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Facts
The assessee company engaged in NLD services filed its return of income. The Assessing Officer (AO) made additions and disallowances, leading to an assessment order. The Commissioner of Income Tax (Appeals) partly allowed the assessee's appeal.
Held
The Tribunal held that a deduction claimed under Section 80G for donations, even if part of CSR expenses, is allowable. It found that disallowing such a claim solely because it falls under CSR would lead to double disallowance, contrary to legislative intent.
Key Issues
Whether donations made as part of Corporate Social Responsibility (CSR) expenses are eligible for deduction under Section 80G of the Income Tax Act.
Sections Cited
143(3), 144B, 250, 143(1), 143(2), 80G, 37(1), 270A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI A BENCH: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
Year : 2020-21] NTT Communications India DCIT vs Network Services Pvt.Ltd. Circle-16(1) A-409, Somdutt Chambers-1, Delhi 5 Bhikaji Cama Place, Delhi-110066. PAN-AAECN9401B APPELLANT RESPONDENT Appellant by Shri Vibhu Jain, Adv. Respondent by Shri Khitesh Gutpa, Sr.DR Date of Hearing 27.11.2025 Date of Pronouncement 27.11.2025 ORDER
PER MANISH AGARWAL, AM :
The present appeal is filed by the assessee against the order dated 02.06.2025 of Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. NFAC/2019-20/10297529 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 27.09.2023 passed u/s 143(3) r.w.s.144B of the Act pertaining to Assessment Year 2020-21.
Brief facts of the case are that the assessee company was incorporated on 13 April 2015 and is engaged in the business of providing NLD (National Long Distance) services to customers in India which comprises of Leased circuits and VPN (Virtual Private Network) under the licenses issued by the Ministry of Communications & technology to operate in telecommunication sector. Return of income was filed on 18.01.2021, declaring income of INR 57,47,47,480/-. The case was selected for scrunty under CASS and notice u/s 143(2) followed by notices 142(1) were issued from time to time. In response, assessee filed its replies and related documents and after considering the submissions made, the AO passed the assessment order dated 27.09.2023 u/s 143(3) r.w.s. 144B of the Act assessing total income of the assessee at INR 57,72,45,980/-.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 02.06.2025, partly allowed the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:- Ground 1: “That, the assessment order dated 27.09.2023 passed under Section 143(3) r.w.s 1448 of the Income Tax Act, 1961 (hereinafter 'the Act') by the National e-Assessment Centre, Delhi (hereinafter FAO) and the order dated 02.06.2025 passed under Section 250 of the Act by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi (hereinafter 'Commissioner (Appeals)") passed in the case of Appellant for Assessment Year (hereinafter 'AY") 2020-21 are illegal, bad in law and without jurisdiction, in so far as the same are passed in contravention to the provisions of the Act, and as such are liable to be quashed. RE: ADDITION OF Rs. 89,400/- Ground 2: That, in the facts and circumstances of the case and in law, the FAO grossly erred in framing the assessment vide order dated 27.09.2023 passed under Section 143(3) r.w.s 144B of the Act by considering the addition of Rs. 89,400/-made vide Intimation dated
24.12.2021 under section 143(1) of the Act, notwithstanding that the Appellant's return for AY 2020-21 was already picked up for scrutiny assessment pursuant to notice dated 29.06.2021 issued under Section 143(2) of the Act. The intimation dated 24.12.2021 issued under Section 143(1) of the Act and the consequent addition of Rs. 89,400/-are illegal, bad in law, without jurisdiction and the same are liable to be quashed/deleted. Ground 3: That, without prejudice to the above, the addition of Rs. 89,400/- was made in an arbitrary manner and in gross violation of the provisions of Section 1448 of the Act in as much as the FAO did not consider detailed replies filled by the Appellant during the course of assessment proceedings and also failed to issue a show cause notice for the aforesaid variation made to the income returned by the Appellant. Ground 4: That, without prejudice to the above, the order dated 02.06.2025 passed under Section 250 of the Act by the Commissioner (Appeals) is illegal and without jurisdiction to the extent that no directions to Assessing Officer can be issued by the Commissioner (Appeals) for re-evaluation/verification of assessable income in terms of the provisions of Section 251 of the Act. RE: DISALLOWANCE OF RS. 24,09,100/- Ground 5: That, in the facts and circumstances of the case and in law, the FAO/ Commissioner (Appeals) grossly erred in disallowing a sum of Rs. 24,00,100/- claimed as deduction from total income under Section 80G of the Act by invoking Explanation 2 to Section 37(1) of the Act and not appreciating that the said provisions are not mutually exclusive. The sum of Rs. 24,09,100/- is liable to be allowed as deduction since the Appellant has met all the requisite conditions for such claim as prescribed under Section 80G of the Act. Ground 6: That in view of the facts and circumstances of the case, and in law, the documents and explanations filed by the Assessee and the material available on record have not been properly considered and judicially interpreted. Ground 7: That in view of the facts and circumstances of the case, and in law, the addition/disallowance made are based on mere surmises and conjectures and therefore, illegal, bad in law and unjust. Ground 8: That on facts and in law, the income computed and tax (including interest) calculated thereupon is grossly incorrect and refunds of other AYs illegally adjusted against the erroneous demand raised for AY 2020-21 ought to be issued to the Appellant along with up-to-date interest as per the provisions of the Act. Ground 9: That on facts and in law, penalty proceedings initiated under Section 270A of the Act are illegal ad void ab initio. The penalty proceedings in the case of the Appellant qua AY 2020-21 Initiated vide show cause notice dated 27.09.2023 are liable to be quashed.
