SHALBY LIMITED,AHMEDABAD ,GUJARAT vs. DCIT, CIRCLE-4(1)(1), AHMEDABAD , GUJARAT

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ITA 1474/AHD/2026Status: DisposedITAT Ahmedabad21 July 2026AY 2023-246 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that CSR expenditure and business expenditure operate in different fields, and there is no bar to claiming deduction under Section 80G for eligible donations, even if they also qualify as CSR. The specific restrictions under Section 80G for certain funds do not apply here.

What were the facts?

The assessee claimed deduction under Section 80G for donations made, which were also considered Corporate Social Responsibility (CSR) expenditure. The Assessing Officer and CIT(A) disallowed the deduction, arguing CSR expenditure is statutory and not voluntary. The assessee appealed to the ITAT.

What were the issues?

Whether donations made towards CSR obligations are eligible for deduction under Section 80G of the Income Tax Act, 1961.

Which sections of the Income-tax Act were involved?

Section 80G,Section 135,Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: DR. B.R.R. KUMAR, VICE-SHRI RAHUL CHAUDHARY

For Appellant: Shri Aseem L Thakkar, AR
For Respondent: Shri Ravindra, Sr. DR
Hearing: 10.06.2026Pronounced: 21.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA Nos.1492 & 1474/Ahd/2026 (Assessment Years: 2022-23 & 2023-24) Shalby Limited, The Deputy Commissioner Vs. Opp. Karnavati Club, of Income Tax, Sarkhej Gandhinagar Highway, Circle-4(1)(1), Ahmedabad-380015. Ahmedabad. [PAN :AAICS 5593 B] (Appellant) .. (Respondent) Appellant by : Shri Aseem L Thakkar, AR Respondent by: Shri Ravindra, Sr. DR Date of Hearing 10.06.2026 Date of Pronouncement 21.07.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-

The captioned two appeals have been filed by the assessee against the separate orders passed by Learned Commissioner of Income Tax (Appeals). National Faceless Appeal Centre (NFAC), Delhi, both dated 13.02.2026, pertaining to the Assessment Years 2022-23 & 2023-24, respectively.

2.

Since the issues involved in both the appeals are common and identical and arise out of similar facts, both the appeals were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. For the purpose of adjudication, the grounds of appeal as raised in ITA No.1492/Ahd/2026 for the Assessment Year 2022-23 are treated as the lead case. The decision rendered therein shall apply mutatis mutandis to the connected appeal in ITA No.1474/Ahd/2026 for the Assessment Year 2023-24.

3.

The assessee has raised the following grounds of appeal in ITA No. 1492/Ahd/2026 for AY 2022-23:

ITA Nos. 1492 & 1474/Ahd/2026 Asst. Years :2022-23 & 2023-24 - 2–

1.

The Ld. CIT(A) has erred in confirming the action of the Assessing Officer in passing an order u/s.143(3) of the Act which is illegal and bad in law hence the same deserves to be quashed.

2.

The Ld.CIT(A) has erred in confirming the disallowance of Rs.43,58,146/- made by the Assessing Officer in respect of deduction u/s.80G of the Income Tax Act 1961.

3.

The appellant craves leave to add, alter, amend, modify and/or withdraw all or any of the grounds of appeal before or at the time of hearing.

4.

The brief facts of the case are that the assessee is a company engaged in the business of operating multi-speciality hospitals and providing tertiary and quaternary healthcare services. It filed its return of income for the year under consideration, i.e. AY 2022-23, declaring a total income of Rs.8,28,04,783/-. The return was selected for limited scrutiny under CASS on four issues viz.

(i) deduction claimed under section 80G,

(ii) reduction in profit on account of application of Income Computation and Disclosure Standards (ICDS),

(iii) claim of large value refund, and

(iv) claim of large other expenses.

