SECURE METERS LIMITED,UDAIPUR vs. DY. COMMISSIONER OF INCOME TAX. CIRCLE -2 , UDAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 737/Jodh/2025 (Assessment Year – 2020-21) SECURE METERS LIMITED DY. COMMISSIONER OF INCOME E-CLASS PRATAP NAGAR TAX, CIRCLE-2 INDUSTRIAL AREA, UDAIPUR- UDAIPUR 313001 PAN No. AACCS 8785 M Assessee by Shri Amit Kothari, CA (Virtual) Shri Anil Kumar Bharadwaj, CIT (Virtual) Revenue by Date of Hearing 27 / 04 / 2026. Date of Pronouncement 27 / 07 / 2026. ORDER PER: SUDHIR PAREEK, J.M. The instant appeal arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as the “Ld. CIT(A)/NFAC”) dated 25.08.2025 with respect to the assessment year 2020-21 challenging disallowance of the claim of deduction under section 80G of the Income Tax Act, 1961 where the appellant/assessee has raised the following grounds of appeal: 1. Under the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [Ld. CIT(A), NFAC, has erred in upholding the action of the Learned Assessing Officer (Ld. AO) in disallowing the deduction claimed under section 80G of the Income-tax Act, 1961, amounting to Rs.

2 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 2,60,00,000/-, being donation made to eligible charitable trusts/institutions. The said donation qualifies for deduction under section 80G, and therefore, the finding of the Ld. CIT(A), NFAC is unjustified, unwarranted, and bad in law. 2. Under the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [Ld. CIT(A), NFAC, has erred in upholding the action of the Learned Assessing Officer (Ld. AO) in charging interest under section 234B and 234C of the IT Act, whereas no interest was chargeable. 3. The appellant craves leave to add, amend, alter, modify, 3 DLEETE and /0R change all OR any of the above grounds of appeal on OR before the date of hearing. 4. The appellant prays justice and appeal deserves to be allowed

3 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 well-being of the society. If deduction u/s 80G is allowed it would defeat the very intent of government and accordingly, the claim of deduction was denied by the AO. 3. In appeal, the Ld. CIT(A) vide para 7 on page 31 has observed that the appellant has claimed deduction u/s 80G amounting to Rs. 2,60,00,000/- being 50% donation of Rs. 5,20,00,000/- made to charitable trust / institutions, out of the total CSR expenditure of Rs. 6,24,26,360/-. The Ld. CIT(A) has discussed the provisions of section 135 of the Companies Act and he has stated that no such deduction can be allowed, by further observing that, the Finance Act 2014 clarified that any expenditure incurred by the Companies on CSR will not be allowed as expenditure incurred for the purpose of business. The intention of legislature is therefore clear that no deduction of CSR expenditure will be allowed under the provisions of the Act. He therefore upheld the findings of the Ld. AO in making the disallowance. 4. The Ld. AR contented that the new explanation In subsection (1) of section 37 of the Act inserted with effect from 2015-16 which prohibits deduction on account of CSR expenses incurred in accordance with section 135 of the Companies Act, only restricts business expenditure. The Section 80G is under

4 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 chapter VIA which is an independent section for allowing deduction of donation. The text of the aforesaid Explanation inserted in section 37 reads as under : “37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". …………. Explanation 2.—For the removal of doubts, it is hereby declared that for the purposes of sub- section (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 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.” 5. The Ld. AR contended that Section 80G of the Act allows deduction to an assessee on gross qualifying amount which is the aggregate of the donations to any of the institutions/bodies mentioned in the section which, inter alia, includes a trust to which the said section applies. The relevant extract of the section has been reproduced below: Deduction in respect of donations to certain funds, charitable institutions, etc. 80G. (1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section,— (i) in a case where the aggregate of the sums specified in sub-section (2) includes any sum or sums of the nature specified in sub-clause (i) or in sub-clause (iiia) or in sub-clause (iiiaa) or in sub-clause (iiiab) or in sub-clause (iiib) or in sub-clause (iiie) or in sub-clause (iiif) or in sub-clause (iiig) or in sub-clause (iiiga) or sub-clause (iiih) or sub-clause (iiiha) or sub-clause (iiihb) or sub- clause (iiihc) or sub-clause (iiihd) or sub-clause (iiihe) or sub-clause (iiihf) or sub-clause (iiihg) or sub-clause (iiihh) or sub-clause (iiihi) or sub-clause (iiihj) or sub-clause (iiihk) or sub-clause (iiihl) or sub-clause (iiihm) or in sub-clause (vii) of clause (a) or in clause (c) or in clause (d) thereof, an

