Peak XV Partners Advisors Private Limited Vs DCIT (ITAT Bangalore)
In a significant ruling for corporate taxation, the Income Tax Appellate Tribunal (ITAT) Bangalore bench has sided with Peak XV Partners Advisors Private Limited (formerly Sequoia Capital India Advisors Private Limited) in its dispute with the Deputy Commissioner of Income Tax (DCIT) regarding the deductibility of Corporate Social Responsibility (CSR) contributions under Section 80G of the Income Tax Act, 1961. The tribunal’s decision, delivered on March 3, 2025, for assessment years 2017-18 and 2018-19, clarifies that CSR expenditure, while not allowable as a business deduction under Section 37, can still qualify for deduction under Section 80G.
The case centered on Peak XV Partners’ claim for deduction under Section 80G for donations made towards CSR activities, amounting to ₹57,79,500 (50% of eligible donations of ₹1,15,59,000) for the assessment year 2017-18. The company had voluntarily disallowed the entire CSR expenditure of ₹1,51,25,400 under Section 37 of the Act while computing its business income.
Background of the Dispute
The Assessing Officer (AO) had disallowed the Section 80G claim, asserting that CSR expenditure, being an application of income and not a business expense under Section 37, could not be subsequently claimed as a deduction under Section 80G. The AO argued that allowing such a deduction would imply government contribution to CSR, defeating legislative intent. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision, additionally noting that some recipient institutions lacked valid Section 80G approvals. The CIT(A) also opined that only CSR donations exceeding the mandatory 2% of net profits might qualify as “optional” and thus be eligible for Section 80G benefits, which was not the case here as the total donation did not exceed 2%.
