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Facts
The assessee claimed deduction under Section 80G for Corporate Social Responsibility (CSR) expenditures. The Principal CIT (Pr. CIT) revised the assessment order, holding that CSR expenses are mandatory and not voluntary donations, hence not eligible for deduction under Section 80G. The assessee appealed this revisionary order.
Held
The Tribunal held that the Pr. CIT erred in setting aside the assessment order. It was observed that while CSR expenditure is mandatory, the choice of donating to specific institutions eligible under Section 80G can be voluntary. The Tribunal found that the disallowance of Section 80G deduction for CSR expenses is restricted only to specific clauses mentioned in Section 80G, and not applicable in this case. Therefore, the Pr. CIT's order was quashed.
Key Issues
Whether Corporate Social Responsibility (CSR) expenditure, mandated under the Companies Act, 2013, qualifies for deduction under Section 80G of the Income Tax Act as a voluntary donation.
Sections Cited
263, 143(3), 144B, 80G, 115BAA, 115BBA, 135, 37(1), 80JAA, 37
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI ARUN KHODPIA
The present appeal filed by the assessee is directed against the order passed u/s. 263 of the Income Tax Act, 1961 (for short ‘the Act’) by the Pr.CIT, Mumbai-6, dated 13.03.2025 arising out of assessment order passed u/s. 143(3) r.w.s. 144B of the Act dated 10.09.2022 for A.Y.2020- 21, as per the following grounds of appeal:
“1 On the facts and circumstances of the case and in law, the learned PCIT erred in setting aside for inquiry the assessment order that is passed after due inquiry and verification related to the donation under section 80G, The order passed after the inquiry, being not fulfilling both the cumulative condition of erroneous and prejudicial to the interest of the revenue and replacing the opinion of Ld. PCIT against the opinion of the Ld. AO is bad in law and needs to be cancelled.
Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law, the learned PCIT erred in continuing with the same proceedings u/s.263 even after dropping the only reason cited in the show cause notice for setting aside the assessment order, only for the other purpose of determining whether the donations made are voluntary or statutory.
Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law, the learned PCIT erred in setting aside the assessment holding that only voluntary donations are eligible for deduction u/s. 80G and not the CSR donations that are made as per statutory requirement.
4. The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.”
3 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai 2. The brief facts in this case are that the assessment in the case of the assessee was completed u/s.143(3) r.w.s. 144B of the Act, dated 10.09.2022, wherein the returned income declared by the assessee has been accepted by the Ld. AO, as assessed income.
3. Subsequently, the case of the assessee was picked up under revisionary proceedings invoking the provision of section 263 of the Act by the jurisdictional Pr. CIT, Mumbai-6, wherein the issue quathe admissibility of deduction under section 80G with respect to assessee’s opting for Concessional Tax Regime (CTR) u/s 115BAA has been raised, but after assessee’s explanation referring to the provisions of section 115BBA as amended by Finance Act (No.2), 2019 are accepted and proceedings to that extent are dropped, with observation that the total income of the company shall be computed, without any deduction, as prescribed under clause (i) of sub-section (2) of section 115BAA that the deduction under chapter VI-Aare barred only for deductions referred to under the heading “C- deductions in respect of certain incomes” other than the provisions of sections 80JAA, which does not include deductions U/s 80G, which are stipulated heading “B” of the said chapter. However the issue qua the justification of assessee’s claim for deduction u/s. 80G on payment of donation to charitable institutions made from the funds allocated in accordance with the mandatory requirement of the Companies Act, 2013 towards Corporate Social Responsibility (CSR) has been raised.