5 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 amount equal to the whole of the sum or, as the case may be, sums of such nature plus fifty per cent of the balance of such aggregate; and (ii) in any other case, an amount equal to fifty per cent of the aggregate of the sums specified in sub-section (2). (2) The sums referred to in sub-section (1) shall be the following, namely :— (a) any sums paid by the assessee in the previous year as donations to— (i) …….. ………… (iv) any other fund or any institution to which this section applies; or …………. (4) Where the aggregate of the sums referred to in sub-clauses (iv), (v), (vi), (via) and (vii) of clause (a) and in clauses (b) and (c) of sub-section (2) exceeds ten per cent of the gross total income (as reduced by any portion thereof on which income-tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), then the amount in excess of ten per cent of the gross total income shall be ignored for the purpose of computing the aggregate of the sums in respect of which deduction is to be allowed under sub-section (1) ……….. (5A) Where a deduction under this section is claimed and allowed for any assessment year in respect of any sum specified in sub-section (2), the sum in respect of which deduction is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other assessment year.” 6. As per the aforesaid provision, appellant is allowed deduction in terms of section 80G on contributions made as donation to an institution registered under section 80G of the Act. It is undisputed that the Trusts to whom the donation of Rs 5,20,00,000/- were made are registered u/s 80G of the IT act. Section 37 of the Act is a residuary provision and provides for deduction of expenditure

6 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 incurred wholly and exclusively laid out or expended for the purpose of business. It forms part of Chapter IV of the Act, which prescribes the provisions for computing income of an assessee under various heads of income. Once the income is computed in terms of Chapter IV, the assessee can claim deduction, inter-alia as per provisions of section 80G, prescribed in Chapter VIA of the Act, to compute the Total Income. A reference may be made to provisions of section 80A of the Act. Sub-section (1) thereto provides that “in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to 80U.

7 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 8. The appellant referred to the decisions, wherein Courts and Tribunals have allowed deduction in terms of section 80G of the Act with respect to expenditure disallowed in terms of section 37(1) of the Act. The Hon’ble Madhya Pradesh High Court in the case of Addl CIT vs. Badrinarayan Shrinarayan Akodiya: 101 ITR 817, directed the Revenue to allow claim of deduction under section 80G of the Act, wherein the department disallowed deduction of the amount paid by the assessee as contribution to the Chief Minister's Drought Relief Fund by holding it as an inadmissible deduction under section 37(1) of the Act.

FAQ 3.11: What tax benefits can be availed under CSR? MCA’s Answer: No specific tax exemptions have been extended to CSR expenditure. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. Treatment under Income Tax Act:

Finance Act 2014 (2014-15 was fiscal year from which CSR was made mandatory u/s 135 of the Indian Companies Act 2013) had made it clear that “CSR Expenditure” shall not be allowed as “Business Expenditure” under section 37 of

8 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 Income Tax Act, 1961. However, CSR expenditure which is allowed as deduction under other sections shall be permissible. The ld. AR relied on the order of ITAT Bangalore, dated 30th November 10. 2021, in the case of Sling Media Private Ltd. Vs DCIT (ITAT Bangalore), Appeal Number: ITA. No. 197/Bang/2020 135 Taxmann. Com 164 where it was held that assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing ‘Total Taxable Income”. If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature“. It further added that 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”. The Ld. AR contended that similar view was taken by Hon’ble ITAT, Bangalore in the case of Allegis services (India) Pvt.Ltd., Bangalore vs ACIT in ITA No.1693/Bang/2019.

9 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 11. In the case of JMS Mining Pvt. Ltd. Vs. PCIT, Kolkata-2 in I.T.A. No. 146/Kol/2021 (2021) 130 taxmann. Com 118 it was held that since Parliament intended certain restrictions to only CSR expenditure in respect of donations included by an assessee as CSR expenditure has impliedly not made any prohibition/restriction in respect of claim of CSR expenses in other cases if it is otherwise eligible under Section 80G of the Act.

10 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 deduction of donations as per Section 80G of the Act, even though, assessee is not gaining any benefit out of any reciprocity from donee. Similar is the case of CSR expenditure.

11 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 80G cannot be denied merely because the expenditure forms part of CSR. In our view, Denial of such deduction would lead to double disallowance, which is not the intent of the legislature. Further, the clarification issued by the Ministry of Corporate Affairs also recognizes that while CSR expenditure is not allowable as business expenditure, deductions under other provisions may still be available if conditions are satisfied. In view of that matter, the contention of the Revenue that CSR expenditure is not voluntary does not hold merit in the context of section 80G. The essential requirement under section 80G is that the payment must be a donation to eligible institutions, and that condition stands fulfilled in the present case.

12 ITA No. 737/Jodh/2025 Asst. Year: 2020-21 18. In the result, the appeal of the assessee is allowed.

Order pronounced on 27/07/2026 under Rule 34(4), in accordance with the ITAT Rules, 1963.

Sd/- Sd/- (DR. MITHA LAL MEENA) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 27/07/2026. Nimisha Sr. PS True Copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File BY ORDER,