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TMI Blog2018 (6) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee nor it had any control over the running of school - expenditure incurred for construction of a block by way of addition to the school building located in a village in the vicinity of mines was incurred for the benefit of its workers and general public - also explanation 2 to Section 37 inserted by the Finance Act, 2014 with effect from 01.04.2015 is not retrospective - hence we are of the view that the action of the A.O. in disallowing the claim of the assessee for peripheral development expenditure as a part of CSR was not well founded and the Ld. CIT(A) was not justified in confirming the said disallowance - thus we delete the same - Decided in favor of assessee. - I.T.A. No. 738/Kol/2017 - - - Dated:- 15-6-2018 - Shri P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so created during the year itself. He held that the creation of such reserve was appropriation of profits and even the utilisation of reserves created from profits was not allowable as business expenditure. He also held that the expenses incurred by the assessee on peripheral development as part of CSR were mainly incurred for construction of schools which was capital in nature. He also observed that the payments made by the assessee for construction of toilets and water supply, electrification of some school could not be considered as expenditure wholly or exclusively incurred for the purpose of assessee s business. He also relied on Explanation 2 to Section 37 inserted by the Finance Act whereby it was declared that any expenditure incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its workers and general public. Hence when the company does not own the school the block constructed in the said school cannot be considered as capital asset of the building. Further the said expenditure is also not of personal nature and has been incurred for the welfare of the workers and general public. Hence the peripheral development expenditure and CSR expenses not being of capital in nature and not personal expenditure nature and has been expended wholly and exclusively for the purposes of the business is allowable as deduction under section 37(1) of the Income Tax Act. As per the direction of the local administration and department of mines company is under obligation to incur expenditure for the welfare of its employees an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribuanl. 5. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the expenditure on peripheral development in question was incurred by the assessee as a part of corporate social responsibility as per the scheme framed under the Companies Act. As submitted by the learned counsel for the assessee, the said expenditure was actually incurred by the assessee during the year under consideration and it was not a creation of reserve by debit to the profit and loss account as alleged by the A.O. while treating the same as appropriation of profits. As a matter of fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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