M/S. INDIA INFRASTRUCTURE FINANCE CO. LTD.,NEW DELHI vs. DCIT, NEW DELHI

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order of the ld CIT(A)-12, New Delhi dated 14.10.2016 for the Assessment Year 2013-14. 2. The assessee has raised the following grounds of appeal:- “1. The learned CIT(A) has erred in fact and in law in disallowing the ground of addition a sum of Rs. 96,45,039/- being expenses on Corporate Social Responsibilities without any proper basis and appreciating of the facts of the case.

2. The learned CIT(A) has erred in facts in law in disallowing the ground of addition a sum of Rs. 24,20,910/- being amortization of premium on non current investment without considering the submission of assessee company and disregarding the directive of CBDT Instruction No. 17/2008.”

3. The brief facts of the case shows that the assessee is a company carrying on the business of providing long term financial assistance of commercially viable infrastructure projects. It filed its return of income on 30.09.2013 declaring income of Rs. 11,39,76,30,080/-. The ld AO made an assessment u/s 143(3) on 04.022016 determining total income of Rs. 11,41,17,54,410/- making four different additions/ disallowances. The assessee preferred an appeal before the ld CIT(A) who partly allowed the appeal of the assessee. Therefore, assessee is in appeal before us. 4. Despite notice none appeared on behalf of the assessee and therefore, issue is decided on the merits of the case. 5. The first ground of appeal is against confirmation of disallowance of Rs. 96,45,039/- on corporate social responsibility.

6. The brief facts shows that the assessee has incurred above expenditure. The assessee submits that all the CSR expenditure is for the purpose of business. The ld AO dismissed the claim of the assessee stating that during the year there is no specific provision for allowing such expenditure. Hence, the above disallowance was made. The assessee preferred an appeal before the ld CIT(A).

7. The assessee submitted that above sum has been paid to Sulabh International for construction of sanitation facilities in 47 schools of West Bengal. The ld CIT(A) noted that there is no nexus between the expenditure incurred by the assessee and the business of the assessee. He therefore, held that it is not clear as the above expenditure has increased the goodwill of the assessee. Therefore, such expenditure is not incurred for the purpose of business. He confirmed the disallowance.

8. The ld DR vehemently supported the order of the lower authorities.

9. We have carefully considered the contentions. Undoubtedly, the corporate social responsibility expenditure incurred by the assessee is disallowable under explanation 2 to section 37 of the Act w.e.f. 01.04.2015. Therefore, merely expenses are on “Corporate Social Responsibility Expenditure” same cannot be disallowed by applying the above explanation prior to 01.04.2015. However, the expenditure incurred on corporate social responsibility for its allowance requires to specify the test of provision of section 37(1) of the Act. Such expenditure should be revenue expenditure, not allowable u/s 32 to 36 or personal expenditure of the assessee. These expenses should have been spent “wholly and exclusively” for the purpose of the business. Therefore, it is mandatory for the assessee to establish that the expenditure is wholly and exclusively incurred for the purpose of the business and is not carved out by the exceptions u/s 37(1) of the Act. In the present case, the assessee has not shown that how the above expenditure has been wholly