AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 530
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....0/- & Rs. 13,21,75,000/- for AYs 2013-14 & 2014-15 respectively) without going into the merit of the case that assessee has furnished in accurate particulars. 2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting addition on account of claim of CSR (amounting to Rs. 6,44,00,000/- & Rs. 5,32,92,063 for AYs 2013-14 & 2014-15 respectively) without going into the merit of the case that assessee has furnished in accurate particulars." 3. The Objector, M/s. Rites Ltd., by filing the present cross objections challenged the impugned order dated 31.07.2017 passed by the Commissioner of Income-tax (Appeals)-38, Delhi qua the assessment year 2013-14 on the grounds inter alia that :- "1(i) That on facts and circumstances of the case, the Ld. CIT(A) was not justified in upholding disallowance of Rs. 77,18,481/- being claim of sustainable development expenses even though same is incurred for the purpose of business and allowable u/s 37 of the Income Tax Act, 1961. (ii) That there being no dispute with regards to genuineness of the expenses and same having direct nexus with business activities of the assessee, the impugned disallowance is misconceived ....
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....LS IN ITA NO.6447/Del/2017 (AY 2013-14) ITA NO. 6448/Del/2017 (AY 2013-14) 8. Undisputedly, the assessee is a Government undertaking and its substantial investments in specified Government securities are coming from earlier years. It is also not in dispute that during the years under assessment, assessee earned dividend income to the tune of Rs. 12,08,26,704/- & Rs. 14,83,49,435/- in AYs 2013-14 & 2014-15 respectively. 9. Assessee has come up with specific plea that for earning exempt dividend income, it has not incurred any expenditure, hence no suo motu disallowance has been made. When we examine the order passed by the AO we find that he has proceeded on the premise that since the assessee has earned huge dividend income, some expenditure would have been incurred for earning the same. 10. AO has accepted the audited books of account maintained by the assessee company which is a Government undertaking. When it is undisputed fact on record that assessee company being a Government undertaking has made investment in specific Government securities and moreover substantial portion of investments is coming from earlier years, no question arises to incur separate expenses. In order....
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....cally disallowed the claim of expenditure made by the assessee company towards Corporate Social Responsibility (CSR) and sustainable development without analyzing the fact that assessee company being a Government undertaking is required to incur such expenses as per guidelines issued by the Department of Public Enterprises by undertaking social welfare activities under the social security scheme. Assessee company has however claimed these expenses as business expenditure permissible under the Act. 16. It is contended by the ld. AR for the assessee that identical claim of CSR expenses has been duly accepted by the Revenue in the earlier years and there is no change in the facts and circumstances of case. Neither AO nor ld. DR for the Revenue has controverted this fact. 17. AO has disallowed claim of the assessee company qua CSR expenditure by misinterpreting the provisions contained under section 37(1) of the Act by observing that since CSR expenditure is not incurred for the purpose of carrying on the business, such expenditure cannot be allowed under the existing provisions of section 37 of the Act. Even Explanation 2 to section 37(1) of the Act is prospective in nature to be ef....
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....ernment. 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, towards implementation of 20 point programme as per specific directions of the Government though voluntary in nature and not forced by any statutory obligation, is allowable as business expenditure. Merely because an expenditure is in the nature of donation, it does not cease to be an expenditure deductible under s. 37(1)." 9.7 The Commissioner of Income tax had mentioned in his order that "the Apex Court (313 ITR 334 SC) CIT Vs Madras Refineries Ltd., while hearing the allowability of CSR expenses observed that neither the High Court nor the Tribunal concerned had given specific finding to the effect that the said CSR expenditure is allowable as business expenditure ". In the above mentioned case, the Apex court has not given any decision on merits of the case. It had only given an observation and remi....
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....ncurred for the implementation of 20-Point Programme was solely for the welfare of the oppressed classes of society, for which even the Constitution of India sanctions positive discrimination and for contribution to all around development of villages, which has always been the central theme of Government's development initiatives. An expenditure of such a nature cannot but be, 'a concrete expression of care and concern for the society at large and an expenditure to discharge the responsibilities of a 'good corporate citizen which brings goodwill of with the regulatory agencies and society at large, thereby creating an atmosphere in which the business can succeed in a greater measure with the aid of such goodwill'. [Para 9] Just because the expenditure was voluntary in nature and was not forced on the assessee by a statutory obligation, it could not cease to be a business expenditure. Therefore, the authorities below indeed erred in law in declining deduction of the expenditure incurred on 20-Point Programme which was, beyond dispute or controversy, at the instance of the Government, and was to discharge the assessee s obligations towards society as a responsible c....