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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This appeal arises from order dated 09.04.2026, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by NFAC.
Brief facts in this case are that the assessee is engaged in oil and gas production since 1995. The assessee filed its original return of income for AY 2020-21, declaring total income at Rs.53,30,30,480/-. During the course of assessment proceedings, it was observed by the AO that the assessee had incurred expenses amounting to Rs.70,50,000/- on account of CSR and on this payment, the assessee had claimed deduction to the extent of Rs.32,25,000/- u/s 80G of the Act. The Ld. AO rejected this claim.
The aggrieved assessee approached the Ld. CIT(A), where also he could not succeed on the basis of the following finding:
“6.I have carefully considered the submissions the appellant and examined the judicial authorities cited. However, I am not convinced with the appellant’s arguments. Explanation 2 to section 37(1) of the Act, inserted by Finance (No.2) Act, 2014, clarifies that CSR expenditure, being mandatory in nature, cannot be treated as an expenditure incurred wholly and exclusively for the purpose of business.
7.The character of CSR outgo is statutory and lacks the element of voluntariness, which is the essence of a “donation”. The judicial precedents quoted by the appellant do not assist the appellant as the same have been delivered on specific set of facts and contexts and are fairly distinguishable. In this backdrop, it makes no difference whether the CSR amount was paid to an institution eligible under section 80G or otherwise, since permitting deduction under section 80G would defeat the legislative intent behind Explanation 2 to section 37 and that behind the section 135 of the Companies Act, 2013 as well.
8.Accordingly, I am constrained to confirm the disallowance made by the Assessing Officer. The claim of deduction under section 80G in respect of CSR expenditure of Rs.35,25,000/- is therefore rejected. Grounds of appeal raised by the appellant are, thus, dismissed.”
The assessee has approached the ITAT with grounds challenging this action of authorities below.
Before us the Ld. AR took us through the facts of the case and mentioned that the assessee had claimed donations out of CSR expenses amounting to Rs.70,50,000/- for the year under consideration. Thereafter, the assessee had disallowed such expenses in the computation and added the same to the net profit for the year. Additionally, the assessee had claimed an amount of Rs.35,25,000/-as deduction u/s 80G of the Act for donation, to eligible entities, made out of CSR expenses. The Ld. AR stated that the amounts claimed u/s 80G were duly given to eligible entities who were registered for the purposes of 80G of the Act. It was the submission that there were a plethora of ITAT coordinate bench orders which have consistently held that claiming of 80G deduction on CSR funds was allowable. The Ld. AR relied on the following coordinate bench orders, among some others:
Cheil India (P) Ltd. vs. DCIT [2024] 169 taxmann.com 507 (Delhi – Trib.) [28.10.2024];
T.V. Today Networks Ltd [2026] 186 taxmann.com 848 (Del);
Interglobe Technology Quotient (P) Ltd. vs. ACIT [2024] 163 taxmann.com 542 (Delhi – Trib.).
It was argued that the authorities below have placed reliance on section 135 of the Companies Act, 2013 as well as section 7 of the Notification of Ministry of Corporate Affairs dated 27.02.2014, to hold that on CSR spends the benefit of Section 80G would not be allowed. It was argued by the Ld. AR that the Income Tax Act was a separate and independent code and wherever some sections have to be borrowed from other enactments then those are specifically mentioned in the relevant sections. It was the submission that to borrow from the Companies Act, 2013 and super-impose Section 135 from that Act on Income Tax provisions would not be justified.
The Ld. DR relied on the orders of the authorities below and specifically pointed out that the disallowance was confirmed in the impugned order on the basis of a detailed discussion on pages 4-5 of the impugned order. Thereafter the Ld. DR highlighted various portions from the impugned order in support of his claim that the impugned disallowance was justifiably made.
We have considered the rival submissions and have gone through the documents before us. We have also perused the coordinate bench cases relied on by the Ld. AR. Right at the outset, it deserves to be mentioned that there is a considerable body of judicial pronouncements by coordinate benches whereby the claim of deduction u/s 80G has been allowed on CSR spends. We find that the cases relied on by the Ld. AR are squarely on the issue of allowability of 80G benefit on CSR. In support of these findings, in another case of Kellog Brown & Root Engineering & Construction India (P) Ltd, reported in 187 taxmann.com 342 [2026] (Delhi – Trib.), the issue has been adequately put in perspective through the following finding: -
“II. Ground No.6 – Denial of deduction u/s 80G
(i)The authorities below has denied deductions to the tune of Rs.12,25,000/- u/s 80G of the Act, 1961 to the assessee with respect to donation of Rs.24,50,000/- paid by the assessee to Odisha State Disaster Management Authority (50%). The same was denied by the authorities below as the same was part of CSR incurred by the assessee to meet its obligation as per Section 135 of the Companies Act, 2013. The AO has allowed deductions to the tune of Rs.48,08,411/- paid by the assessee towards PM Cares Fund and National Defense Fund, as these donations were albeit part of CSR but as per AO eligible for deduction u/s 80G. However, deduction u/s 80G claimed by the assessee with respect to donation of Odisha State Disaster Management Authority was denied by the AO as the same was part of CSR obligation to the assessee u/s 135 of 2013 Act, and hence as per the AO deduction u/s 80G is not admissible. The expenditure towards CSR obligation are prohibited u/s 37(1) of the Act, 1961. The assessee has produced receipt issued by Odisha State Disaster Management Authority bearing number 027667 (PB/page 542) and certificate issued by Odisha State Disaster Management Authority (A Government of Odisha Agency) that it qualifies u/s 80G(5)(vi) of the Act, 1961 and certificate is valid for AY 2020-21 (Placed in PB/page 543). The Tribunal has held in following judicial pronouncements that if the donations are paid towards CSR contribution as part of obligation under the Companies Act, 2013, the same cannot be allowed as deduction u/s 37(1), but there is no bar in claiming deduction u/s 80G except as provided in Section 80G(2)(a)(iiihk) and (iiihl) wrt The Swachh Bharat Kosh and The Clean Ganga Fund. The judicial precedents relied upon by the assessee are as under:
(a)Schenker India (P) Ltd. vs. Asstt. CIT [IT Appeal No.2391 (Delhi) of 2022, dated 19.03.2025]
(b)Strides Pharma Science Ltd. vs. ITO [IT Appeal No.5721 (Mum.) of 2024, dated 20.03.2025]
(c)Livlong Insurance Brokers Ltd. vs. Pr. CIT [2025] 176 taxmann.com 566 (Mumbai – Trib.)
(d)GIA India Laboratory (P) Ltd. vs. Dy. CIT [IT Appeal No.4395 (Mum.) of 2024, dated 21.11.2025]
Respectfully following the aforesaid decisions and other decisions relied upon by the assessee as listed in the paper book filed by the assessee, we direct AO to allow deduction u/s 80G in accordance with law wrt to donation paid by the assessee to Odisha State Disaster Management Authority. We order accordingly.
It is our opinion that once the fact of CSR expenditure on charities eligible for deduction u/s 80G of the Act is seen, then the same would need to be allowed. For this purpose, the finding in Kellog Brown & Root Engineering case (supra) has considerable persuasive value. Accordingly, we direct that the deductions claimed u/s 80G of the Act must be allowed.”
In the result, the appeal is allowed.