I added back my company's CSR spend under Explanation 2 to s.37(1) and then claimed 50 per cent of it under s.80G. The Commissioner says s.37 blocks that and has revised the assessment under s.263. Is he right?
No. Explanation 2 to s.37(1) operates only while computing business income under Chapter IV-D; it says nothing about Chapter VI-A, so a CSR contribution that independently satisfies s.80G remains deductible under s.80G. Parliament carved out only two CSR items in s.80G itself — clauses (iiihk) and (iiihl), the Swachh Bharat Kosh and the Clean Ganga Fund — and by expressio unius that exclusion implies every other qualifying donation survives.
Decided by the ITAT (Shri P.M. Jagtap, Vice-President (KZ) and Shri A.T. Varkey, Judicial Member) on 2021-07-22, reported as I.T.A. No. 146/Kol/2021; Assessment Year 2016-17; cited in later orders as [2021] 130/136 taxmann.com 118 (Kol-Trib.), (2021) 190 ITD 702, 91 ITR (T) 80. It bears on section 80G, section 80G(1), section 80G(2), section 80G(4), section 80G(5), section 80G(5)(vi), section 37(1), section 263, section 263(1), section 143(3), section 142(1) of the Income Tax Act 1961, in Deductions & Disallowances, Revision & Rectification and How Tax Law Is Read matters.
This is the leading Tribunal reasoning on the point and it is the one the department's own audit wing keeps colliding with. It also gives the revision answer: even a Commissioner who prefers the contrary view cannot use s.263, because the Assessing Officer's view is at worst one of two plausible views. But the line is not settled — the Delhi Bench in Agilent Technologies (International) Pvt Ltd has taken the opposite view, and the department's argument that a statutory CSR obligation lacks the voluntariness a 'donation' requires has not yet been tested by any High Court.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a mining service provider, filed its return for AY 2016-17 declaring Rs 56,04,96,630 under the normal provisions. Its profit and loss account carried Rs 1,35,00,000 of CSR expenditure and Rs 10,20,000 of donations. It added both back while computing business income in terms of Explanation 2 to s.37(1) and then claimed fifty per cent of the aggregate, Rs 72,60,000, under s.80G. Of the CSR amount, Rs 1,25,00,000 had gone by RTGS on 20 January 2016 to Shree Charity Trust, which held an 80G(5)(vi) certificate dated 15 January 2009, and Rs 10,00,000 to Pt. Jasraj Music Academy Trust, approved under s.80G(5)(vi) on 30 March 2012. During scrutiny the Assessing Officer had specifically asked, by notice under s.142(1) dated 1 August 2018 at item (v), why the Chapter VI-A claim on CSR of Rs 1.35 crore should not be disallowed; the assessee replied with a note and case law and the officer allowed the claim in the s.143(3) order dated 3 December 2018. The Principal Commissioner issued a show cause notice under s.263 asserting that Explanation 2 to s.37(1) barred any deduction of CSR expenditure whether by way of donation or otherwise, invoked clause (a) of Explanation 2 to s.263(1) for want of enquiry, and by order dated 30 March 2021 set aside the assessment.
The appeal was allowed and the s.263 order quashed (para 24). Explanation 2 to s.37(1) denies CSR expenditure only as business expenditure and is confined to the computation of business income under Chapter IV-D; it cannot be extended to a CSR contribution that is otherwise eligible under Chapter VI-A (para 18). Because Parliament expressly restricted only two CSR donations in s.80G itself — sub-clauses (iiihk) and (iiihl) of clause (a) of sub-section (2), the Swachh Bharat Kosh and the Clean Ganga Fund — it must be taken to have permitted deduction under s.80G of CSR contributions falling in every other sub-clause, subject to the conditions of the section (para 22). The Principal Commissioner's finding that no enquiry had been made was factually incorrect on the record of the s.142(1) query and reply, so clause (a) of Explanation 2 to s.263 was not attracted, and the Assessing Officer's view being a plausible one, neither limb of Malabar Industrial was satisfied (paras 16 and 23).
