier decision of Agilent Technologies international P. Ltd. 2023 (12) TMI 1090 - ITAT DELHI Accordingly we direct Ld. AO to allow impugned deduction u/s 80G. Assessee appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question addressed in this judgment is whether the assessee is entitled to a deduction under Section 80G of the Income Tax Act for a contribution made to the Prime Minister's National Relief Fund as part of its Corporate Social Responsibility (CSR) expenditure. Specifically, the issue is whether such a deduction is permissible given the legislative framework and prior interpretations by tax authorities and tribunals.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The relevant legal framework involves Section 80G of the Income Tax Act, which allows deductions for donations to certain funds and charitable institutions. The Finance Act, 2014, and Circular No.1/2015 clarify that CSR expenditures are not deemed to be incurred for business purposes and are generally not deductible under Section 37. However, deductions may be permissible under Sections 30 to 36 if the conditions specified therein are met. The Finance Act, 2015, further clarifies the treatment of donations to specific funds like the Swachh Bharat Kosh and Clean Ganga Fund, explicitly excluding CSR-related donations from deductions.

Court's Interpretation and Reasoning

The court examined the legislative intent behind CSR expenditure and its treatment under the Income Tax Act. It noted that while CSR expenses are not deductible under Section 37, the law does not explicitly prohibit deductions under Section 80G for donations to certain funds, including the Prime Minister's National Relief Fund. The court emphasized that the prohibition on CSR deductions applies specifically to the funds mentioned in the Finance Act, 2015, and does not extend to the Prime Minister's National Relief Fund.

Key Evidence and Findings

The court considered the nature of the CSR expenditure and its classification as an application of income rather than an expense incurred for business purposes. It also reviewed previous tribunal decisions, including those favorable to the assessee, which supported the claim for deduction under Section 80G.

Application of Law to Facts

The court applied the legal framework to the facts of the case, determining that the assessee's donation to the Prime Minister's National Relief Fund qualifies for a deduction under Section 80G. The court found that the legislative and regulatory framework does not preclude such a deduction, provided the donation meets the criteria specified in Section 80G.

Treatment of Competing Arguments

The court considered the arguments presented by both the appellant and the respondent. The appellant argued for the deduction based on the absence of a specific prohibition in the law, while the respondent relied on the interpretation that CSR expenditures are generally not deductible. The court favored the appellant's interpretation, citing tribunal decisions that supported the deduction.

Conclusions

The court concluded that the deduction under Section 80G for the assessee's donation to the Prime Minister's National Relief Fund is permissible. It directed the Assessing Officer to allow the deduction, aligning with the favorable tribunal decisions and the specific provisions of the Income Tax Act.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

"Considering all the above facts and circumstances of the case, we are of the considered opinion that the impugned deduction u/s 80G would be available to the assessee."

Core Principles Established

The judgment establishes that while CSR expenditures are generally not deductible under Section 37, donations to certain funds, like the Prime Minister's National Relief Fund, may qualify for deductions under Section 80G if they meet the specified conditions. The decision reinforces the principle that legislative intent and specific provisions must guide the interpretation of tax deductions.

Final Determinations on Each Issue

The court determined that the assessee is entitled to the deduction under Section 80G for the contribution to the Prime Minister's National Relief Fund. The appeal was allowed, and the Assessing Officer was directed to grant the deduction.