2012 (7) TMI 1116 - AT - Income Tax

Summary

Issues involved: Appeal against the order of CIT(A) LTU, Chennai deleting the disallowance of social and community welfare expenses by the Revenue.

The judgment pertains to an appeal filed by the Revenue against the order of the CIT(A) LTU, Chennai dated 21.11.2008, specifically challenging the deletion of the disallowance of social and community welfare expenses. The primary contention raised by the Revenue in the appeal was the deletion of these expenses by the CIT(A).

The issue at hand revolves around the expenditure incurred by the assessee on social and community welfare activities. The Tribunal referred to a previous case from the assessment year 1997-98 where a similar issue was addressed. The Tribunal, in line with its decision in the case of DCIT Vs. Madras Refineries Ltd., allowed the expenditure as business expenditure u/s.37 of the Income Tax Act, emphasizing the necessity of such expenses for the smooth functioning of the business.

In the present case, the assessment order revealed that the assessee had incurred various expenses related to social and community welfare activities, including expenses for a Rural Health Centre, Manali School, Sports development, rehabilitation expenses, and expenses in the CBR unit. The Tribunal noted that these expenses were essential for the welfare of the neighbourhood residents affected by the polluting refinery industry, thereby justifying their allowance as business expenditure.

The Tribunal, in alignment with the decision of the coordinate Bench in the assessee's own case, upheld the allowability of the social and community welfare expenses. It emphasized the importance of these expenses in fulfilling the duty towards society and those adversely impacted by the refinery industry. Consequently, the appeal of the Revenue was dismissed for lacking merit.

The judgment was pronounced in an open court during a hearing on Wednesday, the 25th day of July, 2012, in Chennai.