The Tribunal first took the twin conditions in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) — the order must be both erroneous and prejudicial — and the rider that where two views are possible and the officer has taken one, the order is not erroneous unless that view is unsustainable in law (para 14). On the facts it found the officer had raised a specific query under s.142(1) and received a reasoned reply, so the Commissioner's assertion of no enquiry was wrong and his invocation of clause (a) of Explanation 2 to s.263 'smacks of arbitrariness and non-application of mind' (para 16). On the merits it agreed with the departmental representative that Explanation 2 to s.37(1), inserted by the Finance (No. 2) Act 2014, denies CSR expenditure as business expenditure (para 17), but held that the embargo is placed in Chapter IV-D and cannot be imported into Chapter VI-A, which operates at the stage of computing total income (para 18). It then read s.135(5) of the Companies Act 2013 alongside s.80G (paras 20 and 21) and applied the maxim expressio unius est exclusio alterius: the express carve-out of the two CSR items in clauses (iiihk) and (iiihl) implies that CSR contributions to the funds and institutions in the other sub-clauses remain deductible (para 22). It set out four worked examples showing how a company that spends only the mandatory two per cent gets nothing under s.80G for a Swachh Bharat Kosh or Clean Ganga Fund contribution, while any excess over the mandatory spend qualifies at 100 per cent, and a donation to an ordinary approved trust qualifies at fifty per cent under s.80G(2)(a)(iv) read with s.80G(1)(ii), all subject to s.80G(4) (para 22).
The said Explanation according to us cannot be extended or imported to CSR contributions which is otherwise eligible for deduction under any other provision or Chapter, to say donations made to charitable trusts registered u/s 80G of the Act for the reasons cited infra.
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Handle my notice → Ask a CA on WhatsAppNo. Explanation 2 to s.37(1) operates only while computing business income under Chapter IV-D; it says nothing about Chapter VI-A, so a CSR contribution that independently satisfies s.80G remains deductible under s.80G. Parliament carved out only two CSR items in s.80G itself — clauses (iiihk) and (iiihl), the Swachh Bharat Kosh and the Clean Ganga Fund — and by expressio unius that exclusion implies every other qualifying donation survives. This was decided by the ITAT (Shri P.M. Jagtap, Vice-President (KZ) and Shri A.T. Varkey, Judicial Member) and bears on section 80G, section 80G(1), section 80G(2), section 80G(4), section 80G(5), section 80G(5)(vi), section 37(1), section 263, section 263(1), section 143(3), section 142(1) of the Income Tax Act 1961. It is reported as I.T.A. No. 146/Kol/2021; Assessment Year 2016-17; cited in later orders as [2021] 130/136 taxmann.com 118 (Kol-Trib.), (2021) 190 ITD 702, 91 ITR (T) 80. This is the leading Tribunal reasoning on the point and it is the one the department's own audit wing keeps colliding with. It also gives the revision answer: even a Commissioner who prefers the contrary view cannot use s.263, because the Assessing Officer's view is at worst one of two plausible views. But the line is not settled — the Delhi Bench in Agilent Technologies (International) Pvt Ltd has taken the opposite view, and the department's argument that a statutory CSR obligation lacks the voluntariness a 'donation' requires has not yet been tested by any High Court. If it applies to you, the first step is this: Show that the CSR amount was suo motu added back while computing business income — the double-disallowance argument only works if you did that first.
