Ericsson India Global Services Private Ltd. Vs DCIT (ITAT Delhi)
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2015-16. The principal issues involved deduction under Section 80G in respect of Corporate Social Responsibility (CSR) donations, applicability of a lower Dividend Distribution Tax (DDT) rate under a Double Taxation Avoidance Agreement (DTAA), and deduction of Education Cess and Secondary & Higher Education Cess.
The assessee, engaged in providing services relating to operation and support of networks and development and delivery of software-based solutions for the telecommunication industry, had incurred expenditure of ₹3.4 crore towards CSR activities. While computing taxable income, the assessee disallowed the CSR expenditure in view of Section 37(1) of the Income-tax Act. However, it claimed deduction under Section 80G on the basis that the institutions receiving the donations were eligible institutions registered under Section 80G. The assessee contended that it was entitled to deduction of 50% of the amount donated as provided under Section 80G.
The Assessing Officer rejected the claim. The first appellate authority also upheld the disallowance, observing that CSR expenditure is incurred mandatorily under the Companies Act and therefore lacks the voluntary character normally associated with donations. According to the appellate authority, deduction under Section 80G is available only in respect of voluntary donations and not mandatory CSR expenditure.
