TaxTMI 
TaxTMI 
2025 (8) TMI 377
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.... apply mutatis mutandis on the identical grounds raised in other assessment year. Accordingly, all the appeals were heard together and are disposed of by this common order for the sake of convenience and brevity. First, we take up the appeal no. 3305/DEL/2017 for A.Y 2012-13 as the lead case. 3. Since underlying facts pertain to same assessee and identical issues are involved in the captioned appeals, they were heard together and are disposed of by this common order for the sake of convenience and brevity. ITA No. 3305/DEL/2017 [A.Y. 2012-13] [Assessee's Appeal] 4. Ground No. 1 pertains to addition of Rs. 20,87,24,112/- being expenses on Corporate Social Responsibilities. 5. At the very outset, the ld. counsel for the assessee vehemently contended that the issue pertaining to Corporate Social Responsibilities is squarely covered in favour of the assessee and against the Revenue by the decision of this Tribunal in assessee's own case for A.Y 2011-12 decided on 04.11.2024. 6. The ld. DR fairly conceded to this. 7. We have heard the rival submissions and have perused the relevant material on record. We find force in the contentions of the ld. counsel for the asses....
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....essee and proceeded to disallow the entire CSR expenditure in the assessment. It is pertinent to note that CSR is mandated by regulatory agency, Department of Public Enterprises. Hence, an expenditure which is incurred as per the mandate of the regulatory authority by a particular assessee cannot be construed as not incurred wholly and exclusively for the purpose of the business. The assessee has sought to follow the dictates of regulatory authority mandating the assessee to incur certain expenses on account of CSR for a particular purpose. What is required to be seen here is whether that expenditure incurred by the assessee result in overall welfare of the society at large. It is pertinent to note that the assessment year involved herein is AY 2011-12. We are conscious of the fact that Explanation 2 to section 37(1) of the Act specifically prohibits allowability of deduction of expenditure incurred by an assessee on the activity relating to CSR referred to section 135 of the Companies Act, 2013. But we find that this Explanation 2 was introduced by Finance (No.2 ) Act, 2014 w.e.f. 01.04.2015 and hence cannot be made applicable for the year under consideration. Hence, the allowabil....
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....nditure". Hence, the orders passed by the authorities would not stand the test of law and is liable to be set aside. 30. However, it requires to be noticed that while examining the claim for deduction under Section 37(1) of the Act the assessing officer would not blindly or only on the say of the assessee accept the claim. In other words, assessing officer would be required to scrutinise and examine as to whether said deduction claimed for having incurred the expenditure has been incurred and only on being satisfied that expenditure so incurred is relatable to the work undertaken by the assessee namely, only on nexus being established, assessing officer would be required to allow such expenditure under Section 37(1) of the Act and not otherwise." The issue in dispute is clearly covered by the decision of the Hon'ble Jurisdictional High Court in case of PCIT Vs. PEC Ltd reported in 451 ITR 136 (Delhi) wherein, it was held that amendment by way of Explanation 2 to section 37(1) of the Act w.e.f. 01.04.2015 was prospective in nature and thus CSR expenditure incurred prior 01.04.2015 was to be allowed. 25.5. In view of the aforesaid observations, the grou....
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....ms separately in the financial statements, this sum of Rs. 3 lakhs was reflected by the assessee separately in the profit and loss account. The assessee gave the details of the said expenditure before the ld AO as under:- Rs. (in '000) Office Rent Rs. 149; Water and Electricity Rs. 16; Interest in investment Rs. 130; Other expenditure Rs. 5; Total Rs. 300. 3.2. The ld AO however did not heed to the contentions of the assessee and proceeded to disallow this sum of Rs. 3 lakhs as expenditure not pertaining to the year under consideration. This action of the ld AO was upheld by the ld CIT(A). 3.3. The ld AR before us fairly submitted that let the details given by the assessee be examined by the ld AO as no finding whatsoever has been given by the ld AO with regard to each of such expenditure. It was always the case of the assessee that this expenditure get crystallized during the year or the details of the incurrence of the said expenditure were received after the completion of the audit of the earlier years. Both these categories of the expenditure were booked by the assessee as prior period expenditure. We find that the genuineness of the said expenditure is not do....
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....me, we allow Ground No. 4. 14. Ground No. 5 pertains to deletion of addition of Rs. 1,50,00,000/- on account of Revenue recognition on realization basis for application fees, front end fees, administrative fees and processing of fees of loans as against accrual basis. At the very outset, the ld. counsel for the assessee submitted that this issue is covered in favour of the assessee by the judgment of the Hon'ble High Court of Delhi in assessee's own case for A.Y 2007-08 reported in 421 ITR 599 and the order of the Tribunal in ITA No. 3261/DEL/2015 [supra]. 15. We have heard the rival submissions and have perused the relevant material on record. This issue was decided by the Tribunal vide its order in ITA 3261/DEL/2015 for A.Y 2010-11 order dated 04.11.2024. The Tribunal allowed this ground of the assessee by relying on the judgment of the Hon'ble Delhi High Court. Respectfully following the same, we allow Ground No. 5. 16. As a result, the appeal of the assessee is partly allowed for statistical purposes. ITA No. 3704/DEL/2017 [A.Y. 2012-13] [Revenue's appeal] 17. Ground No. 1 pertains to action of the ld. CIT(A) in holding that 'marked to market' loss on ....
