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In what could be a dampener for India Inc, Budget 2014-15 has clarified that CSR spend made by companies in line with new Company Law obligations will not be entitled for income tax deduction (under Section 37).
This clarification has dashed the hopes of Corporate India, which had in the run-up to the Budget urged the Government to allow tax deduction on their Corporate Social Responsibility spend mandated under Company Law.
“Expenditure on CSR is a mandatory requirement under the new Companies Act, 2013. However, tax and company law are at the crossroads on this aspect and Budget 2014 proposes that the expenditure incurred for complying with the CSR obligations will not be allowable under Section 37 of the income tax law,” Pranay Bhatia, Partner, BDO India LLP told Business Line.
However, this disallowance of expenses under Section 37 is applicable only if the expenditure is otherwise not allowable under other provisions of the income tax law, he said.
Former CA Institute Secretary Ashok Haldia said conceptually business and its social responsibility are inseparable.
However, CSR contemplated under Section 135 of the Companies Act excludes activities undertaken in pursuance of the normal course of business of a company and, therefore, render these not deductible under Section 37 (1), Haldia told Business Line .
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