Schneider Electric IT Business India Private Limited Vs DCIT (ITAT Bangalore)
Bangalore ITAT: CSR Donations Eligible for Section 80G Deduction; No 14A Disallowance When No Exempt Income Earned
The Bangalore ITAT, in the case of Schneider Electric IT Business India Pvt. Ltd., held that a deduction under Section 80G cannot be denied merely because the donation formed part of the assessee’s Corporate Social Responsibility (CSR) expenditure. The Tribunal observed that while CSR expenditure is specifically disallowed as a business deduction under Section 37(1) by Explanation 2, there is no corresponding prohibition against claiming deduction under Chapter VI-A, including Section 80G, provided the conditions of that section are satisfied. The Tribunal noted that the Income-tax Act itself excludes only certain CSR-related donations, such as those made to the Swachh Bharat Kosh and Clean Ganga Fund, indicating that other eligible donations continue to qualify for deduction under Section 80G. Denial of both Section 37 and Section 80G benefits would result in an unintended double disallowance. Accordingly, the deduction of ₹3.75 crore claimed under Section 80G was allowed.
On the issue of Section 14A, the Tribunal deleted the disallowance made by the Assessing Officer since the assessee had not earned any exempt income during the year. Relying on the decisions of the Delhi High Court in Cheminvest Ltd. and the Bombay High Court in Kohinoor Project Pvt. Ltd., the Tribunal reiterated that no disallowance under Section 14A can be made where no exempt income has been earned. The Tribunal further observed that the amendment made by the Finance Act, 2022, expanding the scope of Section 14A applies prospectively from AY 2022-23 and cannot be invoked for earlier years. Consequently, the entire disallowance under Section 14A read with Rule 8D was directed to be deleted.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
