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TMI Blog2022 (3) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided in favour of assessee. Addition of excess interest claimed - disallowance of community development and welfare expenses - AO was of the view that this expenditure was in the nature of Corporate Social Responsibility, and was not allowable - CIT-A deleted the addition - HELD THAT:- No material have been brought for our consideration from either side, Revenue or the assessee, to persuade us to take a view different from view already taken by the Ld. CIT(A) in the impugned appellate order dated 15.06.2017 on these issues. Therefore, we decline to interfere with the impugned appellate order of the Ld. Ld. CIT(A); and dismiss grounds 2 and 3 of appeal. - Decided against revenue. - ITA No. 5490/Del/2017 - - - Dated:- 17-2-2022 - SHRI KUL BHARAT , JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA , ACCOUNTANT MEMBER Appellant by : Sh. Ajay Agarwal , CA Respondent by : Sh. Sumit Kumar Verma , Sr. DR ORDER PER ANADEE NATH MISSHRA , AM : (A) This appeal by Revenue is filed against the order of Learned Commissioner of Income Tax (Appeals)-6, Delhi, [Ld. CIT(A) , for short], dated 15.06.2017 for Assessment Year 2013-14. Grounds taken in this appeal of Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer on the ground that the assets (roads) were not owned by the assessee. Vide impugned appellate order dated 15.06.2017, the Ld. CIT(A) deleted this addition. The relevant portion of the impugned appellate order dated 15.06.2017 passed by the Ld. CIT(A) is reproduced as under: 3.2.3 The facts of the case and the submissions of the AR have been carefully considered. There is no dispute that the appellant has incurred the expenditure for construction of approach road from power plant gate to Athipattu Pudunagar railway station. The power plant of assessee is located at a far away distance from the city and highway. The expenditure on infrastructure facilities which are not owned by the appellant but are owned by State Government Authorities are incurred for smooth, efficient and successful operation of power plants of the appellant. The State/local authorities who are supposed to maintain the infrastructure/roads are not able to maintain such facilities in good working conditions on which the development of the plant is dependant. These infrastructure facilities though not owned by the appellant, but are being used for operation of its normal business. The expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has already been decided by the Co-ordinate Bench of ITAT, Delhi; vide order dated 25.04.2019; in favour of the assessee. A copy of the aforesaid order dated 25.04.2019 was filed during the appellate proceedings in Income Tax Appellate Tribunal. The Ld. Counsel for the assessee drew our attention to the following portion of the aforesaid order dated 25.04.2019 of Co-ordinate Bench of ITAT, Delhi in the case of NTPC Ltd.: 13. Assessee claimed the deduction of expenditure of ₹ 20,60,00,000/- u/s 37 of the Act incurred on the assets not owned by it but belongs to various State Governments like irrigation, PWD, Electricity Board and in a few cases Central Government like Indian Railways and the amount was paid to various Government Departments for constructing roads, water supply, rail connectivity and other infrastructure facility like extension of power lines etc. to facilitate smooth running of the business. 14. Ld. DR challenging the impugned order relied upon the assessment order and contended that when assets are not owned by the assessee, the expenditure cannot be allowed as revenue expenditure rather it was having enduring benefits to the assessee. 15. Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting right to carry out the business, any expenditure made by it for smooth running of the business would not lead to acquisition of capital assets. So, we are of the considered view that the expenditure incurred by the assessee on construction of road, water supply, rail connectivity and other infrastructure activities on the assets not owned by it but owned by various Government Departments are revenue expenditure. So, ground no.2 of Revenue s appeals is determined against the Revenue. (B.2.1) We have heard both sides, we have perused the materials on record. We find that the identical issue has already been decided against Revenue and in favour of the assessee vide aforesaid order dated 25.04.2019 in the case of NTPC Ltd. Respectfully following this order of Co-ordinate Bench of ITAT, Delhi; we uphold the order of the Ld. CIT(A) on this issue. The first ground of appeal is accordingly dismissed. (C) Second ground of appeal is regarding the disallowance of ₹ 69,80,737/- out of excess interest claimed by the assessee. Third ground of appeal is regarding disallowance of ₹ 1,87,456/- out of community development and welfare expenses claimed