Mumbai, April 5: In a key ruling, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that companies can claim deductions under Section 80G of the Income Tax Act for their Corporate Social Responsibility (CSR) contributions. This verdict came in response to appeals filed by the Income Tax Department against Sikka Ports and Terminals Ltd. for the Assessment Years 2018-19 and 2020-21.

The company had donated ₹33.85 crore to Reliance Foundation and Shyam Kothari Foundation, both of which are registered under Section 80G. It claimed a 50% deduction on these donations. However, tax authorities argued that since CSR spending is a statutory obligation, such contributions should not be considered voluntary donations eligible for tax deductions.

The tribunal disagreed with the tax department’s stance, stating that CSR expenses, though mandatory, are still eligible for 80G benefits if donated to registered institutions. The ITAT emphasized that companies have discretion in choosing the recipient of their CSR funds, and such payments qualify as donations under the law.

Referencing the Supreme Court’s ruling in Commissioner of Expenditure Tax vs. PVG Raju (1975), the tribunal highlighted that a donation doesn’t need to be entirely voluntary; what matters is that the donor does not receive a benefit in return.

The ITAT also clarified that while the 2014 amendment disallowed CSR deductions under Section 37, it did not affect deductions under other sections like 80G. If lawmakers had intended to restrict 80G claims for CSR, they would have explicitly stated so, the tribunal noted.

In a related observation, the bench struck down a disallowance made under Section 14A, ruling that the 2022 amendment cited by the tax department could not be applied retroactively.

The ITAT bench, comprising Judicial Member Amit Shukla and Accountant Member Padmavathy S., dismissed both appeals filed by the revenue. The ruling offers greater clarity and relief to corporates, reaffirming that mandatory CSR contributions to eligible institutions still attract tax benefits under Section 80G.