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2023 (9) TMI 474 - AT - Income TaxDeduction u/s 80G - donations which formed part of the spend towards CSR - assessee is not claiming the contribution to the trust as business expenditure and suomoto disallowed the same, but claiming this expenditure as deduction under section 80G of the same, such a claim cannot be denied - HELD THAT - Section 80G(2)(iiihk) and (iiihl) of the Act expressly provide that such sums donated for Swatch Bharath Kosh and Clean Ganga Fund shall be the amounts other than the sums spent by the assessee in pursuance of CSR, meaning thereby the donations made towards Swatch Bharath Kosh and Clean Ganga Fund spent as a part of CSR are not qualified for deduction under section 80G of the Act. Out of so many entries under section 80G(2) of the Act, only donations in respect of two entries are restricted if such payments were towards the discharge of the CSR. The Legislature could have put a similar embargo in respect of the other entries also, but such a restriction is conspicuously absent for other entries. The irresistible conclusion that would flow from it is that it is not the legislative intention to bar the payments covered by section 80G(2) of the Act which were made pursuant to the CSR, and other than covered by section 80G(2)(iiihk) and (iiihl) of the Act. As stated above, clue can be had from the restrictions by way of section 80G(2)(iiihk) and (iiihl) of the Act. See JMS Mining (P.) Ltd 2021 (7) TMI 907 - ITAT KOLKATA . Appeal of assessee is allowed.
Issues Involved:
1. Whether the contribution towards Corporate Social Responsibility (CSR) can be claimed as a deduction under section 80G of the Income Tax Act, 1961. 2. The applicability of section 37(1) and Explanation-2 to section 37(1) of the Income Tax Act, 1961 concerning CSR expenditures. 3. The interpretation of section 80G(2) of the Income Tax Act, 1961 in the context of CSR contributions. Issue 1: Deduction under Section 80G for CSR Contribution The assessee, Power Mech Projects Limited, contributed Rs. 44 lakhs to a trust registered under section 12A of the Income Tax Act as part of their CSR obligation. Initially, they disallowed this expenditure under section 37(1) but later claimed it under section 80G. Both the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) rejected this claim, citing that the contribution lacked voluntariness as it was mandated by law under section 135 of the Companies Act. They argued that once the expenditure is disallowed under section 37(1), it cannot be claimed under section 80G. Issue 2: Applicability of Section 37(1) and Explanation-2 The authorities emphasized that Explanation-2 to section 37(1) clearly states that any expenditure towards CSR activities is not considered business expenditure. The assessee complied by not claiming the CSR expenditure under sections 30 to 36 and added it back to the Profit & Loss account. The core issue was whether the same amount could be claimed under section 80G after being disallowed under section 37(1). Issue 3: Interpretation of Section 80G(2) The Tribunal examined whether donations made for CSR purposes could qualify for deductions under section 80G(2). It was noted that section 80G(2)(iiihk) and (iiihl) specifically exclude certain CSR expenditures (Swachh Bharat Kosh and Clean Ganga Fund) from being claimed under section 80G. However, no such restriction exists for other CSR-related donations. The Tribunal concluded that the legislative intent was not to bar CSR contributions from being claimed under section 80G, except for the specified exclusions. Conclusion and Judgment: The Tribunal, referencing various precedents, held that since the assessee met the conditions of section 80G, the CSR contributions could be claimed as a deduction under this section. The Tribunal emphasized that the absence of a broader legislative restriction indicates that other CSR donations are eligible for deduction under section 80G. Consequently, the appeal was allowed in favor of the assessee, permitting the deduction of CSR contributions under section 80G. Order Pronouncement: The judgment was pronounced on August 31, 2023, allowing the appeal of the assessee.
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