The assessee, a mining service provider, filed its return for AY 2016-17 declaring Rs 56,04,96,630 under the normal provisions. Its profit and loss account carried Rs 1,35,00,000 of CSR expenditure and Rs 10,20,000 of donations. It added both back while computing business income in terms of Explanation 2 to s.37(1) and then claimed fifty per cent of the aggregate, Rs 72,60,000, under s.80G. Of the CSR amount, Rs 1,25,00,000 had gone by RTGS on 20 January 2016 to Shree Charity Trust, which held an 80G(5)(vi) certificate dated 15 January 2009, and Rs 10,00,000 to Pt. Jasraj Music Academy Trust, approved under s.80G(5)(vi) on 30 March 2012. During scrutiny the Assessing Officer had specifically asked, by notice under s.142(1) dated 1 August 2018 at item (v), why the Chapter VI-A claim on CSR of Rs 1.35 crore should not be disallowed; the assessee replied with a note and case law and the officer allowed the claim in the s.143(3) order dated 3 December 2018. The Principal Commissioner issued a show cause notice under s.263 asserting that Explanation 2 to s.37(1) barred any deduction of CSR expenditure whether by way of donation or otherwise, invoked clause (a) of Explanation 2 to s.263(1) for want of enquiry, and by order dated 30 March 2021 set aside the assessment. The matter was decided on 2021-07-22 by the ITAT (Shri P.M. Jagtap, Vice-President (KZ) and Shri A.T. Varkey, Judicial Member). On those facts the ITAT held as follows. The appeal was allowed and the s.263 order quashed (para 24). Explanation 2 to s.37(1) denies CSR expenditure only as business expenditure and is confined to the computation of business income under Chapter IV-D; it cannot be extended to a CSR contribution that is otherwise eligible under Chapter VI-A (para 18). Because Parliament expressly restricted only two CSR donations in s.80G itself — sub-clauses (iiihk) and (iiihl) of clause (a) of sub-section (2), the Swachh Bharat Kosh and the Clean Ganga Fund — it must be taken to have permitted deduction under s.80G of CSR contributions falling in every other sub-clause, subject to the conditions of the section (para 22). The Principal Commissioner's finding that no enquiry had been made was factually incorrect on the record of the s.142(1) query and reply, so clause (a) of Explanation 2 to s.263 was not attracted, and the Assessing Officer's view being a plausible one, neither limb of Malabar Industrial was satisfied (paras 16 and 23).
The Tribunal first took the twin conditions in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) — the order must be both erroneous and prejudicial — and the rider that where two views are possible and the officer has taken one, the order is not erroneous unless that view is unsustainable in law (para 14). On the facts it found the officer had raised a specific query under s.142(1) and received a reasoned reply, so the Commissioner's assertion of no enquiry was wrong and his invocation of clause (a) of Explanation 2 to s.263 'smacks of arbitrariness and non-application of mind' (para 16). On the merits it agreed with the departmental representative that Explanation 2 to s.37(1), inserted by the Finance (No. 2) Act 2014, denies CSR expenditure as business expenditure (para 17), but held that the embargo is placed in Chapter IV-D and cannot be imported into Chapter VI-A, which operates at the stage of computing total income (para 18). It then read s.135(5) of the Companies Act 2013 alongside s.80G (paras 20 and 21) and applied the maxim expressio unius est exclusio alterius: the express carve-out of the two CSR items in clauses (iiihk) and (iiihl) implies that CSR contributions to the funds and institutions in the other sub-clauses remain deductible (para 22). It set out four worked examples showing how a company that spends only the mandatory two per cent gets nothing under s.80G for a Swachh Bharat Kosh or Clean Ganga Fund contribution, while any excess over the mandatory spend qualifies at 100 per cent, and a donation to an ordinary approved trust qualifies at fifty per cent under s.80G(2)(a)(iv) read with s.80G(1)(ii), all subject to s.80G(4) (para 22). In the words reproduced by the source cited on this page: "The said Explanation according to us cannot be extended or imported to CSR contributions which is otherwise eligible for deduction under any other provision or Chapter, to say donations made to charitable trusts registered u/s 80G of the Act for the reasons cited infra." The decision followed or applied Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) — applied on the twin conditions for s.263; Goldman Sachs Services Pvt. Ltd. v. JCIT, IT(TP)A No. 2355/Bang/2019 — relied on; Allegis Services (India) v. CIT, ITA No. 1693/Bang/2019, decided 29 April 2020 — relied on; FNF India Pvt. Ltd. v. ACIT, ITA No. 1565/Bang/2019, decided 5 January 2021 — relied on.