4 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai The Pr. CIT while deciding the aforesaid issue after considering the submissions of the assessee a/s. judicial pronouncements relied upon by it and the assessment order has observed as follows:
“7. The submissions of the assessee on claim of deduction under section 80G on CSR expenditure have been duly considered and found unacceptable as CSR-related expenses, being statutorily mandated, cannot be considered "voluntary donations" under Section 80G, which was intended to incentivize voluntary, altruistic contributions. Judicial precedents emphasize that statutorily compelled expenses lack the voluntary and philanthropic nature required to qualify for deduction under Section 80G. 71 In this regard, reliance is placed on the decision of the Apex Court in the case of Commissioner of Expenditure Tax vs PVG Raju of Vizianaram [1967] SCR (I) 1017C wherein it was explained that for a payment to constitute a donation, it must satisfy the test of voluntariness. The Supreme Court's ruling in this case emphasized that a donation is defined as a voluntary payment made without any expectation of return or consideration. The Court further ruled that payments made under statutory obligations do not qualify as donations. In the present case, the CSR payments made under Section 135 of the Companies Act, 2013. do not fulfill the essential criterion of voluntariness, rendering them ineligible for deduction under Section 80G of the Act. Further, the assessee relies upon the decision of the Jurisdictional High Court in the case of Castrol India Ltd. v/s Dy. CIT. On perusal of this order, it is observed that the Hon'ble Bombay High Court allowed the assessee's appeal by relying upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd. (2010) 2 SCC 723, holding that a mere change of opinion cannot be a ground for reopening a concluded assessment. However, the Hon'ble Bombay High Court's ruling did not address the merits of disallowing deductions under Section 80G for CSR-related donations per se. Hence, the ratio decidendi laid down in Castrol India Ltd. v/s Dy. CIT (Bom) is not applicable in the present case. Therefore, the assessee's contention is not tenable. Accordingly, the Tribunal orders cited by the assessee are not applicable to the present case as they overlook the fundamental principle laid down by the Hon'ble Supreme Court in Commissioner of Expenditure Tax vs. PVG Raju of Vizianagaram (1967) SCR (I) 1017C, which mandates that a donation must be voluntary to qualify for deduction under Section 80G. CSR expenditures are statutory obligations under the Companies Act, 2013, and thus lack the essential element
5 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai of voluntariness. Additionally, in case of Agilent Technologies (International) (P.) Ltd. v. ACIT ((2024) 160 taxmann.com 238 (Delhi - Trib.)), the Hon'ble ITAT Delhi ruled that CSR contributions, whether directed to the Prime Minister's National Relief Fund or other eligible charitable institutions, do not qualify for deductions under Section 80G. The Tribunal cited the Finance Act, 2014, which expressly disallowed CSR expenditures as deductible business expenses under Section 37(1). The judgment reaffirmed that CSR expenditures, being a legal mandate. lack the voluntariness required to qualify as donations under Section 80G. This principle is critical to the case at hand, where the assessee's CSR contributions are similarly mandated and cannot be treated as deductible donations. 7.2 Allowing CSR expenditures to be deducted under Section 80G would create a significant loophole, enabling corporations to shift their statutory obligations onto the public exchequer. Such a scenario would defeat the very purpose of CSR provisions, which were introduced to encourage companies to contribute to social welfare without expecting any tax incentives. Moreover, allowing such deductions would lead to a significant loss of revenue, which is contrary to the principles of sound tax policy. 7.3 Analysis of Circular No. 01/2016: The Ministry of Corporate Affairs issued Circular No. 01/2016, dated 12th January 2016, addressing tax benefits related to CSR. The circular clarified that no specific tax exemptions have been extended to CSR expenditures. While CSR activities such as contributions to the Prime Minister's Relief Fund are eligible for tax deductions under Section 80G, this does not extend to CSR contributions as a whole. especially when made under statutory obligations. The Circular explicitly reinforces that CSR expenditures are not eligible for tax deductions as business expenditures under Section 37(1) and by extension should not qualify as voluntary donations under Section 80G.This submission seeks to elucidate the Revenue's stance through a comprehensive examination of the legislative framework, principles of statutory interpretation, and judicial precedents, which collectively reinforce that CSR expenses, even if categorized as donations, cannot qualify for deduction under Section 80G. 7.4 CSR Contributions to Swachh Bharat Kosh and Clean Ganga Fund: While contributions to the Swachh Bharat Kosh and Clean Ganga Fund are recognized as eligible for deductions under Section 80G, this eligibility is confined to voluntary contributions However, when these contributions are made as part of the statutory CSR obligations under Section 135 of the Companies Act. 2013, they cease to qualify as voluntary donations. CSR expenses are mandated by law, and as such, they lack the essential characteristic