by the assessee as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a ratio of: 69.44% - Debt 30.56%- Equity It may be noted that above ratio is for the entire project for 3 units. CERC allows only cash expenditure in gross block for the purpose of tariff determination. The gross block considered for tariff is ₹ 3382.78 Crores against ₹ 3645.79 Crores on accrual basis. The interest on 70% of 3382.78 Crores for 123 days at debt equity ratio of 70:30 has been taken to Profit and Loss Account. Hence, the ratio for the total project is slightly different from the ratio used for Capitalisation of unit-1. Detailed working is also attached herewith. From the above, it can be observed that in the reply furnished by the assessee on 17.02.2016, the assessee has revised the debt equity ratio from 70:30 as claimed in profit loss account to 69.44:30.56 now. The assessee has also furnished the detailed calculation in support of this revised ratio, which has been attached by the assessee with the above reply as Annexure-A. Perusal of Annexure-A reveals that consequent upon this revision in debt equity ratio, the claim of interest as per the revised calculation of interest on accrual basis comes to ₹ 87,25,92,166/-, which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atio is for the entire project for 3 units. CERC allows only cash expenditure in gross block for the purpose of tariff determination. The gross block considered for tariff is ₹ 3382.78 Crores against ₹ 3645.79 Crores on accrual basis. The interest on 70% of 3382.78 Crores for 123 days at debt equity ratio of 70:30 has been taken to Profit and Loss Account. Hence, the ratio for the total project is slightly different from the ratio used for Capitalisation of unit-1. Detailed working is also attached herewith. (Refer page no. 65 to 68 of paper book) From the above detailed working it is clear that the capitalised value of unit-1 as on 28.11.2012 was ₹ 3,645.79 Crore and cash expenditure in respect of unit-1 was ₹ 3,382.78 Crore as per auditor's certificate submitted to CERC for tariff fixation. CERC allows only cash expenditure in gross block for the purpose of tariff determination. The gross block considered for tariff is ₹ 3,382.78 Crore against ₹ 3,645.79 Crore on accrual basis. The appellant company has charged interest to revenue for 123 days (29.11.2012 to 31.03.2013) on the basis of following debt equity ratio of 70:30 on total ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same as part of Corporate Social Responsibility (CSR). Your appellant submits that the aforesaid expenses are not part of Corporate Social Responsibility (CSR) as the appellant has incurred loss during the year and therefore appellant is not required to spend certain percentage of its profit on CSR as per provisions of Companies Act. Thus these expenses are allowable u/s 37(1) of I.T. Act. 3.4.1The Assessing Officer stated in the assessment order as under:- During the course of assessment proceedings, the ARs of the assessee were asked as to why the expenditure of ₹ 1,87,456/- on community development welfare expenses, etc., which is in the nature of corporate social responsibility expenses may not be disallowed. The AR of the assessee furnished the ledger account vide letter dated 08.01.2016 and stated that It is a Public knowledge that the Government of India-through BPE (Bureau of Public Enterprises) had issued guidelines to the effect that companies should spend certain percentage of their profit (linked to quantum of profits) to discharge their Corporate Social Responsibility (CSR) towards fulfillment of the National Plan goals and objectives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to ₹ 1,87,456/- on account of corporate social responsibility is disallowed and the same is added to assessee's total income.... 3.4.2 The AR of the appellant vide his written submission has stated that:- Appellant company has incurred a sum of ₹ 1,87,456/- on community development and welfare expenses etc. during the year. The said expenses have been incurred on organising various medical/Health check-up camps during the year and distribution of sweet and snacks on the occasion of Republic Day. The Ld. Assessing officer disallowed the aforesaid expenses considering the same as expenses incurred on account of Corporate Social Responsibility and disallowed the same u/s 37(1) of the Act. During assessment proceedings, the appellant company submitted a copy of ledger account of the said expense vide letter dated 08.01.2016 to the Ld. Assessing officer and also appraised him that these expenses are not in the nature of Corporate Social Responsibility as the same is not applicable since the company has not earned any profit during the year. Therefore the said expenses incurred for business purpose are allowable u/s 37(1) of the I.T. Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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