CSR Donations Qualify for Section 80G Deduction: ITAT Delhi

Cosmo First Limited Vs ITO (ITAT Delhi)

The ITAT Delhi partly allowed the assessee’s appeal for Assessment Year 2020-21, involving corporate tax and transfer pricing issues arising from the final assessment order passed under Sections 143(3), 144C(13), and 144B of the Income-tax Act. The additions related to disallowance of deduction under Section 80G, transfer pricing adjustment on outstanding receivables, and other claims made during assessment proceedings.

On the issue of deduction under Section 80G, the Assessing Officer and the DRP disallowed the assessee’s claim of ₹1.19 crore, holding that donations made towards Corporate Social Responsibility (CSR) obligations were not voluntary donations. The Tribunal noted that the assessee had disallowed the entire CSR expenditure in computing its income but claimed deduction under Section 80G in respect of donations made to institutions approved under that provision. Relying on several coordinate bench decisions, including Interglobe Technology Quotient (P.) Ltd., the Tribunal held that there is no correlation between the disallowance of CSR expenditure under Explanation 2 to Section 37(1) and the eligibility for deduction under Section 80G. It observed that Section 80G operates independently under Chapter VI-A and that CSR donations satisfying the statutory conditions of Section 80G remain eligible for deduction. The Tribunal also held that the mandatory nature of CSR expenditure does not deprive a qualifying payment of its character as a donation where there is no reciprocal benefit from the donee. Accordingly, it allowed the assessee’s grounds relating to Section 80G deduction.