M/S. ACENTRA HEALTH SOFTWARE INDIA PRIVATE LIMITED,CHENNAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CHENNAI

आयकरअपील�यअ�धकरण ’बी’ �यायपीठ,चे�नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI �ी मनुकुमारिग�र, �ाियक सद� एवं �ी एस. आर. रघुनाथा लेखासद� BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER

आयकर अपील सं./ITA No. 1853/Chny/2026 �नधा�रण वष�/Assessment Years: 2020-21 M/s ACENTRA HEALTH v. The Dy. CIT/ACIT, SOFTWARE INDIA PRIVATE Corporate Circle-1(1), LIMITED, Chennai-600034 Prestige Palladium Bayan, 4th floor 129-140 Greams Road, Thousand Lights ,Greams Road S.O NUNGAMBAKKAM, CHENNAI 600006 , [PAN: AACCC4235C] (अपीलाथ�\Appellant) (��यथ�\Respondent)

अपीलाथ� क ओर से/ Appellant by : Mr. D. Anand, Advocate ��यथ� क ओर से /Respondent by : Mr. E. Elango, JCIT सुनवाई क तार�ख/Date of Hearing : 13.08.2026 घोषणा क तार�ख /Date of : 14.10.2026 Pronouncement आदेश / O R D E R PER MANU KUMAR GIRI, JM:

The captioned appeal filed by the assessee is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as "the Ld. LD.CIT(A)"], dated 15.01.2026, confirming the assessment order passed u/s.

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 2 :: 143(3) of the Income Tax Act, 1961 ("the Act"), for the Assessment Year ("AY") 2020-21. 2. The assessee has raised the following grounds of appeal as under: - 1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to law, facts, and circumstances of the case and is liable to be set aside. 2. The learned LD.CIT(A) failed to appreciate that the assessee had already suo motu disallowed the entire CSR expenditure while computing business income in accordance with Explanation 2 to section 37(1). Having done so, denial of deduction u/s. 80G results in double disallowance, which is impermissible in law. 3. The learned LD.CIT(A) erred in confirming the disallowance of Rs.9,36,298/- claimed as deduction u/s. 80G of the Act, without appreciating that the contributions were made to institutions duly approved u/s. 80G(2) and hence fully eligible for deduction. 4. The learned LD.CIT(A) ought to have appreciated that the genuineness of the donation as well as the eligibility of the donee institutions were not in dispute, and therefore the deduction u/s. 80G ought to have been allowed. 5. The learned LD.CIT(A) failed to appreciate that deduction u/s. 80G falls under Chapter VI-A and operates independently at the stage of computation of total income, after determination of gross total income, and is not governed by the provisions of section 37(1). 6. The learned LD.CIT(A) erred in relying upon CBDT Circular No. 01/2015, which only prohibits allowance of CSR expenditure as business expenditure u/s. 37(1), and does not extend to or restrict deduction u/s. 80G. For these and other grounds that may be rendered at the time of hearing it is most humbly prayed that the Hon'ble Tribunal may be pleased to delete the penalty and thus render justice. 3. Brief facts of the case are that the assessee is a private limited company engaged in the business of providing software development services. For Assessment Year 2020–21, the

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 3 :: assessee filed its return of income on 05.12.2020, declaring total income of Rs.16,13,51,900/-. During scrutiny assessment proceedings u/s. 143(3) of the Income Tax Act, 1961, the Assessing Officer (AO) noticed that the assessee had claimed a deduction of Rs.9,36,298/- u/s. 80G, representing 50% of contributions amounting to Rs.18,72,595/- made to eligible funds and institutions towards CSR activities. The assessee had incurred total CSR expenditure of Rs.21,30,985/- pursuant to its statutory obligation u/s. 135 of the Companies Act, 2013, and had already suo motu disallowed the said expenditure while computing business income, in accordance with Explanation 2 to Section 37(1) and CBDT Circular No. 01/2015 dated 21.01.2015. The AO issued a show-cause notice dated 11.03.2022, proposing to disallow the deduction claimed u/s. 80G on the ground that contributions made to discharge a mandatory CSR obligation could not be regarded as voluntary donations eligible for deduction. Rejecting the assessee's explanation, the AO disallowed Rs.9,36,298/- u/s. 80G and determined the total income at Rs.16,22,88,198/-. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. By order dated 15.01.2026, the LD.CIT(A) confirmed the disallowance. The assessee thereafter preferred an appeal before the Tribunal.

