Fluor Daniel India Private Limited Vs DCIT (ITAT Delhi)
Section 80G Deduction on Eligible CSR Donations Allowed Despite Section 37(1) Disallowance: ITAT Delhi
The assessee challenged the final assessment order passed under Sections 144, 144C(13) and 144B of the Income-tax Act, 1961, principally disputing the denial of deduction under Section 80G in respect of donations forming part of Corporate Social Responsibility (CSR) expenditure and the computation of interest and fees. During assessment, the Assessing Officer noted that the assessee had disallowed CSR expenditure under Section 37(1) in its computation of income but separately claimed deduction under Chapter VI-A under Section 80G for donations made to institutions covered by that provision. The Assessing Officer rejected the claim, holding that CSR expenditure incurred under Section 135 of the Companies Act, 2013 was mandatory, not voluntary, and therefore not eligible as a donation under Section 80G. The DRP upheld the disallowance.
Before the ITAT, the assessee relied upon several coordinate bench decisions. The Tribunal observed that the issue had already been settled by coordinate benches and followed those precedents. It reiterated that Explanation 2 to Section 37(1) only disallows CSR expenditure as a business deduction while computing business income and does not bar a deduction under Section 80G contained in Chapter VI-A. The Tribunal noted that Section 80G operates after computation of gross total income and there is no correlation between the disallowance under Section 37(1) and a claim under Section 80G, provided the conditions of Section 80G are satisfied. It also accepted the reasoning adopted in earlier decisions that the mandatory nature of CSR expenditure under Section 135 of the Companies Act does not, by itself, prevent an otherwise eligible donation from qualifying under Section 80G where there is no allegation that the statutory conditions for deduction have not been fulfilled. Accordingly, the Tribunal set aside the orders of the lower authorities on this issue and allowed the assessee’s grounds relating to the Section 80G claim.
