Revenue's Appeal Dismissed: Periphery Development Expenses Allowed as Business Expenditure

The High Court dismissed the revenue's appeal challenging the Tribunal's decision to allow periphery development expenses as business expenditure for the assessment year 2014-15. The Court found no substantial question of law and upheld the Tribunal's factual re-appraisal, concluding that the expenses were justified and allowable.

---

---

Issues involved:
The appeal filed by the revenue challenging the order passed by the Income Tax Appellate Tribunal "C" Bench, Kolkata in ITA 572/Kol/2019 for the assessment year 2014-15. Delay of 965 days in filing the appeal. Proposal to disallow periphery development expenses by the Assessing Officer. Claim by the assessee that the expenses were incurred for business purposes and were part of corporate social responsibility (CSR).

The assessee, a company engaged in mining iron ore and manganese, filed its return of income for the assessment year 2014-15. The Assessing Officer proposed to disallow periphery development expenses based on a letter from the Periphery Development Society. The assessee did not provide an explanation to the query raised by the Assessing Officer, but furnished ledger copies of expenses. The Assessing Officer disallowed the expenses, which the assessee appealed before the Commissioner of Income Tax (Appeals) 1, contending that the expenses were for business purposes and part of CSR activities. The CIT(A) allowed the appeal, considering the expenses as business expenditure supported by vouchers and memos.

The revenue appealed the decision before the Learned Tribunal, which noted the mandatory nature for mining industries to contribute to the development of the area where they operate. The Tribunal found the expenses justified and allowable as business expenditure for the assessment year 2014-15. The Tribunal concluded that the CSR expenditure incurred before the assessment year 2015-16 was wholly and exclusively for business purposes. Therefore, the Tribunal dismissed the revenue's appeal based on factual re-appraisal.

The High Court found that no question of law, let alone a substantial question of law, arose for consideration in the appeal. Considering the factual matrix, the Court dismissed the appeal filed by the revenue. The connected applications were also dismissed accordingly.

---