TRENT LIMITED,MUMBAI V. DCIT-2(3)(1), MUMBAI

ITA 5602/MUM/2025

AI Insights

The case involves Trent Limited, which appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi, which had partly allowed their appeal against the Assessment Order disallowing a deduction claimed under Section 80G for CSR expenditures. The Assessing Officer had initially disallowed the deduction, categorizing the CSR expenditures as mandatory under the Companies Act, 2013, and not as voluntary donations eligible for deduction under Section 80G. The CIT(A) upheld this decision. However, the Tribunal, referencing several precedents where similar deductions were allowed, overturned the lower authorities' decisions, granting the deduction and directing the Assessing Officer to verify the compliance with the conditions of Section 80G.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792351 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2020-2021
• Appeal Filed On: 09-09-2025
• Other Referred Cases: Synergia Lifesciences Pvt. Ltd. v. DCIT, M/s Rustomjee Realty Pvt. Ltd. v. ACIT, Societe Generale Securities India Pvt. Ltd. v. PCIT, M/s. Sonata Information Vs. Commissioner of Income Tax (Appeals)
• Laws Referred To: Income Tax Act, 1961, Companies Act, 2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Gift; Charitable institution
• Section: 143(3); 37; 37(1); 80G

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER SMT. RENU JAUHRI, ACCOUNTANT MEMBER ITA No.5602/MUM/2025 (Assessment Year:2020-2021) Trent Limited Bombay House, Mumbai - 400001. Maharashtra. [PAN:AAACL1838J] …………. Appellant Deputy Commissioner of Income Tax 2(3)(1), Mumbai 552, 5th Floor, Aayakar Bhavan, Maharishi Karve Road, Mumbai – 400020. Maharashtra. Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Nikhil Tiwari & Shri Charul Mittal Shri Ritesh Misra Date Conclusion of hearing Pronouncement of order : : 10.11.2025 03.12.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the order, dated 30/07/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] whereby the Ld. CIT(A) had partly allowed the appeal against the Assessment Order, dated 23/09/2022, passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for the Assessment Year 2020-2021. 2. The Assessee has raised following grounds of appeal : Ground No.1 to 2 – Disallowance of deduction claimed under section 80G of the Act: Rs.1,28,00,00 Printed from counselvise.com ITA No. 5602/Mum/2025 Assessment Year 2020-2021 2 “1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding the disallowance of deduction claimed under section 80G for donations made, by holding that the donations eligible for claiming deduction under section 80G should be voluntary in nature whereas the CSR expenditure incurred by the Appellant is merely in compliance with a mandatory statutory obligation under the Companies Act, 2013 and therefore does not qualify as a donation. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) failed to appreciate that the provisions relating to disallowance of CSR expenditure have been introduced only in connection with allowability of deduction under section 37(1) of the Act, and do not apply to allowability of deduction under section 80G of the Act.” 3. The relevant facts in brief are that during the relevant previous year, the Assessee had incurred Corporate Social Responsibility (CSR) Expenses of INR.2,65,00,000/-. In the return filed by the Assessee for the Assessment Year 2020-2021, the Assessee claimed deduction for the CSR expenses aggregating to INR.1,28,00,000/- under Section 80G of the Act since the same had been incurred by way of donation made to charitable institutions. While framing assessment under Section 143(3) read with Section 144B of the Act, vide Assessment Order, dated 23/09/2022, the Assessing Officer disallowed the deduction of INR.1,28,00,000/- claimed by the Assessee under Section 80G of the Act observing as under: “2.1 From the perusal of the details and documents, it is seen that the assessee had incurred expenses towards CSR amounting to Rs.2,65,00,000/- during the AY under consideration. From the perusal of the computation of income, it is seen that the assessee has claimed deduction of the said expenditure u/s 80G of the IT Act, 1961. Furthermore, it appeared that during the year, company had incurred expenditure of Rs.2,65,00,000/- on CSR. Simultaneously, the company had claimed deduction of Rs.1,28,00,000/-, being a part of expenditure on CSR u/s 80G in the return of income for AY 2020-21. 2.2 In this regard, the assessee was asked to provide the detail of the same and explain why the same should not be disallowed. In Printed from counselvise.com ITA No. 5602/Mum/2025 Assessment Year 2020-2021 3 response to the same, the assessee made its submission and the same has been perused and kept on record. The assessee also relied on various judicial pronouncements to support its claim. 