TaxTMI 
TaxTMI 
2021 (1) TMI 828
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....and the orders of the authorities below we hold as follows. 4. The reason for revision of the assessment order passed u/s. 143(3) of the Act, as given by the Pr. CIT-1, Kolkata, is reflected in para 2 of the show cause notice issued u/s. 263 of the Act on 27.11.2017. This is extracted for ready reference: "2. On examination of the assessment record of the above mentioned assessment order, I have found that you have claimed an expenditure of Rs. 16,91,78,188.25 towards corporate social responsibility expenses consisting of following expenses: Details of Corporate Social Responsibility Expenses for the Year 2012-13: Health Care & Water 3,14,46,510.00 Promoting Education 2,89,24,938.00 Environmental Protection 1,31,20,296.00 Rural Development near Mines 9,56,86,444.25 16,91,78,188.25 On going through the entire assessment record, I have found that the AO has only called for the details of these expenses. But he has not enquired into the nature of these expenses to determine allowability of these expenses u/s. 37(1) of the Income Tax Act after finding out whether these expenses were incurred wholly and exclusively for t....
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....porate social responsibility was called for. He filed copies of the replies filed by the assessee before the AO to prove his point that the AO has called for not only the break up, but also the details of each and every expenditure. We find from this question and reply that this is a case where the AO has examined this explanation during original assessment proceedings and has accepted the claim of the assessee. Thus in our view, this is not a case of lack of enquiry or non-application of mind by the AO to the issue on hand. The AO has taken a possible view. 4.5. The directions of the Pr. CIT to the AO, to allow only those expenditure which directly benefitted the assessee, even though they are incurred to fulfil the conditions imposed by the Companies Act under corporate social responsibility is against the propositions of law laid down by various Courts and Tribunals. 4.6. The Tribunal in the case of Bengal NRI Complex Ltd. vs. DCIT in ITA No. 2231/Kol/2017 order dated 30.11.2018 at para 4 and 5 is held as under: "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 ....
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....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. In any event, as held by Hon'ble Supreme Court's five judge constitutional bench's landmark judgment, in the case of CIT Vs. Vatika Townships Pvt. Ltd. [ (2014) 367 ITR 466 (SC)], the legal position in this regard has been very succinctly summed up by observing that "Of the various rules guiding how legislation has to be interpreted, one established rule is that unless a contrary intention appears, legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being....
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....hold that the disabling provision of Explanation 2 to Section 37(1) does not apply on the facts of this case." 5. Respectfully following the ratio laid by the Coordinate bench of this Tribunal, we note that since the 'CSR' expenses are mandatory for companies incorporated as per the Companies Act, 2013 and the expenditure have been incurred by the assessee as envisaged under the Companies Act, 2013. So we are of the opinion that it has to be allowed and we take note that the Tribunal in Jindal Power Ltd., (supra), has already held that the introduction of explanation 2 to sec. 37(1) of the Act w.e.f. from 1st August, 2015 cannot be held to be retrospective in operation. Therefore, the expenditure incurred by assessee on account of 'CSR' as envisaged u/s. 135 of the Companies Act, 2013 need to be allowed as deduction. Therefore, the 'CSR' expenditure which the assessee company was obliged to discharge because it was a statutory obligation upon the assessee company so, the deduction should have been allowed as per the law in force for this assessment year and we direct the AO to allow the expenditure. Therefore, the appeal of assessee is allowed." ....
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....pt in mind that while the Commissioner is exercising his revisional jurisdiction over the assessment order, he has to exercise his power in an objective manner and not arbitrarily or subjectively since he is discharging quasi-judicial powers vested in him while doing so. Thus according to us, Explanation (2) inserted by the Parliament u/s. 263 cannot override the main section i.e. sec. 263(1) of the Act. The Ld. CIT can exercise his revisional jurisdiction in the event the assessment order is erroneous as well as prejudicial to the interest of the Revenue as discussed above and not otherwise. 16. In the instant case we find that in the SCN, the Ld. Pr. CIT set out seven specific reasons for which he had considered the AO's order to be erroneous in so far as prejudicial to the interests of the Revenue. We also note that in response, the assessee had submitted before the Ld. Pr. CIT detailed explanations supported by tangible documentary evidence to prove that the SCN had proceeded on assumption of some incorrect facts and wrong interpretation of applicable legal provisions. The assessee also explained with cogent material that before completion of assessment, the AO had....
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....he assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not." 17. The above view is also supported by the following decisions: DIT vs. Jyoti Foundation reported in 357 ITR 388 (Del) CIT vs. Ashish Rajpal reported in 320 ITR 674 (Del) ....