CSR Donations Can Qualify for Deduction Under Section 80G, Rules Mumbai ITAT

In a crucial judgment offering clarity to companies fulfilling their Corporate Social Responsibility (CSR) obligations, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that CSR contributions can be claimed as deductions under Section 80G of the Income Tax Act, 1961, provided certain conditions are met.

This ruling will likely impact how companies structure their CSR activities, especially when they contribute to eligible charitable institutions.

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Case Background: The Ruby Mills Ltd.

The case revolves around Ruby Mills Limited, a company that filed its income tax return for the Assessment Year 2020–21, declaring a total income of ₹31.64 crores.

During the assessment, the Assessing Officer (AO) scrutinized the books and allowed a deduction of ₹48.54 lakhs under Section 80G for CSR-related donations made to charitable institutions.

However, this did not end the matter.

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PCIT’s Objection: Mandatory Nature of CSR

The Principal Commissioner of Income Tax (PCIT) was not satisfied with the AO’s order and initiated revision proceedings under Section 263 of the Income Tax Act.

The PCIT contended that:

• CSR expenses are mandatory under the Companies Act, and
• Because they are not voluntary, they do not qualify as donations under Section 80G, which is meant to encourage voluntary charitable giving.

Based on this reasoning, the PCIT disallowed the deduction of ₹48.54 lakhs and directed the AO to pass a fresh assessment order.

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The Assessee’s Defense Before ITAT

Aggrieved by the revision, Ruby Mills Ltd. challenged the PCIT’s order before the Income Tax Appellate Tribunal (ITAT).

The company’s counsel presented a strong defense:

• The AO had already examined the Section 80G claims during the original assessment.
• Proper notices were issued and answered with receipts, documents, and verification of the recipient institutions.
• All the recipient institutions were registered under Section 80G, fulfilling the necessary conditions.
• Judicial precedents, including decisions from the Jurisdictional Bombay High Court and other ITAT benches, consistently allowed 50% deduction for CSR donations under Section 80G.

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ITAT’s Verdict: CSR + 80G Can Coexist

The ITAT Bench, consisting of Judicial Member Pawan Singh and Accountant Member Prabhash Shankar, examined the matter thoroughly and ruled in favor of the assessee.

Key observations included:

• The donations were made to eligible institutions with valid 80G registration.
• The AO had already verified the claims during the assessment, and no new facts were brought in by the PCIT.
• Precedent cases (such as Gabriel India Ltd. and Dalal & Broacha Stock Broking Pvt. Ltd.) confirmed that CSR donations are not excluded from 80G benefits if the conditions are satisfied.

Therefore, the Tribunal restored the original deduction of ₹48.54 lakhs and quashed the revision order passed by the PCIT.

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What This Means for Businesses

This judgment reinforces the principle that:

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Frequently Asked Questions (FAQs)

Q1. Can CSR expenses be claimed under Section 80G?
👉 Yes, if the donation is made to an institution registered under Section 80G, and the conditions are met, it can be claimed—even if it is part of CSR expenditure.

Q2. What proof is required to claim 80G deduction?
✅ Valid donation receipts, PAN and 80G registration of the donee organization, and bank transfer records.

Q3. Does the mandatory nature of CSR under Companies Act affect 80G eligibility?
🚫 Not necessarily. ITAT has clarified that mandatory CSR does not make donations ineligible, as long as they follow Section 80G norms.

Q4. How much deduction is allowed under Section 80G?
📉 Deductions can be 50% or 100%, depending on the donee. In CSR cases, 50% deduction is commonly applicable.

Q5. What if AO already verified the 80G claim during assessment?
📌 Then, a revision by PCIT without any new facts or errors may not be valid—as confirmed in this case.

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Conclusion

The ITAT’s decision in favor of Ruby Mills Limited brings clarity and relief to companies that genuinely fulfill their CSR duties through registered charitable institutions. It establishes that CSR contributions, though statutory, do not lose their charitable character when donated to qualified entities under Section 80G.

The verdict also sets a precedent: compliance with documentation, transparency, and routing through eligible channels can make CSR spending tax-beneficial too.

In short, CSR and tax-saving can go hand-in-hand — if done right.

📅 Published on: 30 June 2025
✍️ Author: CS Chhavi Goyal