Case Law Details
JM Financial Credit Solutions Limited Vs DCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, disposed of two appeals filed by the assessee for Assessment Years 2018-19 and 2020-21 involving a common issue relating to the allowability of deduction under Section 80G of the Income Tax Act, 1961 for donations forming part of Corporate Social Responsibility (CSR) expenditure.
The assessee had incurred CSR expenditure of ₹5.41 crore in accordance with Section 135 of the Companies Act, 2013. Out of the total donations made during the relevant year, the assessee claimed deduction under Section 80G amounting to ₹3,00,50,000, of which ₹2,70,50,000 related to CSR donations. The Assessing Officer disallowed the deduction attributable to CSR expenditure, holding that CSR spending is mandatory in nature and therefore lacks the voluntary character required to qualify as a donation eligible for deduction under Section 80G.
Before the Commissioner of Income Tax (Appeals), the assessee contended that Explanation 2 to Section 37(1) only prohibits CSR expenditure from being claimed as a business expenditure and does not restrict deduction under Chapter VI-A. It was also submitted that the recipient institutions possessed valid approval under Section 80G and that deduction could not be denied merely because the donations also constituted CSR expenditure. Reliance was placed on several decisions of coordinate benches supporting this view. The CIT(A), however, upheld the disallowance on the ground that CSR expenditure is compulsory and therefore lacks voluntariness.
Before the Tribunal, the assessee reiterated that the issue was covered by several decisions of coordinate benches, including those of the Mumbai Benches. It was argued that Section 80G does not require donations to be voluntary and that the legislature has specifically excluded only contributions made towards the Swachh Bharat Kosh and the Clean Ganga Fund under Section 80G(2)(a)(iiihk) and (iiihl). Accordingly, other CSR donations made to eligible institutions continue to qualify for deduction under Section 80G.
The Tribunal observed that the issue was no longer res integra. It noted that coordinate benches had consistently held that while Explanation 2 to Section 37(1), inserted by the Finance (No. 2) Act, 2014, disallows CSR expenditure as a business deduction under Section 37(1), it does not automatically deny deduction under Section 80G if the statutory conditions prescribed therein are satisfied.
The Tribunal referred to earlier decisions of the Mumbai, Delhi and Kolkata Benches, which held that the restriction contained in Explanation 2 to Section 37(1) is confined to computation of business income under Chapter IV-D and cannot be imported into Chapter VI-A to deny deduction under Section 80G. It also noted that Section 80G itself specifically excludes only contributions towards the Swachh Bharat Kosh and the Clean Ganga Fund forming part of CSR expenditure, indicating that other eligible CSR donations remain entitled to deduction.
In the present case, the Tribunal found that the Revenue had not disputed either the genuineness of the donations or the eligibility of the recipient institutions under Section 80G. The sole ground for disallowance was that the expenditure had been incurred in discharge of CSR obligations. The Tribunal held that such reasoning could not be sustained in view of the consistent judicial precedents and the statutory scheme.
Accordingly, the Tribunal held that the assessee was entitled to deduction under Section 80G in respect of CSR donations made to eligible institutions. It directed the Assessing Officer to allow the deduction after routine verification of the quantum of the claim and fulfillment of the prescribed procedural conditions.
Since the facts and issue involved in the appeal for Assessment Year 2020-21 were identical, the Tribunal applied the same findings to that appeal as well. Both appeals filed by the assessee were accordingly allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. These two appeals are filed by the assessee against separate orders passed by the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi both dated 10.12.2025 for A.Ys. 2018-19 and 2020-21 arising out of assessment orders passed u/s 143(3) of the Income Tax Act, 1961 (“the Act”). Since common issue is involved in both the appeals, they were heard together and are disposed of by this consolidated order. For the sake of convenience, facts in ITA No.180/Mum/2026 for A.Y. 201819 are taken as lead case.
2. The assessee has raised various grounds challenging disallowance of deduction claimed u/s 80G of the Act in respect of donation forming part of CSR expenditure.
3. Brief facts of the case are that the assessee company had incurred CSR expenditure amounting to Rs.5,41,00,000/- in accordance with section 135 of the Companies Act, 2013. Out of the total donations made during the year, the assessee claimed deduction u/s 80G amounting to Rs.3,00,50,000/-, out of which deduction attributable to CSR donation worked out to Rs.2,70,50,000/-. The Assessing Officer held that CSR expenditure being mandatory in nature lacks voluntariness and therefore cannot qualify as donation eligible for deduction u/s 80G of the Act. Accordingly, deduction of Rs.2,70,50,000/- was disallowed.
