ACIT Vs Sikka Ports and Terminals Ltd. (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT) Mumbai has ruled in favor of Sikka Ports and Terminals Ltd., affirming the company’s eligibility to claim a deduction under Section 80G of the Income Tax Act, 1961, for donations made as part of its Corporate Social Responsibility (CSR) spending. The Tribunal’s decision, covering Assessment Years 2020-21 and 2018-19, rejects the Revenue’s argument that mandatory CSR spending cannot be considered “voluntary donations” for tax deduction purposes.
The appeals filed by the Revenue challenged separate orders from the Commissioner of Income Tax (Appeals) [CIT(A)] which had allowed Sikka Ports’ 80G claims and deleted disallowances made under Section 14A.
Background of the Case
For the Assessment Year 2020-21, Sikka Ports and Terminals Ltd. declared a total income of over ₹684 crore. The company claimed a deduction of ₹16.92 crore under Section 80G, representing 50% of the ₹33.85 crore spent on CSR activities. These donations were made to Reliance Foundation and Shyam Kothari Foundation, both registered under Section 80G.
The Assessing Officer (AO) disallowed the 80G claim, arguing that CSR expenditure, mandated by Section 135 of the Companies Act, 2013, is not a voluntary donation. The AO contended that allowing an 80G deduction would indirectly defeat the legislative intent behind Explanation 2 to Section 37(1) of the Income Tax Act, which specifically disallows CSR expenses as business expenditure.
