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2022 (12) TMI 67 - ITAT BANGALORERectification u/s 154 - Addition of community development expenditure by observing that this expenditure is not related to the business activity of the assessee and is not admissible expenditure under the provision of sec. 37(1) - assessee submitted that these expenses were incurred before the amendments in sec. 37(1) and “CSR” (Corporate Social Responsibility) is allowable as business expenditure incurred by the company, which is in the nature of the business expenditure of the company - HELD THAT:- Disallowance under Explanation 2 to section 37(1) comes into play, but, as for latter, there is no such disabling provision as long as the expenses, even in discharge of corporate social responsibility on voluntary basis, can be said to be "wholly and exclusively for the purposes of business". There is no dispute that the expenses in question are not incurred under the aforesaid statutory obligation. For this reason also, as also for the basic reason that the Explanation 2 to section 37(1) comes into play with effect from 1st April 2015, we hold that the disabling provision of Explanation 2 to section 37(1) does not apply on the facts of this case.” In assessee’s case has incurred expenditure to promote the interest of underprivileged and impaired section of society and to gain goodwill of the people living in the area of operation of the assessee. Therefore respectfully following the decision of Gujarat Narmada Valley Fertilizers & Chemicals Ltd. [2019 (8) TMI 1288 - GUJARAT HIGH COURT] we hold that Explanation 2 to section 37(1) is not applicable to the assessee’s case and therefore the expenses incurred voluntarily by the assessee towards CSR expenditure is allowable u/s 37(1). We also allow the appeal of the assessee.
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