Is CSR expenditure is allowable under section 80G of Income Tax Act – ITAT says “Yes”

CSR expenditure of companies is allowable under section 80G unless fall under the two exceptions specified.

In a recent judgment, ITAT Ahmedabad has held that CSR expenditure of companies is allowable under section 80G as intention of the Legislature was clear when the same was clarified by the Finance (No.2) Act 2014.

ABCAUS Case Law Citation:
4961 (2025) (12) abcaus.in ITAT

In the instant case, regular scrutiny assessment of the appellant assessee was completed accepting the returned income after calling for various details.

Subsequently, the PCIT observed that assessee company had debited in the Profit & Loss account Corporate Social Responsibility (CSR) expenses and also claimed deduction u/s 80G against the same donation to an Institute, whereas the amount of donation which was included in the CSR expenses was not allowable.

Thus, the PCIT was of the opinion that AO, during assessment proceedings allowed the same which resulted in under assessment of income resulting in erroneous order and was prejudicial to the interest of Revenue.

Accordingly, PCIT set-aside the assessment order with a direction to pass fresh assessment order by giving proper opportunity of hearing to the assessee.

Before the Tribunal the assessee contened that all details regarding donations were furnished in the Tax Audit Report as well as in the Return of Income and the AO had verified the claim during the assessment proceedings following CBDT Circular No. 1/2015 dated 21-01-2015 and General Circular No.01/2016 dated 12-01-2016.

Further the assessee relied upon Co-ordinate Benches of the Tribunal wherein the issue of claim of CSR expenses u/s 80G had been dealt with and held that where an enquiry was made by the AO during assessment proceedings on the same subject, Revision proceedings cannot be instituted.

The Tribunal observed that it was undisputed fact that during the assessment proceedings, the Assessing Officer issued detailed notice u/s.143(2) calling for the details of donations made and satisfied with the reply filed by the assessee. Therefore, AO passed the assessment order and allowed the claim of deduction u/s. 80G in respect of CSR expenses, which was a plausible view taken by the AO. In the above circumstances, the PCIT was not correct in invoking Revision proceedings u/s. 263 of the Act. 

The Tribunal further observed that the intention of the Legislature was clear when the issue of allowable CSR expenditure as donation was clarified by the Finance (No.2) Act, 2014 that CSR expenses will not fall under the business expenditure and also there has been an express bar specified in sub clause (iii hk) and (iii hl) of section 80G(2)(a) of the Act that any sum paid by the assessee as donation to Swatch Bharat Kosh and Clean Ganga Fund will not come under the purview of deduction u/s 80G of the Act subject to certain conditions. This justifies the fact that the other donations specified u/s 80G of the Act would be entitled to deduction provided the conditions stipulated u/s. 80G of the Act are satisfied.

The Tribunal noted that in the present case in hand, the contributions made by the assessee would not fall under the two exceptions specified which clearly mandates that the assessee was entitled to claim deduction for the donations contributed during the year under consideration u/s. 80G of the Act. 

The Tribunal further noted that the issue whether CSR expenditure is allowable u/s 80G of the Act is also no more res integra by a series of decisions by various Coordinate Benches of the Tribunal at Ahmedabad, ITAT Kolkata, ITAT Delhi, ITAT Mumbai etc.

Following the judicial precedents, the Tribunal quashed the Revision order passed by PCIT and allowed the grounds of appeal raised by the assessee.

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