6 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai Section 80G. Allowing CSR-related contributions to these funds to be treated as deductible donations would violate the statutory disallowance set forth in Explanation 2 to Section 37(1) of the Income Tax Act. This would effectively nullify the legislative intent behind CSR provisions, which aim to ensure that corporations contribute to social welfare without seeking tax incentives for fulfilling their statutory obligations. Therefore, despite their eligibility in cases of purely voluntary donations. CSR contributions directed to the Swachh Bharat Kosh and Clean Ganga Fund do not qualify for deductions under Section 80G when made under compulsion of law. 7.5 The decision of the Assessing Officer in the instant case is erroneous on merits as well as the fact that he has not conducted further enquiries, when facts on record per se justified and mandated further inquiry or investigation. Furthermore, the submissions of the assessee are not acceptable in view of the Finance Bill. 2014 vide which the concept Of Corporate Social Responsibility was introduced. The intent of the legislature itself was that the Corporates share the burden of the Government in providing social services. the extract of which is reproduced here under; “Under the Companies Act 2013 certain companies (which have net worth of Rs.500 crore or more, or turnover of Rs. 9000 crore or more, or a net profit of Rs.5 crore or more during any financial year) are required to spend certain Percentage of their profit on activities relating to Corporate Social Responsibility (CSR). Under the existing provisions of the Ad expenditure incurred wholly and exclusively for the purposes of the business is only allowed as a deduction for computing taxable business income. CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing the taxable income of the company. Moreover, the objective of CSR 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 tax deduction, this would result M subsidizing of around one- third of such expenses by the Government by way of tax expenditure”….. 7.6 Further, the Companies Act, 2013 mandates CSR spending as a statutory obligation, not as a voluntary donation. Therefore:
7 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai CSR expenses are not made out of free will but in compliance with statutory provisions. •Allowing deductions under Section 80G for CSR expenses would lead to double benefits-once by allowing it as a deduction and again by fulfilling a statutory obligation. • Claim of deduction by the assesseewith regard to CSR expenses and allowance of such expenditure will result into wastage of entire effort of the legislature to treat CSR expenditure as appropriation of profit after tax. It will be against the spirit of law and the intention of the legislature. • The Income Tax Act through Explanation 2 to Section 37(1), already disallows CSR expenses from business income, reinforcing the position that they do not qualify for deductions under other provisions. In view of the above, I am of the considered opinion that the assessment order passed by the Assessing Officer u/s.143(3) r.w.s 144B of the Act dated 04.03.2025, is erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, the said assessment order passed by the Assessing Officer is set-aside on the issue of claim of deduction under section 8OG of the Act of CSR expense. The AO is directed to make an enquiry in this matter and re-assess the income after giving an opportunity of being heard to the assessee.
8. The order u/s.263 of the Income tax Act, 1961 is passed accordingly.”
Aggrieved with the aforesaid order passed u/s. 263 of the Act by the Ld. Pr. CIT, the assessee preferred an appeal before this Tribunal which is under consideration herein.
At the outset, the Ld. Counsel for the assessee submitted that the issue in hand and the sole controversy is covered by the various decisions of the Tribunal including jurisdictional Tribunal in the case of ACIT Vs. Sikka Ports & Terminals Ltd. (2025) 173 Taxmann.com 366 (Mum-
8 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai Trib) and in the case of B. Arunkumar Capital & Credit Services Pvt.Ltd., dated 25.07.2025. The Ld. Counsel prayed that since the issue is squarely covered by decision of the jurisdictional Tribunal and there is no contrary decisions of the Hon’ble High Courts or of Hon’ble Apex Court, therefore, the issue being covered in favour of the assessee has to be decided in favour of the assessee. The revisionary proceedings u/s. 263 of the Act, therefore, in contravention to the decision of Jurisdictional Tribunal i.e., ITAT, Mumbaiwasdevoid of merits, without the mandate of law, deserves to be quashed.
