ITAT Kolkata Allows CSR Donation Deductions and Condones ESI Payment Delay for SREI Equipment Finance Limited
Income Tax Appellate Tribunal's landmark decision emphasizes statutory compliance, allowing deductions under Section 80G and condoning delay in ESI contributions due to public holidays.
Kolkata, September 15, 2025: In a significant ruling by the Income Tax Appellate Tribunal (ITAT), Kolkata Bench "D," SREI Equipment Finance Limited secured a partial victory in its appeal against the Commissioner of Income-tax (Appeals) regarding several tax deductions and contributions. The tribunal, presided over by Accountant Member Shri. Rajesh Kumar and Judicial Member Shri. Pradip Kumar Choubey, delivered its judgment on ITA No.1019/Kol of 2025, addressing crucial issues concerning Corporate Social Responsibility (CSR) donations, special reserves under Section 36(1)(viii), and employee contributions to the Employees' State Insurance (ESI).
CSR Donations Eligible for Deduction:
The tribunal ruled that CSR donations, when made to eligible institutions, qualify for deductions under Section 80G of the Income Tax Act, 1961. However, contributions to Swachh Bharat Kosh and Clean Ganga Fund remain exceptions, as specified under clauses (iiihk) & (iiihl) of sub-section 2 of Section 80G. SREI Equipment Finance Limited had donated Rs. 3 crore to SREI Foundation, claiming Rs. 1.5 crore as deduction under Section 80G. The tribunal overturned the previous decisions of both the Assessing Officer (AO) and the CIT (A), asserting that the donation qualifies for deduction despite being part of mandatory CSR expenses.
Special Reserve Exclusions Under Section 115JB:
In addressing the transfer of Rs. 29,98,69,029 to a special reserve under Section 36(1)(viii), the tribunal acknowledged practical difficulties in adding such reserves to book profits under Section 115JB. The amount transferred is taxable when withdrawn, hence it should not be added to book profit, as doing so would create undue complexities. The tribunal set aside the CIT (A)'s order, directing the AO to exclude these reserves when computing book profits, offering relief to the appellant.
ESI Contribution Delay Condoned:
A pivotal aspect of the ruling involved condoning a delay in ESI contribution payments. The tribunal recognized that the due date for ESI payment fell on a public holiday, allowing the payment on the subsequent working day to be deemed timely. This interpretation aligns with the General Clauses Act, highlighting the tribunal's understanding of statutory compliance and bona fide intent. The tribunal directed the AO to accept the payment without penalty, reinforcing a precedent for similar cases.
Conclusion:
The tribunal's decision underscores a balanced approach to statutory compliance, allowing legitimate deductions while acknowledging practical challenges faced by taxpayers. By upholding CSR donations under Section 80G and condoning delays due to public holidays, the ITAT has set a precedent emphasizing fairness and practicality in tax administration. The judgment partially allows the appeal of SREI Equipment Finance Limited, providing relief on several counts while guiding future interpretations of tax provisions related to CSR and statutory reserves.
This decision marks a significant development for corporate entities navigating the complexities of tax compliance, encouraging adherence to statutory requirements while ensuring equitable treatment under the law.
