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  • Jun 11, 2024
  • Tax tribunals allow deductions for donations part of CSR spend

    Delhi and Mumbai benches of ITAT recently allowed a deduction under section 80-G of the I-T Act to two corporate entities for donations made by them, even though such donations were part of their CSR expenses.
    During assessment, I-T officials had denied the deduction on the ground that donations, which are part of CSR expenses, are not voluntary in nature but are a compliance to be made under the Companies Act.Donations can only be voluntary in nature, was the stand taken by I-T officials.

    Under section 135 of the Companies Act read with the rules, companies having a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more have to comply with the CSR provisions. These companies have to spend at least 2% of their average net profit for the immediately preceding three fiscals on CSR activities. In the case of Alubound Dacs, which was heard by the Mumbai ITAT, a deduction of Rs 15 lakh made under 80-G for donations to educational and charitable trusts during the financial year 2019-20, was denied during assessment. The Delhi ITAT heard the case of Interglobe Technology Quotient, where during the financial year 2019-20, Rs 78 lakh was denied on the ground that the underlying expenditure was not in the nature of donation, but a mandatory CSR expense. Both companies succeeded in litigation at the ITAT level.