CSR Donations Eligible for Section 80G Deduction — ITAT Delhi Partly Allows Cosmo First Ltd.'s Appeal

Case Overview

Cosmo First Ltd. Vs DCIT (ITAT Delhi)
Assessment Year: 2022-23
Tribunal: Income Tax Appellate Tribunal, Delhi Bench

The Delhi Bench of the Income Tax Appellate Tribunal partly allowed the appeal filed by Cosmo First Ltd. for Assessment Year 2022-23. The appeal raised multiple contested issues, including deductions under Section 80G, Section 80-IA, and Section 80M of the Income Tax Act, 1961, along with transfer pricing adjustments, interest computations, and penalty proceedings. On several matters, the Tribunal aligned itself with its own prior ruling in the assessee's case for Assessment Year 2020-21.

Background and Facts of the Case

Cosmo First Ltd. is engaged in the manufacture of Bi-axially Oriented Polypropylene films and flexible packaging films. For Assessment Year 2022-23, the assessee filed its return of income on 29.11.2022, declaring total taxable income of Rs. 305,81,15,809/-.

During the relevant previous year, the assessee discharged its Corporate Social Responsibility (CSR) obligations by contributing a total of Rs. 3.55 crore, broken down as follows:

  • Contribution to Cosmo Foundation — Rs. 2,80,00,000
  • Expenditure towards social welfare activities — Rs. 75,00,000

The assessee voluntarily added back the entire CSR expenditure while computing income under Section 37(1) of the Income Tax Act, 1961, in compliance with Explanation 2 to Section 37(1). However, it simultaneously claimed a deduction of Rs. 1.40 crore (representing 50% of the donation made to Cosmo Foundation) under Section 80G, since Cosmo Foundation holds valid registration and approval under that provision.

The Assessing Officer, while framing the final assessment order dated 27.11.2025 under Section 143(3) read with Section 144C(13) read with Section 144B of the Income Tax Act, 1961, in consonance with the directions of Dispute Resolution Panel (DRP)-1, New Delhi dated 30.10.2025 under Section 144C(5), denied the deduction claimed under Section 80G on the ground that the donation was not voluntary in nature, being a fulfilment of statutory CSR obligation under Section 135 of the Companies Act, 2013.

Issue 1: Deductibility of CSR Donations Under Section 80G

The central question before the Tribunal was whether an assessee can legitimately claim deduction under Section 80G of the Income Tax Act, 1961, in respect of amounts that are categorised as CSR expenditure and disallowed under Section 37(1).

Tribunal's Analysis and Ruling

The Tribunal held that this issue is no longer res integra, having already been settled in the assessee's own case for Assessment Year 2020-21 in ITA No. 4176/Del/2024 dated 23.04.2025. The Tribunal extracted and followed the operative findings from that earlier order, which are reproduced below:

"7.1 Further, we like to observe that as a matter of fact as per Section 135 of the Companies Act, 2013 ('CA 2013), the qualifying Companies as mentioned therein ITA no. 95/Del/2024 are required to spend certain percentage of profits of last three years on activities pertaining to Corporate Social Responsibility (CSR). The expenditure on CSR, could be by way of expenditure on projects directly undertaken by said companies, such as setting up and running schools, social business projects, etc. Such expenditure would include expenditure otherwise falling for consideration under section 37(1) of the Act. On the other hand, companies, instead of undertaking or participating directly in a project, may choose to give donations to institutions that are engaged in undertaking such projects, which is also a recognized way of compliance of CSR obligation."