It was decided by the ITAT on 2021-07-22 and is reported as I.T.A. No. 146/Kol/2021; Assessment Year 2016-17; cited in later orders as [2021] 130/136 taxmann.com 118 (Kol-Trib.), (2021) 190 ITD 702, 91 ITR (T) 80. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 80G, section 80G(1), section 80G(2), section 80G(4), section 80G(5), section 80G(5)(vi), section 37(1), section 263, section 263(1), section 143(3), section 142(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the s.263 order quashed (para 24). Explanation 2 to s.37(1) denies CSR expenditure only as business expenditure and is confined to the computation of business income under Chapter IV-D; it cannot be extended to a CSR contribution that is otherwise eligible under Chapter VI-A (para 18). Because Parliament expressly restricted only two CSR donations in s.80G itself — sub-clauses (iiihk) and (iiihl) of clause (a) of sub-section (2), the Swachh Bharat Kosh and the Clean Ganga Fund — it must be taken to have permitted deduction under s.80G of CSR contributions falling in every other sub-clause, subject to the conditions of the section (para 22). The Principal Commissioner's finding that no enquiry had been made was factually incorrect on the record of the s.142(1) query and reply, so clause (a) of Explanation 2 to s.263 was not attracted, and the Assessing Officer's view being a plausible one, neither limb of Malabar Industrial was satisfied (paras 16 and 23). It arises in Deductions & Disallowances, Revision & Rectification and How Tax Law Is Read matters, on section 80G, section 80G(1), section 80G(2), section 80G(4), section 80G(5), section 80G(5)(vi), section 37(1), section 263, section 263(1), section 143(3), section 142(1) of the Income Tax Act 1961, and was decided by Shri P.M. Jagtap, Vice-President (KZ) and Shri A.T. Varkey, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the donee's s.80G approval certificate, the receipt and the banking trail on record at the assessment stage, not at appeal; the deduction is allowed 'subject to fulfilment of necessary conditions'. Check whether any part of the CSR spend went to the Swachh Bharat Kosh or the Clean Ganga Fund; to the extent it is the mandatory two per cent under s.135(5), clauses (iiihk) and (iiihl) expressly deny it, and only the excess over the mandatory spend qualifies. Apply the s.80G(4) ceiling to the qualifying amount before claiming — the Tribunal's worked examples are expressly made 'subject to section 80G(4) of the Act', and it does not state what that ceiling is, so read the sub-section itself before you compute. If a s.263 notice has issued, lead with the record of the s.142(1) query on CSR and your reply; that defeats Explanation 2 to s.263(1) on the facts before any merits argument is needed.
