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2024 (9) TMI 1519 - HC - Income TaxCSR expenses claimed u/s 37(1) - applicability of Section 135 of the Companies Act 2013 - how the expenses like building classrooms or toilets in U.P. or installing LED lights or planting trees in MECON Colony is incidental to the business of the assessee-company i.e. rendering engineering/architectural consultancy services has not been proved by the assessee-company - whether Section 135 of the Companies Act 2013 which deals with Corporate Social Responsibility (CSR) could be applied to the financial year 2012-13? HELD THAT - Tribunal by putting reliance on the judgment passed in the case of ACIT Vs. Jindal Power Limited 2016 (7) TMI 203 - ITAT RAIPUR has reversed the findings without considering the applicability of Section 135 of the Companies Act and without making any assessment regarding its applicability based upon the financial year in the present case which has ended on 31st March 2013. This Court therefore is of the view that the reference which has been considered by the Tribunal is required to be answered in favour of the Revenue. The aforesaid reference having been answered the consequence would be that the order passed by the Tribunal is held to be bad in the eyes of law. Accordingly the order passed by the Income Tax Appellate Tribunal Kolkata Ranchi Bench 2023 (2) TMI 1335 - ITAT RANCHI is quashed and set aside and the matter is remitted to the Tribunal for passing a fresh order in the case after giving opportunity of hearing to the parties.
Issues Involved:
1. Applicability of Section 135 of the Companies Act, 2013. 2. Retrospective vs. Prospective application of legislation. 3. Validity of the Tribunal's reliance on a previous judgment. Issue-wise Detailed Analysis: 1. Applicability of Section 135 of the Companies Act, 2013: The primary issue was whether Section 135 of the Companies Act, 2013, which deals with Corporate Social Responsibility (CSR), could be applied to the financial year 2012-13. The Tribunal reversed the Assessing Officer and the Appellate Authority's decisions by relying on a previous judgment (ACIT Vs. Jindal Power Limited). The Tribunal concluded that the factual aspects of the present case aligned with the previous case. However, the Tribunal's application of Section 135 was contested by the Revenue, arguing that the section came into effect on 29th August 2013, and thus could not impact the financial year ending on 31st March 2013. 2. Retrospective vs. Prospective Application of Legislation: The court emphasized that legislation is typically prospective unless explicitly stated otherwise. The court cited several Supreme Court judgments to support this principle, including State of Uttar Pradesh vs. Singhara Singh, Babu Verghese vs. Bar Council of Kerala, and P. Mahendran vs. State of Karnataka. These cases establish that a statute must be followed as written without deviation, and retrospective application requires explicit statutory language. Since Section 135 did not contain any provision for retrospective application, it could only be applied prospectively. 3. Validity of the Tribunal's Reliance on a Previous Judgment: The Tribunal relied on the judgment in ACIT Vs. Jindal Power Limited without adequately assessing the applicability of Section 135 based on the financial year in question. The court noted that the Tribunal failed to consider the financial year ending on 31st March 2013, which predates the enactment of Section 135. The Tribunal's reliance on the previous judgment was deemed inappropriate because it did not account for the specific timeline of the financial year under review. Conclusion: The court concluded that Section 135 of the Companies Act, 2013, could not be applied retrospectively to the financial year 2012-13. The Tribunal's order, which did not consider the prospective nature of the legislation, was found to be erroneous. Consequently, the court quashed the Tribunal's order dated 22.02.2023 and remitted the matter back to the Tribunal for a fresh order after giving the parties an opportunity to be heard. The appeal was disposed of with these observations and directions.
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