Our company was eligible for CSR Expenditure last FY. We made the same to PM cares. So I want to ask can the same be claimed tax benefit as 100% deduction under section 80G.

The FAQ issued by Ministry of Corporate Affairs (MCA) General Circular No. 14 /2021, dated 25th August 2021 states at 3.11 that no specific tax exemptions have been extended to CSR expenditure. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure.

Memorandum to Finance Bill 2014 had mentioned that if CSR expenditure is of the nature which is covered by specific deductions contained in Sections 30 to 36, the expenditure by virtue of being governed by a specific provision (of Income tax) shall be granted a deduction if the conditions prescribed are satisfied.

Section 37 (2) of Income Tax Act 1961 clarifies that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.

In the matter of Sling Media Private Ltd. Vs DCIT (ITAT Bangalore), Appeal Number: ITA. No. 197/Bang/2020 ITAT has held that “assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing ‘Total Taxable Income. If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature“.

In this case the assessee had disallowed the CSR expenditure while calculating Gross Total Income and claimed the deduction under section 80G. ITAT’s view in the case is appended below:

“For claiming benefit under section 80G, deductions are considered at the stage of computing “Total taxable income”. Even if any payments under section 80G forms part of CSR payments, keeping in mind ineligible deduction expressly provided, the same would already stand excluded while computing, Income under the head, “Income form Business and Profession”. The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing “Total Taxable Income” cannot be denied to assessee, subject to fulfilment of necessary conditions therein. 

Conclusion:

Assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing ‘Total Taxable Income. If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance.