Corporate Social Responsibility (CSR)

Section 37 (1) of Income Tax Act, 1961 states that any expenditure which does not qualify under revenue expenditure within Section 30-36 or is a capital expenditure or personal expenses of the assessee shall be considered to be business expenditure if it is wholly and exclusively for the purposes of business or profession shall be allowed as business expenditure while computing income from profits and gains from business or profession.

As the CSR expenditure is not incurred for the purposes of carrying on business, such expenditures cannot be allowed under the provisions of section 37 of the Income-tax Act. The amount spent by a company towards CSR cannot be claimed as business expenditure. The Finance Act, 2014 provides that any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.

However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Income-tax Act shall be allowed as deduction under those sections subject to fulfillment of conditions, if any, specified therein.