TaxTMI 
TaxTMI 
2026 (7) TMI 1807
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....expenses relatable to earning exempt income which was replied by the assessee. The submission was not tenable and thereafter the AO computed the disallowance by invoking Rule 8D at Rs. 4,76,36,626/- being 1% of the average value of investment and accordingly issued a show cause notice as to how the same should not be disallowed and added to the income of the assessee. When the assessee did not reply, the AO added the same to the income of the assessee. 4. In the appellate proceedings, the Ld. CIT(A) affirmed the order of AO. 5. We have heard the rival contentions and perused the material on record. We find that the AO rejected the reply of the assessee filed during the course of assessment proceedings by noting that the submission of the assessee is not acceptable. Therefore, in our opinion, so far as the issue of satisfaction is concerned, the same is recorded in the assessment order and therefore the plea of the assessee that the AO has not recorded any satisfaction and consequently no disallowance was called for, is not rejected . So far as the second plea is concerned that the disallowance is to be computed only on those investments which yielded income during the year. W....
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....assessee is also covered by the decision of jurisdictional High Court in the case of Kesoram Industries Ltd. vs. PCIT in [2022] 441 ITR 648 (Cal) and PCIT vs. Shalimar Pellet Feeds Ltd. in [2023] 453 ITR 547 (Cal). Consequently we set aside the order of Ld. CIT(A) on this issue and direct the AO to restrict the addition of Rs. 4,76,36,626/-. Accordingly, ground raised by the assessee is partly allowed. 6. Issue raised in ground no. 2 is against the confirmation of addition of Rs. 10,00,00,000/- by the Ld. CIT(A) as made by the AO u/s. 37(1) of the Act on account of CSR expenses. 7. Facts in brief are that during the FY 2022-23, the assessee has incurred CSR expenses amounting to Rs. 10,00,00,000/-. The assessee is a local authority under the Ministry of Finance, Govt. of India and is registered under Major Port Trust Act, 1963 and not registered under the Companies Act, 2013. As per explanation 2 to Section 37 of the Act, any expenditure incurred by the assessee on the activities relating to corporate social responsibility referred to section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purpose of business or profess....
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....ng 27% of salary thereby disallowing the balance of Rs. 1,38,93,12,461/- [Rs. 1,60,15,63,167/- Rs. 21,22,50,706/-]. The assessee submitted before the AO that the said expenses were governed by the actuarial valuations done by LIC of India. The assessee submitted that the port can contribute without any limit till the fund value reaches the actuarial valuation amount, and that the limit under Rule 87 applies only to initial contribution and ordinary annual contribution. In defense of argument the assessee relied on the decision of Co-ordinate Bench of Mumbai in ACIT vs. Glaxosmithkline Pharmaceuticals in ITA No. 6444/Mum/2007. The contention of the assessee did not find any favour with the AO and he added the same to the income of the assessee. 12. In the appellate proceedings, the disallowance was confirmed by holding that more than 27% falls squarely under ordinary annual contribution as per the definition of Rule 87 and 88 and the reliance on the decision of Co-ordinate Bench of Mumbai in the case of Glaxosmithkline Pharmaceuticals (supra) was not acceptable. 13. After hearing the rival contentions and perusing the material on record including Rule 87 of the Income Tax Rule....
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....nuation funds. Conditions relating to the grant of approval and the procedure therefor are set out in these, two Parts. Rule 11 of Part B provides, that in addition to any power conferred by Part B, the CBDT may make rules, inter alia, limiting the ordinary annual contribution and any other contributions to an approved superannuation fund by an employer. Rules 87 and 88 of the Income-tax Rules, 1962 ('the Rules'), are prescribed in pursuance of section 36(1)(iv). For convenient reference these rules are reproduced below : "87. Ordinary annual contributions.-The ordinary annual contribution by the employer to a fund in respect of any particular employee shall not exceed twenty-five per cent of his salary for each year as reduced by the employer's contribution, if any, to any provident fund (whether recognised or not) in respect of the same employee for that year. 88. Initial contributions.-Subject to any condition which the Board may think fit to specify under clause (iv) of sub-section (1) of section 36, the amount to be allowed as a deduction on account of an initial contribution which an employer may make in respect of the past services of an employee admitte....
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....rther find that the assessee is squarely covered by the decision of Hon'ble Calcutta High Court in the case of PCIT vs. Exide Industries Ltd. [2023] 146 taxmann.com 21 (Cal) dated 22.09.2022 wherein the Hon'ble High Court has held as under: "This has not been disputed by the revenue that the amount paid by the respondent/ assessee in excess of 27% of the salaries of the employees are neither towards ordinary annual contribution nor towards initial contribution and the payment was necessitated due to short-fall discovered in the course of actuarial valuation of the funds which is in exceptional circumstances and has been made to ensure that the superannuation funds will be able to discharge its obligation to the employees... We are satisfied that the amount which was remitted by the respondent/assessee is neither towards an initial contribution nor towards an ordinary annual contribution and, therefore, the ceiling fixed under the rules will not apply to such a contribution. That apart, this contribution had to be made considering the peculiar circumstances and it was a one-time payment." We further note that the decision in the case of ACIT vs. Glaxosmithkline (supra) w....
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....sallowed the said payment. The Ld. CIT(A) sustained the addition on the same reasoning. 16. After hearing the rival contention and perusing the material on record, we find that undisputedly and admittedly the assessee has furnished all the details/ evidences such as invoices, bills and vouchers before the AO as well as before the Ld. CIT(A). The assessee has made payment through banking channel after deduction TDS at source and the TDS was also deposited in the Govt. treasury. We also note that the payment has been made for development of customize software and in connection with the annual maintenance charges. The payments were made through banking channels. The mere fact that the recipient has not filed return of income or is struck off and has not responded u/s. 133(6) cannot be a ground for disallowing payment made by the assessee. We further note that the assessee has provided all the details qua the said party namely PAN, name and addresses etc. and it is not the fault of the assessee that the said company did not respond or not traceable. The case of the assessee finds support from the decision of Hon'ble Supreme Court in the case of CIT vs. Orissa Corporation Ltd. [1986]....
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.... of Rs. 1,13,08,93,220/- under the head other provisions - Accrued expenses in schedule-6 under the head current liability in the balance sheet as on 31.03.2023. Besides the assessee has also reported Rs. 1,76,72,856/- under employee related benefits and provident fund and Rs. 1,56,53,662/- under salary and wages in the same schedule. The assessee was accordingly asked to explain and justify the said provisions with supporting documentary evidences. In response, the assessee submitted the details that the expenses were incurred in the regular course of business and recurring in nature. The assessee claimed that these expenses were discharged in the next financial year. The assessee submitted before the AO that these expenses are not contingent and uncertain expenses but certain expenses which were paid subsequently. The assessee submitted that books of account were prepared as per the common framework for financial reporting approved by Indian Port Association and duly approved by Ministry of Shipping, Govt. Of India and audited by Comptroller and Auditor General of India (C & AG). It was submitted that accrual or provision was approved on specific criteria or relevant historical d....