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Expenditure incurred by a company on Corporate Social Responsibility activities referred to in section 135 of the Companies Act, 2013 is:
AFully deductible under section 37(1) as business expenditure
BNot deductible under section 37(1), being treated as an application of income
CDeductible to the extent of half of the amount actually spent
DDeductible only where the company opts out of the default regime
Answer & Solution
Correct answer: B. Not deductible under section 37(1), being treated as an application of income
1. Explanation 2 to section 37(1) declares that CSR expenditure under section 135 of the Companies Act, 2013 is not deemed to be incurred for the purposes of business.
2. It is treated as an application of income and is therefore disallowed under section 37(1).
3. However, if a particular CSR outlay independently qualifies under sections 30 to 36 (for example, a section 35 contribution), it remains deductible under that specific section.
_Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 3 PGBP, PDF p. 75_
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