2.3 Further, the assessee was show-caused as to why such deduction claimed u/s.80G amounting to Rs. 1,28,00,000/- should not be disallowed and added to their total income. The assessee replied to the show-cause and their reply is summarized as under: - That they had already disallowed CSR expenditure claimed in the computation of income u/s: 37 and Section 37 & Section 80G of the Act are independent of each other. TAX DEP - That there are only two exceptions provided in Section 80G of the Act, it can be inferred that the other contributions made u/s. 135(5) of the Companies Act are eligible for deduction u/s.80G of Income Tax Act. - The assessee then quoted various case laws to support their case. 2.4 The assessee requested for personal hearing as well through Video-conference to explain their side. The opportunity of personal hearing through Video-conference was given to the assessee and video conference was conducted which was attended by both sides. The assessee presented their case and was heard. The replies of the assessee on this issue in response to notices, Show cause notice & Video-conference, were perused and the observations of this office are discussed in the subsequent paragraphs. 2.5 It is pertinent to mention here regarding CSR that, the newly inserted Section 135 of the Companies Act mandates that every company fulfilling the threshold specified therein in terms of net worth or turnover or net profits shall ensure that the company spends, in every financial year, at least two per cent of the average net profits made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. It is also specified that the Company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities. Printed from counselvise.com ITA No. 5602/Mum/2025 Assessment Year 2020-2021 4 2.6 The following are the activities clearly specified under Schedule VII given in the Companies Act qualifying for the CSR spend: \"Schedule VII (See sections 135) Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to:- (i) eradicating extreme hunger and poverty, (ii) promotion of education; (iii) promoting gender equality and empowering women; (iv) reducing child mortality and improving maternal health; (v) combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases, (vi) ensuring environmental sustainability: (vii) employment enhancing vocational skills: (viii) social business projects; (ix) contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government or the State Governments for socio- economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and (x) such other matters as may be prescribed.\" 2.7 The arguments put forth by the assessee have duly been considered, but before arriving at the conclusion in this regard, it is important to peruse the provisions of Section 80G of the Act. Sub-section 1 of Section 800 of the Act provides that the sums specified in sub-section 2 of section 80G of the Act are eligible for deduction at the rate of 100% or 50% depending upon the entity to which the sum is paid. Section 80G(2) of the Act details various sums which are referred to in sub-section 1 of Section BOG of the Act. Section 80G(2) further reveals that any sum paid by the assessee in the previous year has to be in nature of 'donations to various entities. The relevant part of Section 500 read as follows: Printed from counselvise.com ITA No. 5602/Mum/2025 Assessment Year 2020-2021 5 “Deduction in respect of donations to certain funds, charitable institutions, etc. 80G (1) in computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section,- ……………………………………………… (2) The sums referred to in sub-section (1) shall be the following, namely (a) any sums paid by the assessee in the previous year as donations to- ……………………………………………… (b) any sums paid by the assessee in the previous year as year as donations for the renovation or repair of any such temple, mosque, gurdwara, church or other place................. (c) any sums paid by the assessee, being a company, in the previous your as donations to the Indian Olympic Association or to any other association or institution………………………………… (5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose. 2.8 So it is important to note that 'sums paid' need to be 'donation' for the purpose of being eligible for deduction under Section 80G of the Act. The meaning of the word 'donation has not been given in the Act. The dictionary meaning of the word 'donation' is that it is a gift for charity, humanitarian aid, or to benefit a cause. A donation may take various forms, including money, alms, services, or goods such as clothing, toys, food, or vehicles. A donation may satisfy medical needs such as blood or organs for transplant. However, for the purpose of Section 80G of the act, it is the donations which are in nature of 'sum paid or money that are relevant. Further, the dictionary meaning of the word donation refers to an amount paid voluntarily by a person and that too without any consideration as the donation is a 'gift. The voluntary act on the part of the donor is thus an essential element to treat the amount paid as a donation. 2.9 In the case under consideration, the amount has not been paid by the Assessee to the eligible entity specified in Section 80G of the Act on a voluntary basis. But the same has been paid by it Printed from counselvise.com ITA No. 5602/Mum/2025 Assessment Year 2020-2021 6 as the Assessee was mandatorily required to spend such an amount for specified activities as per the provisions of Section 135 of the Companies Act, 2013. The expression \"shall ensure\" used in Section 135(5) of the Companies Act 2013 clearly implies that there is a mandate to spend 2% of average net profits of the preceding three years on CSR activity. Thus the required-to-spend amount is perceived by the legislature to be mandatory in nature. So when the Assessee had paid the amount to an eligible entity under Section 80G of the Act, such payment was not made on a voluntary basis but it was to fulfil a mandatory requirement of law on account of CSR spend for activities benefiting the society. 