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Facts
The assessee, Adani Logistics Ltd., filed its income tax return for A.Y. 2020-21, claiming a deduction of Rs. 29.10 lakhs under Section 80G for CSR expenses. The Assessing Officer (AO) disallowed this deduction and made an addition of Rs. 15.42 crores under Section 14A read with Rule 8D. The CIT(A) allowed the assessee's appeal, deleting both the disallowance under Section 14A and the deduction under Section 80G. The Revenue subsequently appealed to the ITAT.
Held
The Tribunal upheld the CIT(A)'s decision to delete the disallowance under Section 14A, reasoning that no exempt income was earned by the assessee during the year, and the Explanation to Section 14A (w.e.f. 01.04.2022) is prospective. Regarding CSR expenses, the Tribunal affirmed that deductions under Section 80G are permissible for contributions to eligible trusts, even if such expenses are disallowed under Section 37, provided they are not made to specific restricted funds like Swachh Bharat Kosh or Clean Ganga Fund. The Tribunal relied on several precedents supporting both positions.
Key Issues
Whether disallowance under Section 14A for administrative expenses is justified when no exempt income is earned by the assessee. Whether deduction under Section 80G is permissible for amounts spent on mandatory Corporate Social Responsibility (CSR) obligations.
Sections Cited
Section 143(3), Section 144B, Section 80G, Section 14A, Rule 8D, Section 37(1), Section 80G(2)(a)(iiihk), Section 80G(2)(a)(iiihl)
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI TR SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the Revenue against the order of National Faceless Appeal Centre(NFAC), Delhi [hereinafter referred to as ‘CIT(A)’], dated 04.08.2025 for the Assessment Year (A.Y.) 2020-21 in the proceeding u/s 143(3) r.w.s. 144B of the Income Tax Act.
The brief facts of the case are that the assessee had filed its return of income for the Assessment Year (A.Y.) 2020-21 on 29.01.2021 declaring total income of Rs.160,81,00,830/-. The case was selected for scrutiny under CASS. In the course of assessment, the AO noticed that the assessee had claimed deduction of Rs.29,10,000/- u/s 80G of the Act, DCIT Vs Adani Logistics Ltd., AY- 2020-21 2 in respect of CSR expense. According to the AO, the CSR expense was not eligible for deduction under the provision of the Act. Accordingly, the deduction claimed u/s 80G in respect of CSR expense was disallowed. Further, the AO had also made the addition of Rs.15,42,24,483/- u/s 14A read with Rule 8D of IT Rules. The assessment was completed u/s. 143(3) on 29.02.2022 at total income of Rs.178,06,26,060/-.
Aggrieved with the order of the AO, the assessee had filed an appeal before the First Appellate Authority, which was decided by the CIT(A) vide the impugned order and the appeal of the assessee was allowed.
Now the Revenue is in appeal before us. The following grounds have been taken in this appeal:
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting disallowance Rs. 15,42,27,483/-, u/s 14A of the Act without appreciating the fact that the AO was justified in invoking the provisions of Section 14A r.w. Rule 8D of the Act according to the facts of the case?.
Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in allowing deduction of Rs. 29,10,000/- u/s 80G of the Act for amounts spent under mandatory CSR obligation which would result in an indirect tax benefit, defeating the purpose of Explanation 2 to Section 37(1) of the Act?.
The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.
It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing officer be restored?.
DCIT Vs Adani Logistics Ltd., AY- 2020-21 3 5. The first ground pertains to disallowance of Rs.15,42,27,483/- u/s 14A of the Act. Shri R P Rastogi, the Ld. CIT-DR submitted that the assessee had made huge investments which could yield exempt income. However, no disallowance u/s. 14A r.w. Rule 8D was made by the assessee. In the course of assessment, the AO had made addition of Rs.15,42,27,483/- being 1% of annual average of investment towards administrative expense, in accordance with the provision of Rule 8D of the IT Rules. He submitted that the Ld. CIT(A) was not correct in deleting the addition made by the AO.
Per contra Shri Dhrunal Bhatt, the Ld. A.R of the assessee submitted that the assessee did not earn any exempt income during the year. Under the circumstances, no disallowance u/s. 14A r.w. Rule 8D was called for. In this regard He relied upon the following decisions.
i. Chettinand Logistics Pvt Ltd [2018] 95 taxmann.com250 (SC) ii. Adani Green Technology Ltd. in (ITAT) iii. Harsha Engineers Ltd in (ITAT) iv. ACIT V. Reliance Retail Ltd [2025] 175 taxmann.com 206 (ITAT Mumbai)
The Ld. A.R further submitted that the provision of section 14A of the Act, was amended with effect from A.Y. 2022-23 and the disallowance can be made even if no exempt income was earned or accrued during the year. He submitted that this amendment was prospective in nature and not applicable to the current A.Y. 2020-21. In this regard he relied upon the decision of Hon’ble Gauhati High Court in the case of Williamson Financial Services Limited vs. CIT (166 taxmann.com 607).
DCIT Vs Adani Logistics Ltd., AY- 2020-21 4 7. We have considered the submissions of the assessee. There is no dispute to the fact that no exempt income was earned by the assessee during the year. Hon’ble Supreme Court has upheld the decision of Hon’ble Delhi High Court in the case of Chettinad Logistics (P.) Ltd. (supra) that where no exempt income was earned in the relevant assessment year by the assessee, the provision of Section 14A of the Act could not be invoked. Further, Hon’ble Gujarat High Court in the case of Corrtech Energy (P.) Ltd. (45 taxmann.com 116)(Gujarat) has held that if the assessee did not make any claim for exemption of any income, disallowance u/s.14A of the Act could not be made. Similarly, Hon’ble Gujarat High Court had held in the case of PCIT vs. Adani Wilmar Limited, 133 taxmann.com 443 (Guj.) that no disallowance under Section 14A of the Act can be made if the assessee did not earn any exempt income during the year. The provision of Section 14A of the Act was amended and an Explanation was inserted w.e.f. 01.04.2022, as per which the disallowance under Section 14A of the Act can be made, even if no exempt income is earned during the year. The Hon’ble Guwahati High Court in the case of Williamson Financial Services Limited vs. CIT (supra) has held that the Explanation inserted to Section 14A of the Act vide Finance Act, 2022 w.e.f 01.04.2022 is prospective in nature and cannot be presumed to have retrospective effect and applied to assessment years prior to 01.04.2022. Respectively following the judgement of Hon’ble Guwahati High Court, we are of the considered opinion that the Ld. CIT(A) had rightly deleted the addition made under Section 14A of the Act, as the assessee did not earn any exempt income
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.
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 6 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, 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 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.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Court on 12/02/2026 at Ahmedabad.
Sd/- Sd/- (TR SENTHIL KUMAR) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 12th February, 2026 Neelesh Kumar True Copy
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file.
आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार
पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद