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TMI Blog2022 (3) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature only as these funds are meant to be used for public purposes and the assessee could not have commenced its operations without paying the same, the same is allowable as revenue expenditure. We are therefore of the view that payment made as compensation is not hit by Explanation 1 to Section 37(1) and is an allowable expenditure Disallowance of CSR expenditure - HELD THAT:- Hon ble High Court of Karnataka in the case of CIT v. Infosys Technologies Ltd. [ 2013 (7) TMI 451 - KARNATAKA HIGH COURT ] held that, where assessee incurred expenditure on installation of traffic signals at various parts of city in order to secure free movement of its employees so that they reached office in time, amount so spent being a part of its corporate responsibility, was to be allowed as business expenditure as under section 37(1). Assessee appeal allowed. - ITA Nos.464 to 465/Bang/2020 - - - Dated:- 7-3-2022 - Shri Chandra Poojari, Accountant Member And Smt. Beena Pillai, Judicial Member For the Appellant : Shri Narendra Sharma, Advocate For the Respondent : Dr. Manjunath Karkihalli, CIT(DR)(ITAT), Bengaluru ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the AO on perusal of same record available with during original assessment came to a different conclusion and reopened the assessment which is nothing but change of opinion which cannot be permitted. For this purpose, he relied on the following judgments:- - CIT v. Bharatiya Reserve Bank Note Mudran Pvt. Ltd. in ITA No.433/2011 order dated 11.8.2021 (Kar.). - Dell India (P) Ltd. v. JCIT, LTU, 123 taxmann.com 468 (Karnataka) - Sri Jagannath Promoters Builders v. DCIT [2021] 133 taxmann.com 270 (Ori.) - Vishwanath Engineers v. ACIT [2014] 45 taxmann.com 15 (Guj) - Jainam Investments v. ACIT, [2021] 131 taxmann.com 327 (Bom) 5. On the other hand, the ld. DR submitted that in the present case, income liable to tax has escaped assessment in the original assessment due to oversight and inadvertence or mistake, therefore the AO exercised jurisdiction u/s. 147 of the Act to reopen the assessment. For reopening the assessment, it is not necessary that the information must be derived from external source of any kind or there must be disclosure of income on important matter subsequent to the original assessment. According to him, reassessment is also possible if the inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is a difference between power to review and power to reassess. The AO has no power to review, but he has power to reassess. But reassessment is to be made based on fulfilling certain pre-conditions and if the concept of change of opinion is removed in the garb of reopening of assessment, review would take place. We must treat the concept of change of opinion as an in-built test to check the abuse of power by the AO. Hence after 1st April, 1989, AO has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. 9. The judgment of Full Bench of Karnataka High Court in Dell India Pvt. Ltd. v. Jt. CIT, LTU Anr. [432 ITR 212 (Karn)(FB held as under:- 12. We have given careful consideration to the submissions. We are dealing with a reference to a larger bench where we have been called upon to decide the questions formulated by a Division Bench of this Court. The first two questions revolve around the issue whether the Division Bench of this Court in the case of Rinku Chakraborthy (supra) has laid down the correct law. We must, therefore, refer to the decision in the case of Rinku Chakrabort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t: (a) Where in the original assessment, the income liable to tax escapes assessment due to oversight or inadvertence or a mistake committed by Assessment Officer, the jurisdiction to reopen the original assessment vests in the Assessment Officer. (b) A tax payer should not be allowed to take advantage of an oversight or mistake committed by Assessment Officer.' 13. Thus, what is held in the case of Rinku Chakraborthy (supra) is clearly based on the decision of the Apex Court in the case of Kalyanji Mavji Co. (supra) and in particular what is held in clause (2) highlighted above. In paragraph 13 of the decision of Kalyanji Mavji Co. (supra) it was held thus: '13. On a combined review of the decisions of this Court the following tests and principles would apply to determine the applicability of section 34(1)(b) to the following categories of cases: (1) Where the information is as to the true and correct state of the law derived from relevant judicial decisions; (2) Where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the Income-tax Officer. This is obviously based o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er must fall within Section 34(1)(b) of the Indian Income-tax Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants insofar as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the Income-tax Officer discovers that he has committed an error in consequence of which income has escaped assessment it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this Court in Maharaj Kumar Kamal Singh v. CIT, CIT v. Raman Co. and Bankipur Club Ltd. v. CIT and we do not believe that -the law has since taken a different course. Any observations in Kalyanji Mavji Co. v. CIT suggesting the contrary do not, we say with respect, lay down the correct law. (emphasis supplied) 15. Hence, Apex Court expressly held that the law laid down by a Bench of two Hon'ble Judges of the Apex Court in the case of Kalyanji Mavji Co. (supra) was not correct. The Apex Court after noticing the view taken in its earlier decision i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in section 147 of the Act (with effect from 1-4-1989), they are given a goby and only one condition has remained viz. that where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of change of opinion is removed, as con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e change of opinion on consideration of the same material is no ground to invoke section 147 of the said Act. 18. As noted earlier, the decision in the case of Rinku Chakraborthy (supra) is based only on what is held in clause (2) of paragraph 13 of the decision in the case of Kalyanji Mavji Co. (supra). The decision rendered in the case of Kalyanji Mavji Company (supra) was by a Bench of two Hon'ble Judges. Subsequently, a larger Bench of three Hon'ble Judges in the case of Indian Eastern Newspaper Society (supra) has clearly held that oversight, inadvertence or mistake of the Assessing Officer or error discovered by him on the reconsideration of the same material does not give him power to reopen a concluded assessment. It was expressly held that the decision in the case of Kalyanji Mavji Co. (supra), on this aspect does not lay down the correct law. The decision in the case of Rinku Chakraborthy (supra) is based solely on the decision of the Apex Court in the case of Kalyanji Mavji Co. (supra) and in particular what is held in clause (2) of paragraph 13. The said part is held as not a good law by a subsequent decision of the Apex Court in the case of Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 6,92,00,000/- for the A.Y. 2014-15 have been examined. In this connection the extract of the Hon'ble Supreme Court Order dated 28.09.2012 (page 6 and page 7) is reproduced below: The amicus has submitted a Note, dated September 27, 2012, which actually gives a gist of the main features of the earlier CEC Reports on the subject. In this Note, the amicus suggests certain steps which are essential before the Court may consider granting permission for resumption of mining operations in the 63 'Category B' mining leases. The suggestions of the amicus are contained in paragraphs 6 to 9 and paragraph 10 (which has a number of sub-paragraphs) of the Note. The suggestions include, compensatory payments by the leaseholders for repairing the environmental depredation wrought by the leaseholders by unplanned and to an extent, illegal mining done in their respective areas and the implementation of the Reclamation and Rehabilitation (R R) plan by each of the 'lease holders. Another important suggestion is in regard to the constitution of a Special Purpose Vehicle (SPV) by the State of Karnataka to carry out the ambitious, but highly essential Comprehensive Environment P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion, the issue is squarely covered by the order of the Tribunal in the case of M/s. Veerabhadrappa Sangappa Co. v. ACIT in ITA No.1054/Bang/2014 dated 08,12.2020 wherein it was held as follows: - 8.12. We have perused submissions advanced by both sides, in light of records placed before us. 8.12.1. Ld.AO took the view that these payments are penal in nature as they have been levied for contravention of laws by way of damages caused to forest and environment. Ld.AO referred to the letter F.No.DMG/R 86 R/Notice/2012-13/11 dated 28-02- 2013 issued by Department of Mines and Geology, Bangalore demanding the payment from the assessee. It is pertinent to note that the above said letter uses the expression penalty for these payments. Accordingly, the AO took the view that these payments are in the nature of penalty for various irregularities committed by the assessee in the mining area like illegal mining, illegal dumping of waste and other violations like encroachment etc. Ld.AO relied upon following case laws to buttress his view that the penalty is not allowable as deduction:- (a) Maddi Venkataramana Co (P) Ltd vs. CIT (1998)(229 ITR 534)(SC) (b) Haji Azis Ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the compensation / penalty may be imposed @ Rs . 1 . 00 crores ( Rs . One Crores only ) for per ha . of the area found to be under illegal over burden dump etc . iii ) Mining operation may be allowed to be undertaken after ( a ) the implementation of the R R Plan is physically undertaken and is found to be satisfactory based on the pre - determined parameters, ( b ) penalty / compensation as decided by this Hon'ble Court is deposited and ( c ) the conditions as applicable in respect of Category - A leases are fulfilled / followed; iv ) In respect of the seven mining leases located on / nearby the interstate boundary, the mining operation should presently remain suspended . The survey sketches of these leases should be finalized after the interstate boundary is decided and thereafter the individual leases should be dealt with depending upon the level of the illegality found; and v ) Out of the sale proceeds of the existing stock of the mining leases, after deducting : a) The penalty / compensation payable; b) Estimated cost of the implementation of the R R Plan; and c) 10 % of the sale proceeds to be retained by the Monitori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the CEC to this Court within three months from today. The final determination so made, on being approved by the Court, shall be payable by each of the leaseholders. 8.12.6. Hon'ble Supreme Court further directed as under( page 173 clause): 888.. In addition to the above, each leaseholder must pay a sum equivalent to 15% of the sale proceeds of its iron ore sold through the Monitoring Committee as per the earlier orders of this Court. In this regard, it may be stated that though the amicus suggests the payment @ 10% of the sale proceeds, having regard to the overall facts and circumstances of the case, we have enhanced this payment to 15% of the sale proceeds. Here it needs to be clarified that the CEC/Monitoring Committee is holding the sale proceeds of the iron ores of the leaseholders, including the 63 leaseholds being the subject of this order. In case, the money held by the CEC/Monitoring Committee on the account of any leaseholder is sufficient to cover the payments under the aforesaid three heads, the leaseholder may, in writing, authorize the CEC to deduct from the sale proceeds on its account the amounts under the aforesaid three heads and an underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position advanced, have been cited in the course of arguments made. 29. According to Shri Divan (Amicus Curiae), the present is a case of mass tort resulting in the abridgment of the fundamental rights of a large number of citizens for enforcement of which the writ petition has been filed under Article 32. Shri Divan has submitted, by relying on several decisions of this Court, that in a situation where the Court is called upon to enforce the fundamental rights and that too of an indeterminate number of citizens there can be no limitations on the power of Court. It is the satisfaction of the Court that alone would be material. Once such satisfaction is reached, the Court will be free to devise its own procedure and issue whatever directions are considered necessary to effectuate the Fundamental Rights. The only restriction that the Court will bear in mind is that its orders or directions will not be in conflict with the provisions of any Statute. However, if the statute does not forbid a particular course of action it will be certainly open for the Court under Article 32 to issue appropriate directions..... 31. The question that has been raised on behalf of the leaseholders i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been granted for subsequent slots because in the past the authorities have not taken into account the macro effect of such wide-scale land and environmental degradation caused by the absence of remedial measures (including rehabilitation plan). Time has now come, therefore, to suspend mining in the above area till statutory provisions for restoration and reclamation are duly complied with, particularly in cases where pits/quarries have been left abandoned. 45. Environment and ecology are national assets. They are subject to intergenerational equity. Time has now come to suspend all mining in the above area on sustainable development principle which is part of Articles 21, 48-A and 51-A(g) of the Constitution of India. In fact, these articles have been extensively discussed in the judgment in [M.C. Mehta case (2004) 12 SCC 118] which keeps the option of imposing a ban in future open. 8.12.10. After considering all these judgments rendered by earlier bench, Hon'ble Supreme Court, observed as under:- 35. The issue is not one of application of the above principles to a case of cancellation as distinguished from one of suspension. The issue is more fundamental, namely, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above observations is understood to be laying down a note of caution, the same would be a qualified one and can have no application in a case of mass tort as has been occasioned in the present case. The mechanism provided by any of the Statutes in question would neither be effective nor efficacious to deal with the extraordinary situation that has arisen on account of the large scale illegalities committed in the operation of the mines in question resulting in grave and irreparable loss to the forest wealth of the country besides the colossal loss caused to the national exchequer. The situation being extraordinary the remedy, indeed, must also be extraordinary. Considered against the backdrop of the Statutory schemes in question, we do not see how any of the recommendations of the CEC, if accepted, would come into conflict with any law enacted by the legislature. It is only in the above situation that the Court may consider the necessity of placing the recommendations made by the CEC on a finer balancing scale before accepting the same. We, therefore, feel uninhibited to proceed to exercise our constitutional jurisdiction to remedy the enormous wrong that has happened and to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inter alia, would include following measures:- (Page 171 of Hon'ble Supreme Court's order) E) SOIL AND MOISTURE CONSERVATIONS, AFFORESTATION AND OTHER MEASURES 26. The R R plan would inter alia provide for: i) broad design/specification for: b) retaining walls c) check dams d) gully plugs and/or culverts (if required) e) geo textile/geo matting of dumps f) afforestation in the safety zones g) afforestation in peripheral area, road side, over burden dumps and other areas ii) dust suppression measures at/for loading, unloading and transfer points, internal roads, mineral stacks etc. iii) covered conveyor belts (if feasible) - such as down hill conveyor, pipe conveyor etc. iv) specification of internal roads, v) details of existing transport system and proposed improvements vi) railways siding (if feasible) vii) capacity building of personnel involved in the mining and environmental management viii) rain water harvesting 8.12.15. We note that co-ordinate bench of Tribunal considered an identical issue in the case of Mysore Minerals Ltd vs. ACIT (ITA No.679/Bang/2010 dated 2.11.2012). In this case, the assessee was engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, the authorities below have not pointed out the income generated against the purported deferred Revenue expenditure so proposed by them in their impugned orders. The amount was incurred as a Revenue expenditure and is directed to be allowed in the year it has been incurred. Respectfully following the decision of the co-ordinate bench of the Bangalore Tribunal, in the case of Ramgad Minerals Mining P. Ltd. (supra), we hold that the entire expenditure of ₹ 5,02, 59,000 incurred by the assessee of net present value to CAMPA in the relevant period are to be allowed as revenue expenditure for Assessment Year 2004-05. 8.12.16. Above decision of this Tribunal in case of M/s.Mysore Minerals(supra) was upheld by Hon'ble Karnataka High Court in the appeal filed by revenue against order of this Tribunal. Relevant extract of the view taken by Hon'ble High Court in CIT vs. M/s Mysore Minerals Ltd in ITA No.144/2013 dated 08/03/2017 is as under:- 2. As such, in our view, the only question of law which may arise is, whether the payment made by way of compensation of ₹ 5,02, 59,000/-by the assessee as per the direction of the Apex Court for mining l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess or profession and no deduction or allowance shall be made in respect of such expenditure. A careful perusal of the above said provision would show that the purpose of expenditure should be an offence or prohibited by law. In the instant cases, the purpose of payments is for R 86 R plans and the same cannot be considered as payment for the purposes, which is an offence or which is prohibited by law. Hence Explanation 1 to section 37 is not applicable to these payments. 8.12.19. Respectfully following Hyderabad bench of Tribunal in case of NMDC Ltd (supra) and Bangalore Tribunal M/s Mysore Minerals Ltd (supra) which has been upheld by Hon'ble Karnataka High Court, the payment of ₹ 9,69,00,000/- is compensatory in nature only as these funds are meant to be used for public purposes and the assessee could not have commenced its operations without paying the same, the same is allowable as revenue expenditure. We are therefore of the view that payment made as compensation is not hit by Explanation 1 to Section 37(1) and is an allowable expenditure. Accordingly this ground raised by assessee stands allowed. 15. Following the above order of the Tribunal, we are i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of business and hence shall not be allowed as deduction under said section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Income-tax Act shall be allowed as deduction under those sections subject to fulfilment of conditions, if any, specified therein. Hence the AO held that CSR expenditure is not an allowable expense. 19. The CIT(Appeals) confirmed the order of the AO. Against this, the assessee is in appeal before us. 20. The ld. AR submitted that CSR expenditure is incurred wholly and exclusively for the purpose of business and is to be allowed as an expenditure u/s. 37(1) of the Act on principle of commercial expediency. Explanation 2 to section 37(1) is effective from 1.4.2015 and from AY 2015- 16 onwards. Being so, the present appeals under consideration being prior to that, accordingly it cannot be applied. He relied on the following decisions:- i) National Small Industries Corporation Ltd. v. DCIT, [2019] 175 ITD 601 (Del Trib.) ii) DCIT v. M/s. Great Eastern Energy Corporation Ltd. v. DCIT [2019] 112 taxmann.com 412 (Del Trib.) iii) Garden Reach Ship Builders Engineers Ltd. v. Pr.CIT [2021] 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. 10. The Memorandum to Finance (No. 2) Bill, 2014 explaining provisions relating to direct taxes on Corporate Social Responsibility is extracted below:- CORPORATE SOCIAL RESPONSIBILITY (CSR) Under the Companies Act, 2013 certain companies (which have net worth of ₹ 500 crore or more, or turnover of ₹ 1000 crore or more, or a net profit of ₹ 5 crore or more during any financial year) are required to spend certain percentage of their profit on activities relating to Corporate Social Responsibility (CSR). Under the existing provisions of the Act expenditure incurred wholly and exclusively for the purposes of the business is only allowed as a deduction for computing taxable business income. CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing the taxable income of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable business income. CSR expenditure being an application of income is not incurred wholly and exclusively for the purpose of carrying on business. As application of income is not allowed as deduction for the purpose of taxable income of a company, the amount spent on CSR cannot be allowed as a deduction for computing taxable income of the company. The object of the CSR expenditure is to share the burden of the Govt. in providing social service by companies having import/turnover/profit above a threshold. If such expenses are allowed as deduction, it will result in subsidizing the amount of one-third