TaxTMI 
TaxTMI 
TaxTMI 
2025 (1) TMI 1579
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....ect in directing to allow the Products Registration expenditure of Rs. 80,41,02,275/- as revenue expenditure. 2. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) was correct in deleting the depreciation allowed to the assessee on the disallowance of the Products Registration expenditure of Rs. 80,41,02,275/- as capital expenditure. 3. Whether on the facts and circumstances of the case and in Law, the Ld. CIT(A) was correct in directing to allow the claim of deduction u/s 80G of the Act, at Rs. 1,57,52,645/, on the basis that such expenditure was incurred by the appellant for CSR expenses u/s 135 of the Companies Act, 2013 particularly in view of Explanation in sub-section (1) of section 37 clarifying that for the purposes of sub-section (1) of the said section, any expenditure incurred by an assessee on the activities relating to Corporate Social Responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. Ground no.1&2 3. The assessee claimed deduction of Products Registration expenditure of Rs. 80,41,02,275/- as reven....
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....of the case. The ld. DR relied on assessment order. Per contra, the ld.AR R supported the order of the ld. CIT(A).It is stated that the claim of Product Registration Expenses being revenue in nature, the Hon'ble ITAT at Mumbai in the order in ITA No. 4798/Mum/2017-A.Y.2013-14 dated 31.10.2018 and in ITA No. 3804 & 3805/Mum/2016-A.Ys. 201112 and 2012-13 dated 16.03.2018 in assessee's own case, held that the claim of Product Registration Expenses to be revenue in nature, on identical set of facts. The AO has not brought on record any distinguishable feature relating to the relevant year. Therefore, the decision rendered by the above squarely applies to the year under consideration, as well. Accordingly, we find no infirmity in the order of the ld. CIT(A) and uphold the same. Ground no.2 is consequential in nature. The ld. CIT(A) has rightly deleted the depreciation allowed to the assessee on the disallowance of the Products Registration expenditure of Rs. 80,41,02,275/.Consequently, both the grounds 1 and 2 are dismissed. Ground no.3 6. The assessee has contested the disallowance the claim of deduction u/s 80G of the Act, at Rs. 1,57,52,645/.It was noted by the AO that the a....
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.... of Section 30 to Section 36, the assessee cannot suo-moto expand the scope of such a law to imply Section 80G. 6.1 It was further noted that the amount was not paid by the assessee voluntarily to become eligible for entity specified under Section 80G of the Act but as a mandatory requirement as per Section 135 of the Companies Act, 2013 to spend certain amount for specified activities as per. The CSR expense being a contribution mandated by the Companies Act, 2013 is necessary obligation of the company which was introduced by the legislature with the objective that companies having net worth/turnover/profit above a threshold should share the burden of the government in providing social services. Thus, a CSR expense cannot at the same time be a donation. For this purpose, the government also categorically mentioned that the amount relating to the CSR should be 2% of the average net profit. If tax deduction is allowed on such CSR expenses, this would result in subsidizing these expenses by one-third amount. The Assessee could also have very well made payment to an entity not covered by Section 80G or it could have directly incurred the expenditure for the specified purpose, but it....
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.... there was no voluntary element in the donation made as per the scheme of CSR. Per contra, the ld. Authorized Representative relied on the decision of the appellate authority as also on the cited decision of the co-ordinate Bench in the case of Alubound Dacs India Pvt Ltd. 9.We have carefully perused relevant provisions of the Act and legal position emerging from the cited decision (supra).The CSR expenses which are required to be mandatorily incurred by the assessee-company as per section 135 of the Companies Act are not entitled to deduction under section 37(1) for assessment year 2015-16 by virtue of the fetter placed by Explanation 2 to section 37(1), which was inserted by the Finance (No. 2) Act, 2014. A plain reading of Explanation 2 to section 37(1) shows that any expenditure incurred towards CSR activities as referred to in section 135 of the Companies Act, 2013 shall not be allowed as 'business expenditure' and shall be deemed to have not been incurred for purpose of business. The embargo created by Explanation 2 inserted in section 37 by Finance (No. 2) Act, 2014 was to deny deduction for CSR expenses incurred by companies, as and by way of regular business expen....
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....sion of the Hon'ble Apex Court in the case of Commissioner of Expenditure - Tax vs. PVG Raju, Raja of Vizianaram [1967] SCR (1)1017C which has held that donation has to be voluntary for it to satisfy the test of voluntariness. The ld. CIT(A) upheld the order of the ld. A.O. holding that the reasoning given by the ld. A.O. was justifiable. 9. The learned Authorised Representative (ld. AR for short) for the assessee contended that the issue of deduction of CSR expenses u/s. 80G of the Act is squarely covered by various decisions of the co-ordinate bench in favour of the assessee. The ld. AR further iterated that there has been express bar in claiming the said expenses u/s. 37(1) of the Act and also on sub clause (iiihk) and (iiihl) of section 80G(2)(a) of the Act pertaining to Swatch Bharat Kosh and Clean Ganga Fund where donation made pursuant to CSR is not an allowable deduction. The ld. AR further contended that the test of voluntariness is irrelevant in claiming deduction u/s. 80G of the Act where there is no criteria specified by the Act. The ld. AR relied on a catena of decisions where the donation towards CSR has been allowed u/s. 80G of the Act. 10. The learned Depa....
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.... the business expenditure and also there has been an express bar specified in sub clause (iiihk) and (iiihl) of section 80G(2)(a) of the Act that any sum paid by the assessee as donation to Swatch Bharat Kosh and Clean Ganga Fund will not come under the purview of deduction u/s. 80G of the Act subject to certain conditions. This justifies the fact that the other donations specified u/s. 80G of the Act would be entitled to deduction provided the conditions stipulated u/s. 80G of the Act are satisfied. In the present case in hand, the contributions made by the assessee would not fall under the two exceptions specified above which clearly mandates that the assessee is entitled to claim deduction for the donations contributed during the year under consideration u/s.80G of the Act. The decision relied upon by the ld. A.O. in the case of PVG Raju (supra) is distinguishable on the facts of the present case where there is no requirement of proving the voluntariness of the donation contributed by the assessee for claiming deduction u/s. 80G of the Act. The amendment brought about by Finance Act, 2015 to section 80G of the Act which had inserted the sub clauses (iiihk) and (iiihl) to be the ....
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....e) is not incurred for the purposes of carrying on business, such expenditure cannot be allowed under the existing provisions of section 37 of the Income-tax Act. A. Y : 2016 - 17 Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein." 13. From the above it is clear that under Income tax Act, certain provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, 'Income from Business and Profession" to those, who pursue corporate social responsibility projects under following sections. * Section 30 provides deduction on repairs, municipal tax and insurance pr....
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....on 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, "Income from Business and Profession". 16. For claiming benefit under section 80G, deductions are considered at the stage of computing "Total taxable income". Even if any payments under section 80G forms part of CSR payments( keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, "Income form Business and Profession". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing "Total Taxable Income" cannot be denied to assessee, subject to fulfillment of necessary conditions therein. 17. We therefore do not agree with arguments advanced by Ld.Sr.DR. 18. In present facts of case, Ld.AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the ....