TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 621
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....te Paper Mill Pvt. Ltd. Included by Ld. AO which has yielded nil exempted income during the previous year 2013-14. 3. (i) Under the facts and in circumstances of the case the Ld. CIT(A) has erred in law by sustaining the disallowance of Rs. 3,96,00,919/- debited as CSR expenses, made by Ld. AO. (ii) Without prejudice to above the Ld. CIT(A) has erred in law by not allowing donation of Rs. 2.50 crore to CM relief fund deductible u/s. 80G out of aggregate CSR expenses disallowed." 3. We have heard the Ld. Representatives of the parties and perused the material available on record. 4. Ground No. 1 is general. 5. Ground No. 2 relates to disallowance of Rs. 1,92,91,622/- under section 14A of the Income Tax Act, 1961 ("Act") read with Rule 8D(2)(iii) of the Income Tax Rules, 1962 ("Rules") which has been sustained by the Ld. CIT(A). 5.1. The Ld. AO has discussed this issue in para 4 of his order. The Ld. AO found that the assessee has made substantial investment in mutual funds, dividend on which is exempt. In addition, the assessee has also held shares of a JV Company during the year, such shares being assets which can yield exempt income to the assessee. The assessee was asked ....
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.... and also daily managing this fund portfolio for assessee without any cost. The Investment Advisors engaged does not get any fees/remuneration being so settled between the assessee and the Investment Advisors vide renewed Letter No. SPMCIL/UTI/73/06/6143 dated 30.06.2010. In fact, no indirect expense on account of establishment, audit fees or otherwise are incurred related to operation of this fund as being estimated by the Ld. AO without any reason. The dividend is automatically reinvested in the plan by UTI as per the instruction of the assessee company. 7.1. After analysing the correspondence between the assessee and M/s. SPA Merchant Banker Limited, the Tribunal in ITA No. 475/Del/2018 for AY 2011-12 came to the conclusion that no disallowance under section 14A is called for. The relevant paras 10 & 11 are reproduced below:- "10. We have gone through the correspondence between the assessee and M/s. SPA Merchant Banker Limited. The engagement is subject to the following conditions: 1. You are requested to start this assignment w.e.f. 02.06.2008. 2. As per you presentation held on 25.04.2008, the services will be provided by your turn on honorary basis. 3. All investme....
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....said disallowance. 13. After hearing both the parties, we find that while invoking the disallowance u/s. 14A read with Rule 8D, nowhere the AO has recorded his satisfaction as to why the assessee's explanation is not tenable. The relevant observation of the Ld. AO reads as under:- "The assessee's contention is not acceptable, section 14A is very clear that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income, which does not form part of total income under this 'Act', Dividend income arising out of these investments is exempt u/s. 10 and does not form part of total income Considering the facts of the assessee's case as common expenditure incurred and debited in the P&L a/c for both the activities i.e. for investment as well as business, I hold that disallowance of expenditure u/s. 14A r. w. Rule 8D is warranted in this case, which is worked out at Rs. 49,82,310/- (being 0.5% of the average investment of Rs. 99,64,63,755/-) as under and added to the total income of the assessee:- Opening Investment : Rs. 99,18,92,595/- Closing Investment : Rs. 1,00,10,34,915/- Average Investment : Rs. 99,64,63,755/- 0.5....
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.... & Silver, and Assay of Precious Metals. The Appellant has following units in different states as under: * Currency Note Press (CNP) at Nashik, Maharashtra * Bank Note Press (BNP) at Dewas, Madhya Pradesh * India Government Mints (IGM) at Mumbai (Maharashtra), Hyderabad (Telangana), Kolkata (West Bengal) and Noida (Uttar Pradesh) * Security Printing Press (SPP), Hyderabad, Telangana * India Security Press (ISP), Nashik, Maharashtra * Security Paper Mill (SPM), Hoshangabad, Madhya Pradesh * The Ink Factory, Dewas, Madhya Pradesh 5. Ld. AO noted that the assessee has shown expenses on account of corporate social responsibility of Rs. 4.36 crore which otherwise is incorrect figure because the actual amount of CSR expenditure debited to the profit and loss account is Rs. 3.55 crore whereas it was in the assessment year 2012-13, the assessee has debited sum of Rs. 4.36 crore. Thus, it appears to be a typographical mistake. The details of CSR expenditure as given by the assessee before the authorities below are as under:- Sr. No. Project Amount 1. Construction of 10 Nos Primary School at Murshidabad (WB). 102.25 2. Beautification and widening of the road leading....
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.... commission, hospitality, entertainment, advertisement etc. For these reasons, the expenditure on account of social responsibilities is being treated as capital expenditure and added back to the total income of the assessee. It is noted here that in the earlier years similar disallowance have been confirmed by the Appellate Authorities." 7. Ld. CIT(A) has confirmed the disallowance after observing and holding as under:- "5.6 During the course of hearing the appellant dwelt on the said expenditure as under the Corporate Social Responsibility as per the guidelines laid down by DFE, MCA GOI. While at the assessment stage it had given details of the CSR expenditure which were held to be capital expenditure, on the decision of ITAT Raipur relied upon by the appellant for its expenditure on CSR, it is important to note that the facts of the case there is different In that case, the expenditure was voluntary while in the present case, it is not so. Secondly, the Tribunal observed that disabling provisions of Explanation 2 are not triggered as long as the discharge of CSR on voluntary basis can be said to be wholly and exclusively for the purpose of business. Thirdly, the principle beh....
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....xpenses and to decide whether the same are allowable u/s. 37(1) of the Income-tax Act. 1961 [Refer Paper Book Page No. xx]. * The Ld. AO vide remand assessment order dated 30-12-2019, has allowed expenses of Rs. 53,29,551/- u/s. 37(1) against total CSR expenses of Rs. 72,28,051/-. The appellant has filed appeal before CIT(A) with respect to CSR expenses of Rs. 18,9,500 disallowed by the ld. AO [Refer Paper Book Page No. xx] 9. Thus, he submitted that issue is squarely covered by the order of the Tribunal in assessee's own case for the earlier assessment years 2010-11 & 2011-12. 10. On the other hand, Ld. DR relied upon the order of the AO and Ld. CIT(A). 11. After considering the aforesaid submissions and on perusal of the impugned order as well as the order of the Tribunal, we find that this Tribunal vide order dated 21.3.2018 for the assessment year 2010-11 had remanded the case to the AO with specific direction to examine the nature of expenses to decide whether the same is allowable u/s. 37(1) of the Income Tax Act 1961. The relevant observation and the finding of the Tribunal is as under:- "According to us these expenditure are required to be examined firstly fro....