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 4 :: 5. The AR for the assessee contended that Section 37(1) governs the computation of business income, whereas Section 80G falls under Chapter VI-A and operates at the stage of computing total income after determination of gross total income. Since the entire CSR expenditure of Rs.21,30,985 had already been disallowed u/s. 37(1), the restriction applicable to business expenditure stood complied with. The separate deduction u/s. 80G was claimed in respect of eligible donations and was not a deduction of CSR expenditure as a business expense. The assessee also submitted that denying the deduction u/s. 80G after disallowing the expenditure u/s. 37(1) would result in double disallowance of the same outgo. According to the ld.AR for the assessee, the statutory scheme does not permit denial of an otherwise admissible Chapter VI-A deduction merely because the contribution also constitutes CSR expenditure. The assessee further submitted that contributions of Rs.18,72,595/- had been made to institutions eligible u/s.80G(2)(a)(iv). The deduction claimed was restricted to Rs.9,36,298/- representing 50% of the eligible contributions. The genuineness of the payments and the eligibility of the recipient institutions had not been disputed by the AO. The disallowance was founded solely on the mandatory nature of the CSR contributions. The assessee relied upon the specific restrictions u/s. 80G(2)(a)(iiihk) and 80G(2)(a)(iiihl) relating to contributions to the Swachh Bharat Kosh and Clean Ganga Fund. It argued that Parliament had expressly excluded

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 5 :: specified CSR contributions, and that such exclusions should not be extended to donations made to other eligible institutions when no corresponding prohibition had been enacted. The assessee argued that the CBDT Circular No. 01/2015 prohibits the allowance of CSR expenditure as a business deduction u/s. 37(1), but does not impose a blanket prohibition on deductions u/s. 80G. The assessee relied upon the following decisions in support of its claim: (i) M/s. Source Hov India Private Limited v. DCIT, ITA No.2454/Chny/2024, dated 10.12.2024; (ii) TVS Motor Company Ltd. v. PCIT, ITA Nos.1643 & 1644/Chny/2024, dated 03.01.2025; (iii) Acqueon Technologies Pvt. Ltd. v. DCIT, IT(TP)A Nos.34 & 115/Chny/2024, dated 30.05.2025. The assessee accordingly prayed that the disallowance of Rs.9,36,298/- be deleted and the deduction u/s. 80G be allowed. 6. The ld.DR for the revenue relied upon the orders of the authorities below. The ld.DR contended that expenditure incurred u/s. 135 of the Companies Act, 2013, arises from a statutory obligation and cannot be characterised as a voluntary charitable donation. Ld.DR further pleaded that since the assessee was legally required to incur CSR expenditure, the contributions lacked the voluntary character considered necessary by the Revenue for a claim u/s. 80G. Explanation 2 to Section 37(1), read with CBDT Circular No. 01/2015 and the

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 6 :: Explanatory Memorandum to the Finance (No. 2) Act, 2014, was relied upon to support the proposition that CSR expenditure should not receive tax relief merely because it was routed through an eligible institution. The Revenue disputed the assessee's interpretation that the express exclusions concerning the Swachh Bharat Kosh and Clean Ganga Fund necessarily imply that all other CSR contributions are deductible. On this basis, ld.DR for the Revenue supported the orders of the AO and LD.CIT(A) and sought dismissal of the assessee's appeal. 7. Now we would examine whether the deduction u/s. 80G can be denied merely because the contributions were made in discharge of the assessee's CSR obligation u/s. 135 of the Companies Act, 2013, when the expenditure has already been disallowed while computing business income u/s. 37(1). The issue is not whether CSR expenditure is deductible as a business expense. Explanation 2 to Section 37(1) expressly prohibits such deduction. The issue is whether that prohibition automatically extends to a deduction independently claimed u/s. 80G in respect of contributions made to eligible institutions. 8. In M/s. Source Hov India Private Limited v. DCIT, ITA No. 2454/Chny/2024, dated 10.12.2024, the Co-ordinate Bench of Tribunal considered the allowability of a deduction u/s. 80G for CSR contributions made to the Prime Minister's National Relief Fund. The Co-ordinate Bench of Tribunal distinguished the

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 7 :: prohibition on claiming CSR expenditure u/s. 37 from the availability of deductions under other provisions, subject to satisfaction of the conditions prescribed therein. It also considered the specific statutory restriction applicable to CSR contributions to the Swachh Bharat Kosh and Clean Ganga Fund and observed that the same restriction was not applicable to contributions from CSR funds to the Prime Minister's National Relief Fund. The Co-ordinate Bench of Tribunal accordingly held that the deduction u/s. 80G was allowable and directed the AO to grant the claim. Relevant extract of aforesaid order is as under: Our findings and Adjudication 4. There is no dispute to the fact that CSR expenditure is considered as an application of income. The Explanation-2 to Sec. 37(1) as inserted by Finance Act 2014 w.e.f. 01-04-2015 specifically provide that such CSR expenditure shall not be deemed to be an expenditure incurred by the assessee for the purpose of business or profession. The same is on the logic that the objective of CSR expenditure is to share burden of the Government in providing social services by companies having net worth / turnover / profit above a threshold. If such expenses are allowed as deduction the same would result into subsidizing of around one-third of such expenses by the Government by way of tax expenditure. However, Clause 13 of the Finance Act, 2014 provide that though deduction of CSR expenditure is not available u/s 37, however, if the CSR expenditure is of the nature as described in Sec.30 to Sec.36 of the act, the deduction of the same would be allowed under those sections subject to fulfillment of conditions as specified therein. The same is amply clear from

