Delhi Duty Free Service [P] Ltd Vs DCIT (ITAT Delhi)
In these three appeals, the core dispute was whether CSR expenditure, though disallowed as business expense, could still qualify for deduction u/s 80G. AO held that CSR is a compulsory statutory obligation u/s 135 of Companies Act & therefore cannot be treated as a voluntary donation eligible u/s 80G. CIT(A) upheld the disallowance.
Assessee argued that CSR payments were made to entities duly approved u/s 80G & relied on various Delhi ITAT decisions including InterGlobe Technology Quotient & Max New York Life Insurance Co. to submit that even if CSR is not allowable as business deduction, it does not lose its character as donation if all conditions u/s 80G are fulfilled.
Tribunal observed that several Co-ordinate Benches have already held that CSR can qualify for deduction u/s 80G subject to compliance with statutory requirements. Tribunal therefore restored the matter to AO to verify donation receipts & 80G certificates & allow deduction accordingly for AYs 2017-18 & 2018-19.
For AY 2020-21, AO further denied 80G deduction on the ground that Assessee opted for 22% tax rate u/s 115BAA. Tribunal held that for AY 2020-21, 115BAA restricted only deductions falling under Chapter VI-A “C – deductions in respect of certain incomes”. Section 80G falls under “B – deductions in respect of certain payments”. Hence, deduction u/s 80G was still eligible in that year. Tribunal clarified that the law was amended from AY 2021-22 onwards to bar 80G deduction, but such bar did not apply to AY 2020-21. Accordingly, Tribunal directed AO to allow 80G claim subject to verification.
