M/S. HINDUSTAN TIN WORKS LTD.,NEW DELHI vs. ACIT, NEW DELHI

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ITA 5906/DEL/2016Status: DisposedITAT Delhi21 August 2019AY 2013-144 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the expenses incurred for promoting sustainability and environmental friendliness of metal packaging, including awareness about recycling, have a direct nexus with increasing demand for the company's products. Therefore, these expenses are allowable under Section 37(1) of the Income Tax Act.

What were the facts?

The assessee company incurred expenses of Rs. 19,66,901/- under the head 'Can-viroment Expenses' which was treated as Corporate Social Responsibility (CSR) expenditure by the Assessing Officer and disallowed. The CIT(A) also sustained this disallowance.

What were the issues?

Whether expenses incurred for promoting environmental sustainability and recycling awareness, termed 'Can-viroment Expenses', are business expenditure allowable under Section 37(1) or non-allowable CSR expenditure.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH “C”, NEW DELHI

Before: MS. SUCHITRA KAMBLE & SH. PRASHANT MAHARISHI

For Appellant: Adv. &
Hearing: 05.08.2019Pronounced: 21.08.2019

This appeal by the assessee is directed against the order dated 06.10.2016 passed by the CIT(A)-12, New Delhi in relation to assessment year 2013-14 on the following grounds:-

1. “That on the facts and in the circumstances of the case and in law the Learned Commissioner of Income Tax (Appeal) erred in dismissing the appeal of appellant company and retaining disallowance of Rs.19,66,901/- in the order passed by Ld. Deputy Commissioner of Income Tax Circle-11(2) New Delhi u/s 143(3) of the Income Tax Act, 1961.

2. That Ld. CIT (Appeal)-12 New Delhi grossly erred in law and on facts in sustaining a disallowance of Rs. 19,66,901/- treating the “Can-viroment Expenses” as “Corporate Social responsibilities” expenditure.

3. That the order passed by the Ld. CIT (Appeal)New Delhi, being erroneous in law and on facts deserved to be deleted. The appellant craves leave to add or amend any ground of appeal.”

2. The assessee is engaged in the business of manufacturing of tin cans/printed lac sheet/component & trading in tin plate. For the relevant Assessment, the assessee company filed return of income on 28.09.2013 declaring an income of Rs. 9,17,83,460/-. The Assessing Officer made disallowance of expenses incurred on account of Corporate Social Responsibility Expenses amounting to Rs. 19,66,901/- and disallowance of sales promotions amounting to Rs. 1,46,894/-. Thus, the Assessing Officer assessed the income of the assessee at Rs. 9,38,97,260/-.

3.

Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

4.

The Ld. AR submitted that during the year under consideration the assessee company debited Rs. 19,66,901/- to the profit and loss account under the head Misc. expenses. The Ld. AR further submitted that promoting the sustainability and environmentally friendliness of metal packaging is increasingly important to the canmaking industry. Indian canmaker Hindustan Tin Works through its Canvironment Week campaign, has been providing a lead in this goal while at the same time helping the needy in India, and raising awareness of the importance of recycling. The response from the industry was certainly positive – as well as numerous companies and organizations showing their support for the campaign, it had been recognized with several awards in recent months. The Ld. AR submitted that these expenditure was related to promotion & spreading awareness about sustainability and environmentally friendliness of metal packaging is increasingly important to the canmaking industry. The assessee through its Canvironment Week Campaign has been providing a lead in this goal and raising awareness of the importance of recycling which have direct nexus with the increase in demand of CAN’s in market. Thus, the Assessing Officer as well as the CIT(A) erred in not allowing these expenses. The Ld. AR further submitted that in A.Y. 2012-13, the Tribunal in allowed this issue in favour of the assessee and against the revenue.

5.

The Ld. DR relied upon the Assessment Order and the order of the CIT(A).

6.

We have heard both the parties and perused all the relevant material available on record. The Tribunal in A.Y. 2012-13 held as under: “16. Hon’ble Karnataka High Court in case cited as CIT & Anr. Vs. Infosys Technologies Ltd. – (2014) 360 ITR 714 allowed the expenditure incurred by Infosys Technologies Ltd. on account of CSR by installing traffic signal near the establishment to ease the traffic congestion u/s 37(1) of the Act by holding that such expenses can be held to be expanded wholly and exclusively for the purpose of business u/s 37(1) of the Act. 17. In this case, the assessee claimed expenditure of Rs. 15,22,874/- under the head ‘Can-viroment Week’ expenses having details as under:- Date of voucher Nature of expenses Amount 14.07.2011 Website expenses 27,575 08.12.2011 Health check-up of Rag Pickers 37,303 26.12.2011 Film Making 1,35,000 12.01.2012 Organizing Can-Viroment Week 13,22,970 Programme

Total 15,22,874

18.

So, we are of the considered view that keeping in view the totality of the aforesaid circumstances, the ld. CIT(A) has rightly deleted the disallowance made by the AO on account of CSR by following the decision rendered by Hon’ble Karnataka High Court as well as following the rule of consistency. So, ground no. 2 is determined against the Revenue.” The issue in the present Assessment Year is also identical. The Assessing Officer as well as CIT(A) ignored the fact that the said expenditure was incurred relating to promotion and spreading awareness about sustainability and environmentally friendliness of metal packaging which is important to canmaking industry. Thus, the expenses incurred by the assessee are coming under purview of Section 37(1) of the Income Tax Act, 1961. Therefore, the appeal of the assessee is allowed.

7.

In result, appeal of the assessee is allowed.

Order pronounced in the open court on 21st day of August, 2019.

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