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 8 :: Circular No.1/2015 [F.NO.142/13/2014-TPL] dated 21- 01-2015 as under: - 13.3 The provisions of section 37(1) of the Income-tax Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Incometax 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 expenditures cannot be allowed under the provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, said section 37 has been amended to clarify that for the purposes of sub-section (1) of section 37 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 not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under said section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Income-tax Act shall be allowed as deduction under those sections subject to fulfillment of conditions, if any, specified therein.

It could thus be seen that there is prohibition on claiming such expenditure u/s 37. However, there is no such restriction for claiming deduction thereof u/s 30 to 36. In other words, It is quite possible to claim the deduction in other sections subject to fulfillment of conditions of those sections and allowability of CSR expenditure is not completely ruled out. 5. We further find that bouquet of activities that have been permitted under CSR Scheme, inter-alia, include contribution to Prime Minister’s National Relief Fund or any other fund set up by the Government for socio economic development. The impugned donation as made by the assessee is one of the prescribed modes of CSR Activities. 6. We also find that

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 9 :: Finance Act, 2015 has allowed tax benefits u/s 80G for donations made to Swachh Bharat Kosh and Clean Ganga Fund. The amendment and explanatory statement read as under: - Tax benefits for Swachh Bharat Kosh and Clean Ganga Fund Under the existing provisions of section 80G of the Income-tax Act, a deduction is allowed in computing the total income of a person in respect of donations made to certain funds and charitable institutions. The deduction is allowed at the rate of fifty percent of the amount of donations made except in the case of donations made to certain funds and institutions formed for a social purpose of national importance, where it is allowed at the rate of one hundred percent, such as the National Defence Fund set up by the Central Government, the Prime Minister's National Relief Fund, the Prime Minister's Armenia Earthquake Relief Fund, the Africa (Public Contributions-India) Fund, the National Children's Fund, the National Foundation for Communal Harmony etc. "Swachh Bharat Kosh" has been set up by the Central Government to mobilize resources for improving sanitation facilities in rural and urban areas and school premises through the Swachh Bharat Abhiyan. Similarly, Clean Ganga Fund has been established by the Central Government to attract voluntary contributions to rejuvenate river Ganga. With a view to encourage and enhance people's participation in the national effort to improve sanitation facilities and rejuvenation of river Ganga, it is proposed to amend section 80G of the Act so as to incentivise donations to the two funds. It is proposed to provide that donations made by any donor to the Swachh Bharat Kosh and donations made by domestic donors to Clean Ganga Fund will be eligible for a deduction of hundred per cent from the total income. However, any sum spent in pursuance of Corporate Social Responsibility under sub- section (5) of section 135 of the Companies Act, 2013, will not be eligible for deduction from the total income of the donor. The existing provisions of section 10(23C) of the Act provide for exemption from tax in respect of the income of certain charitable funds or institutions

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 10 :: like the Prime Minister's National Relief Fund ; the Prime Minister's Fund (Promotion of Folk Art); the Prime Minister's Aid to Students Fund; the National Foundation for Communal Harmony. Considering the importance of Swachh Bharat Kosh and Clean Ganga Fund, it is also proposed to amend section 10(23C) of the Act so as to exempt the income of Swachh Bharat Kosh and Clean Ganga Fund from income-tax. These amendments will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years.

It could be seen 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. 7. 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. The Ld. AR has cited many decisions of Tribunal taking a view favorable to the assessee. The same include the decision of Delhi Tribunal in Interglobe Technology Quotient Pvt. Ltd. (ITA No.95/Del/2024 dated 28-05-2024) as well as the decision of Mumbai Tribunal in Jamnagar Utilities and Power P. Ltd. (ITA No.211/Mum/2024 dated 24-07-2024). Therefore, we take similar view in preference to view expressed in the earlier decision of Delhi Tribunal in Agilent Technologies international P. Ltd. (160 Taxmann.com 238). Accordingly, we direct Ld. AO to allow impugned deduction u/s 80G. 8. The appeal stand allowed in terms of our above order. Order pronounced on 10th December, 2024.