2.10 The Assessee could also have very well made payment to an entity not covered by Section 80G or it could have directly incurred the expenditure for the specified purpose, but it chose to spend only on those areas where they knew that they could comfortably claim deduction u/s 80G of the Act. So the sum paid by the Assessee cannot be considered as a 'donation' for the purpose of Section 80G of the Act as the element of charity is missing. The character of charity is that it is purely voluntary and there is no legal obligation to make that contribution. CSR spending, even if it is a contribution to the areas where 80G deduction is available lacks this purely voluntary character and partakes the nature of an obligation to fulfil the requirement imposed by the law, which is Section 135 of the Companies Act 2013. 2.11 Again, if one were to look at the legislative intent behind the insertion of CSR provisions, it is mainly to ensure that the well to do Corporates participate in the growth of the Society and its surroundings by way of making meaningful monetary contributions. There may be many areas where the Government may be unable to reach or lend assistance to, out of resource or other constraints so the main objective behind introducing the concept of CSR spend is to enable the Company (only eligible ones not all) to share the burden of the Government to ensure benefits to the society by and large. Now if the Corporates were to spend only on those areas where 80G deductions are available, it would defeat the very purpose of roping in the Corporates to share this burden as then it would result in subsidizing these expenditures and Government ultimately bearing the burden of these CSR spending by way of reduced taxes collected. And this could certainly have been not in the minds of the legislators while they were proposing this new law. Printed from counselvise.com ITA No. 5602/Mum/2025 Assessment Year 2020-2021 7 2.12 Thus, in the light of the above discussion, the contention of the assessee is not acceptable, and accordingly deduction u/s.80G is not allowable on such expenses and hence the claim of the assessee amounting to Rs.1,28,00,000/-is being disallowed and added back to the Returned Income of the assessee. (Addition: Rs.1,28,00,000/-) Since the above adjustments, attracts penal provisions, penalty proceedings u/s.270A of the Income-Tax Act, 1961 is initiated separately for under-reporting of income in consequence to misreporting of income in this matter.” 4. Being aggrieved, the Assessee carried the issue in appeal before Learned CIT(A). Vide Order, dated 30/07/2025, the Learned CIT(A) disposed off the appeal preferred by the Assessee as partly allowed, inter alia, upholding the above disallowance of INR.1,28,00,000/- made by the Assessing Officer. 5. Now the Assessee has preferred the present appeal before the Tribunal challenging the denial of deduction claimed by the Assessee under Section 80G of the Act in respect of CSR expenses of INR.1,28,00,000/-. 6. We have given thoughtful consideration to do the rival submissions. 7. The issue of consideration is whether the expenses incurred on CSR activity by way of donation made to charitable organizations would be eligible for deduction under Section 80G of the Act. 8. During the course of hearing the Learned Authorized Representative for the Assessee had placed reliance upon following decisions of the Mumbai Bench of the Tribunal before the Learned CIT(A): - Synergia Lifesciences Pvt. Ltd. v. DCIT (ITA No. 938/Mum/2023) - M/s Rustomjee Realty Pvt. Ltd. v. ACIT (ITA No. 1585/Mum/2023) - Societe Generale Securities India Pvt. Ltd. v. PCIT (ITA No. 1921/Mum/2023) Printed from counselvise.com ITA No. 5602/Mum/2025 Assessment Year 2020-2021 8 On perusal of above decisions of the Tribunal, we find that the Tribunal had accepted the contentions of the Assessee and has allowed deduction for CSR expenses incurred by way of donation to charitable institutions under Section 80G of the Act. 9. We find identical view has been taken by the Tribunal in the case of M/s. Sonata Information Vs. Commissioner of Income Tax (Appeals): [ITA No.1402/Mum/2024, dated 05/11/2024]. (placed at Page No.256 to 264 of the Paper Book). We note that the Tribunal had rejected reasoning given by the Revenue identical to the reasoning given by the Assessing Officer for rejecting Assessee’s claim for deduction under Section 80G of the Act in the present case. 10. Thus, adopting the view taken by the Co-ordinate Benches of the Tribunal in favour of the Assessee, we hold that the Assessee is entitled to claim deduction under Section 80G of the Act in respect of CSR Expenditure. Accordingly, the Assessing Officer is directed to grant deduction of INR.1,28,00,000/- as claimed by the Assessee under Section 80G of the Act after verifying that the applicable conditions for granting deduction under Section 80G of the Act are satisfied. In terms of aforesaid, Ground No.1 & 2 raised by the Assessee are allowed. 11. In result, the present appeal preferred by the Assessee is allowed. Order pronounced on 03.12.2025. Sd/- Sd/- (Renu Jauhri) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated : 03.12.2025 Milan, LDC Printed from counselvise.com ITA No. 5602/Mum/2025 Assessment Year 2020-2021 9 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai Printed from counselvise.com "