ITAT Ahmedabad Grants Relief To Milacron India, Says CSR Donations May Qualify For Section 80G Deduction

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) on 27 May held that tax authorities cannot deny a deduction under Section 80G of the Income Tax Act merely because a company made the donation to fulfil its Corporate Social Responsibility (CSR) obligations.

Vice-President Dr. B.R.R. Kumar and Judicial Member T.R. Senthil Kumar partly allowed an appeal filed by Milacron India Private Limited for Assessment Year 2020-21 and remanding the matter to the Assessing Officer for fresh consideration. The Bench held:

"The deduction under section 80G cannot be denied merely because the payment was made in discharge of CSR obligations, provided the contribution otherwise satisfies the requirements of section 80G."

Milacron India claimed a deduction of Rs. 83.20 lakh under Section 80G for donations made as part of its CSR expenditure. The Assessing Officer disallowed the claim, and the Dispute Resolution Panel affirmed the disallowance, holding that CSR expenditure constitutes mandatory spending under the Companies Act and therefore does not qualify as a voluntary donation.

Before the Tribunal, the company argued that Section 80G does not bar deductions for CSR-related donations. It submitted that the Income Tax Act excludes only contributions made to the Swachh Bharat Kosh and the Clean Ganga Fund as part of CSR expenditure from the benefit of Section 80G.

The Bench accepted the company's contention. It noted that Parliament specifically excluded only those two funds from Section 80G benefits when taxpayers make contributions towards CSR obligations. It held that other CSR-related donations may qualify for deduction if they satisfy the statutory conditions prescribed under Section 80G.

However, the Tribunal found that the tax authorities had not examined whether the recipient institutions held valid approval under Section 80G and whether the donations fulfilled the other statutory requirements.

Accordingly, the ITAT remanded the matter to the Assessing Officer for fresh consideration.