The ITAT ruled that CSR expenditure incurred before the 2015 statutory bar is allowable for AY 2012-13. It emphasized that the new provisions cannot be applied retroactively.
ITAT Ruling on Leave Encashment Deduction
The Income Tax Appellate Tribunal (ITAT) has held that contributions towards Corporate Social Responsibility (CSR) expenditure made under the Ministry of Shipping guidelines are deductible for the Assessment Year (AY) 2012-13. This decision was significant as it pertains to CSR contributions made before the introduction of Explanation 2 to section 37(1), which introduced a statutory restriction that came into effect for AY 2015-16.
The Tribunal's ruling is grounded in the legal principle that statutes affecting rights or liabilities should generally not be applied retroactively unless explicitly stated. In this case, the ITAT found that the statutory bar to claiming such expenses should not apply to expenditures incurred prior to its enactment.
This decision has implications for businesses regarding the taxation of CSR expenditures, allowing them to potentially benefit from deductions that would otherwise be disallowed under the recent legislative changes. Practitioners should note the importance of substantiating CSR expenditures with proper documentation to defend against potential disallowances.
Citations
- ITAT (2026) ITAT Order Page
