DY. C.I.T.1(2), RAIPUR (CG) vs. M/S GODAWARI POWER & ISPAT LTD., RAIPUR (CG)

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ITA 363/BIL/2014Status: DisposedITAT Raipur18 January 2018AY 2009-1015 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal reversed the CIT(A)'s order regarding fly ash bricks and depreciation on common assets, restoring the AO's additions. The issue of foreign exchange fluctuation loss was remanded to the AO. The CIT(A)'s deletion of disallowances for share capital expenses and social welfare expenses was upheld, while the disallowance under Section 40A(3) was partly allowed.

What were the facts?

The revenue appealed against the CIT(A)'s orders concerning the AYs 2009-2010 and 2010-2011. Key issues involved the eligibility of profit from fly ash bricks for Section 80IA deduction, foreign exchange fluctuation loss, depreciation on common assets, disallowance under Section 14A, expenses on shares, social welfare expenses, and cash payments under Section 40A(3).

What were the issues?

Whether profits from by-products are eligible for deduction, the treatment of foreign exchange losses, depreciation on common assets, and the allowability of various business expenses.

Which sections of the Income-tax Act were involved?

Section 80IA,Section 37,Section 14A,Section 40A(3)

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR

Before: S/SHRI N.S SAINI & PAVAN KUMAR GADALE

For Appellant: Shri R.B.Doshi, AR
For Respondent: Shri P.K.Mikshra, CIT DR
Hearing: 17/01

per the requirements of SEBI and other misc professional fees relating to the

work. The Assessing Officer rejected the submission of the assessee and

disallowed Rs.21,94,020/-.

11 ITA Nos.363 & 364/Rpr/2014 Assessment Years : 20098-2010 & 2010-2011

25.

Before the CIT(A), the assessee reiterated the submissions before the

Assessing Officer and submitted that as per Board Circular No.10/67/65-

IT(A-1) dated 26.8.1965, such expenditure is allowable as revenue

expenditure.

26.

The CIT(A) deleted the addition by observing that the Assessing officer

has disallowed the claim of the assessee without considering relevant

schedule of the balance sheet. The nature of expenses as claimed shows

that expenses are of recurring nature incurred in connection with various

compliances as per listing agreements, etc. He also cited the Board

circular(supra) and deleted the addition.

27.

Before us, ld D.R. supported the order of the Assessing Officer

whereas ld AR supported the order of the CIT(A).

28.

We find that the assessee is listed with BSE, NSE and SEBI, and the

expenses relate to annual custodian fees, listing fees, compliance certificate

fees, printing of annual reports, charges publication of quarterly, half-yearly

and annual results as per the requirements of SEBI and other misc

professional fees relating to the work, which are recurring in nature. The

CIT(A) has deleted the addition after properly appreciating the facts of the

case. Hence, we confirm his order and reject the ground of appeal of the

revenue.

12 ITA Nos.363 & 364/Rpr/2014 Assessment Years : 20098-2010 & 2010-2011

29.

The next issue relates to deletion of disallowance of Rs.77,58,654/- on

account of Social Welfare expenses which have not been incurred wholly and

exclusively for the purpose of business.

30.

The Assessing Officer has claimed deduction for an amount of

Rs.77,58,654/- on account of social welfare expenses for development of

various facilities for public of nearby villages like construction of ponds,

organizing of medical camps, promotion of education facilities, contribution

to gram vikas samitees for various development works to earn goodwill in

the society. The Assessing Officer rejected the explanation of the assessee

and disallowed the claim of the assessee.

31.

On appeal, the CIT(A) observed that there is no dispute to the

genuineness of claim of expenditure i.e. incurrence of expenditure and

payment thereof. The CIT(A) following the decision in the case of CIT vs.

Modi Industries Ltd., 327 ITR 570, the decision of Karnataka High Court in

the case of CIT vs. Infosys Technologies Ltd., 360 ITR 714 (kar) and also the

amendment in Section 37 in the Finance No.(2) Act, 2014 w.e.f. 1.4.2015,

deleted the disallowance of Rs.2,68,796/-.

46.

Being aggrieved, the revenue is in appeal before us.

13 ITA Nos.363 & 364/Rpr/2014 Assessment Years : 20098-2010 & 2010-2011

47.

We have heard the rival submissions and perused the record of the

case. We find that the CIT(A) has relied on the decision in the case of Modi

Industries (supra) and Hon’ble Karnataka High Court in the case of CIT vs.

Infosys Technologies Ltd (supra), wherein, it has been held that the

expenditure incurred on social responsibility was laid out or expended wholly

and exclusively for purposes of business. The CIT(A) has referred to the

amendment made in Finance Act (No.2) 2014 w.e.f. 1.4.2015 in Section 37,

wherein, it is declared that for the purposes of sub-section(1) any

expenditure incurred by an assessee on the activities relating to corporate

social responsibility referred to in section 135 of the Companies Act, 2013

shall not be deemed to be an expenditure incurred by the assessee for the

purposes of the business or profession. The CIT(A) has held that there was

no such embargo for the preceding years. In view of above, the CIT(A) held

that the disallowance cannot be sustained. In the instant case, it is

submitted that CSR expenses are incurred for the welfare of local community

and thereby improve corporate image of the companies incurring such

expenditure. We are of the considered opinion that the CIT(A) has rightly

considered the decision and deleted the addition made by the Assessing

Officer and Ground No.d of appeal of the revenue is dismissed.

14 ITA Nos.363 & 364/Rpr/2014 Assessment Years : 20098-2010 & 2010-2011

48.

The last issue pertains to restriction of disallowance u/s.40A(3) of the

Act to Rs.17,54,455/- thereby giving relief of Rs.7,02,475/- to the assessee.

49.

The Assessing Officer observed that the assessee has made payments

in violation of provisions of section 40A(3) of the Act as per the list enclosed

in the assessment order and, therefore, disallowed Rs.17,54,455/-.

50.

On appeal, the CIT(A) the assessee submitted that as per list

furnished, the expenses to the tune of Rs.7,02,476/- were below as

prescribed limit u/s.40A(3) of the Act. It was submitted that out of total

expenses of Rs.75,10,62,825/-, as transport expenses, only Rs.24,56,931/-

was paid in cash that too due to urgent requirement of transporters and the

payments were genuine.

51.

The CIT(A) found that only Rs.7,02,476/- paid in cash were below the

prescribed limit and deleted the addition to that extent and sustained the

addition for the balance amount.

52.

Having heard the rival submissions, we have carefully gone through

the orders of lower authorities. We find that the CITA) has allowed the

deduction which are below the prescribed limit u/s.40A(3) of the Act. Before

us, no plausible explanation was submitted by the ld D.R. to controvert the

15 ITA Nos.363 & 364/Rpr/2014 Assessment Years : 20098-2010 & 2010-2011

above findings of the CIT(A). Hence, we uphold the order of the CIT(A) and

dismiss the ground of appeal of the revenue.

53.

In the result, appeal filed by the revenue is partly allowed.

Order pronounced on 18 /01/2018.

Sd/- sd/- (N.S Saini) (Pavan Kumar Gadale) ACCOUNTANT MEMBER JUDICIALMEMBER Raipur; Dated 18 /01/2018 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : DCIT 1(2), Aayakar Bhavan, Raipur 2. The Respondent. Godawari Power & Ispat Limited, Plot No.482/2, Industrial Growth Central Phase-1, Raipur 3. The CIT(A)- Raipur 4. Pr.CIT- Raipur 5. DR, ITAT, Raipur 6. Guard file. //True Copy//

BY ORDER,

SR.PRIVATE SECRETARY ITAT, Raipur

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