Cheil India Private Limited Vs DCIT (ITAT Delhi)
The Delhi ITAT allowed the assessee’s appeal for AY 2020-21 and held that eligible payments forming part of Corporate Social Responsibility (CSR) expenditure could not be denied deduction under Section 80G merely on the ground that such expenditure was incurred pursuant to the statutory obligation under Section 135 of the Companies Act, 2013.
The assessee had claimed deduction of ₹2,57,66,663 under Section 80G of the Income-tax Act, 1961 in respect of payments forming part of CSR expenditure. The Assessing Officer disallowed the claim, charged interest under Section 115P and initiated penalty proceedings under Section 270A. The CIT(A) upheld the disallowance on the ground that the expenditure was mandatorily incurred within the threshold limits prescribed under Section 135(5) of the Companies Act, 2013 and lacked the element of voluntary charity. According to the CIT(A), the underlying nature of the payment was CSR expenditure rather than a voluntary donation for purposes of Section 80G.
Before the Tribunal, the assessee submitted that the issue was covered by several coordinate bench decisions holding that denial of CSR expenditure under Section 37(1) does not operate as an embargo on claiming deduction under Section 80G. The Revenue could not controvert the assessee’s submission that the issue was covered in its favour.
The ITAT referred to the Delhi Tribunal’s coordinate bench ruling in Ratna Sagar Pvt. Ltd. vs. ACIT, which had considered a similar issue and relied upon the decision in Interglobe Technology Quotient Private Limited. The Tribunal noted that Explanation 2 to Section 37(1), inserted by the Finance (No. 2) Act, 2014 and applicable from AY 2015-16, provides that expenditure incurred on CSR activities referred to in Section 135 of the Companies Act, 2013 shall not be deemed expenditure incurred for the purposes of business or profession and shall not be allowed as a deduction under Section 37(1).
The Tribunal observed that the legislative rationale for disallowing CSR expenditure under Section 37(1) was that such expenditure constituted application of income and was not incurred wholly and exclusively for business purposes. In its view, this did not bar a deduction under Section 80G. Since CSR expenditure treated as application of income continued to form part of the total income of the assessee, a deduction could be considered under Section 80G in accordance with its provisions.
The ITAT further noted that Section 80G falls under Chapter VI-A, which applies after gross total income has been computed by applying the relevant computation provisions under various heads of income, including Explanation 2 to Section 37(1). Accordingly, the Tribunal held that there was no correlation between disallowance under Section 37(1) and a claim for deduction under Section 80G.
On the objection that CSR expenditure was mandatory rather than voluntary, the Tribunal observed that the voluntary nature of a donation arose from the absence of any reciprocal promise from the donee. CSR expenditure was likewise made without reciprocal commitment from the beneficiary and remained philanthropic in nature. Therefore, the mandatory character of CSR expenditure did not justify disallowance under Section 80G where the other statutory conditions were fulfilled.
The Tribunal also recorded that there was no allegation by the Revenue that the other conditions prescribed under Section 80G had not been satisfied. Respectfully following the coordinate bench precedent, the ITAT set aside the orders of the lower authorities, decided the issue in favour of the assessee and allowed the appeal.
Cases Discussed
- Societe Generale Securities India (P) Ltd. vs. PCIT, [2024] 204 ITD 796 (Mumbai – Trib.)
- Interglobe Technology Quotient Private Limited vs. ACIT, Circle 10(1), New Delhi, ITA No. 95/Del/24
- Ericsson India Global Services Private Limited vs. DCIT, Circle 7(1), New Delhi, ITA No. 1150/Del/22
- Power Mech Projects Ltd. vs. DCIT, [2023] 156 taxmann.com 575 (Hyderabad Trib.)
- Honda Motorcycle & Scooter India Pvt. Ltd. vs. ACIT, Circle 1(1), Gurugram, ITA No. 1523/Del/22
- Ramnath And Co. vs. The Commissioner of Income Tax, delivered on June 05, 2020
- Ratna Sagar Pvt. Ltd. vs. ACIT, Central Circle-4, New Delhi, ITA No. 2256/Del/23
- M/s Goldman Sachs Services Pvt. Ltd. vs. JCIT, Special Range-3, Bangalore, IT(TP)A No. 2355/Bang/2019
- M/s JMS Mining Pvt. Ltd. vs. PCIT, Kolkata-2, Kolkata, ITA No. 146/Kol/21
- Optum Global Solutions (India) Private Limited, Hyderabad vs. DCIT, Circle 5(1), Hyderabad, ITA-TP Nos. 145 & 482/Hyd/2022
FULL TEXT OF THE ORDER OF ITAT DELHI






