CSR Expenditure: Deductible issues under Income Tax Act

CSR Expenditure: Deductible issues under Income Tax Act

Background:
India is the first country in the world where the voluntary guidelines for CSR has embedded into a statutory legislation. The debate started after implementing the Section 135 of the Companies Act, 2013 with effect from April 1, 2014, whether the CSR expenditure so mandated to be
incurred by every eligible company would be considered as an expense for the purpose of Income Tax Act, 1961. In other words, an urgency was felt to incorporate amendments in the Income Tax Act,1961 allowing CSR expenditure in correspondence with the related amendment in Section 135 of the Companies Act, 2013. As the excitement over the tax benefit among the corporates impounded because of the expectation from the new government was very high to
see “Acche Din Aa Gaya Hain”. Before July 10, 2014, Industry was hoping that the government would clear the confusion over CSR expenditure and propose a new clause in the Finance Bill 2014, which would allow as deduction under section 37 of the Income tax Act,1961. But the recent amendment in the Finance Act, 2014 has defeated the real purpose of bringing CSR related provision in the Companies Act, 2013. A great setback to Industry as the CSR spending will not be allowed as tax deductible expenditure.