AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 552
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....ised read as follows:- "1. The learned Commissioner of Income tax erred in concluding that the assessment order dated 19/03/2015 passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue since the Assessing Officer had allowed deduction for CSR expenditure of Rs. 44.69 lakhs without due verification in the manner it ought to be. 2. The learned Commissioner of Income tax failed to note that the "explanation (2) to section 37(1) of the Income tax Act", where by any expenditure incurred by an assessee on the activities relating to "CSR" referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purpose of business or profess....
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.... assessee on activities relating to CSR referred to in section 135 of the Companies Act, 2013 shall not be allowed as an expenditure incurred by the assessee for the purpose of business or profession. 5. To the notice issued u/s 263 of the I.T.Act, the assessee filed its objections. It was submitted by the assessee that the CSR expenses had to be necessarily incurred on account of Government Guidelines dated 09.04.2010 and the same is to be treated as an expenditure wholly and exclusively for the purpose of business u/s 37 of the I.T.Act. The assessee had also relied on the judgment of the Hon'ble jurisdictional High Court in the case of Travancore Titanium Products Ltd. (187 Taxman 81) for the proposition that when Government issues ord....
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.... issued certain Guidelines dated 09.04.2010 to all Central Public Sector Enterprises on CSR. The Guidelines issued by the Central Government dated 09.04.2010, is placed at pages 9 to 27 of the paper book filed by the assessee. As per the Guidelines as indicated under "5. Funding", all PSUs should mandatorily spend a percentage of net profit for CSR activities. The CSR expenses that has been incurred by the assessee is based on the specific directions of the Government of India and the A.O. in the assessment order passed u/s 143(3) dated 19.03.2015 had allowed the CSR expenditure. 9.1 The following explanation was introduced in the I.T.Act by Finance Act, 2014: "Explanation 2. - For the removal of doubts, it is hereby declared th....
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...., apply in relation to the assessment year 2015-16 and subsequent years. (emphasis supplied) 9.3 The ITAT, Raipur Bench in the case of Jindal Power Ltd (supra) had held that Explanation 2 to section 37(1) of the I.T.Act is prospective. The relevant findings of the Tribunal reads as follows:- "This disabling provision, as set out in Explanation 2 to Section 37(1), refers only to such corporate social responsibility expenses as under Section 135 of the Companies Act, 2013, and, as such, it cannot have any application for the period not covered by this statutory provision which itself came into existence in 2013. Explanation 2 to Section 37(1) is, therefore, inherently incapable of retrospective application any further." ....
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....lic sector companies are not formed just to make profit alone but are supposed to achieve larger objectives for the society and the State. By making payment of service charge, the respondent company has discharged only the obligation under Government orders. It cannot carryon business by violating Government orders and remain as a defaulter to the Government. 9.6 The ITAT Mumbai bench in the case of Hindustan Petroleum Corporation Ltd. (96 ITD 186) had held CSR expenditure incurred by Government Undertaking is an allowable deduction. The relevant finding of the ITAT Mumbai Benches reads as follows:- "Expenditure incurred by assessee, a company owned by the Government of India and working under its control and directions....