of such expenses by Govt. by way of tax expenditure. The provisions of section 37(1) provide that deduction for any expenditure which is not mentioned specifically in section 30 to 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purpose of carrying on business or profession. As CSR expenditure being application of income is not incurred for the purpose of carrying on of business, such expenditure cannot be allowed under the provisions of section 37 of the Act. Therefore, in order to provide certainty on this issue, the said section 37 has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Policy which shall indicate the activities to be undertaken by the company [in areas or subject, specified in Schedule VII]; (b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and (c) monitor the Corporate Social Responsibility Policy of the company from time to time. (4) The Board of every company referred to in sub-section (1) shall,- (a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, if any, in such manner as may be prescribed; and (b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company. (5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years [or where the company has not completed the period of three financial years since its i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.] (8) The Central Government may give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of provisions of this section and such company or class of companies shall comply with such directions.] [(9) Where the amount to be spent by a company under subsection (5) does not exceed fifty lakh rupees, the requirement under sub-section (1) for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee provided under this section shall, in such cases, be discharged by the Board of Directors of such company.] 14. Schedule VII to the Companies Act, 2013 is extracted hereunder:- SCHEDULE VII (See Section 135) Activities which may be included by companies in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded Universities; Indian Institute of Technology (IITs); National Laboratories and autonomous bodies established under Department of Atomic Energy (DAE); Department of Biotechnology (DBT); Department of Science and Technology (DST); Department of Pharmaceuticals; Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH); Ministry of Electronics and Information Technology and other bodies, namely Defense Research and Development Organisation (DRDO); Indian Council of Agricultural Research (ICAR); Indian Council of Medical Research (ICMR) and Council of Scientific and Industrial Research (CSIR), engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).] (x) rural development projects] [(xi) slum area development. Explanation.- For the purposes of this item, the term `slum area' shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force.] [(xii) disaster management, including relief, rehabilitation and reconstruction activities.] 15. By going through the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee being an individual, the restriction imposed under Explanation (2) to section 37 is not applicable to assessee s case. At this stage, it is appropriate to draw support from the judgment of Hon ble Gujarat High Court in the case of Pr. CIT v. Gujarat Narmada Valley Fertilizers Chemicals Ltd., 422 ITR 164 (Guj). In that case, the following question was before the Hon ble High Court :- Whether in the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in deleting disallowance u/s 37(1) of the Act in respect of expenses being contribution/donation to educational institutions, trust, local bodies? 18. The Hon ble Gujarat High Court held as under:- 8.10 We have also noted that the amendment in the scheme of section 37(1) is not specifically stated to be retrospective and the said Explanation is inserted only with effect from 1st April 2015. In this view of the matter also, there is no reason to hold this provision to be retrospective in application. As a matter of fact, the amendment in law, which was accompanied by the statutory requirement with regard to discharging the corporate social responsibility, is a disabling provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied. Further, in the present case, the assessee being an individual, and not a corporation under the Companies Act, 2013, Explanation 2 to section 37 cannot be applied so as to deny the voluntary expenditure incurred by assessee towards community welfare. Accordingly, we are of the opinion that the expenditure incurred is wholly and exclusively for the purpose of business of assessee and has to be allowed as business expenditure. Accordingly, this ground of appeal is allowed. 23. Moreso, the Hon ble High Court of Karnataka in the case of CIT v. Infosys Technologies Ltd., 43 taxmann.com 251 held that, where assessee incurred expenditure on installation of traffic signals at various parts of city in order to secure free movement of its employees so that they reached office in time, amount so spent being a part of its corporate responsibility, was to be allowed as business expenditure as under section 37(1). 24. Being so, following the above judicial precedents, we allow the grounds taken by the assessee with regard to CSR expenditure for both the assessment years under appeal. 25. In the result, both the appeals are allowed. Pronounced in the open court on this 7th d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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