TaxTMI 
TaxTMI 
2022 (7) TMI 621
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.... upholding the average investment in Joint Venture named Bank Note 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 shar....
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....t Banker Limited as honorary services without any cost to the assessee. It has been advising 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. A....
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....ule 8D of Rs. 49,82,310/- which was worked out under rule 8D by deducting 0.5% of the average investment. Ld. CIT(A) after detailed reasoning and analysis has confirmed the 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 ....
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....rs, Postal Stamps & Stationary, Travel Documents viz. Passport and Visa, Security certificates, Cheques, Bonds, Warrant, Special Certificates with security features, Security Inks, Circulation & Commemorative Coins, Medallions, Refining of Gold & 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. 4.3....
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....penditure is made for enduring long term benefits for communities, cultures and societies in which the assessee company operates. These include establishments of medical facilities, sanitation, building of schools and houses, building vocational training centre etc. The expenditure has to come out of the permanent corpus of the assessee company and cannot be debited as revenue expenditure at par with other expenses like 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 ....
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....Annual Report, the Chairman underlying the importance of such expenses has commented that corporate social responsibility has been the cornerstone of success for your company right from its inception. * In AY 2010-11 which is the base year for CSR expense, on the identical facts, the co-ordinate Bench of this tribunal vide order dated 21.03.2018 has remanded the matter vide order no ita 5102/del/2017 to the Ld. AO with a specific direction to examine the nature of expenses 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 consider....