4.1 During the course of assessment proceedings, the Assessing Officer accepted the assessee's explanation on all the aforesaid issues except the claim of deduction u/s 80G of the Act. The Assessing Officer observed that the donations in respect of which deduction u/s 80G had been claimed also formed part of the expenditure incurred by the assessee towards Corporate Social Responsibility (CSR) under section 135 of the Companies Act, 2013. According to the Assessing Officer, CSR expenditure is incurred pursuant to a statutory obligation and, therefore, lacks the essential element of voluntariness required for a donation u/s 80G of the Act. Accordingly, the claim of deduction of Rs.43,58,146/- was disallowed.

ITA Nos. 1492 & 1474/Ahd/2026 Asst. Years :2022-23 & 2023-24 - 3–

5.

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who concurred with the view of the Assessing Officer by holding that CSR expenditure being mandatory in nature could not be regarded as a voluntary donation eligible for deduction u/s 80G of the Act and accordingly sustained the addition.

6.

Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

7.

Before us, the Ld. AR submitted that the authorities below erred in denying deduction u/s 80G merely because the payments also constituted CSR expenditure. The Ld. AR argued that there is no provision u/s 80G which prohibits deduction in respect of an otherwise eligible donation merely because it is made towards discharge of CSR obligations. The Ld. AR further submitted that Explanation 2 to section 37(1) merely disentitles the claim as business expenditure and has no application while considering deduction under Chapter VI-A of the Act.

8.

The Ld. DR, on the other hand, relied upon the orders of the lower authorities. It was submitted that CSR expenditure is incurred in discharge of a statutory obligation u/s 135 of the Companies Act, 2013 and cannot partake the character of a voluntary donation contemplated u/s 80G of the Act. The Ld. DR, therefore, contended that the Ld. CIT(A) was justified in sustaining the disallowance.

9.

We have heard the rival submissions and perused the material available on record. The only issue arising for our consideration is whether deduction u/s 80G of the Act can be denied merely because the donations also constitute expenditure incurred towards CSR u/s 135 of the Companies Act, 2013.

ITA Nos. 1492 & 1474/Ahd/2026 Asst. Years :2022-23 & 2023-24 - 4–

9.1 We find that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in the cases of Milacron India Pvt. Ltd. Vs. DCIT in ITA No.1696/Ahd/2024, Vimal Coal Pvt. Ltd. Vs. DCIT [175 taxmann.com 694], Gujarat Mineral Development Corporation Ltd Vs. PCIT [176 taxmann.com 227] and DCIT Vs. Adani Logistics Ltd. [183 taxmann.com 391]. For the sake of ready reference, the relevant findings of the Co- ordinate Bench of this Tribunal in the case of Adani Logistics Ltd (supra) are reproduced hereunder:-

“8. The second ground pertains to disallowance of Rs.29,10,000/- u/s. 80G of the Act, in respect of amount expended under CSR activity. The assessee had incurred expenditure of Rs.58,20,000/- towards CSR activity which was disallowed under the provision of section 37 of the Act. However, the assessee had claimed deduction u/s 80G of the Act, in respect of CSR expense donated to the eligible Trust which was disallowed by the Assessing Officer.

9.

We have heard the Ld. CIT-DR and the Ld. AR on this issue. The Co- ordinate Bench of this Tribunal in the case of Gujarat State Financial Services Limited vs. DCIT, (174 taxmann.com 461) has held that under Section 80G of the Act, the CSR expenses and the business expenses under Section 37 operate under different arena and that there was no bar in claiming deduction under Section 80G of the Act in respect of CSR contribution, if the fund to which donations were made, was eligible for such deduction. The provision of Section 80G of the Act restricts on deductibility of donation made pursuant to CSR obligation, as expressly provided under Section 80G(2)(a)(iiihk)/(iiihl) of the Act, in respect of donation made to Swachh Bharat Kosh and Clean Ganga Fund set up by the Central Government. Apart from the donation to these two funds, there is no restriction in respect of donation made to any other fund. In the present case, the donation was not made to Swachh Bharat Kosh and Clean Ganga Fund. Therefore, there was no bar on the assessee to claim the deduction under Section 80G of the Act. The Co-ordinate Bench of DCIT Vs Adani Logistics Ltd., AY- 2020-21 Kolkata Tribunal in the case of JMS Mining Pvt. Ltd. vs. DCIT, (130 taxmann.com 118) has held that Explanation-2 to section 37(1) of the Act which denies deduction for CSR expenses by way of business expenditure is applicable only to the extent of computing 'Business Income' under Chapter IV-D of the Act. The said Explanation cannot be extended or imported to CSR contributions which is otherwise eligible for deduction under any other provision or Chapter,

