ITAT Quashes PCIT’s Revision Order on CSR Donations under Section 80G

The assessee claimed a deduction of Rs. 3.36 crore under Section 80G, being 50% of donations made to eligible institutions out of the total CSR expenditure of Rs. 6.73 crore. The Assessing Officer allowed the deduction.

The PCIT, however, revised the assessment under Section 263, holding that CSR expenditure is not allowable under Section 37 and therefore cannot qualify for deduction under Section 80G.

Main Issue: Whether the PCIT was justified in invoking Section 263 to disallow deduction under Section 80G in respect of donations made out of CSR expenditure.

ITAT’s Decision: The Tribunal noted that while CSR expenditure is not deductible under Section 37(1), donations made to eligible institutions under Section 80G constitute a distinct claim, unless specifically excluded by law. The tribunal referred to decisions favouring the assessee, including Gujarat State Financial Services Ltd. v. DCIT (Ahmedabad ITAT), and Interglobe Technology Quotient (P) Ltd. v. ACIT (Delhi ITAT), which held that CSR donations are allowable under Section 80G.

Therefore, the Tribunal held that the AO’s decision allowing deduction represented a “plausible view.” Since one of the mandatory conditions under Section 263, that the order be “erroneous”, was not met, the PCIT’s revision could not stand. The revision order was quashed, and the appeal of the assessee was allowed.

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