Still good law. The Mumbai Bench has followed this order and treated it as the leading authority on the point. In Polynova Industries Ltd v DCIT 14(1)(1), ITA No. 2982/Mum/2025, decided 19 June 2025, JMS Mining is relied on in the Bench's own reasoning at paras 6.5 and 6.6 - not merely in counsel's list, although it is also cited there at para 3.2 - and the revision order was quashed on the basis that allowing s.80G on CSR expenditure is a plausible and legally sustainable view. Polynova also records at its para 6.5 that the Delhi Bench in Agilent Technologies (International) Pvt. Ltd. v. ACIT has taken the contrary view and disallowed a s.80G claim on CSR expenditure. That disagreement is between Tribunal benches, not between High Courts. No High Court decision on the point has been located, and no appeal against this order has been traced. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
ON THE ORDER. It runs to 24 numbered paragraphs with the disposal at paragraph 24. The revision point is at paragraphs 14 to 16 and 23, the Chapter IV-D against Chapter VI-A reasoning at paragraphs 17 and 18, and the expressio unius reasoning on the two excluded funds at paragraphs 20 to 22. WHOSE PARAGRAPH NUMBERS ARE WHOSE. Paragraph 6 reproduces Goldman Sachs Services Pvt Ltd v JCIT and paragraph 7 reproduces Allegis Services (India), so the paragraph numbers 16, 18 and 19 that appear inside those extracts belong to those orders and not to this one. Every locator cited on this page is the Kolkata Bench's own. A MISPRINT IN THE ORDER. At paragraph 22 it twice spells clause (iiihl) as '(iiihi)'. The correct clause letters are (iiihk) for the Swachh Bharat Kosh and (iiihl) for the Clean Ganga Fund; they can be checked against the extracts of the section reproduced at paragraphs 6 and 21 of this order and against the reproduction of it in Polynova Industries Ltd v DCIT. Quote the section, not paragraph 22, for the clause letters. A CHANGE IN THE PAPERWORK SINCE THE ORDER. The order refers throughout to approval under s.80G(5)(vi). For donations made on or after 1 April 2021 that clause has been replaced by the re-approval regime built on Form 10A and Form 10AB, so the certificates this order describes - the donee's s.80G(5)(vi) certificate of 15 January 2009 and the approval of 30 March 2012 - are not the paperwork a donee holds now. The reasoning is unaffected; the diligence file is different. TWO LIMITS ON THE HOLDING. The Tribunal's worked examples are expressly made 'subject to section 80G(4) of the Act', and the order does not state what that ceiling is, so the sub-section has to be read before a claim is computed. And to the extent the CSR spend is the mandatory two per cent under s.135(5) of the Companies Act 2013 and goes to the Swachh Bharat Kosh or the Clean Ganga Fund, clauses (iiihk) and (iiihl) deny it expressly; only what falls outside those two funds is in issue here. ONE THING THE ORDER SHOWS THAT IS EASY TO OVERLOOK. The Assessing Officer had raised the very point by a notice under s.142(1) dated 1 August 2018, at item (v), and received a reasoned reply before allowing the claim. That record is what defeated the revision under clause (a) of Explanation 2 to s.263, and it is the first thing to produce when a s.263 notice issues. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the s.263 order quashed (para 24). Explanation 2 to s.37(1) denies CSR expenditure only as business expenditure and is confined to the computation of business income under Chapter IV-D; it cannot be extended to a CSR contribution that is otherwise eligible under Chapter VI-A (para 18). Because Parliament expressly restricted only two CSR donations in s.80G itself — sub-clauses (iiihk) and (iiihl) of clause (a) of sub-section (2), the Swachh Bharat Kosh and the Clean Ganga Fund — it must be taken to have permitted deduction under s.80G of CSR contributions falling in every other sub-clause, subject to the conditions of the section (para 22). The Principal Commissioner's finding that no enquiry had been made was factually incorrect on the record of the s.142(1) query and reply, so clause (a) of Explanation 2 to s.263 was not attracted, and the Assessing Officer's view being a plausible one, neither limb of Malabar Industrial was satisfied (paras 16 and 23).
TaxSphere, “JMS Mining Pvt Ltd v PCIT-2, Kolkata”, https://taxnotice.vittsphere.com/caselaw/case/jms-mining-csr-donation-deductible-under-80g/ (validity last checked 2026-09-16)
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An internal audit objection has produced a s.263 notice saying CSR spending is not voluntary and so is not a 'donation' at all for s.80G. Does that argument let the Commissioner revise my assessment?
I built a structure for a temple at my own cost instead of handing over money. Can I claim the s.80G deduction for what I spent?
The Commissioner has issued a section 263 notice saying my assessment order does not discuss a deduction the officer allowed. Is a brief order by itself erroneous?
The Commissioner's show cause notice before revising my assessment was defective. Does that knock out his jurisdiction to revise at all?
