JM Financial Credit Solutions Limited Vs DCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, disposed of two appeals filed by the assessee for Assessment Years 2018-19 and 2020-21 involving a common issue relating to the allowability of deduction under Section 80G of the Income Tax Act, 1961 for donations forming part of Corporate Social Responsibility (CSR) expenditure.
The assessee had incurred CSR expenditure of ₹5.41 crore in accordance with Section 135 of the Companies Act, 2013. Out of the total donations made during the relevant year, the assessee claimed deduction under Section 80G amounting to ₹3,00,50,000, of which ₹2,70,50,000 related to CSR donations. The Assessing Officer disallowed the deduction attributable to CSR expenditure, holding that CSR spending is mandatory in nature and therefore lacks the voluntary character required to qualify as a donation eligible for deduction under Section 80G.
Before the Commissioner of Income Tax (Appeals), the assessee contended that Explanation 2 to Section 37(1) only prohibits CSR expenditure from being claimed as a business expenditure and does not restrict deduction under Chapter VI-A. It was also submitted that the recipient institutions possessed valid approval under Section 80G and that deduction could not be denied merely because the donations also constituted CSR expenditure. Reliance was placed on several decisions of coordinate benches supporting this view. The CIT(A), however, upheld the disallowance on the ground that CSR expenditure is compulsory and therefore lacks voluntariness.
