Facts
The assessee filed an appeal against the order confirming a disallowance of Rs.48,35,182/- on account of CSR expenditure. The disallowance was made under Section 143(1) of the Income Tax Act.
Held
The Tribunal noted that the assessee had itself disallowed the CSR expenditure while filing the return of income, and this aspect was inadvertently missed by the lower authorities. The issue was remitted to the AO for limited verification.
Key Issues
Whether the disallowance of CSR expenditure was justified when the assessee itself had disallowed it and whether the addition was a double addition/taxation.
Sections Cited
37, 135, 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI AMITABH SHUKLA
Assessment Years: 2019-20 Sulochana Cotton Spinning Mills Deputy Commissioner of Income Private Limited, Tax, No.424, 426(Old No.483, 484), Circle-1, Kamaraj Road, Tiruppur, Tiruppur Tamil Nadu-641 604. [PAN: AADCS8189G) (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Shri Suraj Nahar, C.A, प्रत्यर्थी की ओर से /Revenue by : Ms.Anitha, Addl.CIT सुनवाई की तारीख/Date of Hearing : 03.06.2025 घोषणा की तारीख /Date of Pronouncement : 11.06.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M :
This appeal is filed by the assessee against the order bearing DIN & Order No.ITBA / APL / S / 250 / 2024-25 / 1072454940(1) dated 23.01.2025 of the Learned Commissioner of Income Tax [herein after “CIT(A), Addl/JCIT(A)-1, Noida for the assessment year 2019-20. The reference to the word “Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time. 2.0 The only issue contested in the present appeal is regarding a disallowance of Rs.48,35,182/- u/s 37 vide order u/s 143(1) dated 06.07.2020. It is the case of the Revenue that the impugned expenditure is liable for disallowance as the same is hit by the mischief of being a CSR expenditure. We have noted from para 4.9 of the order of Ld.First Appellate Authority that explanation-2 to section 37 mandates that any expenditure in the nature of CSR, falling under the ambit of section 135 of the Company’s Act, is not an allowable expenditure. Accordingly, the addition was confirmed. 3.0 The Ld. Counsel for the appellant has submitted that its financials including computation of income have not been properly understood and appreciated by the department. It was argued that the appellant is fully conscious of the fact that explanation-2 to section 37 mandates that any expenditure in the nature of CSR, falling under the ambit of section 135 of the Company’s Act, is not an allowable expenditure under the Act. It was submitted that consequently the appellant had itself disallowed the impugned amount qua CSR activities while filing its return of income. It was argued that the impugned disallowance has resulted in a case of double addition / double taxation. In support of its submissions, the appellant had provided a copy of computation of its income. 4.0 The Ld.DR fairly conceded in the light of submissions made and details filed by the appellant assessee but submitted that the veracity of evidences filed requires to be verified at the end of the Ld.AO. Page - 2 - of 4 5.0 We have heard rival submissions in the light of material available on records. We have noted that the assessee concurs with the conclusions drawn by the Revenue that explanation-2 to section 37 mandates that any expenditure in the nature of CSR, falling under the ambit of section 135 of the Company’s Act, is not an allowable expenditure and had therefore had disallowed itself the impugned CSR expenses while filing its return of income. It appears that this aspect was inadvertently omitted to be considered by the lower authorities. Be that as it may be, we are of the considered view that the Ld.AO may be given an opportunity to verify the details filed by assessee. Accordingly, we set aside the order of lower authorities and remit the issue to the Ld.AO with the directions of holding a limited verification of details filed by the assessee. The impugned disallowances of Rs.48,35,182/- u/s 143(1) would stand deleted if the Ld.AO satisfies himself, from perusal of original records, that the disallowance was suo moto made by the assessee. Accordingly all the grounds of appeal raised by the assessee on the issue of disallowance / double addition are allowed for statistical purposes. 6.0 Through ground of appeal no.2 the assessee has raised a legal ground contesting that the addition per se was non-maintainable because of the prohibition of making similar additions u/s. 143(1). Apropos to the decision in para 5 above, as the assessee has succeeded on merits and Page - 3 - of 4. Ld.AO for limited verification and corresponding relief, this legal ground of appeal has been left open. 7.0 In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 11th , June-2025 at Chennai.