2015 (10) TMI 2869 - HC - Income Tax

Donations to educational institutions treated as allowable CSR/income; section 40(a)(ia) inapplicable without payment evidence, no substantial question of law arose

HC upheld that expenditure on donations to educational institutions was allowable as corporate social responsibility/application of income. The court ... Expenditure on account of donation to educational institutions - allowable expenditure under corporate social responsibility - -application of income - HELD THAT:- Assessment order itself records that for assessment year 1995­96, appeal filed by Department in this respect before ITAT was withdrawn. It is not the case of Department that aims and objects of assessee do not permit such expenditure. Fact show that, to provide education to wards of its employees who are working at sites which are otherwise away from town, schooling facility is being provided by employer. To provide better facility, the central school organization an undertaking of Union of India is requested to offer it at such site. No substantial questions of law as sought to be raised arise out of concurrent finding of CIT and ITAT. Disallowance of contract charges paid to Nagindevi Agrawal u/s. 40(a)(ia) on account of non deduction of TDS - According to the assessee, it has not incurred any such expenditure and has not made any such payment to any Naginadevi Agrawal. Shri Dewani submits that books of accounts of assessee do not show any such payment. He also submits that appellant Commissioner of Income Tax-II monitors the assessment of respondent assessee and demand has been made by ACIT (TDS) Circle­II. Thus, there is apparent mis­match and when books of account does not show such payment, provision of Section 40(a)(ia) cannot be used against assessee. Two questions were framed: (i) whether expenditure of Rs. 342.42 lacs as donation to educational institutions is allowable under corporate social responsibility though it is 'only application of income'; and (ii) whether disallowance of contract charges of Rs. 6,25,000 paid to Nagindevi Agrawal u/s. 40(a)(ia) for non-deduction of TDS was justified. The court found the educational expenditure arose from the assessee's obligations under the National Coal Wage Agreement, which are legally enforceable under Section 18 of the Industrial Disputes Act, and had been accepted by the Department since 1992 (including withdrawal of a prior departmental appeal). On that basis, 'no substantial questions of law as sought to be raised arise out of concurrent finding of CIT and ITAT.' As to the Rs. 6,25,000, the assessee's books did not show any such payment and the demand recorded an apparent mis-match; thus, 'no such question arises as substantial question.' Appeal rejected; no costs.