6. The Ld. Sr. DR on behalf revenue on the other hand vehemently supported the order of the Ld. Pr. CIT and reiterated the findings of the Pr. CIT from its order u/s. 263 of the Act.
We have heard the rival contentions of the parties herein and perused the material available on record as well as judicial pronouncements that had been pressed into service by the parties herein. We find that the similar issue had been dealt with by the ITAT, Mumbai in a detailed manner in the case of Krishna Processors & Industries Pvt. Ltd., dated 19.08.2025 wherein the Tribunal on the aforesaid issue has held as follows:
14. We have considered the rival contentions and perused the material available on record and case laws relied upon by the parties. The issue in hand regarding allowability of 80G deduction, if 9 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai CSR is the short controversy which has already been deliberated upon and decided by the Tribunal (in citations referred to supra) in favour of the assessee, extending the finding that if the stipulated condition of Section 80G are satisfied, the assessee would be entitled to claim deduction u/s. 80G in respect of eligible donations which forms part of the amount sanctioned towards CSR activities. This issue is thoroughly discussed by the ITAT Mumbai ‘G Bench in the case of ACIT Vs. Sikka Ports & Terminals Ltd. (2025) 173 Taxmann.com 366 (Mum-Trib), wherein the Tribunal has observed as follows:
“5. We heard the parties and perused the material on records. The assessee during the year disallowed a sum of Rs.33,85,00,000 under section 37 of the Act towards the CSR Spend in compliance with section 135 of the Act. Since the institutions to which the said amounts are given are registered under section 80G of the Act, the assessee claimed 50% i.e.16,92,50,000 of the same as deduction. The argument of the revenue is that the payment are made to comply with the mandate under the Companies Act, and therefore it cannot be treated as donations which are "voluntary" payments. The further argument of the revenue is that when the statute has denied the direct claim of the CSR spend under section 37, the assessee claiming the deduction indirectly under section 80G is against the intention of the legislature and cannot be allowed. The assessee's contention is that there is no restriction under section 80G to the effect that the contribution should be voluntary and that the CSR spend is an application of income which is eligible for deduction from the gross total income of the assessee as per the provisions of section 80G.
The word "donation" has not been defined under the Act. However the Hon'ble Supreme Court in the context of Expenditure Tax Act in the case of P.V.G. Raju (supra) has described the meaning of the word "donation" in the following words 'When a person gives money to another without any material return, he donates that sum. An act by which the owner of a thing voluntarily transfers the title and possession of the same from himself to another, without any consideration, is a donation. We do not require lexicographic learning nor precedential erudition to understand the meaning of what many people do every day, viz., giving donations to some fund or other, or to some person or other.' Indeed, many rich 10 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai people out of diverse motives make donations to political parties. The hope of spiritual benefit or political goodwill, the spontaneous affection that benefaction brings, the popularization of a good cause or the prestige that publicized bounty fetches -these and other myriad consequences or feelings may not mar a donation to make it a grant for a quid pro quo. Wholly motiveless donation is rare, but material return alone negates a gift or donation.' 7. Therefore to examine if CSR spending of the assessee would be a donation it is essential to examine whether the donations given by the assessee to M/s.Reliance Foundation and M/s Shyam Kothari Foundation without any material return and without any consideration and whether it was a grant for quid pro quo. It is not the case of the revenue that the assessee has made contributions to these institutions with an intention get something in return. The only contention of the revenue is that the contributions are made as part of a mandate and not voluntary. However, the Hon'ble Supreme Court in the above case has laid down the basic principle that a payment made without any material return and without any consideration and not for quid pro quo is a donation. Therefore in our considered view, the payment made whether voluntarily or as part of a mandate does not negate the intention of the contribution made. The reliance placed by the ld DR on the decision of Agilent Technologies (International) Pvt. Ltd (supra) is factually distinguishable. The DRP whose order was upheld in the said case, had placed reliance on the decision of the Hon'ble High Court in the case of DCIT vs Hindustan Darr Oliver Ltd (1994) 45 TTJ Mumbai 552 where the payment made was held as not a donation since it was found that the intention behind making the donation was to get reserved seats in the college run by the institute to whom the payments are made as part of CSR spending. As already mentioned, the revenue is not contending that the assessee in the present case has made payments to get something material in return.
