ITAT Mumbai Holds CSR Donations Deductible Under Section 80G, Allows Aditya Birla's PF Contributions

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) on 6 February, observed that CSR donations to approved institutions qualify for deduction under Section 80G of the Income Tax Act, 1961. The Bench also clarified that employees' provident fund contributions cannot be disallowed if deposited within the statutory due date.

In the consolidated appeals filed by Aditya Birla Sun Life AMC Limited, the Bench of Judicial Member Amit Shukla and Accountant Member Makarand Vasant Mahadeokar, partly allowed the appeals relating to assessment years 2017-18, 2018-19, 2022-23, and 2023-24.

For AYs 2017-18 and 2018-19, the Tribunal allowed deduction under Section 80G in respect of CSR donations, holding that Explanation 2 to Section 37(1) only bars CSR expenditure as business deduction but does not prohibit deduction under Chapter VI-A. The Bench observed:

“Explanation 2 to section 37(1) merely prohibits allowance of CSR expenditure as business expenditure ..but does not operate as a bar against claiming deduction under Chapter VI-A, particularly under section 80G of the Act.”

For AY 2017-18, the Bench upheld the disallowance of employees' PF contribution, following the Supreme Court's decision in Checkmate Services (P) Ltd. It also allowed the provision for leave encashment to be made on actuarial basis as an ascertained liability, based on Bharat Earth Movers v. CIT.

In AY 2022-23, the Tribunal deleted disallowance of Rs. 54.93 lakh under Section 36(1)(va) after noting that PF contribution was deposited on 4 July 2021, before the statutory due date of 15 July 2021. It held that timely payment under the relevant welfare law precludes any disallowance.

The Bench remanded issues relating to DDT credit, short TDS credit, computation differences, and interest to the Assessing Officer for verification.

Accordingly, the appeals were partly allowed.