9911796707
TMI Blog2019 (12) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... is no increase in the capital base of the assessee company. In view of this, we dismiss ground number 1 of the appeal of the learned AO. Disallowance of 50 % of the expenditure on account of the community development donation expenses under section 37 (1) - HELD THAT:- Following the decision of the honourable Karnataka High Court in case of CIT vs. Infosys Ltd [ 2013 (7) TMI 451 - KARNATAKA HIGH COURT] , we do not find any reason to sustain the order of the learned CIT A upholding the above disallowance. Further the reasons given by the learned CIT A that as the PSU are directed by Government Of India to incur certain expenditure in the form of corporate social responsibility, if such expenditure are allowed to them as deduction, then in case of private corporate assessee also the above expenditure is to be allowed. We do not find this just reason for confirming the disallowance. Express provision of disallowance of the corporate social responsibility expenditure is provided under explanation 2 of the provisions of section 37 (1) of the income tax act with effect from 1/4/2014 by The Finance (Number 2) Act, 2014. Thus, prior to that it is clear that no such disallowance was provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... villagers, the drilling operations which is the business of the Appellant could not have been carried on, there was no reason to disallow 50% of the expenses." 5. Assessee is a company engaged in the business of exploration and production of coal bed methane‟s gas and compressed natural gas. It filed its return of income on 26/9/2011 declaring a loss of INR 607506849/-. Assessment u/s 143 (3) of The Income Tax Act 1961 was passed by the learned AO wherein disallowance of INR 32741784/- was made of expenses incurred by the assessee towards listing fee holding it to be capital expenditure in nature and allowing depreciation at the rate of 15% thereon, thus the balance addition of INR 27830516/- was made. Further assessee has incurred community development expenditure of ₹ 2442804/- same was also disallowed by the learned assessing officer holding that those expenses are not supported by proper vouchers but by self-made vouchers and further these expenses are incurred on the humanitarian ground and cannot be treated as business expenditure. 6. The assessee aggrieved with the order of the learned AO preferred an appeal before the learned CIT - A who deleted the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry receipt holders to trade their holdings. He therefore submitted that there is no enduring benefit received by the assessee. The learned authorised representative further submitted that issue squarely covered by the decision of the honourable Supreme Court in case of CIT vs. General Insurance Corp 286 ITR 232 wherein the honourable Supreme Court has also considered and distinguished the decision in case of Punjab State industrial development Corp Ltd 225 ITR 792 and Brooke Bond India Ltd 225 ITR 798 for the reason that in the said cases expenditure was incurred for the purpose of increasing company share capital by the issue of fresh shares and there was in flow of fresh funds. 10. We have carefully considered the rival contention and perused the orders of the lower authorities. In the present case, the appellant has shifted its global depository receipt exchange from AIM London stock exchange to the main market London stock exchange without increasing any capital but to provide a bigger platform to global depository receipt holders to trade their holding. The learned assessing officer has not shown that there is any increase in the capital base of the assessee. The learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivals, construction of market share in the bazaar, cash paid to various persons , for Puja, for water tanks, roads and amount expended for renovation of the roads et cetera. The learned assessing officer stated that the expenditure is not supported by proper vouchers but is booked based on the self-made vouchers. Therefore, it was held that such expenditure could not be covered by the provisions of section 37 being not wholly and exclusively incurred for the purposes of the business. The learned assessing officer noted that the intention of the assessee company for incurring this expenditure may be humanitarian but the same cannot be treated as business expenditure. Therefore, he disallowed the above expenditure. The assessee preferred an appeal before the learned CIT - A who allowed 50% of such expenditure. Therefore, both the parties are in appeal before us. 13. The learned departmental representative vehemently relied upon the order of the learned assessing officer and stated that when the assessee has booked these expenditure on the self-made vouchers and they are in the form of the donation et cetera it cannot be said that they are incurred wholly and exclusively for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee by the decision of the honourable Karnataka High Court in CIT vs. Infosys technologies Ltd [2014] 43 taxmann.com 251 (Karnataka)/[2014] 223 Taxman 469 (Karnataka)/[2014] 360 ITR 714 (Karnataka)/[2014] 270 CTR 523 (Karnataka) wherein it has been held as under:- "25. Therefore in the instant case, admittedly the assessee is having their establishment at Bannerghata Circle. Nearly about 500 employees are working in the said Unit. There was severe traffic congestion. Employees had to wait for longer time to reach the office. It seriously affected the business of the assessee, resulting in delay in completing the project. In order to facilitate its employees to reach their establishment safely and early, the assessee has installed traffic signals at Bannerghata Circle. However, it is the responsibility of the State and in particular, the Police Department to either install the traffic signal or control the traffic, the fact remains that in the absence of traffic signal or traffic police being positioned at Circles, the traffic congestion is a regular phenomenon. It seriously affects the free movement of public and in the instant case, the employees of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, expenditure on community development had nexus with the business of the Appellant." 20. Briefly stated the facts assessee filed its return of income on 27/9/2012 declaring loss of ₹ 431571144/-. Subsequently the return was revised on 24/05/2013. The assessment u/s 143 (3) of the income tax act was passed on 27/3/2015 wherein the learned assessing officer disallowed the community development expenditure of INR 1 928737/- on the same reasoning as given in the assessment year 2011 - 12. Assessee preferred an appeal before the learned CIT - A who confirmed the disallowance. Therefore, assessee is in appeal before us. 21. The learned authorised representative submitted that the assessee has submitted the complete detail to the assessing officer vide letter dated 19/12/2014, which is placed at page number 1 to 3 of the paper book. He referred to such details and submitted that expenditure has been incurred by the assessee for certain cultural programs, construction of the well, road patch up, renovation of community hall, expenses for medical camp, advertisement and souvenirs and providing water tanks. He further submitted that as per letter dated 26/03/2015 the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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