Now coming to the intention of legislature while amending the provisions of section 37 whereby the CSR spend are not allowed to be claimed as a deduction under the said section. Finance (No.2) Act, 2014 brought in the amendment to section 37 by inserting Explanation 2 to the said section w.e.f.01.04.2015. It is relevant to look at the provisions of section 37 of the said Act which read as under 11 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai "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. "
The "Explanatory Notes to the provisions of Finance (No.2) Act, 2014" issued by the Central Board of Direct Taxes vide its Circular No.01/2015 dated 21.1.2015 explaining the aforesaid amendment, read as under: "13. Corporate Social Responsibility (CSR) 13.1 Corporate Social Responsibility (CSR) Under the Companies Act, 2013 certain companies (which have net worth of Rs.500 crore or more, or turnover of Rs.1000 crore or more, or a net profit of Rs.5 crore or more during any financial year) are required to spend certain percentage of their profit on activities relating to Corporate Social Responsibility (CSR). Under the existing provisions of the Act expenditure incurred wholly and exclusively for the purposes of the business is only allowed as a deduction for computing taxable business income. 13.2 CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing the taxable income of the company. Moreover, the objective of CSR is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold. If such 12 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai Government by way of tax expenditure. 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 Income-tax 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 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 not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under 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 deduction under those sections subject to fulfilment of conditions, if any, specified therein. 13.4 Applicability:-This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years." (emphasis supplied) 10. The intention behind insertion of the explanation as explained above is that the objective of CSR is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold and that if such expenses are allowed as tax deduction, this would result in subsidizing of around one-third of such expenses by the Government by way of tax expenditure. However, it is pertinent to note that in para 13.3 above, it has been mentioned that though, the expenditure incurred towards CSRs is not an expenditure incurred for the purpose of business, if the spend is of the nature described in section 30 to section 36 of the Act deduction shall be allowed under those 13 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai sections subject to fulfillment of conditions, specified therein. For example if the contribution is made to a scientific research association, or to a university or to a college or other institution to be used for scientific research etc., which are approved under section 35 of the Act as part of CSR spending then deduction can be allowed subject to the fulfillment of conditions prescribed under section 35 of the Act. This explanatory note though self- contradictary i.e. denying deduction under section 37 but allowing the assessee to claim deduction under section 30 to 36, also makes it clear that there is no bar regarding the admissibility of CSR expenditure under any other provision of the Act, except under section 37(1) of the Act. In other words, the intention of the legislature is not to restrict the right of the assessee to claim deduction towards the CSR spend if the payment is otherwise allowable under a specific provision of the Act. Further wherever the intention is to restrict the claim of deduction under any other provisions of the Act the same is explicitly provided for to that effect by the legislature. This view is supported by the Explanatory Memorandum Finance Bill 2015 which brought in the specific restriction for claiming deduction under section 80G of the Act towards the CSR spend towards donation to Swachh Bharat Kosh and Clean Ganga Fund. Therefore we are unable to appreciate the contention that the CSR spend being claimed as a deduction under section 80G of the Act is against the intention of the legislature which restricts the same to be claimed as a deduction under section 37 of the Act.
