CSR Disallowance Under Section 37 Does Not Bar Relief Under Section 80G- Bangalore ITAT

Sandisk India Device Design Centre Private Limited Vs DCIT (ITAT Bangalore)

CSR Disallowance Under Section 37 Does Not Bar Relief Under Section 80G- Bangalore ITAT

The Bangalore ITAT held that eligible donations made as part of Corporate Social Responsibility (CSR) expenditure qualify for deduction under section 80G, even though the CSR expenditure itself is not allowable as a business deduction under section 37. The Tribunal observed that there is no statutory prohibition against claiming section 80G deduction where the donation is made to institutions holding valid section 80G recognition and all prescribed conditions are satisfied. Since the assessee had already disallowed the CSR expenditure while computing business income and had produced receipts evidencing donations through account-payee cheques to eligible institutions, the Assessing Officer was directed to allow the section 80G deduction of ₹1,02,33,452. However, the Tribunal clarified that donations to Clean Ganga Fund and Swachh Bharat Abhiyan would not qualify under this principle.

On the issue of employees’ contribution to Provident Fund, the Tribunal dismissed the assessee’s claim by following the Supreme Court’s decision in Checkmate Services Pvt. Ltd., holding that delayed payment beyond the due date prescribed under the relevant welfare statute is not allowable, even if deposited before the due date for filing the return under section 139(1). Accordingly, while the section 80G claim was allowed, the PF disallowance was sustained, and the appeal was partly allowed.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

1. This appeal by M/s. Sandisk India Device Design Centre Private Limited pertains to Assessment Year 2020-21 and is directed against the order dated 18 September 2025 passed by the National Faceless Appeal Centre, Delhi, dismissing the assessee’s appeal against the assessment order dated 26 September 2022 passed under section 143(3) read with section 144C of the Income Tax Act, 1961, by the National Faceless Assessment Centre, Delhi.

2. The assessee has raised several grounds of appeal. Ground No. 1 is general in nature. Ground No. 4 relates to the chargeability of interest under sections 234A, 234B and 234C of the Act, which is consequential in nature. Accordingly, Ground Nos. 1 and 4 are dismissed.

3. Ground No. 3 concerns the disallowance of employees’ contribution to Provident Fund on the ground that it was paid after the due date prescribed under the relevant statute. The assessee contended that such contribution should be treated at par with the employer’s contribution and allowed under section 43B if paid on or before the due date for filing the return of income under section 139(1). However, this issue is now covered against the assessee by the decision of the Hon’ble Supreme Court in Checkmate Services Private Limited. Accordingly, Ground No. 3 is dismissed.

4. The principal issue for consideration is whether the assessee is entitled to deduction under section 80G in respect of donations made as part of its Corporate Social Responsibility expenditure. The assessee submits that the CSR expenditure was already disallowed while computing business income and that the donations were made to institutions holding valid recognition under section 80G. It is therefore contended that the deduction cannot be denied merely because the donations formed part of CSR expenditure.

5. Briefly stated, the assessee is a private limited company. It filed its return of income on 31 March 2021, declaring taxable income of ₹1,954.7 million. The return was selected for scrutiny, resulting in a final assessment order dated 26 September 2022, in which the deduction claimed under section 80G was denied and the employees’ contribution to Provident Fund amounting to ₹1,95,25,472 was disallowed. Accordingly, the final assessment was completed at ₹1,98,42,57,072, as against the returned income of ₹1,95,46,98,152.

6. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). The assessee raised two grounds, challenging the disallowance of deduction under section 80G and the disallowance of employees’ contribution to Provident Fund amounting to ₹1,95,25,472 on account of delayed payment. The learned CIT(A) dismissed the appeal.

7. Before us, the learned Authorised Representative submitted that the disallowance of deduction claimed under section 80G was not justified. It was further submitted that the assessee had made donations to various institutions, and the relevant details and supporting documents were placed on record. According to the assessee, the recipient institutions were eligible for deduction under section 80G.

8. The learned Departmental Representative, however, supported the orders of the lower authorities and submitted that the expenditure was in the nature of CSR expenditure and, therefore, was not allowable as a deduction under section 80G.

9. We have considered the rival submissions and perused the orders of the lower authorities. The assessee incurred CSR expenditure of ₹2,04,66,899 during the relevant financial year and disallowed the same while computing its business income. It claimed deduction of ₹1,02,33,452 under section 80G in respect of eligible donations forming part of that expenditure and furnished supporting receipts showing that the donee institutions were recognised under section 80G.

10. Though CSR expenditure is not allowable as business expenditure under section 37 in view of Explanation 2 thereto, there is no statutory bar on allowing deduction under section 80G where the donation is made to an eligible institution and the prescribed conditions are satisfied.

11. The assessee has also furnished evidence that the donations were made through account-payee cheques, as reflected in the receipts issued by the donee institutions.

12. Since the donations were made to recognised institutions, other than clean Ganaga and Swachh Bharat Abhiyan, on all other donations, the assessee is eligible for deduction under section 80G. Accordingly, we direct the Assessing Officer to allow deduction under section 80G on the eligible amount of ₹1,02,33,452. Ground No. 2 is allowed,

13. Appeal is partly allowed.

Order pronounced in the open court on 24^th June, 2026.