4. Before the Ld. CIT(A), the assessee submitted that Explanation-2 to section 37(1) merely prohibits claim of CSR expenditure as business expenditure and does not bar deduction under Chapter VI-A. It was further submitted that the donee institutions possessed valid approval u/s 80G and therefore deduction could not be denied merely because the expenditure also qualified as CSR expenditure. Reliance was placed on various decisions of coordinate benches including Alubound Dacs India Pvt. Ltd. vs DCIT, Interglobe Technology Quotient Pvt. Ltd. vs ACTT, JMS Mining Pvt. Ltd. vs PCIT, HDFC Bank Ltd. vs DCIT and Axis Securities Ltd. vs PCIT. However, the Ld. CIT(A) upheld the disallowance observing that CSR expenditure is mandatory in nature and therefore lacks the voluntary character necessary for claiming deduction u/s 80G of the Act. Aggrieved, the assessee is in appeal before us.
5. The Ld. AR reiterated the submissions made before lower authorities and submitted that the issue is now squarely covered in favour of the assessee by series of decisions of coordinate benches of the Tribunal including decisions of Mumbai Benches. It was submitted that section 80G nowhere mandates that donation should be voluntary in nature and legislature itself has carved out only two exceptions under section 80G(2)(a)(iiihk) and (iiihl), namely contribution towards Swachh Bharat Kosh and Clean Ganga Fund. Therefore, other CSR donations made to eligible institutions continue to qualify for deduction u/s 80G of the Act.
6. The Ld. DR relied on the orders of the lower authorities.
7. We have heard the rival submissions and perused the material available on record. The short issue involved in the present appeal is whether deduction u/s 80G can be denied in respect of donation made to eligible institutions merely because such donation also constituted CSR expenditure incurred pursuant to section 135 of the Companies Act, 2013.
8. We find that the issue is no longer res integra. The coordinate benches of the Tribunal have consistently held that though CSR expenditure is not allowable as deduction u/s 37(1) in view of Explanation-2 inserted by Finance (No.2) Act, 2014, the same does not result in automatic denial of deduction u/s 80G of the Act if other conditions prescribed therein are fulfilled.
9. The Mumbai Bench of the Tribunal in the case of AluboundDacs India Pvt. Ltd. vs DCIT reported in 207 ITD 393 held that the legislature while inserting Explanation-2 to section 37(1) consciously restricted the disallowance only to claim under section 37(1). The Tribunal further held that section 80G specifically excludes only contributions made towards Swachh Bharat Kosh and Clean Ganga Fund forming part of CSR expenditure and therefore other donations made to institutions covered u/s 80G continue to remain eligible for deduction.
10. Similar view has been taken by the Delhi Bench of the Tribunal in Interglobe Technology Quotient Pvt. Ltd. vs ACTT reported in 207 ITD 360 wherein it was held that merely because CSR expenditure is mandatory in nature, deduction u/s 80G cannot be denied once other statutory conditions are satisfied.
11. The Kolkata Bench of the Tribunal in JMS Mining Pvt. Ltd. vs PCIT reported in 130 com 118 elaborately examined the statutory framework and held that Explanation-2 to section 37(1) operates only while computing business income under Chapter IV-D and cannot be imported into Chapter VI-A so as to deny deduction otherwise available u/s 80G of the Act.
12. We further note that the Mumbai Benches of the Tribunal in HDFC Bank Ltd. vs DCIT reported in 179 com 268 and Axis Securities Ltd. vs PCIT reported in 175 taxmann.com 982 have reiterated the same principle and allowed deduction u/s 80G in respect of CSR donations made to eligible institutions.
13. In the present case, the Revenue has not disputed the genuineness of donation nor eligibility of donee institution u/s 80G of the Act. The only basis for disallowance is that the expenditure was incurred towards CSR obligation. In our considered opinion, in view of consistent judicial precedents on the issue, such reasoning cannot be sustained.
14. We also note that section 80G itself provides specific exclusion only in respect of contributions made towards Swachh Bharat Kosh and Clean Ganga Fund under section 80G(2)(a)(iiihk) and (iiihl). The donation made by the assessee admittedly does not fall within the said excluded categories. Therefore, deduction cannot be denied by importing restrictions not contemplated under the statute.
15. Respectfully following the decisions of coordinate benches referred supra, we hold that the assessee is entitled to deduction u/s 80G of the Act in respect of CSR donation made to eligible institution. The Assessing Officer is directed to allow the claim of deduction u/s 80G after routine verification of quantum and fulfillment of procedural conditions.
16. Since the facts and issue involved in ITA No.181/Mum/2026 for A.Y. 2020-21 are identical, our findings rendered hereinabove shall apply mutatis mutandis to said appeal also.
17. In the result, both appeals of the assessee are allowed.
Order pronounced in the open court on 18/05/2026.
Author Bio