11. The next issue is whether the impugned payments are otherwise eligible for deduction under section 80G of the Act. We have already established that the payments made by the assessee are donations and therefore if the other conditions for the deduction under section 80G is are fulfilled then there should not be any restriction for the assessee to claim the deduction. Before holding so we will address the contention of the revenue that the payments made towards CSR spend are monitored and controlled by the assessee and are not voluntary. In this regard it is relevant to note that though there is a statutory obligation of CSR expenditure under section 135 of Companies Act 2013, there are many prescribed modes and activities under Schedule VII of the Companies Act for spending the CSR expenditure, (the list is not exhaustive but inclusive). Further neither section 135 of the Companies Act nor Schedule VII to the Companies Act nor the CSR Rules, mandates donations to the 14 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai 80G of the Act. Therefore, in our considered view there is merit in the submission of the ld AR that though the quantum of CSR spend is mandatory there is no mandate on how amount is to be spent or to whom the contribution is to be made. Accordingly the act of the assessee to choose to M/s.Reliance Foundation and M/s Shyam Kothari Foundation which are eligible to accept donations under section 80G of the Act is voluntary and is not mandated by section 135 of the Companies Act 2013. Further from the perusal of CSR Rules as applicable in assessee's case, we notice that the monitoring of the CSR spend is to ensure that the same is as per the CSR policy of the company and it does not provide for monitoring the utilization of the funds by the third party donees. In any case the donations made for a specific cause does not result denial of deduction which is otherwise allowable as per the provisions of section 80G of the Act. The Kolkata Bench of the Tribunal in the case of L&T Finance Ltd vs DCIT [2024] 167 taxmann.com 503 (Kolkata - Trib.), has elaborately discussed the allowability of CSR spend as a deduction under section 80G of the Act and it is relevant to take note of the following observations made regarding monitoring of CSR spend by the donor i.e.assessee – 12.2. The contribution made by a company toward the discharge of it's CSR to a registered charitable institution, in our view, is akin to corpus donations. Section 11(1)(d) of the Income Tax Act speaks of the specific or corpus, donations, although it has not been defined under Income Tax Act, 1961. Corpus donations are donations wherein, the donor makes the donations to the donee for a specific purpose or object. Prior to the amendment made by amended CSR Rules of 2021, Rule 7 of the erstwhile CSR Rules permitted corpus contributions to charitable institutions as eligible CSR expenditure. Further, the Ministry of Corporate Affairs vide Circular No.21/2014 dated 18th June 2014 had also clarified that contribution to Corpus of a Trust/ society/ section 8 companies etc. will qualify as CSR expenditure, if such a donee institution or the said corpus has been created exclusively for a purpose related to the activities provided under the CSR framework. However, under the old rules, the mechanism to monitor and ensure that such donation has been actually spent on CSR activity was missing. The donor company would get absolved of its liability of CSR by just 15 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai donating to the eligible trust/society/company, without ensuring that the amount has been actually spent by the donee on such specific object or purpose (CSR activity) for which it was donated. Therefore, Rule 7 of the CSR Rules, which permitted corpus contributions as eligible CSR expenditure, has been substituted and under the amended CSR Rules of 2021, corpus contributions to any entity shall not be admissible as CSR expenditure. The object and purpose of the aforesaid amendment is to ensure that the expenditure made is actually utilised towards CSR activities.