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.... respect of disallowance under section 14A of the Act. The Id AO invoking Rule 8D of the IT Rules computed the disallowance of Rs. 53,80,730/- against the exempt income of Rs. 1,72,000/-. The Ld. CIT(A) upheld the disallowance made by the ld AO. Before us the ld AR submitted that the issue may be decided in view of the findings of the Hon'ble Jurisdictional High Court in the case of Joint Investments Pvt. Ltd Vs CIT in ITA No. 117/2015 wherein the Hon'ble Court has held that the portion of expenditure disallowed cannot swallow the entire tax exempt income. Alternatively, the learned AR pleaded that the assessee invested its own funds in investments earning exempted income and thus question of interest disallowance corresponding to borrowed capital did not arise in the case of the assessee. Further, the relying on the judgement of Hon'ble Bombay High Court in the case Godrej Agrovet in ITA No. 934 of 2011 and other decisions of the Tribunal, the ld AR submitted that the disallowance if at all is to be made under section 14A of the Act, then same may be restricted to 2percent. of the exempted income. The Ld CIT DR on the other hand relied on the orders of the lower author....
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....partly allowed. 24. Accordingly, the appeal is partly allowed for statistical purposes. 22. We find that in the instant year, the assessee has earned exempt income of Rs. 27.36 lakh. The assessee contested the addition u/s 14A stating that the investment are old and made out of surplus own funds and not borrowed funds. The assessee, however further stated that even if addition is made under Rule 8D, it should be restricted to Rs 26,65,455/-. The CIT(A), following the ITAT decision in assessee's own case for AY 2005- 06 and AY 2008-09 restricted the addition to Rs 26,65,455/-. Respectfully following the decision of coordinate bench of ITAT in ITA no 3365/Del/2013 for AY 2008-09, we find no reason to interfere with the decision of the CIT(A). Ground No. 2 is dismissed. 23. As a result, appeal of the Revenue is dismissed. ITA No. 1954/DEL/2018 [A.Y. 2014-15] [Assessee's appeal] 24. Ground No. 1 being addition on account of CSR expenses has been discussed and decided by us hereinabove while deciding Ground No. 1 of assessee's appeal for A.Y 2012-13. Respectfully following the same, Ground No. 1 is allowed. 25. Ground No. 2 pertaining to addition of Rs. 18,12,43,258/- ....
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....imited (supra) laid down the purpose test to determine the character of expense being capital or revenue. We are of the considered view that in the instant case, the premium received by the assessee on the tax free Bonds do not expand the capital base of the assessee and the same is on revenue account. We, therefore, decline to interfere with the findings of the ld. CIT(A). Ground No. 5 is dismissed. 30. Ground No. 6 pertains to incremental Special Reserve u/s 36(1)(viia)(c) and 36(1)(viii) of the Act. We find that the CIT(A), following the ITAT decision in assessee's own case for the year 2009-10 in ITA 3366/Del/2013, remitted the matter to the AO for allow the enhanced deduction in accordance with law. Respectfully following the coordinate bench of ITAT, we restore the issue of deduction u/s 36(1)(viia)(c) to the file of AO for fresh adjudication in line with decision of ITAT. Ground no 6 is allowed for statistical purposes. 31. As a result, the appeal of the assessee is allowed in part for statistical purposes. ITA No. 2063/DEL/2018 [A.Y. 2014-15] Revenue's appeal 32. Ground Nos. 1 and 2 pertain to deletion of addition of prior period expense of Rs. 1,33,00,000/- ....
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....ot inclined to interfere with the decision of CIT(A). Ground no 3 and 4 are dismissed. 36. As a result, the appeal of the Revenue is partly allowed for statistical purposes. ITA No. 7218/DEL/2018 [A.Y. 2015-16] Assessee's appeal 37. Ground No. 1 pertaining to deletion of addition of Rs. 18,12,43,258/- on account of Revenue de recognition in books has been discussed and decided by us hereinabove while deciding Ground No. 3 of assessee's appeal for A.Y 2012-13. Respectfully following the same, Ground No. 2 is dismissed. 38. Ground No. 2 regarding deletion of addition of Rs. 2,07,00,000/- being disallowance u/s 14A of the Act has been discussed and decided by us while deciding Ground No. 2 of Revenue's appeal for A.Y 2012-13. Respectfully following the same, Ground No. 2 is restored to the Assessing Officer. Ground No. 2 is allowed for statistical purpose. 39. Ground No. 3 pertains to incremental Special Reserve u/s 36(1)(viia)(c). This issue has been discussed and decided by us while deciding Ground No. 6 of Assessee's appeal for A.Y 2014-15. Respectfully following the same, we restore the issue of deduction u/s 36(1)(viia)(c) to the file of AO for fresh adjudicatio....