TaxTMI 
TaxTMI 
2021 (10) TMI 495
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....jecting the contention of the assessee that Explanation 2 to Section 37(1) having been inserted with effect from 01.04.2015 the same is not applicable in the relevant assessment year. (iii)That the disallowance has been confirmed despite the expenses having been incurred wholly and exclusively for the purpose of business, otherwise allowable under the Income Tax Act. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, in confirming the action of the AO of charging the interest under sections 234A, 234B, 234C and 234D of the Act. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, in confirming the action of the AO of withdrawing the interest u/s 244A. 5. The appellant craves leave to add, amend or alter any of the grounds of appeal. 2. Briefly stated facts of the case are that the assessee is a Government of India undertaking, engaged in execution of civil /electrical projects. The assessee filed return of income for the year under consideration on 25/09/2014, declaring total income of Rs. 293,47,00,300/-, which was revised to Rs. 293,58,51,230/....
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.... by this Explanation that the expenses incurred on CSR activities shall not be deemed to be an expenditure incurred for the purpose of business and profession. It has to mention here that the said Explanation is not an amendment to law which would be effective prospectively, rather, it is clarification to provisions of law as it was brought in statute originally and therefore would be effective from the date of enactment of law. In view of this, since the Explanation has been inserted to clarify the position of law in respect of section 37(1) of the IT Act, any expenditure incurred under this head in any of the years shall not be deemed to be an expenditure incurred for the purpose of business and profession. Since the CSR expenses are not allowable u/s 37(1) of the IT Act being not for the purpose of business or profession and there are no other provisions under this statue under which CSR expenses could be claimed as genuine allowable business expenditure, the same are to be disallowed if claimed by any assessee. In view of this, I uphold the conclusion drawn by AO and addition made by him and dismiss the ground taken by the appellant." 3.4 But, we find that Tribunal in the ca....
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....nment 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 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 pointprogramme as per specifi....
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....ions, but if it could be termed as expenditure of the category falling in section 37(/), then the right of the assessee to claim the whole of it as a deduction under section 37(1) cannot be declined. What is material in this context is whether the expenditure in question was necessitated by business considerations or not. Once it is found that the expenditure was dictated by commercial expediencies, the deduction under section 37(1) cannot be declined. [Para 7] In the instant case, the expenditure on 20-Point Programme was incurred in view of specific directions of the Government of India. It could not but be in the business interest of the assessee to abide by the directions of the Government of India which also owned the assessee. Further, the expenditure incurred 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 a....