DCIT Vs Ernst & Young Services Private Limited (ITAT Delhi)
CSR Donations Eligible for Section 80G Deduction; No Double Disallowance Merely Because They Form Part of CSR Spend
The Delhi ITAT upheld the CIT(A)’s order allowing deduction under Section 80G in respect of donations made as part of Corporate Social Responsibility (CSR) expenditure, holding that while CSR expenditure is specifically disallowed as business expenditure under Explanation 2 to Section 37(1), there is no prohibition in Section 80G against claiming deduction for eligible donations merely because they form part of CSR obligations.
The Tribunal observed that Section 37 and Section 80G operate in different fields. Disallowance of CSR expenditure under Section 37 affects computation of business income under Chapter IV-D, whereas deduction under Section 80G is granted while computing total income under Chapter VI-A. Therefore, a donation made to an institution approved under Section 80G does not lose its eligibility simply because it also qualifies as CSR expenditure.
Relying on decisions including Interglobe Technology Quotient Pvt. Ltd., Ericsson India Global Services Pvt. Ltd., American Express (India) Pvt. Ltd., Honda Motorcycle & Scooter India Pvt. Ltd., and First American (India) Pvt. Ltd., the Tribunal held that denying Section 80G deduction merely because the donation formed part of CSR spending would result in an unintended double disallowance, which was never the legislative intent.
The Tribunal also upheld deletion of disallowance under Section 43B relating to bonus, GST liability and employer’s PF contribution since the amounts had admittedly been paid before the due date of filing the return and had been wrongly disallowed by CPC based on a misreading of the tax audit report. Further, since the earlier appellate order deleting the same disallowance had attained finality, the Revenue’s challenge was rejected.
FULL TEXT OF THE ORDER OF ITAT DELHI
This present appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld. CIT(A)’ in short] in Appeal No. NFAC/2019-20/10192313 arising out of assessment order passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) dated 17.09.2022 for Assessment Year: 2020-21.