12. One more point that needs to be considered while deciding the deduction under section 80G for CSR spend is that the restriction on the allowability of the said spend as provided in Explanation 2 to section 37 is for computing the business income under the provision of Section 28-44DB whereas the deduction under section 80G is claimed under Chapter VIA i.e. after computing the Gross Total Income. The provisions of section 80G does not impose any condition that the contribution should be voluntary and therefore when the CSR spend is evaluated independently under the provisions of the Act, in our considered view there is no restriction for the assessee to claim deduction under section 80G provided the CSR spend meets the conditions specified therein. In other words, the provisions of section 37 computation provision whereas section 80G is a beneficial provision which allows deduction towards payments made by the assessee for charitable purposes and therefore these two sections are independent of each other. Let us assume a situation when a company which is not required to comply with the provisions of section 135 of the Companies Act 2013 makes a donation or a company makes donations in excess of 2% even then the payment may get disallowed under section 37 but in that case the revenue would not impose any restriction to evaluate the payment for claiming deduction under section 80G. If the same analogy is applied to the CSR spend in our view the assessee should be able to claim deduction under section 80G if the other conditions are fulfilled. Denying the claim for the reason that there is a specific mention under section 37 for disallowance and that the payments are made in compliance with section 135 of the Companies Act in our view is not legally tenable unless there is an explicit provision for e.g. contributions towards ‘Swacha Bharat Kosh’ and ‘Clean Ganga Fund’. This view of ours is supported by the decision of the coordinate bench of the Tribunal in the case of Blue 16 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai Dart Express Limited vs PCIT (ITA No.1101/Mum/2024 dated 03.09.2024) where in the context of revision under section 263 of the Act, the bench has considered the issue of allowing deduction under section 80G towards CSR spend and held that – 10. On merits also, we find that view of ld. AO is correct in law. Claiming a deduction from computation of business income as provided from sections 28 to 44DB is different from claiming a deduction under chapter VIA of the Act which is allowed from Total Income. As per Explanation 2 to Section 37, CSR expenditure is not allowable as deduction while computing the business income under the provision of Section 28-44DB, whereas deduction u/s.80G is allowed while computing the total income under Chapter VIA. There is no precondition that claim for deduction u/s.80G on a donation should be voluntary. It is independent of computation of business income as it is allowed from Gross Total Income. The assessee had disallowed the CSR expenses while computing business income. Further, there is no dispute that the assessee has filed complete details of donation and also filed the certificate u/s.80G which was enclosed before the AO. Section 80G (1) of the Act provides that in computing total income of the assessee, they shall be deducted in accordance with the provision of Section, such sum paid by the assessee in the previous year as a donation. Deduction under Chapter VIA provides deduction from the gross total income which is computed after making necessary allowances/ disallowances in accordance with Section 28- 44BB of the Act including Explanation to Section 37(1). Thus, Section 37(1) and Section 80G of the Act are independent and the principles governing what is not allowable u/s. 37(1) have been provided in the section itself. Even in section 80G also, what is not allowable has also been provided under the Act. For instance, Section 80G specifically mentions two clauses, viz., section 80G(2)(a)(iihk) and (iiihl), i.e., contributions towards ‘Swacha Bharat Kosh’ and ‘Clean Ganga Fund’, where donation in the nature of CSR Expenditure is not allowable as deduction under section 80G of the Act. Therefore, the disallowances for deduction under section 80G vis-à-vis CSR can be restricted to contributions made to these Funds mentioned in Section 800(2)(a)(iiihk) and (iiihl) only. It is an undisputed fact that the assessee has not claimed any 17 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai 80G (2)(a) of the Act and as such entire donation claimed by the assessee is allowable u/s 80G. The Ministry of Corporate Affairs ("MCA") has issued "FAQs" through General circular no. 01/2016 dated January 12, 2016 (FAQ No. 6) and has clarified on the issue as follows: "Question No. 6: What tax benefits can be availed under CSR? Answer: No specific tax exemptions have been extended to CSR expenditure per se. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. While no specific tax exemptions have been extended to expenditure incurred on CSR, spending on several activities like Prime Minister's Relief Fund, scientific research, rural development projects, skill development projects, agriculture extension projects etc, which fund place in Schedule VII, already enjoys exemptions under different sections of the Income-tax Act, 1961."
This clarification being issued by the Ministry of Corporate Affairs, Government of India clarifies that donation covered under CSR Expenses which not are eligible for the deduction under section 80G of the Income-tax Act, 1961, but are allowed under different sections. Ergo, there is nothing that if any expenditure is disallowable u/s 37 the same cannot be allowed under other provisions of Act, if the conditions of allowability are satisfied. Thus, allowing the claim of deduction u/s.80G by the ld. AO cannot be held to be unsustainable in law or amounts to erroneous and prejudicial to the interest of the Revenue. Thus order of the Ld. PCIT is reversed on this point.
