TaxTMI 
TaxTMI 
2024 (9) TMI 516
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed in Assessment year 2011-12 read as under and the decision would apply mutatis-mutandis to assessment year 2012-13. "1. For that ld AO was not justified in initiating proceedings u/s.148 beyond 4 years specially when original assessment has been completed u/s.143(3). Proceeding initiated u/s.148 is bad in law and assessment framed there by is fit to be quashed. 2. For that ld AO has neither in order of assessment or in the reasons recorded mentioned the issue that assessee failed to fully and truly disclose the facts. As such proceeding u/s.148 initiated beyond 4 years without recording of above finding is bad in law. 3. For that ld CIT(A) was not justified in confirming the addition of Rs. 2,47,87,000/- being CSR expenses claimed by the assessee. Assessee is a PSU under the Ministry of Steel and governed by their norms and DPE guidelines. Complete details of CSR and sustainable development expenses has been provided to AO and ld CIT(A). As such addition made by AO and confirmed by CIT(A) is fit to be deleted. 4. For that the assessee being a PSU are governed by strict norms and its books ae subject to CAG audit. Any expenses made is only done....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... DPE, a department of Government of India and the assessee being a wholly owned Central Public Sector Enterprise, was bound by the government's directives. However, the ld CIT(A) analysed the claim in the light of the provisions contained in section 37(1) of the Act, which reads as under: "37(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession." 10. It was observed by ld CIT(A) that above section allows deduction of only those expenses, which are incurred wholly and exclusively for the purpose of business or profession. He agreed with the findings of the AO that the expenses were not related to assessee's business and could in no way influence its business dealing with its clients. He proceeded to conclude that the assessee's case was squarely covered by the provisions of section 37(1) in as much as such expenses are out of the purview of section 3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l vide order dated 22.2.2023 and 23.11.2022, respectively. Ld AR has also strongly relied upon the decision of Hon'ble Calcutta High Court in the case of PCIT vs Ramesh Prasad Sao, 155 taxmann.com 256, in which it was held that CSR expenses incurred prior to assessment year 2014-15 were allowable as business expenses as the same were incurred wholly and exclusively for the purposes of business. Reliance was placed on the decision of Hon'ble Delhi High Court in the case of PCIT vs. PEC Ltd., 146 taxmann.com 407(Del),wherein, it has been, inter alia, that Explanation 2 to Section 37(1) of the Act is prospective in nature being effective from 1.4.2015 and applicable to the expenses incurred with reference to Section 135 of the Companies Act, 2013 that too after 1.4.2015, so, Explanation 2 to Section 37(1) was not applicable to the facts of the case. 13. In reply, ld CIT DR vehemently supported the conclusions drawn by the lower authorities. He has reiterated that the above expenses were incurred wholly and exclusively for the purposes of business of the assessee company. It has been claimed that the assessee has not been able to make out a case for commercial expediency for the rel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evelopment and environmental sustainability. It is viewed as business committing to contribute the sustainable economic development by collaborating with employees, their families, local communities and the society at large. An ethically responsible business should embrace economic, legal, ethical and philanthropic responsibilities. CSR is being actively promoted as a developmental model that provides an alternative to state intervention. The corporate responsibility has constitutional responsibility as well as it is connected with the constitutional provisions, philosophy and values. 16. The Parliament of India, in 1976 had inserted the term "socialist' in the preamble of the country's constitution thereby committing itself to ensure a development process which would be guided and spearheaded by the State. This incorporation casts more responsibility on the State when one goes through the Articles under the Chapter 'Directive Principles of State Policy', which is basically a guidance for governance and also for promotion and enhancement of the welfare of the State. 17. Article 38(1) encapsulates the constitutional concern for human rights and it requires the State to promote....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uly obeyed. Apparently, these expenses are incurred for commercial expediency. Assessee was duty bound to comply with these guidelines. 21. In this regard, it may also be mentioned here that this Bench itself vide Virtual hearing at Kolkata in assessee's own case in ITA No.232/RAN/2017 for A.Y. 2013-14 and ITA No.267/RAN/2017 for A.Y. 2014-15 order dated 22.2.2023 and 23.11.2022, respectively has allowed similar claim of the assessee. Relevant concluding portion of the order in A.Y. 2014-15 is reproduced as below: "7. We have heard the rival submission and gone through the facts and circumstances of the case. we note that the AO after taking note that the assessee had debited under the head CSR an amount of Rs. 2,02,04,000/- and ask the assessee as to why the amount should not be disallowed because according to him this expenditure is not wholly and exclusively for the purpose of the assessee's business. Pursuant to this query of the AO, the assessee explained that payments under the of CSR were made like building classrooms or toilets installing LED lights or planting trees in MECON Colony and the expenditure was part of the CSR expenditure as envisaged u/s 135 of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 is entitled to arrange his affairs by rely on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit: law looks forward not backward. (iv) It may appear to be some kind of a dichotomy in the tax legislation but the well settled legal position is that when a legislation confers a benefit on the taxpayer by relaxing the rigour of pre-amendment law, and when such a benefit appears to have been the objective pursued by the legislature, it would a purposive interpretation giving it a retrospective effect but when a tax legislation imposes a liabi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld 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. 9. In the result, the appeal of the assessee is allowed." 22. We also find that the Hon'ble Delhi High Court in the case of PEC Ltd (supra) while deciding the similar issue has held as under: "S. 37(1): Business expenditure-Corporate social responsibility expenditure-Expenditure for earlier years allowable as a deduction-CBDT Circular binding on the department. Dismissing the appeals of the Revenue the Court held that circulars issued by the Central Board of Direct Taxes were binding on the Department. Therefore, the Tribunal had not erred in allowing the deduction claimed by the assessees under section 37 of the expenses incurred for their corporat....