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TMI Blog2025 (4) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... e of convenience which are reproduced as below: 1. On the facts and in the circumstances of the case, the orders passed by the LAO and the Hon. CIT(A) are bad in law since the same were undertaken without appreciating the Appellant's submissions. 2. The Hon. CIT(A) erred in upholding the disallowances made by the LAO without considering that the same is not in accordance with the provisions of the Act to the extent they are prejudicial to the Appellant since the order is: a. Against the provisions of principles of natural justice and the rule of law; b. Against the provisions of the Income-tax Act, 1961 ('the Act') and the judicial precedence on the subject. 3. The Hon. CIT(A) erred in disallowing the claim made by the Appellant under section 80G of the Act, amounting to Rs. 57,79,500/ -. 4. The Hon. CIT(A) erred in not following the decisions of the jurisdictional Income-tax Appellate Tribunal in respect of allowability of deduction towards Corporate Social Responsibility expenses under Section 80G of the Act. 5. The Hon. CIT(A) erred in holding that the receipts issued by donee-organisations totalling to Rs.50,50,000 do not contain the approvals under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also cannot be claimed as deduction u/s 80G of the Act and accordingly, the amount of Rs. 57,79,500/- claimed by the assessee as deduction u/s 80G of the Act towards donations/contributions for the purpose of CSR Activities was disallowed and added back to the income of the assessee company. 2.2 Aggrieved by the assessment completed u/s 143(3) of the Act dated 23.12.2019, for the assessment year 2017-18, the assessee has preferred an appeal before the ld. CIT(A)/NFAC. 2.3 The ld. CIT(A)/NFAC dismissed the appeal of the assessee firstly on the ground that out of the total CSR expenses claimed amounting to Rs. 1,15,59,000/- u/s 80G of the Act, certain institutions receiving sums aggregating to Rs. 50,50,000/- from the assessee company do not contain the approvals u/s 80G of the Act and the remaining institutions receiving the sums aggregating to balance of Rs. 65,09,000/- (Rs.1,15,59,000/- (-) Rs. 50,50,000/-) have approvals u/s 80G of the Act. Therefore, the issue of deductibility u/s 80G of the Act should be restricted to Rs. 32,54,500/- being 50% of Rs. 65,09,000/- as against the deduction claimed of Rs. 57,79,500/- being 50% of Rs. 1,15,59,000/-. Further, ld. CIT(A)/NFAC was of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 4. The ld. D.R. on the other hand supported the order of the authorities below and vehemently submitted that if the statutory payment towards CSR expenditure are allowed as deduction u/s 80G of the Act, then it will defeat the very intention and purpose of the legislation. If the income tax act specifically provides that CSR expenditure is not an allowable expenditure u/s 37 of the Act, then the same also cannot be claimed as deduction u/s 80G of the Act. 5. We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that the assessee company made total donations/contributions amounting to Rs. 1,51,25,400/- towards its corporate social responsibility (CSR) activities as required u/s 135 of the Companies Act, 2013 out of which the donations/contributions amounting to Rs. 1,15,59,000/- was eligible for deduction u/s 80G of the Act. The donation paid towards CSR activity of Rs. 1,51,25,400/- was duly disallowed by the assessee company u/s 37 of the Act while computing the income from business/profession. However, an amount of Rs. 57,79,500/- (being 50% of the eligible donations amounting to Rs. 1,15,59,000/-) was claimed as deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80G to provide that the approval once granted shall continue to be valid in perpetuity. Further, the Commissioner will also have the power of withdraw the approval if the Commissioner is satisfied that the activities of such institution or fund are not genuine or are not being carried out in accordance with the objects of the institution or fund. This amendment will take effect from 1st day of October, 2009. Accordingly, existing approvals expiring on or after 1st October, 2009 shall be deemed to have been extended in perpetuity unless specifically withdrawn." It appeals that some doubts still prevail about the period of validity of approval under section 80G subsequent to 1.10.2009, especially in view of the fact that no corresponding change has been made in Rule 11A(4). To remove any doubts in this regard, it is reiterated that any approval under section 80G(5) on or after 1.10.2009 would be a one time approval which would be valid till it is withdrawn." 5.1 As can be seen above, the existing approval u/s 80G(5)(vi) of the Act expiring on or after 1st October, 2009 shall be deemed to have been extended in perpetuity unless specifically withdrawn. Further, any new approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, accordingly, apply to assessment year 2015-16 and subsequent years. 12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head 'Income form Business and Profession'. Further, clarification regarding impact of Explanation 2 to section 37(1) of the Income Tax Act in Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as under: "The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditure cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80G for all those sums that do not fall under section 80G(1)(i). Under Section 80G(2) (iiihk) and (iiihl) there are specific exclusion of certain payments, that are part of CSR responsibility, not eligible for deduction u/s80G. 14. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession", where as monies spent under section 80G are claimed while computing "Total Taxable income" in the hands of assessee. The point of claim under these provisions are different. 15. Further, 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 and Profession". 16. For claiming benefit under section 80G, deductions are considered at the stage of computing "Total taxable income". Even if any payments under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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