CSR via Trusts and Form 10BE - Legality of 80G Claims

Tax planning 217 views 2 replies
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Executive
70 Points Joined May 2025

Dear Experts,

Many companies outsource their CSR activities to implementing agencies or trusts by way of donations. These agencies then carry out CSR projects on behalf of the companies and issue donation receipts along with Form 10BE. However, Section 80G of the Income Tax Act clearly states that deductions are not allowed for CSR expenditures. In such cases, how are companies managing to claim these deductions?

Regards,

S Ram

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On 07 May 2025 at 11:45 Report
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Master in Accounts & high court Advocate
9020 Points Joined December 2011

Companies are managing to claim deductions for CSR expenditures under Section 80G of the Income Tax Act by donating to registered institutions and trusts that qualify for such deductions. Here's how: - *Donations to Registered Institutions*: When companies donate to institutions registered under Section 80G, they can claim deductions on these donations. The key is that the donation is made to a qualified institution, not necessarily that the CSR expenditure itself is voluntary. -

*CSR Expenditure Eligible for Deduction*: Recent ITAT rulings have clarified that CSR expenditures, although mandatory, can be eligible for deductions under Section 80G if donations are made to eligible institutions. This means companies can claim tax benefits while fulfilling their CSR obligations. -

 *Importance of Documentation*: To claim these deductions, companies need to ensure proper documentation, including receipts and Form 10BE from the recipient institutions. This documentation is crucial for supporting the deduction claim during tax assessments.

*Key ITAT Rulings:* - *Mumbai ITAT Ruling*: The Mumbai bench of ITAT has held that deduction under Section 80G is allowable on CSR expenditure, emphasizing that the test of voluntariness is irrelevant for claiming deductions under Section 80G. -

 *Delhi ITAT Ruling*: The Delhi bench of ITAT has also ruled that companies are eligible to claim deductions under Section 80G for donations made as part of their mandatory CSR expenditure.

*Implications for Companies:* 

- *Tax Savings*: By donating to eligible charitable organizations, companies can not only fulfill their CSR obligations but also avail tax savings on charitable donations. - 

*CSR Strategy*: Companies can plan their CSR spending strategically, choosing to donate to Section 80G-approved groups to maximize tax benefits.³

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On 07 May 2025 at 14:38
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Executive
70 Points Joined May 2025

Dear Ram-sir,

Thanks for your swift response.

It would be very beneficial if you can share the judgement titles for easy reference.

Regards,

S Ram

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On 07 May 2025 at 14:58


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