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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
Appellant by Shri Gagan Tiwari & Shri Piyush Parashar, A.Rs Respondent by Shri K.G. Goyal, Sr.D.R. & Smt. Ashima Gupta, D.R. Date of Hearing: 18.11.2019 Date of Pronouncement: 22.11.2019 आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of the Ld. CIT(A)-1Bhopal dated 30.3.2017. The assessee has raised following grounds of appeal:
[ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal]
That on the facts and circumstances of the case, the order of the Ld. lower authorities is vitiated on several grounds, hence the same may kindly be quashed.
That the order passed is illegal, unlawful and opposed to the provisions of law. 3. That the Ld. A.O. erred and was not justified in disallowing and the Ld. CIT(A) in confirming the addition of Rs.1,03,35,000/- on account of CSR expenses u/s 37 of the Income Tax Act. 4. The appellant craves leave to add, amend, alter, substitute modify any of the above grounds on or before the final hearing. 2. The only effective ground is against confirming the addition of Rs. 1,03,35,000/- on account of CSR expenses u/s 37 of the Income Tax Act, 1961 (hereinafter called as ‘the Act’). The facts in brief are that case of the assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Act was framed vide order dated 10.2.2016 pertaining to the assessment year 2013-14.
While framing the assessment, the A.O. disallowed claim of expenditure incurred on account of corporate expenses to the tune of Rs.1,03,35,000/-. Aggrieved against this [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] order, the assessee preferred an appeal before Ld. CIT(A), who after considering the submissions rejected the appeal of the assessee and confirmed the order of the A.O. Ld. Counsel for the assessee submitted that the authorities below are not justified for disallowance of expenditure. He submitted that the expenditure was incurred at the behest of the State Government for the welfare of the public at large. He submitted that assessee is a Government company and under the identical facts, this Tribunal has allowed such expenses. He further submitted that the assessment year involved is 2013-14. The amendment in the section 37 of the Act came w.e.f. 1.4.2015, hence, could not be applicable for the assessment year 2013-14. He further placed reliance on the decision of the Tribunal rendered in the case of National Seed Corporation Limited Vs. Additional CIT in and the decision rendered in the case of M/s. Kerala State
[ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] Industrial Development Corporation Vs. ACIT in dated 7.2.2019. Ld. Counsel further reiterated the submissions as made before the Ld. CIT(A).
Per contra, Ld. D.R. submitted that there is no ambiguity under the law. The law is amply clear.
Deduction of expenditure u/s 37 of the Act is available only in respect of those expenses which have been wholly and exclusively incurred on business of the assessee. He submitted that the claim of the assessee for deduction of expenditure incurred under the CSR would not qualify deduction as the same has not been expended wholly and exclusively for the business of the assessee. He submitted that this position of law is further clarified by way of explanation to the section 37 of the Act, which was inserted w.e.f. 1.4.2015 but being declaratory and clarificatory in nature would apply retrospectively from the date when section 37 of the Act was introduced in the statute book. 4
[ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] He placed reliance on this position from the judgement of the Delhi High Court rendered in the case of Pawan Commercial & others Vs. Directorate of revenue 2007 (218)
ELT 331 Delhi. Ld. D.R. submitted that the assessee is required to demonstrate that the expenditure is expended wholly and exclusively for the purpose of its business.
We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The controversy in this case is with regard to the allowability of the expenditure incurred under the Corporate Social Responsibility (in short ‘CSR’) scheme. There is no quarrel with regard to the nature of expenditure whether it is a capital or revenue. It is to be decided whether expenditure incurred under the CSR scheme would be allowable as claimed by the assessee.
Similar issue came before the coordinate bench of this Tribunal in the case of National Seeds Corporation Ltd. Vs. 5
[ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] Addl. CIT in wherein the Tribunal has held as under:
[ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal]
Further, reliance is placed by the Ld. Counsel for the assessee on the decision of the coordinate bench rendered in the case of M/s. Kerala State Industrial Development Corporation Vs. ACIT in ITA No.142/Cochin/2014.
[ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] [ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal]
From the above, it is evident that the coordinate benches have held that expenditure incurred under the CSR Scheme is allowable expenditure and the explanation
[ITA No.444/Ind/2017] [MP State Mining Corporation Ltd., Bhopal] so inserted in section 37 of the Act shall be operative w.e.f.
1.4.2015. The revenue has not brought to our notice any other binding precedent. We, therefore, following the decisions of coordinate benches rendered in the case of National Seeds Corporation Ltd. Vs. Addl. CIT in and in the case of M/s. Kerala State Industrial Development Corporation Vs. ACIT in ITA No.142/Cochin/2014 allow this ground of appeal and direct the Assessing Officer to delete the addition.
In the result, appeal of the assessee is allowed.
Order was pronounced in the open court on 22.11.2019.