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TMI Blog2021 (9) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... ure or for any violation of law. Disallowance u/s 14A - Mandation of recording satisfaction - HELD THAT:- As we find that while invoking the disallowance u/s 14A read with Rule 8D, nowhere the AO has recorded his satisfaction as to why the assessee s explanation is not tenable - it is seen that nowhere AO has noticed the nature of expenditure debited nor he has examined the books of accounts as to what are the expenditure which can be said to be attributable for opening of the dividend income. The conditions laid down in u/s 14A (2) is not being satisfied and accordingly in view of the decision in the case of Godrej Boyce Manufacturing [ 2010 (8) TMI 77 - BOMBAY HIGH COURT ] disallowance made u/s 14A is allowed. Assessee appeal allowed. - ITA Nos.3685 & 3686/Del/2017 - - - Dated:- 16-9-2021 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER Assessee by: Shri Y.K. Madan, CA Shri Yogesh Kumar, CA Department by : Shri Prakash Dubey, Sr. DR O R D E R PER AMIT SHUKLA, J.M. The aforesaid appeals have been filed by the assessee against separate impugned order dated 24.3.2017, for the assessment year 2012-13; and order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the view that expense under the head Corporate Social responsibility is not incurred by the appellant in connection with the business of the appellant and thus cannot be treated as revenue expenditure u/s 37 of the Income Tax Act. The action of the learned authority is not based on finding the facts, but is based merely on hypothecation, conjectures and surmises. 3. That the appellant craves leave and prays that the relief claimed above or any other relief, to which the appellant is entitled, may kindly be allowed. 3. In the AY 2012-13 exactly similar grounds have been raised. Besides this, in assessment year 2012-13, assessee has also challenged the addition of Rs. 49,82,319/- u/s 14A. We will take up the appeal for the assessment year 2013-14. The main issue is disallowance of Corporate Social Responsibility (CSR) expenses which is also common to the assessment year 2012-13 as raised vide ground No. 2. 4. Brief facts and background of the case are that assessee is a Central Public Sector Undertaking under the ages of Ministry of Finance, Government of India is engaged in the manufacture/ production of Currency and Bank Notes, Security Paper, Non-Judicial Stamp Pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.62 8. Providing Solar Lamp at Mallupura at Hoshangabad. 1.85 9. Providing Ultra Sound Scanner to Rama Krishna Mission Rajahmundrv Past Godavari District of (AP). 5.47 10. Comprehensive repair of approach road from Radhaganj Gate to Bhopal Chouraha along with road side amenities including landscaping. 59.71 11. Providing drinking water supply facility to Adhartimth Adharashram near Trambkashwar District Nashik Maharashtra. 10.83 12. Providing 16 Sealer School Bus for visually impaired children to Sahyog Vishesh Aawasiya Vidyalaya I loshangabad (MP) 9.15 13. Providing drinking water facility in Kesals Block of District Hoshangabad (MP). 16.00 14. Project regarding Plantation of trees Near Narmada belt for Lnvironment Protection at Hoshangabad (MP). 50.00 15. Project rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rring social scientific expenditure which is otherwise deductible under various other provisions of the Act. Hence, the intention of legislature to put in place a transparent process where 'on the ground demonstration of CSR expenditure has now been clarified. It is not prejudicial to the taxpayer, in my opinion, as the broad basis has travelled down from philanthropy to corporate sustainability. Secondly, under the income tax Act, the expenditure has to be covered within the ambit of the provisions of Section 37(1) thereof. Accordingly, as the expenditure is claimed to be under CSR and yet there is a claim of deduction thereof in the P L account as any other expenditure incurred to be wholly and exclusively for the purpose of business (except capital and personal expenses), I am inclined to uphold the disallowance made on this issue in the impugned order. 8. Before us it has been submitted that from the details of the nature of expenditure it can be seen that primarily expenses were incurred on providing educational facilities, development of infrastructure such as road, rain water harvesting, training to MSMF workers, etc. The brief details of CSR is also reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee wholly and exclusively for purposes of its business or not. Neither Ld. Assessing Officer nor Ld. CIT(Appeals) has examined the expenses from this angle. Furthermore, Explanation (2) of section 37(1) of the Act introduced by the Finance No. 2 of 2014 is stated to be effective from 01.04.2015 i.e. from A.Y. 2015-16 only. Therefore for present A.Y. 2010-11 no disallowance this explanation to section 37(1) can be made. In view of the above facts the whole issue is set aside to the file of Ld. Assessing Officer with direction to examine the nature of these expenditure and decide whether same are allowable u/s 37(1) of the Act or not. 11. It has been informed by the Ld. Counsel that the matter got resolved in the remand proceedings in the favour the assessee. First of all, we find that there is no dispute that these CSR expenses which have been incurred for the purpose of business has not been disputed by the AO and Ld. CIT(A) except for that was treated it as capital expenditure. The amendment which has been brought in the Explanation 2 of section 37(1) is also not applicable either in the assessment year 2012-13 or 2013-14 as it has come with effect from assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to income, which does not form part of total income under this Act , Dividend income arising out of these investments is exempt u/s 10 and docs not form part of total income Considering the facts of the assessee s case as common expenditure incurred and debited in the P L a/c for both the activities i.e. for investment as well as business, I hold that disallowance of expenditure u/s 14A r. w. Rule 8D is warranted in this case, which is worked out at Rs. 49,82,310/- (being 0.5% of the average investment of Rs. 99,64,63,755/-) as under and added to the total income of the assessee:- Opening Investment : Rs. 99,18,92,595/- Closing Investment : Rs 1,00,10,34,915/- Average Investment : Rs. 99,64,63,755/- 0.5% of average : Rs. 49,82,319/- (Addition of Rs. 49,82,319/-) 14. From the bare reading of the aforesaid observation, it is seen that nowhere AO has noticed the nature of expenditure debited nor he has examined the books of accounts as to what are the expenditure which can be said to be attributabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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