Section 80G deduction for company opting 115BAA

This query is : Resolved

Tamanna Kapoor (Querist)
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14 June 2024 In a recent case law Synergia Lifesciences Pvt. Ltd Vs DCIT (ITAT Mumbai) tribunal has allowed for deduction of csr expenses.
Is it applicable to all companies.
Can a company opting for 115BAA claim csr expenses deduction under 80G for current financial year?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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11 July 2024 In the case law of Synergia Lifesciences Pvt. Ltd. vs. DCIT (ITAT Mumbai), the Tribunal allowed deduction of CSR (Corporate Social Responsibility) expenses as a business expenditure under the Income Tax Act, which is an important decision. However, the applicability of this decision to all companies and the specific scenario of claiming CSR expenses under Section 80G and Section 115BAA requires careful consideration:

### Applicability of CSR Expenses Deduction:

1. **General Applicability**:
- The decision in the Synergia Lifesciences case pertains to allowing CSR expenses as a deductible business expenditure under the normal provisions of the Income Tax Act. This means that for companies opting to compute their income under normal provisions (not under presumptive taxation schemes), CSR expenses can potentially be claimed as a deduction against their taxable income.
- It’s important to note that this decision is specific to the facts of that case and may not automatically apply universally to all companies. Each case is evaluated based on its merits and circumstances.

2. **Companies Opting for Section 115BAA**:
- Section 115BAA of the Income Tax Act, introduced in 2019, provides for a lower tax rate of 22% for domestic companies, subject to certain conditions.
- Companies opting for Section 115BAA are subject to a flat tax rate and do not generally avail deductions or exemptions under Chapter VI-A (which includes deductions like Section 80G for donations).
- Therefore, companies opting for Section 115BAA may not be able to claim CSR expenses under Section 80G as a deduction from their taxable income for the purpose of computing tax liability under this section.

### Specifics of Claiming CSR Expenses under Section 80G:

- **Section 80G**: This section allows deductions for donations made to specified funds, charitable institutions, etc. CSR expenses incurred by a company are not typically considered donations under Section 80G.
- **CSR Expenses**: These are mandated expenditures under the Companies Act, 2013, which require companies meeting certain criteria to spend a specified percentage of their average net profits on CSR activities.

### Conclusion:

- The allowance of CSR expenses as deductible business expenditure (as seen in the Synergia Lifesciences case) is significant for companies assessing their taxable income under normal provisions of the Income Tax Act.
- However, companies opting for Section 115BAA, which offers a lower tax rate but disallows most deductions, including those under Chapter VI-A (like Section 80G), may not be able to claim CSR expenses as deductions under Section 80G.
- It’s advisable for companies to consult with tax professionals or legal experts to understand the specific implications of the Synergia Lifesciences case and their eligibility to claim CSR expenses based on their chosen method of income computation under the Income Tax Act.