All the aforesaid grounds of objections are without prejudice to each other. The Appellant craves for leave to add, amend, vary, omit or substitute any of the aforesaid grounds at any time before or at the time of hearing of the appeal. Any consequential relief, to which the Appellant may be entitled under law les pursuance of the aforesaid grounds of appeal, or otherwise, may thus be granted.”
Ground of appeal No.1 raised by the assessee is general in 5. nature, hence not adjudicated.
Ground of appeal Nos. 2 to 4 raised by the assessee are with 6. respect to addition of INR 89,400/- made u/s 143(1) of the Act.
From the perusal of the appellate order, it is observed that Ld. CIT(A) has allowed the ground of appeal No.4 taken by the assessee and deleted the addition of INR 89,400/- made by AO in the order passed u/s 143(1) of the Act. Therefore, there is no grievance remained. Thus, Grounds of appeal Nos. 2 to 4 raised by the assessee are dismissed.
The effective sole issue remained is raised through Ground of 8. appeal No.5 taken by the assessee regarding disallowing the deduction claimed us 80G of the Act of INR 24,09,100/- from the total income.
We have heard the rival submissions. The dispute is whether the donation given can be allowed as deduction u/s 80G when it is part of CSR expenses. Section 80G(1) provides that in computing the total income of the assessee, there shall be deducted, in accordance with the provisions of this section, such sum paid by the assessee in the previous year as a donation. Further, section 80G(2) provide a list where deduction is allowed to the assessee for making donations. Section 80G falls in Chapter VIA of the Act, which comes after the computation of gross total income under various heads of income which interalia includes the disallowance of CSR expenses as per Explanation 2 of section 37(1). Thus, both section 37(1) and section 80G has different field to play. Further according to section 80G(2)(a)(iiihk) and section 80G(2)(a)(iiihl), any contributions made towards Swacha Bharat Kosh and Clean Ganga Fund, is not allowable as deduction under section 80G if the same is claimed as CSR expenses. However, section 80G(2)(a) provides deduction for ‘any sums paid by the assessee in the previous year as donations’, thus except the donations paid to the Swachh Bharat Kosh and Clean Ganga Fund, all other donation made to the eligible institutions / funds as per section 80G(2) are eligible for deduction u/s 80G of the Act. The coordinate bench of ITAT Bangalore in case of First American (India) Pvt. Ltd v. ACIT in vide its order dt. 29.04.2020 has allowed the deduction under Section 80G by making following observations:
In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession", whereas monies spent under section 80G are claimed while computing "Total Taxable income" in the hands of assessee. The point of claim under these provisions are different.
16. Further, 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".
For claiming benefit under section 80G, deductions are considered at the stage of computing "Total taxable income". Even if any payments under section 80G forms part of CSR payments (keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, "Income form Business and Profession". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing "Total Taxable Income" cannot be denied to assessee, subject to fulfilment of necessary conditions therein.
We therefore do not agree with arguments advanced by Ld. Sr. DR.
In present facts of case, Ld.AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, "Income from Business and Profession". It has been submitted that some payments forming part of CSR were claimed as deduction under section 80G of the Act, for computing "Total taxable income", which has been disallowed by authorities below. In our view, 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.
On the basis of above discussion, in our view, authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act.
The Co-ordinate bench of Tribunal, Delhi in following case has also expressed the same view: - Honda Motorcycle and Scooter India Pvt Ltd vs ACIT in (ITAT, Delhi ) - Teradata India Pvt Ltd vs. DCIT in ITA 1248/Del/2022 (ITAT, Delhi) - Amway India Enterprises Pvt. Ltd. Vs. AO, NFAC in (ITAT, Delhi)
- Interglobe Technology Quotient Pvt. Ltd. Vs. ACIT [2024] 163 taxmann.com 542(Delhi-Trib)
As per the above discussion and also by respectfully following the aforesaid judgements of various benches of Tribunal, we are of the considered view that Explanation 2 inserted in Section 37 to deny the deduction for CSR expenses incurred by companies as normal business expenditure and the same applies only to the extent of computing business income under Chapter IV-D. The said Explanation cannot be extended or imported to CSR contributions which are otherwise eligible for deduction under any other provision or Chapter, to say donations made by a charitable trust registered under Section 80G and if the same denied merely because such payment forms part of CSR, it would lead to double disallowance, which is not the intention of Legislature. Accordingly, we allow the deduction of Rs. 24,09,100/- made to PM Care Fund as claimed by the assessee u/s 80G of the Act. Thus, Ground of appeal No.5 raised by the assessee is allowed.
With respect to Ground of appeal No. 6 & 7, no specific submission was made thus, the same are dismissed.
Ground of appeal No. 8 is regarding charging of interest which is consequential and the AO is directed to charge the interest as per law on the income determined after giving effect to this order.
15. Ground of appeal No. 9 is regarding initiation of penalty proceedings u/s 270A of the Act which is premature at this stage.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open Court on 27.11.2025.