ITAT Mumbai Allows Section 80G Deduction on CSR Donations; Grants Relief on Timely PF Deposits

February 07, 2026 : The Mumbai Bench of the Income Tax Appellate Tribunal has held that Corporate Social Responsibility donations made to eligible institutions can qualify for deduction under Section 80G of the Income Tax Act, even though CSR expenditure is not allowable as business expenditure under Section 37(1).

The ruling came in a batch of appeals filed by Aditya Birla Sun Life AMC Limited against the Deputy Commissioner of Income Tax, Circle 6(1)(1), Mumbai. The appeals related to Assessment Years 2017–18, 2018–19, 2022–23 and 2023–24. The Bench comprised Judicial Member Amit Shukla and Accountant Member Makarand Vasant Mahadeokar.

For AYs 2017–18 and 2018–19, the Assessing Officer had denied deduction under Section 80G in respect of CSR donations, on the ground that CSR expenditure is not allowable in view of Explanation 2 to Section 37(1). The Commissioner (Appeals) upheld the disallowance.

The Tribunal reversed this finding. It clarified that Explanation 2 to Section 37(1) only bars CSR expenditure from being claimed as a business deduction under the head “Profits and gains of business or profession.” It does not prohibit an assessee from claiming deduction under Chapter VI-A, including Section 80G, provided the statutory conditions are satisfied.

The Bench noted that the donations were made to institutions approved under Section 80G and did not fall within the specific exclusions carved out in the provision. It further observed that denying deduction under Section 80G merely because the payment formed part of CSR obligation would amount to an unintended double disallowance.

Accordingly, the Tribunal directed the Assessing Officer to allow deduction under Section 80G of ₹92.31 lakh for AY 2017–18 and ₹2.53 crore for AY 2018–19.

The Tribunal dealt with employees’ contribution to provident fund separately for different years.

For AY 2017–18, the disallowance of ₹82.10 lakh was upheld in view of the Supreme Court’s ruling in Checkmate Services (P) Ltd. v. CIT, which held that delayed deposit of employees’ contribution beyond the due date under the relevant welfare law attracts disallowance under Section 36(1)(va).

However, for AY 2022–23, the Tribunal deleted a disallowance of ₹54.93 lakh. It found that the employees’ contribution for June 2021 had been deposited on 4 July 2021, which was before the statutory due date of 15 July 2021 under the Provident Fund law. The adjustment had initially been made at the processing stage under Section 143(1), based on an incorrect date in the tax audit report.

The Tribunal held that once the contribution is deposited within the due date prescribed under the relevant statute, no disallowance under Section 36(1)(va) can be sustained. It also observed that during scrutiny assessment under Section 143(3), the Assessing Officer is required to examine the issue on merits rather than mechanically adopting the earlier intimation.

For AY 2017–18, the Tribunal allowed deduction of ₹57.63 lakh towards provision for leave encashment. The Assessing Officer had treated it as an unascertained liability and the Commissioner (Appeals) had invoked Section 43B(f) to deny the claim.

The Tribunal relied on the Supreme Court’s decision in Bharat Earth Movers v. CIT and held that a provision made on actuarial basis represents an ascertained liability, allowable under the mercantile system of accounting. It set aside the disallowance and directed deletion of the addition.

Certain matters, including non-grant of dividend distribution tax credit, levy of interest under Section 115P, short grant of TDS credit, computation differences and levy of interest under Sections 234B, 234C and 234D, were restored to the Assessing Officer for verification and fresh adjudication.

In AY 2018–19, the Tribunal also granted relief in respect of a disallowance under Section 40(a), where a year-end provision had been reversed in the subsequent year.

The appeals were partly allowed. The Tribunal granted substantive relief on CSR-related Section 80G deductions and on provident fund contributions deposited within the statutory due date, while remanding computational and verification issues to the Assessing Officer.

Case Title: Aditya Birla Sun Life AMC Limited v. DCIT Circle-6(1)(1), Mumbai
Case Numbers: ITA Nos. 6663, 6701, 6702 & 6703/Mum/2025
Coram: Amit Shukla (JM) and Makarand Vasant Mahadeokar (AM)

Counsels : Assessee represented by Shri Ronak Doshi, Shri Shrey Agrawal and Shri Aadish Jain, Authorised Representatives; Revenue represented by Shri Surendra Mohan, Departmental Representative.