Donations Qualifying U/s 80G Deduction Don’t Lose Eligibility Merely For It Being CSR: ITAT

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has held that donations qualifying under Section 80G of the Income Tax Act, 1961 do not lose their eligibility merely because they form part of Corporate Social Responsibility (CSR) expenditure. The bench of R.K. Panda (Vice President) and Astha Chandra (Judicial Member) has allowed the appeal of Nyati Builders Private Limited for the assessment year 2018–19, directing the tax department to grant the disputed deduction after due verification The appellant/assessee, Nyati Builders Private Limited, a real estate developer engaged in residential and commercial projects, had filed its return of income for AY 2018–19 declaring income under both normal provisions and Section 115JB. During scrutiny, the Assessing Officer (AO) noted that the company had incurred CSR expenditure amounting to over ₹1.16 crore, which was disallowed as business expenditure under Section 37 in line with Explanation 2 to that section. However, the company also claimed deduction under Section 80G in respect of donations aggregating ₹1.13 crore, resulting in a deduction claim of ₹56.68 lakh. The AO disallowed this claim on the ground that CSR expenditure is mandatory under the Companies Act, 2013 and, therefore, cannot be treated as a “voluntary donation” eligible for deduction under Section 80G. The AO further reasoned that allowing such a deduction would amount to subsidising CSR expenditure through tax benefits, contrary to legislative intent On appeal, the Commissioner of Income Tax (Appeals) largely upheld the AO’s reasoning, observing that CSR outlays are mandatory in nature and represent application of income rather than voluntary donations. The CIT(A) emphasised that Section 80G applies only to voluntary contributions and that allowing deductions for CSR expenditure would defeat the objective of Section 135 of the Companies Act, which requires companies to bear social responsibility from their own resources. However, the CIT(A) partly accepted an alternative plea raised by the assessee. Based on the company’s Board Report, it was found that only ₹50 lakh had been specifically approved as CSR expenditure, while the balance donations were voluntary in nature. Accordingly, the CIT(A) directed the AO to restrict the disallowance to ₹25 lakh and allow deduction on the remaining amount under Section 80G. Aggrieved by the sustained disallowance of ₹25 lakh, the assessee approached the ITAT. The Tribunal noted that the issue was no longer res integra and had been consistently decided in favour of taxpayers by various coordinate benches. It relied heavily on earlier rulings, including those in Advik Hi Tech Pvt. Ltd., Credit Suisse Services (India) Pvt. Ltd., and several Mumbai and Pune Bench decisions, which held that deductions under Chapter VI-A, including Section 80G, operate at a different stage than business expenditure disallowances under Section 37. The Tribunal observed that CSR expenditure is specifically barred only for deduction as business expenditure under Section 37, but the law does not prohibit claiming deductions under other provisions, provided their respective conditions are satisfied. Denying Section 80G relief solely because a donation forms part of CSR would result in double disallowance, which is not supported by the statute. Rejecting the revenue’s contention on legislative intent, the Bench held that once a payment qualifies as a donation under Section 80G and meets the prescribed conditions, the deduction cannot be denied merely due to its linkage with CSR obligations. Accordingly, the ITAT set aside the order of the CIT(A) and directed the AO to verify and allow the assessee’s claim of deduction under Section 80G, including the disputed ₹25 lakh. Case Details Case Title: Nyati Builders Private Limited Versus ACIT Case No.: ITA No.1246/PUN/2025 Date: 24-11-2025 Counsel For Appellant: Krishna V. Gujarathi Counsel For Respondent: Ratnakar Bhimrao Shelake Click Here To Read Order Read More: Worn Luxury Watch Is a ‘Personal Effect’ Under Baggage Rules: Delhi HC Orders Release of Seized Rolex Watch

Donations Qualifying U/s 80G Deduction Don’t Lose Eligibility Merely For It Being CSR: ITAT

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