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Income Tax Appellate Tribunal, HYDERABAD BENCH “A”, HYDERABAD
PER A. MOHAN ALANKAMONY, A.M:
This appeal is filed by the Revenue against the order of the Ld. CIT(A)-2, Guntur in appeal No. 0731/CIT(A)-2/GNT/2016-17, dated 07/02/2020 passed U/s. 143(3) r.w.s 250(6) of the Act for the A.Y. 2014-15.
The Revenue has raised four grounds in its appeal however, the cruxes of the issues are as follows:
(i) The Ld. CIT (A) has erred in deleting the addition made by the Ld. AO amounting to Rs. 6,92,79,532/- on account of disallowance of expenses incurred towards rehabilitation by treating it as capital expenditure. (ii) The Ld. CIT (A) has erred in deleting the addition made by the Ld. AO amounting to Rs. 2,31,04,348/- on account of disallowance of expenses incurred towards corporate social responsibility.
At the outset, Ld. DR submitted before us that there is a delay of 51 days in filing the appeal before the Tribunal. In this regard, the Revenue had filed an affidavit seeking condonation of delay wherein the reasons for not filing the appeal within the prescribed time limit was explained. For reference, the relevant portion from the affidavit is extracted herein below: -
“…….. There is a delay of 51 days in filing the appeal in the case of M/s. Andhra Pradesh Mineral Development Corporation Limited, Hyderabad for the A.Y. 2014-15, which filed on 6/7/2020. The delay was due to the ongoing COVID Pandemic and consequent lockdown declared by the Government of Indian and State Government. Hence, it is requested that the delay of 51 days in filing the appeal may kindly be condoned and the appeal be admitted.”
On perusal of the affidavit filed by the Revenue, We are of the view that the delay was due to COVID Pandemic and consequent lockdown declared by the Government of India and the State Government. Therefore, since the Revenue was prevented by sufficient reason for filing the appeal before the Tribunal beyond the prescribed time limit,
in the interest of justice, We hereby condone the delay of 51 days in filing the appeal before the Tribunal and proceed to adjudicate the appeal on merits.
The brief facts of the case are that the assessee is a limited company engaged in the business of mining, filed his return of income for the relevant AY on 31/3/2016. Thereafter, the case was selected for scrutiny under CASS and finally the assessment was completed U/s. 143(3) of the Act vide order dated 7/12/2016 wherein the Ld. AO had made the above-mentioned additions amongst certain other additions.
Ground No.: Addition on account of rehabilitation expenses being capital in nature:
During the course of scrutiny assessment proceedings, it was observed by the Ld. AO that the assessee had debited its P & L Account with an amount of Rs. 6,92,79,532/- towards rehabilitation expenses. The Ld. AO opined that the rehabilitation expenses are non- recurring in nature and also brings enduring benefit to the assessee. Therefore, he was of the view that the rehabilitation expenditure is capital in nature. For the above stated reasons he disallowed rehabilitation expenses as allowable deduction. On appeal, the ld. CIT (A) deleted the addition made by the Ld. AO by observing as follows:
“5.3…… The issue of rehabilitation expenses is decided in favour of the appellant by the decision of the Hon’ble Tribunal in assessee’s own case for the earlier years 2002-03, 2003-04, 2004-05 and 2007-08 in their orders as under: ITA No. 1255/Hyd/2005 for the A.Y. 2003-03 dated 24/09/2009. ITA No. 1001/Hyd/2006 for the A.Y. 2003-04 dated 24/09/2009 ITA No. 731/Hyd/2007 for the A.Y. 2004-05 dated 24/09/2009. ITA No. 1839/Hyd/2012 for the A.Y. 2007-08 dated 21/01/2014. Following the judicial discipline, I direct the A.O. to delete the addition of Rs. 6,92,79,532/- made under the head rehabilitation expenses. Ground No.3 is adjudicated.”
Since, the ld. CIT (A) has held the issue in favour of the assessee following the decision of the Hyderabad Bench of the Tribunal in the assessee’s own case for the subsequent years as well as the earlier years, We do not find it necessary to interfere with his order on this issue.
Ground No:2 : Disallowance of Corporate Social Responsibility Expenditure: 10. During the course of scrutiny assessment proceedings, it was observed by the Ld. AO that the assessee has incurred expenditure of Rs. 2,31,04,348/- towards Corporate Social Expenses and debited to the P & L Account. The Ld. AO was of the openion that keeping in view of the provisions of section 37(1) of the Act this expenditure incurred by the assessee is not wholly and exclusively incurred for the purpose of the business of the assessee and hence it cannot be treated as allowable deduction. Ld. AO also opined that though Explanation 2 to section
37(1) of the Act came into effect from the assessment year 2015-16 wherein corporate social responsibility expenditure incurred by the assessee as per section 135 of the Companies Act is not allowable as deduction, it shall be with effect from the earlier assessment year. Therefore, the Ld. AO disallowed the amount of Rs. 2,31,04,348/- being expenses incurred towards corporate social responsibility and added to the income of the assessee. On appeal, the Ld. CIT (A) deleted the addition made by the Ld. AO by observing as under:
“5.4……… These expenses are spent by the appellant for social obligation arising out of displacement and ecological disturbance caused due to mining activity carried out. The company is obliged clean water for drinking, medical benefits, education provision for the persons effected by the mining activity. This expenditure is incurred only due to the mining activity which was main business of the appellant. The disallowance of such CSR expenditure provided as per the company’s Act is not allowed U/s. 37(1) only from AY2015-16 and not the current year. Therefore, the A.O. is directed to delete the addition of Rs. 2,31,04,348/- made on account of CSR Expenditure.
At the outset, we do not find any infirmity in the order of the Ld. CIT (A) on this issue. The finding of the Ld. CIT (A) is that the assessee has incurred expenditure towards providing clean drinking water, medical benefit and education to the families affected by the Mining activity of the assessee which is obviously connected with the smooth working of the business of the assessee. Hence, we do not find it necessary to interfere with the order of the Ld. CIT (A) on this issue.
In the result, the appeal of the Revenue is dismissed.
Pronounced in the open Court on the 28th July, 2021.
Sd/- Sd/- (P. MADHAVI DEVI) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 28th July, 2021. OKK Copy to:- 1) M/s. The Andhra Pradesh Mineral Development Corporation Limited, D.No. 2994/1D, 100 Feet Road, Kanuru Village, Panamaluru Mandal, Vijayawada – 521137. 2) DCIT, Circle-2(1), R.No. 514, 5th Floor, Signature Towers, Kondapur – 500 084. 3) The CIT(A)-2, Guntur. 4) The Pr. CIT-2, Guntur. 5) The DR, ITAT, Hyderabad 6) Guard File