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 11 :: The aforesaid decision supports the assessee's contention that Explanation 2 to Section 37(1) does not, by itself, establish a blanket prohibition against deductions u/s. 80G. The eligibility of the contribution must be examined under the applicable provisions of Section 80G. 9. In TVS Motor Company Ltd. v. PCIT, ITA Nos. 1643 & 1644/Chny/2024, dated 03.01.2025, The Co-ordinate Bench of Tribunal considered the issue of deduction u/s. 80G in the context of CSR expenditure in proceedings arising from an order u/s. 263. The Tribunal directed the AO to verify the receipts and the eligibility of the donee institutions and to allow the claim u/s. 80G in accordance with law. The appeals were partly allowed. 10. In Acqueon Technologies Pvt. Ltd. v. DCIT, IT(TP)A Nos. 34 & 115/Chny/2024, dated 30.05.2025, the Chennai Tribunal considered the disallowance of a deduction u/s. 80G for CSR contributions for Assessment Year 2020–21 and the subsequent assessment year. Following the decision in Source Hov India Private Limited, the Co-ordinate Bench of Tribunal held that CSR expenditure contributed to eligible donees, other than the specifically excluded Swachh Bharat Kosh and Clean Ganga Fund, could qualify for deduction u/s. 80G. The Co- ordinate Bench of Tribunal accordingly directed the AO to allow the deduction u/s. 80G. This order is particularly significant because the decision concerns directly addresses the distinction

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 12 :: between the disallowance of CSR expenditure u/s. 37(1) and the eligibility of a deduction u/s. 80G. 11. The above decisions of Co-ordinate Bench of Tribunal support the proposition that the disallowance of CSR expenditure u/s. 37(1) does not automatically preclude a deduction u/s. 80G. The claim must be examined in accordance with the conditions and exclusions prescribed u/s. 80G. 12. In the present case, the assessee has stated that total CSR expenditure of Rs.21,30,985/- was suo motu disallowed u/s. 37(1). Contributions of Rs.18,72,595/- were made to institutions claimed to be eligible u/s. 80G. The deduction claimed was Rs.9,36,298/- representing 50% of the contributions. The genuineness of the payments and the eligibility of the recipient institutions were not disputed by the lower authorities. If these facts are borne out by the record and the contributions satisfy the applicable statutory requirements, the ratio of the above Co-ordinate Bench decisions supports allowing the deduction u/s. 80G. 13. The Revenue's contention that the mandatory character of CSR expenditure, by itself, extinguishes eligibility u/s. 80G would not be sufficient to sustain the disallowance in the face of these decisions. The specific statutory exclusions must be applied to the contributions to which they relate and should not automatically be extended to all other eligible institutions.

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 13 :: 14. Having considered the rival submissions, the material available on record and the decisions of the co-ordinate Benches of the Tribunal, the issue is covered in favour of the assessee by the principles laid down in M/s. Source Hov India Private Limited v. DCIT, TVS Motor Company Ltd. v. PCIT and Acqueon Technologies Pvt. Ltd. v. DCIT. The prohibition contained in Explanation 2 to Section 37(1) concerns the allowance of CSR expenditure as a deduction in computing business income. It does not, by itself, conclusively determine the admissibility of a deduction u/s. 80G. Such admissibility must be determined independently, having regard to the eligibility of the donee, the nature of the contribution and the specific statutory restrictions applicable to the claim. 15. In the present case, the assessee has already disallowed the CSR expenditure of Rs.21,30,985 u/s. 37(1). The deduction of Rs.9,36,298 has been claimed separately u/s. 80G in respect of contributions of Rs.18,72,595 made to eligible institutions. The lower authorities have not disputed the genuineness of the payments or the eligibility of the recipient institutions; the disallowance has been made principally on the ground that the contributions arose from a mandatory CSR obligation. 16. Respectfully following the decisions of the co-ordinate Benches referred to above, the disallowance cannot be sustained merely on the ground that the contributions were made towards CSR activities. Accordingly, the AO is directed to allow the deduction of Rs.9,36,298 u/s. 80G.

ITA No. 1853/Chny/2026 (AY 2020-21) M/s Acentra Health Software India Pvt Ltd Vs DCIT :: 14 :: 17. In the result, appeal of the assessee is allowed. Order pronounced in the open court on the 14th day of October, 2026 in Chennai.

Sd/- Sd/- (एस. आर. रघुनाथा) (मनु कुमार िग�र) (S.R.RAGHUNATHA) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER �या�यक सद*य/JUDICIAL MEMBER चे�नई/Chennai, SANDEE +दनांक/Dated: 14th October 2026 Digitally signed by SANDEEP SNDP, Sr. PS P KUMAR Date: 2026.10.16 आदेश क ��त,ल-प अ.े-षत/Copy to: KUMAR 11:27:23 +05'30' 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF