Weighted Deduction Under Section 35(2AB) Is Limited to DSIR Approval, but Unapproved Portion Is Deductible Under Section 37(1)

By | July 27, 2026
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Weighted Deduction Under Section 35(2AB) Is Limited to DSIR Approval, but Unapproved Portion Is Deductible Under Section 37(1)

Issue

Whether an in-house scientific research expenditure disallowed for weighted deduction under Section 35(2AB) due to partial approval by DSIR in Form 3CL is still allowable as a normal business expenditure under Section 37(1).

Facts

  • Assessee & Claim: The assessee-company maintained an approved in-house R&D facility and claimed a weighted deduction of 150% on revenue expenditure under Section 35(2AB) for Assessment Year 2020-21 based on Form 3CLA.

  • DSIR Approval: The Department of Scientific and Industrial Research (DSIR), via Form 3CL, approved only a part of the total expenditure as eligible revenue expenditure.

  • AO Action: During assessment under Section 143(3), the Assessing Officer disallowed 150% of the difference between the claimed expenditure and the DSIR-approved amount.

Decision

  • Weighted Deduction Restricted: The weighted deduction under Section 35(2AB) must be strictly confined to the revenue expenditure quantified and approved by DSIR in Form 3CL.

  • Allowability under Section 37(1): The remaining unapproved revenue expenditure cannot be summarily rejected; it is allowable as a regular business expenditure under Section 37(1) if incurred wholly and exclusively for business purposes.

  • The issue was decided partly in favour of the assessee.

Key Takeaways

  • Dual-Tier Claim: Partial DSIR approval restricts the extra weighted benefit under Section 35(2AB), but it does not forfeit the assessee’s right to claim the base revenue expenditure under general business deduction provisions.

  • Role of Form 3CL: While Form 3CL is binding for calculating the quantum of weighted deduction under Section 35(2AB), it does not restrict the Assessing Officer from examining whether unapproved R&D expenses qualify under Section 37(1).

IN THE ITAT BANGALORE BENCH ‘B’
TTP Technologies (P.) Ltd.
v.
Deputy Commissioner of Income-tax
Prashant Maharishi, Vice President
and SANDEEP SINGH KARHAIL, Judicial Member
IT Appeal No. 863 (Bang) of 2026
[Assessment year 2020-21]
JULY  6, 2026
Sachin Mehta and C. R. Krishna, CAs for the Appellant. Pradeep S., Addl. CIT for the Respondent.
ORDER
Sandeep Singh Karhail, Judicial Member.- The assessee has filed the present appeal against the impugned order dated 09/12/2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], which in turn arose from the assessment order passed under section 143(3) of the Act, for the assessment year 2020-21.
2. In this appeal, the assessee has raised the following grounds: –
1. Disallowance under section 14A of Rs. 14,06,904/-

1.1. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in disallowing a sum of Rs. 14,06,904/- under section 14A of the Income Tax Act, 1961.

1.2. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in not appreciating the fact that the amount of Rs. 14,06,904 had already been disallowed in the computation of total income under the head Any other item or items of addition under section 28 to 44DA and further disallowance in this regard has resulted in double disallowance.

2. Disallowance under section 35(2AB) should be restricted to Rs. 20,36,890/- and not Rs. 61,10,670/-

2.1. On the facts and circumstances of the case the learned Commissioner of Income tax (Appeals) erred in disallowing the research and development expenditure claimed of Rs. 40,73,780/-under section 35(2AB).

2.2. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals), erred in not appreciating the fact that the expenditure incurred towards scientific research for which deduction under section 35(2AB) was not allowed does not tantamount expenditure not allowable. The amount of expenditure which was not eligible under section 35(2AB) is eligible under section 37 of the Act and the amount to be disallowed is Rs.20,36,890/- and not Rs. 61,10,670/-. The detail is as under:

S. No. Particulars As per ROI filed As per Form 3CL Difference
1 Amount of revenue expenditure incurred in respect of scientific research 7,54,09,780 7,13,36,000 40,73,780
2 Amount of deduction @150% 11,31,14,670 10,70,04,000 61,10,670
Excess deduction 20,36,890

 

3. Disallowance under section 80G of Rs. 28,35,150/-

3.1. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals), erred in not allowing deduction under section 80G of Rs. 28,35,150/- on the ground that the amount incurred is in respect of corporate social responsibility and the same is not eligible for deduction under section 80G.

2.2. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals), erred in not appreciating the fact that the donations were made to registered trusts under section 12A of the Income Tax Act, 1961 consequent to which such donations are eligible for deduction under section 80G.

3. Ground No. 1, raised in assessee’s appeal, pertains to disallowance under section 14A of the Act.
4. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee company is engaged in the business of manufacturing and exporting radiators for Power Transformers. During the year under consideration, the assessee filed its return of income on 15/02/2021, declaring a total income of INR 33,91,89,900. The return filed by the assessee was processed vide intimation dated 24/11/2021 issued under section 143(1) of the Act, accepting the returned income. Subsequently, the return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. Vide order dated 30/08/2022 passed under section 143(3) read with section 144B of the Act, the Assessing Officer (“AO”) disallowed the deduction claimed under section 35(2AB) of the Act and the deduction claimed under section 80G of the Act in respect of Corporate Social Responsibility (“CSR”) expenses. As per the assessee, while assessing the total income at INR 34,95,42,624, the AO considered the total income computed under section 143(1) at INR 34,05,96,804 as against INR 33,91,89,900, which is due to the adjustment of INR 14,06,904 proposed under section 143(1)(a)(iv) on account of disallowance under section 14A of the Act. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the said adjustment was not ultimately made and vide intimation dated 24/11/2021 issued under section 143(1) of the Act, the returned income of the assessee at INR 33,91,89,900 was accepted.
5. Having considered the submissions and perused the material available on record, we find merit in the contentions of the learned AR, as vide intimation issued under section 143(1) of the Act, the total income of the assessee was computed at the returned income, and the adjustment proposed on account of disallowance under section 14A of the Act was not made. Therefore, we direct the AO to compute the total income of the assessee, considering the returned income at INR 33,91,89,900 as the base amount. As a result, Ground No.1 raised in assessee’s appeal is allowed.
6. Ground No.2, raised in assessee’s appeal, pertains to the disallowance of weighted deduction under section 35(2AB) of the Act.
7. The brief facts of the case pertaining to this issue are that during the year under consideration, the assessee claimed a weighted deduction of INR 11,31,14,670 (150% of the revenue expenditure of INR 7,54,09,780) based on Form 3 CLA filed by the accountant. The Ministry of Science and Technology, Department of Scientific and Industrial Research (“DSIR”) vide Form No. 3CL dated 24/11/2021, approved a revenue expenditure of only INR 7,13,36,000. Accordingly, the AO vide order passed under section 143(3) of the Act disallowed 150% of the difference of INR 40,73,780, i.e. amounting to INR 61,10,670. In the appellate proceedings before the learned CIT(A), the assessee, in the alternative, claimed that the expenditure not eligible under section 35(2AB) of the Act is still a valid business expenditure allowable under section 37 of the Act. Therefore, the assessee claimed that the disallowance should be restricted to only 50% weighted portion, i.e. INR 20,36,890.
8. The learned CIT(A), vide impugned order, disagreed with the submissions of the assessee and held that the DSIR is the “prescribed authority” as per Rule 6 of the Income Tax Rules, 1962 (“the Rules”), and therefore, is authorised to quantify the expenditure eligible for weighted deduction. The learned CIT(A) further held that the AO’s role is limited to allowing the weighted deduction on the quantum of expenditure as certified by the DSIR in Form No. 3CL. The learned CIT(A) also rejected the alternative contention of the assessee on the basis that, having failed the test of section 35 of the Act, the assessee cannot be permitted to recharacterize the unapproved portion of expenditure on scientific research as general expenditure under section 37 of the Act. The learned CIT(A) held that the non-approval of expenditure by the DSIR is the definitive finding that the said expenditure does not qualify as eligible R&D expenditure. Being aggrieved, the assessee is in appeal before us.
9. We have considered the submissions of both sides and perused the material available on record. In the present case, it is undisputed that the assessee has an approved in-house R&D facility. In its return of income, the assessee claimed 150% weighted deduction on revenue expenditure of INR 7,54,09,780 incurred on its R&D facility under section 35(2AB) of the Act. However, DSIR vide Form No. 3CL dated 24/11/2021, approved a revenue expenditure of only INR 7,13,36,000. Thereby, a weighted deduction amounting to INR 61,10,670 was disallowed by the AO under section 35(2AB) of the Act.
10. Before proceeding further, it is pertinent to analyse certain provisions of the Act and the Rules, which are relevant for the adjudication of the issue raised in this appeal. Section 35(2AB)(1) of the Act, as it stood in the relevant year, reads as follows:-
“(2AB)(1) Where a company engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to one and one-half times of the expenditure so incurred:
Provided that where such expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility is incurred in a previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, the deduction under this clause shall be equal to the expenditure so incurred.
Explanation.—For the purposes of this clause, “expenditure on scientific research”, in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970 (39 of 1970).”
11. The relevant rules, so far as they concern deduction under section 35(2AB) of the Act, are provided in Sub-Rule (1B), (4), (5A) and 7A of Rule 6 of the Income Tax Rules, 1962 (“the Rules”). These rules read as follows:-
“(1B) For the purposes of sub-section (2AB) of section 35, the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research.”;
“(4) The application required to be furnished by a company under sub-section(2AB) of section 35 shall be in Form No.3CK.”;
“(5A) The prescribed authority shall, if he is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of the Act are fulfilled, pass an order in writing in Form No. 3 CM:
Provided that a reasonable opportunity of being heard shall be granted to the company before rejecting an application.
“(7A) Approval of expenditure incurred on in-house research and development facility by a company under sub-section (2AB) of section 35 shall be subject to the following conditions, namely:-
(a) The facility should not relate purely to market research, sales promotion, quality control, testing, commercial production, style changes, routine data collection or activities of a like nature;
(b) The prescribed. authority shall submit its report in relation to the approval of inhouse Research and Development facility in Form No. 3CL to the Director General (Income Tax Exemptions) within sixty days of its granting approval;
(c) The company shall maintain a separate account for each approved facility; which shall be audited annually and a copy thereof shall be furnished to the Secretary, Department of Scientific and Industrial Research by 31st day of October of each succeeding year;
Explanation:-For the purposes of this sub-rule the expression “audited” means the audit of accounts by an accountant, as defined in the Explanation below sub-section (2) of section 288 of the Income-tax Act, 1961.
(d) Assets acquired in respect of development of scientific research and development facility shall not be disposed off without the approval of the Secretary, Department of Scientific and Industrial Research”
12. In the present case, the deduction under section 35(2AB) of the Act was restricted on the basis that the said expenditure was not approved by the DSIR for weighted deduction under section 35(2AB) of the Act. It is pertinent to note that there was an amendment with effect from 01/07/2016 to Rule 6(7A)(b) of the Rules, whereby it has been laid down that the prescribed authority, i.e., DSIR shall quantify the expenditure incurred on in-house research and development facility by the company during the previous year and eligible for weighted deduction under section 35(2AB) of the Act in Part-B of Form No. 3CL.
13. Therefore, we are of the considered view that the said amendment is clearly applicable to the year under consideration, being post 01/07/2016. Thus, the assessee is only entitled to claim a weighted deduction under section 35(2AB) of the Act in respect of the expenditure approved by the DSIR in Form No. 3CL.
14. As regards the alternative claim of the assessee for the allowability of expenditure under section 37 of the Act, we are of the considered view that in Form No. 3CL, the DSIR only quantifies the expenditure incurred by the assessee on in-house R&D facility and thus only said expenditure is eligible for computation of weighted deduction under section 35(2AB) of the Act. However, at the same time, the expenditure which is not quantified by the DSIR in Form No. 3CL does not cease to be an expenditure incurred wholly and exclusively for the purpose of the business and allowable under section 37 of the Act. Therefore, we are of the considered view that the learned CIT(A) erred in outrightly rejecting the alternative claim of the assessee merely on the basis that once an expenditure fails to qualify the test of section 35, the said expenditure cannot also be allowed under section 37 of the Act. Accordingly, we direct the AO to allow the balance revenue expenditure, which was not approved by the DSIR in Form No. 3CL, under section 37 of the Act. Accordingly, Ground No. 2 raised in assessee’s appeal is partly allowed.
15. Ground No. 3, raised in assessee’s appeal, pertains to the denial of deduction claimed under section 80G of the Act on CSR expenses.
16. We have considered the submissions of both sides and perused the material available on record. The only grievance of the assessee is against the denial of deduction under section 80G of the Act in respect of CSR expenditure. In the present case, it is undisputed that the assessee has not claimed the CSR expenditure under section 37(1) of the Act, and its claim is only restricted to section 80G of the Act. We find that a similar issue came up for consideration before various coordinate benches of the Tribunal. We find that in Allegis Services (India) v. CIT [IT Appeal No. 1693 (Bang.) of 2019], the deduction in respect of CSR expenditure under section 80G of the Act was denied by the Revenue on a similar basis as in the present case. While deciding the issue in favour of the taxpayer, the coordinate bench of the Tribunal, vide order dated 29/04/2020, observed as follows: –
“We have perused submissions advanced by both sides in light of records placed before us.
10. Section 135 of Companies Act, 2013 requires companies with CSR obligations, with effect from 01/04/2014.
Finance (No.2) Act, 2014 inserted new Explanation 2 to sub- section (1) of section 37, so as to clarify that for purposes of sub- section (1) of section 37, any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.
11. This amendment will take effect from 1/04/2015 and will, accordingly, apply to assessment year 2015-16 and subsequent years.
12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head Income form Business and Profession’. Further, clarification regarding impact of Explanation 2 to section 37(1) of the Income Tax Act in Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as under:

“The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditure cannot be allowed under the existing provisions of section 37 of the Income-tax Act.

Therefore, in order to provide certainty on this issue, it is proposed to clare that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein.”

13. From the above it is clear that under Income tax Act, certain provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, ‘Income from Business and Profession” to those, who pursue corporate social responsibility projects under following sections.

• Section 30 provides deduction on repairs, municipal tax and insurance premiums.

• Section 31, provides deduction on repairs and insurance of plant, machinery and furniture.

• Section 32 provides for depreciation on tangible assets like building, machinery, plant, furniture and also on intangible assets like know-how, patents, trademarks, licenses.

• Section 33 allows development rebate on machinery, plants and ships.

• Section 34 states conditions for depreciation and development rebate.

• Section 35 grants deduction on expenditure for scientific research and knowledge extension in natural and applied sciences under agriculture, animal husbandry and fisheries. Payment to approved universities/research institutions or company also qualifies for deduction. In-house R&D is eligible for deduction, under this section.

• Section 35CCD provides deduction for skill development projects, which constitute the flagship mission of the present Government.

• Section 36 provides deduction regarding insurance premium on stock, health of employees, loans or commission for employees, interest on borrowed capital, employer contribution to provident fund, gratuity and payment of security transaction tax.

Income Tax Act, under section 80G, forming part of Chapter VIA, provides for deductions for computing taxable income as under:

• Section 80G(2) provides for sums expended by an assessee as donations against which deduction is available.

(a) Certain donations, give 100% deduction, without any qualifying limit like Prime Minister’s National Relief Fund, National Defence Fund, National Illness Assistance Fund etc., specified under section 80G(1)(i).

(b) Donations with 50% deduction are also available under Section 80G for all those sums that do not fall under section 80G(1)(i).

Under Section 80G(2) (iiihk) and (iiihl) there are specific exclusion of certain payments, that are part of CSR responsibility, not eligible for deduction u/s80G.
14. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, ‘Income form Business and Profession”, whereas monies spent under section 80G are claimed while computing “Total Taxable income” in the hands of assessee. The point of claim under these provisions are different.
15. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, “Income from Business and Profession”.
16. For claiming benefit under section 80G, deductions are considered at the stage of computing “Total taxable income”. Even if any payments under section 80G forms part of CSR payments(keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, “Income form Business and Profession”. The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing “Total Taxable Income” cannot be denied to assessee, subject to fulfilment of necessary conditions therein.
17. We therefore do not agree with arguments advanced by Ld.Sr.DR.
18. In present facts of case, Ld. AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, “Income from Business and Profession”. It has been submitted that some payments forming part of CSR were claimed as deduction under section80G of the Act, for computing “Total taxable income”, which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing Total Taxable Income”. If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature.
19. On the basis of above discussion, in our view, authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act.
20. Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate its calim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility.”
17. We further find that the coordinate bench of the Tribunal in Societe Generale Securities India (P.) Ltd. v. Pr. CIT [2023]  [2024] 204 ITD 796 (Mumbai – Trib.), while affirming the claim of deduction under section 80G of the Act in respect of CSR expenditure, observed as follows: –
“6. After computing the business income, while computing the total income of the assessee, the assessee is invoking the benefit under Chapter VIA by claiming deduction of the sums under section 80G of the Act. According to the revenue, when once such sum went to satisfy the requirement of section 135 of the Companies Act, the benefit gets exhausted and such an amount is no more available for the purpose of claiming deduction under section 80G of the Act. There is no express provision to support the contention of Revenue. On the other hand, section 80G (2) (iiihk) and (iiihl) of the Act expressly provide that such sums donated for Swatch Bharath Kosh and Clean Ganga Fund shall be the amounts other than the sums spent by the assessee in pursuance of CSR, meaning thereby the donations made towards Swatch Bharath Kosh and Clean Ganga Fund spent as a part of CSR are not qualified for deduction under section 80G of the Act. Out of so many entries under section 80G(2) of the Act, only donations in respect of two entries are restricted if such payments were towards the discharge of the CSR. The Legislature could have put a similar embargo in respect of the other entries also, but such a restriction is conspicuously absent for other entries. The irresistible conclusion that would flow from it is that it is not the legislative intention to bar the payments covered by section 80G(2) of the Act which were made pursuant to the CSR, and other than covered by section 80G(2)(iiihk) and (iiihl) of the Act. As stated above, clue can be had from the restrictions by way of section 80G (2) (iiihk) and (iiihl) of the Act. Explanation 2 to section 37(1) of the Act which denies deduction for CSR expenses by way of business expenditure is applicable only to extent of computing ‘business income’ under Chapter IV-D of the Act and; it could not be extended or imported to CSR contributions which was otherwise eligible for deduction under Chapter VI-A of the Act.
7. Where the deduction under section 80G of the Act is also disallowed, since CSR qualifying donations are not ‘voluntary contributions’, it will be a double jeopardy in the case of assessee. Assessee cannot be denied the benefit of claim under Chapter VIA of the Act, which is considered for computing ‘Total Taxable Income”. If assessee is denied this benefit, merely because such payment forms part of CSR, it would lead to double disallowance, which is not the intention of Legislature at all. Legislature on this matter simply dealing with the computation of total income under chapter IVD pertaining to “Income under the head Business and Profession” and not at all dealt with the eligibility of assessee to claim deduction u/s. 80G of the Act, falling in chapter VIA of the Act. It is further observed that genuineness of the transactions and identity of the donees are also not under challenge. All the payments were made through proper banking channel and appropriate donation receipts were also produced before the lower authorities and before us also.”
18. Further, the coordinate bench of the Tribunal in Alubound Dacs India (P.) Ltd. v. Dy. CIT 207 ITD 393 (Mumbai – Trib.), held that the expenditure towards CSR activities is an allowable deduction under section 80G of the Act. The relevant findings of the coordinate bench, in the decision, are reproduced as follows:-
“11. We have heard the rival submissions and perused the materials available on record. The only moot question to be decided here is whether the expenditure towards CSR activities are an allowable deduction u/s. 80G of the Act. The CSR expenses are governed by section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies (CSR) Policy Rules, 2014 where companies having net worth of Rs.500 crores or more or turnover of Rs.1000 crores or more or net profit of Rs.5 crores or more have to mandatorily comply with the CSR provisions specified u/s. 135(1) of the Companies Act, 2013. The above mentioned companies are liable to spend atleast 2% of its average net profit for the immediately preceding three financial years on CSR activities. In the present case, the assessee has contributed Rs.30 lacs to various educational and charitable trust for which the assessee has claimed 50% of the total donation paid as deduction u/s. 80G of the Act. Prior to the Finance (No.2) Act, 2014, the said expenditure was claimed as ‘business expenditure’ u/s. 37(1) of the Act where after the insertion of Explanation 2 to section 37(1) of the Act, the CSR expenses referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purpose of business or profession. It is observed that the said expenses pertaining to CSR has been claimed as deduction u/s. 80G of the Act which claim was perennially rejected by the Revenue for the reason that only donations which are voluntary in nature will come under the purview of section 80G of the Act and donation towards CSR was merely a statutory obligation on companies as per section 135 of the Companies Act, 2013. It is pertinent to point out that the intention of the legislature was clear when the same was clarified by the Finance (No.2) Act, 2014 that CSR expenses will not fall under the business expenditure and also there has been an express bar specified in sub clause (iiihk) and (iiihl) of section 80G(2)(a) of the Act that any sum paid by the assessee as donation to Swatch Bharat Kosh and Clean Ganga Fund will not come under the purview of deduction u/s. 80G of the Act subject to certain conditions. This justifies the fact that the other donations specified u/s. 80G of the Act would be entitled to deduction provided the conditions stipulated u/s. 80G of the Act are satisfied. In the present case in hand, the contributions made by the assessee would not fall under the two exceptions specified above which clearly mandates that the assessee is entitled to claim deduction for the donations contributed during the year under consideration u/s.80G of the Act. The decision relied upon by the ld. A.O. in the case of PVG Raju, Raja of Vizianaram (supra) is distinguishable on the facts of the present case where there is no requirement of proving the voluntariness of the donation contributed by the assessee for claiming deduction u/s. 80G of the Act. The amendment brought about by Finance Act, 2015 to section 80G of the Act which had inserted the sub clauses (iiihk) and (iiihl) to be the exception for qualifying a donation for claiming u/s. 80G of the Act could also be an evidencing factor to substantiate that CSR expenditures which falls under the nature specified in section 30 to 36 of the Act are an allowable deduction u/s. 80G of the Act.
12. On the above observation, we deem it fit to hold that the assessee is entitled to deduction claimed u/s. 80G of the Act towards the CSR expenditure incurred by it. We, therefore, direct the ld. A.O. to allow the claim of the assessee subject to the condition that the assessee has satisfied the other requirements warranted u/s.80G of the Act. Hence, ground no. 2 raised by the assessee is allowed.”
19. Thus, respectfully following the aforementioned decisions, we are of the considered view that the claim for deduction under section 80G of the Act in respect of CSR expenses cannot be denied. In the present case, the lower authorities denied the deduction claimed by the assessee under section 80G of the Act without verifying the conditions as laid down in the said section. Therefore, respectfully following the aforesaid decisions rendered by the coordinate bench of the Tribunal, we remit this issue to the file of the jurisdictional AO to verify the conditions necessary for claiming deduction under the said section. The assessee is also directed to file all the details for the purpose of claiming a deduction under section 80G of the Act. We further direct that if the conditions as laid down in section 80G are found to be satisfied, then a deduction be granted to the assessee. With the above directions, the impugned order on this issue is set aside. As a result, Ground No. 3 raised in assessee’s appeal is allowed for statistical purposes.
20. In the result, the appeal by the assessee is partly allowed for statistical purposes.