2022 (8) TMI 603

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....essing Officer in making a disallowance of corporate social responsibility (CSR) expenses of Rs.3,01,00,000/- under Section 37 of the Income Tax Act, 1961. 3. The appellant craves leave to add, amend, alter or delete the said ground of appeal." Ground No. 1: 3. At the outset, the ld. Counsel for the assessee has submitted that there was a delay in depositing employee's as well as employer's contribution to the Employee's Provident Fund/ESI fund. However, the amount was deposited before the due date of the filing of the return. The ld. Counsel has submitted that this issue is squarely covered by the decision of the Hon'ble Jurisdictional Calcutta High Court in the case of CIT, Kolkata vs. M/s Vijay Shree Limited 43 taxman.com 396(Cal) which has been, further, followed by the Coordinate Calcutta Bench of this Tribunal in the case of Harendra Nath Biswas vs. DCIT in ITA No.186/Kol/2021 by the order dated 16.07.2021. The ld. D/R could not show any decision contrary to the case law cited by the ld. Counsel for the assessee. 3.1. We find that the issue is covered in favour of the assessee as the assessment year involved is AY 2017-18 and the Explanation- 5 inserted by F....

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....ourt will apply and since this Explanation-5 has not been made retrospectively. So we are inclined to follow the same and we reproduce the order of Hon'ble Calcutta High Court in the case of Vijayshree Ltd. supra wherein the Hon'ble Calcutta High Court has taken note of the Hon'ble Supreme Court decision in CIT vs. Alom Extrusion Ltd. reported in 390 ITR 306. The Hon'ble Calcutta High Court's decision in Vijayshree Ltd. supra is reproduced as under: "This appeal is at the instance of the Revenue and is directed against an order dated 28th April, 2011 passed by the Income Tax Appellate Tribunal, "A" Bench, Kolkata in ITA No. 1091/Kol/2010 relating to assessment year 2006-07 by which the Tribunal dismissed the appeal preferred by the Revenue against the order of CIT(A). The only issue involved in this appeal is as to whether the deletion of the addition by the AO on account of Employees 'Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not. It appears that the Tribunal below, in view of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion ....

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....ion 135 of Companies Act, held that it was the statutory obligation of the assessee company to take care of the environment, society at large and contribute to the wealth of the nation. He further observed that as per the Explanation 2 to Section 37 of the Income Tax Act as amended by Finance Act, 2014, any expenditure incurred by an assessee on the activities relating to Corporate Social Responsibility as referred to in Section 135 of the Companies Act shall not be deemed to be an expenditure incurred by the assessee for the purpose of the business or profession. The ld. AO accordingly disallowed to the aforesaid expenditure being not admissible under the relevant provisions of Section 37 of the Income Tax Act. In appeal, the ld. CIT(A) confirmed the disallowance so made by the AO. The assessee has, thus, come in appeal before us. 4.2. At the outset, ld. Counsel for the assessee has submitted that the aforesaid expenditure was incurred by the assessee company for the purpose of business. He, in this respect has invited our attention to the submissions made before the ld. CIT(A, which read as under: "Further it is submitted that the assessee company has to maintain a....

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....penditure was incurred by the assessee as over and above its statutory Corporate Social Responsibility as required under Section 135 of the Companies Act. He, in this respect, has relied upon the notes to financial statement of the company for the year ended on 31.03.2018 wherein, under column "O", the details of Corporate Social Responsibility expenditure have been mentioned as under: Rs. Crores Particulars As at31st March, 2018 As at 31stMarch, 2017 Amount required to be spent as per Section 135 of the Act - - Amount spend during the year on:     (i) Construction/acquisition of an asset - - (ii) On purpose other than (i) above 3.01 2.52 Total 3.01 2.52 4.4. The ld. Counsel for the assessee inviting our attention to the above chart has submitted that the assessee was not required to spend Corporate Social Responsibility expenditure under Section 135 of the Companies Act. The aforesaid expenditure was incurred by the assessee in addition to any statutory liability to incur the same. He has, further, referring to above submissions, submitted that the aforesaid expenditure was incurred for the upliftment of living ....

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.... Corporate Social Responsibility Policy: Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities: Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount. Explanation. -For the purposes of this section -average net profit shall be calculated in accordance with the provisions of Section 198." 4.7. As per the aforesaid provisions of Section 135 of the Companies Act, a company, having net worth of Rs. 500 Cr. or more, or turnover of Rs. 1000 Cr. or more, or net profit of Rs. 5 Cr. or more during any financial year, is obliged to spend at least 2% of the average net profits of the company made during the three immediate preceding financial years on Corporate Social Responsibility. 4.8. At this stage, it will also be relevant to reproduce Section 37(1) of the Act as amended vide Finance Act, 2014 with effect from 01.04.2015. "Section 37(1) of the Income Tax Act: Any expenditure (not b....

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....onstrated as to how the assessee was exempted from incurring such expenditure on Corporate Social Responsibility. 4.11. A perusal of the chart also shows that for the year ended on 31.03.2017 the assessee has again shown its liability under Section 135 of the Companies Act on Corporate Social Responsibility as 'NIL'. Further, the assessee has also relied upon the assessment order for the AYs 2015-16, 2016-17 & 2017-18 to submit that such expenditure incurred by the assessee on Corporate Social Responsibility has been allowed by the ld. AO in earlier years. However, there is no pleading that the company has spent more than the amount as it was required to spend as per the provisions of Section 135 of the Companies Act in an earlier years which, as per the provisions of sub-Section 5 to Section 135 of the Companies Act, can be set off against the requirement of Corporate Social Responsibility in succeeding three financial years. Hence, there is nothing on the file to show that the assessee had incurred more than the required expenditure on CSR in earlier years which could have been set-off against the liability on CSR of the current year. Even otherwise, there is nothing on ....