2018 (12) TMI 744

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....any as CSR u/s. 37(1) of the Income-tax Act, 1961 (hereinafter referred to as the "Act") to the tune of Rs. 39,06,724/-. 3. Briefly stated facts are that on perusal of accounts submitted by the assessee, during the course of assessment proceedings, the AO observed that an amount of Rs. 39,06,724/- have been debited under the head 'Corporate Social Responsibility' (CSR). On a specific query raised by AO on it, the assessee in its submission dated 24.08.2016, submitted that "It may be noted that these expenses were incurred for the purpose of business as well as social responsibility of the company. It is an allowable business expenses u/s 37(1) of the Act in as much as explanation 2 to the Section 36(1) of the Act has been added w....

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..... Aggrieved, assessee preferred an appeal before the Ld. CIT(A) who confirmed the action of AO and dismissed the appeal of assessee. Aggrieved, assessee is in appeal before us. 4. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO after taking note that the assessee had debited under the head 'CSR' an amount of Rs. 39,06,724/-, asked the assessee as to why the amount should not be disallowed because, according to him, this expenditure is not wholly and exclusively for the purpose of the assessee's business. Pursuant to this query of the AO, the assessee explained that the payments under the head 'CSR' were made primarily to an institute for the purpose of vocational training p....

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....ata Satyanarayna Rice Mill Contractors Co. v. CIT [1997] 223 ITR 101, Hindustan Petroleum Corporation Ltd Vs DCIT [(2005) 96 ITO 186 (Bom)] (iii) The amendment in the scheme of Section 37(1), which has been introduced with effect from 1st April 2015, cannot be construed as to disadvantage to the assessee in the period prior to this amendment. 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 ....

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....tax legislation imposes a liability or a burden, the effect of such a legislative provision can only be prospective. We have also noted that the amendment in the scheme of Section 37(1) is not specifically stated to be retrospective and the said Explanation is inserted only with effect from 1st April 2015. In this view of the matter also, there is no reason to hold this provision to be retrospective in application. As a matter of fact, the amendment in law, which was accompanied by the statutory requirement with regard to discharging the corporate social responsibility, is a disabling provision which puts an additional tax burden on the assessee in the sense that the expenses that the assessee is required to incur, under a statutory obligat....