TaxTMI 
TaxTMI 
2020 (11) TMI 700
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.... of the Act for A.Y. 2013-14 on 30th January, 2016 and A.Y. 2014-15 on 28th November, 2016. Thereafter, the Ld. Pr. CIT issued separate show cause notice for each of these assessment years proposing to revise the assessment orders u/s 263 of the Income Tax Act. 4. In the show cause notice alleging that the assessment orders passed by the A.O. for both of these assessment years 2013-14 & 2014-15, are erroneous, in so far as it is prejudicial to the interest of Revenue, the following reasons are given by the Ld. Pr. CIT: "i. From the details of 'Other Expenses' (Note -2.26) in the Profit & Loss Accounts it is observed that your company had claimed 'Corporate Social Responsibility Expenses' of Rs. 300.54 Lakh and the same was allowed in the assessment. However, as the expenditure was not incurred wholly and exclusively for the purposes of the business of the assessee as per provisions u/s 37 of the IT Act, 1961, the same was not allowable as business expenditure resulted in under assessment of income of Rs. 300.54 Lakh involving undercharge of tax of Rs. 1,30,66,366/-. ii. The AO has passed the impugned assessment order without making enquiries or verification whi....
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.... locality and therefore GRSE assisted in installing proper Power backup system in the local schools. The local schools were also provided with computers for assisting the students in their education. Blood Donation Camps were also being arranged by GRSE for Thallaesemia and RTA patients. GRSE entered into a Memorandum of Understanding with Tata Institute of Social Sciences in order to arrange for the upliftment of the locality wherein GRSE's business was being carried on. As there had been a number of Scheduled Caste people in the locality, for the benefit of them GRSE supplied blankets. All these activities were undertaken by GRSE for facilitating its business in the areas wherein its business was being carried on. Hence it must be appreciated that all these expenses aggregating to Rs. 3,00,54,276 had been incurred towards the benefit of GRSE in carrying on its business in a peaceful manner and without any obstruction of any nature. It is submitted that only after appreciating as to how the above-mentioned activities of GRSE had been facilitating the business carried on by GRSE, the Assessing Officer had decided that the CSR expenses aggregating to Rs. 3,00,54,276 should ....
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.... erroneous Order which is allegedly prejudicial to the interests of the revenue. Hence, on behalf of GRSE it is submitted that the proposal made by you for revision of the said Order u/s 263, may kindly be dropped. 6. The Ld. Pr. CIT rejected the contention of the assessee at para 5 and 11 as follows: "5. I have considered the facts and circumstances of the case and the submission of the assessee. The issue at hand pertains to claim of "Corporate Social Responsibility expenses" to the tune of Rs. 300.54 lakhs. The assessee explained that the issue stood discussed during the impugned assessment proceedings that such expenses were necessary for facilitating its business of ship building for the India Navy for mainly in Reach and Khidderpore areas. The expenditure were stated to have been incurred for Vocational Training for local unemployed Youth, health welfare programme, arrangements for water and toilet facilities, power back up system & computers for schools etc. No doubt CSR expenses were have been specially curbed w.e.f. 01.04.2015 i.e. A.Y. 2015-16 onwards, but previous year debits of such kind will necessarily have to pass the test of wholly and ....
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....ndrum in ITA No. 123/Coch/2017 decided on 11.06.2018 takes into consideration an identical claim of corporate social responsibility expenses incurred by a public sector enterprise as per Government of India's direction not disallowed in case of regular assessment to be not resulting error causing prejudice to interest of the Revenue as under:- "3. The brief facts of the case are as follows: The assessee is a company. For the assessment year 2012-2013, return was filed declaring an income of Rs. 29,26,21,280, which was subsequently revised to Rs. 22,88,55,880. The assessment u/s 143(3) of the I.T. Act was completed on 19.03.2015 determining a total income of Rs. 23,88,46,210. In the assessment completed u/s 143(3) of the I.T. Act, the Assessing Officer had allowed deduction of Corporate Social Responsibility (CSR) expenses to the tune of Rs. 44.69 lakh. 4. The Principal Commissioner of Income-tax issued notice u/s 263 of the I.T. Act, since according to him, the A.O. allowed deduction of CSR expenses without properly verifying the same. According to the Commissioner, as per Explanation 2 to section 37(1) of the I.T. Act, any expenditure incurred by an assessee on a....
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....he 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 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 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession" 9.2 The "Notes on Clauses" of Finance Bill, 2014 states as under: "Clause 13 of the Bill seeks to amend section 37 of the Income-tax Act relating to general expenditure. The existing provisions contained in sub-section (1) of the aforesaid....
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....ound to comply with all the Government orders and the Board of Directors itself is constituted with the Government secretaries and other nominees as members. Therefore, the claim of deduction has to be considered with reference to the peculiar circumstances of the company which has no discretion in regard to the payment of the service charges to the government as it is bound to comply with the government orders. So much so, we are of the view that the parameters applicable in the case of a private company that too with respect to the claim for business expenditure, are exactly not applicable in the case of Public Sector Company whether it is under the control of the State Government or Central Government. In fact, many public 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 he....
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....dia's guidelines only. It has been further subjected to statutory audits as well qua all the expenses incurred from time to time. The question as to whether the relevant assessment order must expressly discuss the issues in question or not so as to attract sec, 263 revision proceedings stands settled long back in Commissioner of Income Tax vs. Gabrial India Ltd. (1993) 203 ITR 108 (Bom) that mere non-discussion on an issue in the assessment order does not render it an erroneous causing prejudice to the interest of the Revenue. Hon'ble apex court's landmark decisions in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax (2000) 243 ITR 83 (SC) and Commissioner of Income Tax vs. Max India (2007) 295 ITR 282 (SC) also hold that before an assessment is sought to be revised as erroneous causing prejudicial to the interest of the revenue, these twin conditions must exist simultaneously. We conclude in view of above stated factual and legal backdrop that even if it is held that the Assessing Officer had erred in not carrying out the necessary enquiry / factual verification on the assessee's claim of its "CSR", the same could not have caused any prejudice interest of the revenue ....