ITA Nos. 1492 & 1474/Ahd/2026 Asst. Years :2022-23 & 2023-24 - 5–

to say donations made to charitable trusts registered u/s 80G of the Act. The Co-ordinate Bench of this Tribunal has held in the case of Torrent Power Grid Ltd. In ITA No. 1191/Ahd/2025 dated 16.02.2025 that the CSR expenditure is allowable as deduction u/s 80G of the Act. The Co- ordinate Bench of Mumbai Tribunal also held in the case of Gabriel India Limited, (173 taxmann.com 219) that the assessee's claim for deduction under Section 80G of the Act in respect of CSR expenses was eligible for deduction. Considering the consistent view of the different Benches of the Tribunal on this issue, the Ld. CIT(A) had rightly allowed the relief to the assessee and accordingly the order of the Ld. CIT(A) is upheld. The ground taken by the Revenue is dismissed.”

9.2. In the case of DCIT v. Adani Logistics Ltd. (supra), the Coordinate Bench, while considering an identical issue, observed that CSR expenditure and business expenditure u/s 37 operate in different fields and that there is no bar on claiming deduction u/s 80G in respect of CSR contributions, provided the donation is otherwise eligible for deduction u/s 80G of the Act. The Co-ordinate Bench in the aforesaid judgment further observed that the restrictions specifically provided u/s 80G in respect of donations made to the Swachh Bharat Kosh and Clean Ganga Fund could not be extended to other eligible donations in the absence of any express statutory prohibition.

9.3. In the present case, the assessee has claimed deduction under section 80G in respect of donations made to eligible institutions. The mere fact that the said donations were also considered towards discharge of the assessee's CSR obligation under section 135 of the Companies Act, 2013, cannot, by itself, constitute a valid ground for denying deduction under section 80G of the Act.

9.4. In view of the above discussion and respectfully following the consistent judicial view of the Coordinate Benches, we hold that the assessee is entitled to claim deduction u/s 80G of the Act in respect of the eligible donations made by it, notwithstanding the fact that the same were also considered as CSR expenditure under section 135 of the Companies Act,

ITA Nos. 1492 & 1474/Ahd/2026 Asst. Years :2022-23 & 2023-24 - 6–

2013. Accordingly, we hold that the donation given by the assessee of Rs. Rs.50,00,000/- to High On Life Foundation approved by CIT(E), vide 80G/2019-20/A/10520 and Rs.60,00,000/-, donated to Shri Hiraba Charitable Trust approved by CIT(E), vide 286/15-16/T-673/80G(5) dtd. 08.02.2016, are eligible for deduction subjected to the ceiling prescribed by the Act.

9.5 In the result, the appeal of the assessee bearing ITA No. 1492/Ahd/2026 for AY 2022-23 is allowed.

10.

Since the issue involved in ITA No.1474/Ahd/2026 for the Assessment Year 2023-24 is identical, our findings recorded hereinabove shall apply mutatis mutandis to the said appeal also.

11.

In the result, both the appeals filed by the assessee are allowed.

The order is pronounced in the open Court on 21.07.2026.

Sd/- Sd/-

(RAHUL CHAUDHARY) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 21.07.2026 **btk आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent. 2. संबंिधत आयकर आयु� / Concerned CIT 3. 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad

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