Section 80G IT Act | CSR Expenses Allowable as Deduction Even If Claim Raised Post-Section 143(1) Processing : ITAT Delhi

The Income Tax Appellate Tribunal, Delhi, has clarified that corporate social responsibility (CSR) expenditures, though not directly deductible under Section 37, may qualify for deduction under Section 80G if they meet the prescribed conditions. The Tribunal further held that an assessee is not barred from raising such a claim for the first time in appeal after a section 143(1) assessment, reinforcing the principle that procedural lapses do not defeat substantive rights.

Background & Facts

The Dispute

The appeals concern the disallowance of CSR-related expenditures by the Assessing Officer (AO) for Assessment Years (AY) 2019-20 and 2020-21. The appellant, GPA Capital Foods Private Limited, incurred CSR expenses of Rs. 19,75,000 in AY 2019-20 and Rs. 13,40,000 in AY 2020-21, which were claimed as deductions under Section 80G of the Income Tax Act, 1961. The tax authorities disallowed these amounts on the ground that CSR expenses are not eligible for deduction under Section 80G and that the claim was not made during the original assessment proceedings.

Key Facts

• The appellant is a private limited company engaged in food processing and distribution.
• In AY 2019-20, the company spent Rs. 19,75,000 on CSR activities under Schedule VII of the Companies Act, 2013.
• In AY 2020-21, the company spent Rs. 13,40,000 on similar CSR initiatives.
• Both amounts were credited to the Profit and Loss Account and claimed as deductions under Section 80G in the income tax returns filed.
• The Centralized Processing Centre (CPC), Bangalore, processed the returns under Section 143(1) and disallowed the claims without issuing any notice under Section 143(2).
• The appellant filed appeals before the First Appellate Authority (FAA) under Section 246A, raising the Section 80G claim for the first time in writing during the appellate stage.
• The FAA rejected the claim, holding that since the deduction was not claimed during the assessment proceedings, it could not be entertained at the appellate stage.

Procedural History

• 04.12.2019: Intimation under Section 143(1) issued for AY 2019-20, disallowing CSR deduction of Rs. 19,75,000.
• 23.12.2021: Intimation under Section 143(1) issued for AY 2020-21, disallowing CSR deduction of Rs. 13,40,000.
• 18.11.2025: Order of the FAA (DIN: ITBA/APL/S/250/2025-26/1082728962(1)) upholding disallowance.
• 15.12.2025: Appeal filed before ITAT Delhi (ITA No. 9158/Del/2025 for AY 2019-20).
• 15.12.2025: Appeal filed before ITAT Delhi (ITA No. 9157/Del/2025 for AY 2020-21).
• 30.04.2026: Hearing before ITAT Delhi.
• 13.05.2026: Judgment pronounced.

Relief Sought

The appellant sought:

• Allowance of Rs. 19,75,000 as deduction under Section 80G for AY 2019-20.
• Allowance of Rs. 13,40,000 as deduction under Section 80G for AY 2020-21.
• Allowance of Rs. 2,82,521 as profit on sale of depreciable assets, not subject to Section 50.
• Setting aside of the FAA order dated 18.11.2025.

The Second Issue: Profit on Sale of Fixed Assets

In ITA No. 9157/Del/2025 (AY 2020-21), the appellant challenged the addition of Rs. 2,82,521 as profit on sale of plant and machinery. The AO treated this as taxable income, arguing that Section 50 applied. The appellant contended that since the block of assets still had a positive written down value after the sale, Section 50 was inapplicable.

The Legal Issue

The central questions were: (1) Whether CSR expenditures qualify for deduction under Section 80G of the Income Tax Act, 1961, and (2) Whether an assessee can raise a claim for deduction under Section 80G for the first time in appeal after the return has been processed under Section 143(1).

Arguments Presented

For the Appellant

The appellant relied on the decision in Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC), which held that where a return is processed under Section 143(1) without scrutiny, the assessee is entitled to raise new claims in appeal before the FAA, provided the claim is substantiated and relevant to the assessment. The appellant argued that CSR contributions made to eligible funds under Schedule VII of the Companies Act, 2013, are essentially charitable contributions and satisfy the conditions of Section 80G, particularly when made to notified institutions. The appellant further submitted that the FAA erred in refusing to consider the claim on procedural grounds alone.

For the Respondent

The Revenue contended that CSR expenses are statutory obligations under the Companies Act and not voluntary charitable donations. Hence, they do not fall within the scope of Section 80G, which is meant for voluntary contributions to specified funds. The Revenue also argued that since the claim was not made during the assessment proceedings, it could not be entertained at the appellate stage, citing procedural propriety under the Act.

The Court's Analysis

The Tribunal examined the nature of CSR expenditures and their alignment with the objects of Section 80G. It noted that Section 80G permits deduction for contributions made to funds, institutions, or associations approved by the prescribed authority for charitable purposes. The Tribunal observed that CSR activities under Schedule VII of the Companies Act, 2013, include relief to the poor, education, medical relief, and environmental preservation - all of which are explicitly covered under Section 80G.

"The fact that the contribution is made as a statutory obligation under the Companies Act does not negate its charitable character or its eligibility for deduction under Section 80G."

The Tribunal further held that the FAA’s refusal to entertain the claim on the ground that it was raised for the first time in appeal was legally unsustainable. It relied on Goetze (India) Ltd., where the Supreme Court held that Section 143(1) processing is a mechanical, non-scrutiny procedure, and does not constitute a final assessment. Therefore, an assessee retains the right to raise new claims in appeal, provided they are supported by evidence and are relevant to the assessment.

Regarding the second issue, the Tribunal held that Section 50 applies only when the sale of a depreciable asset results in the block of assets becoming negative. Since the appellant’s block of plant and machinery retained a positive written down value after the sale of assets worth Rs. 3,00,000, Section 50 was inapplicable. The profit of Rs. 2,82,521 was merely a book profit arising from the difference between the sale consideration and the written down value, and was not taxable as separate income.

The Verdict

The appeals were allowed. The Tribunal set aside the FAA order dated 18.11.2025 and directed that:

• Rs. 19,75,000 be allowed as deduction under Section 80G for AY 2019-20.
• Rs. 13,40,000 be allowed as deduction under Section 80G for AY 2020-21.
• Rs. 2,82,521 be deleted from the income for AY 2020-21.
• The appellant’s income be recomputed accordingly.
• No interest or penalty shall be levied on the amounts allowed.

What This Means For Similar Cases

CSR Contributions Are Eligible for Section 80G Deduction

• Practitioners may now confidently claim CSR expenditures under Section 80G if made to notified institutions under Schedule VII of the Companies Act, 2013.
• The statutory nature of CSR under the Companies Act does not disqualify the contribution from being treated as a charitable donation for tax purposes.
• Taxpayers should maintain documentary proof of payment to eligible entities, including receipts and certificates under Section 80G.

Claims Raised Post-Section 143(1) Processing Are Permissible

• An assessee is not precluded from raising a deduction claim in appeal merely because it was not raised during the Section 143(1) processing.
• The FAA and AO must examine the merits of such claims if substantiated with evidence.
• This judgment reinforces that Section 143(1) is not a final assessment and does not extinguish the right to claim deductions in appeal.

Section 50 Does Not Apply If Block of Assets Remains Positive

• Profit on sale of depreciable assets is not taxable under Section 50 if the block retains a positive written down value.
• The entire profit should not be added back to income; only the excess of sale consideration over written down value is relevant for depreciation adjustment.
• Practitioners must verify the block-wise computation before agreeing to additions under Section 50.