DCIT, CIRCLE-1(1)(1), AHMEDABAD, AHMEDABAD vs. AMNEAL PHARMACEUTICALS PRIVATE LIMITED, AHMEDABAD

The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. Asst. Year –2022-23 - 2–

It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored.”

The brief facts of the case are that the assessee, a company, filed its return of income for Assessment Year 2022-23 declaring total income of ₹1,97,28,94,500/. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had made donations aggregating to ₹2,88,00,000/- to Irada Foundation and Niswarth Children Foundation and claimed deduction under section 80G of the Act to the extent of ₹1,44,00,000/- being 50% of the donation amount. The assessee had suo- motu disallowed the entire donation amount of ₹2,88,00,000/- while computing business income under section 37(1) of the Act treating the same as Corporate Social Responsibility (CSR) expenditure in terms of Explanation 2 to section 37(1) of the Act. However, the assessee claimed deduction under section 80G of the Act in respect of the said donations on the ground that the donee institutions were duly approved under section 80G(5) of the Act and that there is no restriction in the provisions of section 80G of the Act denying deduction merely because the donation forms part of CSR expenditure.

The Assessing Officer, however, rejected the explanation of the assessee and held that the contribution made by the assessee was not a voluntary donation but a mandatory expenditure incurred in compliance with section 135 of the Companies Act, 2013. According to the Assessing Officer, a payment can qualify as a “donation” under section 80G of the Act only if it is voluntary and without consideration. The Assessing Officer observed that CSR expenditure is mandatory in nature as companies are required to spend 2% of their average profits on CSR activities and therefore such payments Asst. Year –2022-23 - 3–

Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(Appeals). The assessee contended before the learned CIT(Appeals) that there is no prohibition under section 80G of the Act preventing deduction of donations made as part of CSR obligations, provided the donee institutions satisfy the conditions prescribed under section 80G(5) of the Act. It was further submitted that the disallowance under Explanation 2 to section 37(1) operates only with respect to deduction under the head “profits and gains of business or profession” and does not restrict deduction available under Chapter VI-A of the Act. The assessee also relied upon certain judicial precedents wherein it was held that donations made towards Asst. Year –2022-23 - 4–

We have carefully considered the rival submissions and perused the material available on record. The short issue involved in the present appeal is whether a donation made as part of Corporate Social Responsibility (CSR) expenditure, which is otherwise disallowed under section 37(1) of the Act, can still qualify for deduction under section 80G of the Act if the donee institution satisfies the statutory conditions prescribed under section 80G of the Act.

At the outset, we note that the assessee has suo-motu disallowed the CSR expenditure while computing business income under Explanation 2 to section 37(1) of the Act. Therefore, the assessee has not claimed the said expenditure as a deduction under the head “profits and gains of business or profession”. The only claim made by the assessee is a deduction under section 80G of the Act in respect of donations made to institutions which are duly approved under section 80G(5) of the Act. The controversy therefore revolves around the interplay between Explanation 2 to section 37(1) of the Act and the deduction available under section 80G of the Act.

The issue is no longer res integra and has been considered by various coordinate benches of the Ahmedabad Tribunal. We first refer to the decision of the Ahmedabad Tribunal in Vimal Coal (P.) Ltd. vs. Deputy Commissioner of Income-tax [2025] 175 taxmann.com 694 (Ahmedabad - Trib.), wherein the Tribunal held that Explanation 2 to section 37(1) of the Act merely disallows CSR expenditure as a business deduction but does not impose any restriction on deduction under section 80G of the Act. The Ahmedabad Tribunal observed that Chapter VI-A operates independently and unless the Statute specifically provides a restriction, deduction under section DCIT vs. Amneal Pharmceuticals Pvt. Ltd. Asst. Year –2022-23 - 5–

Similar view has been taken by the Ahmedabad Tribunal in Gujarat State Financial Services Ltd. vs. Deputy Commissioner of Income-tax [2025] 174 taxmann.com 461 (Ahmedabad - Trib.), wherein the Tribunal held that the restriction in section 80G of the Act relating to CSR donations is specifically confined to donations made to Swachh Bharat Kosh and Clean Ganga Fund as provided under section 80G(2)(a)(iiihk) and (iiihl). The Tribunal held that where the assessee made CSR contribution to another eligible fund which satisfied the conditions of section 80G of the Act, the deduction cannot be denied merely because the payment formed part of CSR expenditure.

Further, in Gujarat Mineral Development Corporation Ltd. vs. Principal Commissioner of Income-tax-1 [2025] 176 taxmann.com 227 (Ahmedabad - Trib.), the Ahmedabad Tribunal held that Explanation 2 to section 37(1) of the Act operates independently and is confined only to business expenditure. It cannot be extended to override the specific deductions granted under Chapter VI-A. The Tribunal categorically held that once a donation satisfies the statutory requirements of section 80G of the Act, the deduction cannot be denied merely because the payment also discharges Asst. Year –2022-23 - 6–

A similar principle was reiterated by the Ahmedabad Tribunal in TTEC India Customer Solutions (P.) Ltd. vs. Principal Commissioner of Income-tax-3 [2025] 176 taxmann.com 289 (Ahmedabad - Trib.), where the Tribunal observed that CSR expenditure disallowed under section 37(1) of the Act does not automatically become ineligible for deduction under section 80G of the Act. The Tribunal held that if the donation is made to an institution approved under section 80G(5) of the Act and all statutory conditions are satisfied, the deduction cannot be denied simply because the expenditure also fulfills CSR requirements under the Companies Act.

Recently, the Ahmedabad Tribunal in Deputy Commissioner of Income-tax vs. Adani Logistics Ltd. [2026] 183 taxmann.com 391 (Ahmedabad - Trib.) has again reiterated this legal position and held that Explanation 2 to section 37(1) of the Act only bars deduction of CSR expenditure as business expenditure and does not prohibit deduction under section 80G if the donation otherwise satisfies the statutory requirements.

In view of the consistent judicial view expressed by the coordinate benches of the Ahmedabad Tribunal in the above decisions, we hold that the deduction claimed by the assessee under section 80G of the Act cannot be denied merely because the donation was made in discharge of CSR obligations. Once it is not in dispute that the donee institutions were duly approved under section 80G(5) of the Act and the donations were made through banking channels, the assessee is entitled to deduction under section 80G of the Act in accordance with law. Asst. Year –2022-23 - 7–

Respectfully following the aforesaid decisions of the coordinate benches of the Ahmedabad Tribunal, we hold that the disallowance made by the Assessing Officer and confirmed by the CIT(Appeals) is unsustainable. Accordingly, the addition made by disallowing deduction under section 80G is directed to be deleted.

In the result, the appeal of the Department is dismissed. This Order is pronounced in the Open Court on 12/03/2026 (NARENDRA P. SINHA) JUDICIAL MEMBER Ahmedabad; Dated 12/03/2026