Thus, we hold that ld. PCIT is not correct in law in cancelling the assessment order by the ld. AO on this issue. Accordingly, the order of the ld. PCIT is quashed. Consequently, the appeal of the assessee is allowed.
In view these discussions and considering the judicial precedence in this regard, we are of the view that there is no infirmity in the order of the CIT(A) in allowing the deduction under section 80G to the assessee towards donations made to M/s.Reliance Foundation and M/s.Shyam Kothari Foundation by placing reliance on the decision of the coordinate bench in the case
Further, Similar findings have been arrived at by the ITAT, Mumbai ‘B’, bench in the case of B. Arunkumar Capital & Credit Services Pvt.Ltd., the recent order dated 25.07.2025, wherein revisional proceedings initiated u/s. 263 of the Act in absence of any conclusive findings to show that there wasan intention of material returnbehind the donation or that the donation was paid quid pro quo. Accordingly, the impugned order u/s 263 washeld to be unsustainable and in terms of provisions of the Act which allows the assessee to claim deduction u/s. 80G.
In view of the facts & circumstances of the present case, judicial pronouncements referred herein above, we are of the considered view that the reason for which revisionary jurisdiction was invoked by the Pr. CIT, that whether the claim of expenses under CSR cannot be utilized for donation to claim deduction u/s. 80G was bereft of substance, since the issue has been answered by the coordinate benches of this Tribunal in various decisions referred to (supra) and accordingly, the assessee would be eligible for claim of deductions u/s 80G for eligible donations out of the CRS funds, if the stipulated condition of sections 80G are duly satisfied. Therefore, the very genesis of the revisionary proceedings by the Ld. Pr. CIT, wason wrong interpretation of the law, thus have no mandate to stand in the eyes of law,consequently, the impugned order u/s. 263 cannot be sustained in the present case,the same therefore stands quashed. In conclusion, Grounds of appeal
No.6 & 7 raised by the assessee are allowed.
17. As the order passed by the Pr.CIT u/s. 263 of the Act is quashed, in terms of failure of Ld. Pr. CIT in validly assuming the jurisdiction u/s 263 of the Act, being exercised such power on wrong premise / issue which is already and squarely covered by the decision of jurisdictional ITAT (referred to supra) as discussed herein above.Therefore, remaining contentions raised by the assessee challenging validity of proceedings and impugned order u/s. 263 are rendered to be academic only.
18. In the result, appeal of the assessee is allowed, in terms of our aforesaid observations.”
8. Respectfully following the aforesaid order, we are of the considered view that the reason for which revisionary jurisdiction was invoked by the 19 Hemani Industries Limited Vs. Pr. CIT-6, Mumbai Pr. CIT, that whether the claim of expenses under CSR cannot be utilized for donation to claim deduction u/s. 80G was bereft of substance, since the issue has been answered by the coordinate benches of this Tribunal in various decisions referred to (supra) and accordingly, the assessee would be eligible for claim of deductions u/s 80G for eligible donations out of the CRS funds, if the stipulated condition of sections 80G are duly satisfied. Therefore, the very genesis of the revisionary proceedings by the Ld. Pr. CIT, wason wrong premise, thus have no mandate to stand in the eyes of law,consequently, the impugned order u/s. 263 cannot be sustained in the present case,the same therefore stands quashed.
9. As the order passed by the Pr.CIT u/s. 263 of the Act is quashed, in terms of failure of Ld. Pr. CIT in validly assuming the jurisdiction u/s 263 of the Act, being exercised such power on wrong premise/issue which is already and squarely covered by the decision of jurisdictional ITAT (referred to supra) as discussed herein above. Therefore, remaining contentions raised by the assessee challenging validity of proceedings and impugned order u/s. 263 are rendered to be academic only.
Order pronounced in the open court on 21st August, 2025.