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TMI Blog2022 (7) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of CSR expenses - expenditure of capital nature or personal nature - HELD THAT:- As decided in own case [ 2021 (9) TMI 1405 - ITAT DELHI] the impugned expenditure cannot be held to be capital and it is not in the nature of personal expenditure or for any violation of law. Thus we delete the impugned disallowance of CSR expenses. As regards donation to CM s relief fund, the same is, otherwise allowable as deduction under section 80G(2)(a)(iiihf). - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) the assessee reiterated the same contentions and also submitted that the Ld. AO has not recorded the satisfaction as to why there was expenditure relatable to exempt income. The assessee also without prejudice submitted that the average investment was computed after inclusion of strategic investment which is contrary to the provisions laid down for the computation of disallowance under section 14A. The Ld. CIT(A), however endorsed the findings of the Ld. AO and observed that satisfaction is not mandatory where no disallowance or apportionment has been made by the assessee. Since the assessee has made no disallowance, prima facie reason to invoke section 14A exists. 6. Aggrieved, the assessee is before the Tribunal. 7. We noticed that no disallowance under section 14A read with Rule 8D was made in AY 2011-12 by the Ld. AO in original assessment under section 143(3) framed on 28.02.2014. The Ld. Pr. CIT-(8) set aside the said assessment under section 263. Consequent thereto, the Ld. AO made fresh assessment under section 263/143(3) on 19.12.2016 by making addition of Rs. 50,25,537/- being 0.5% of the average investment. When the matter reached the Tribunal, the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred for investment, no disallowance u/s. 14A is called for. The appeal of the assessee on this ground is allowed." 7.2. Similar disallowance under section 14A came up for consideration before the Tribunal in the case of the assessee relating to the AY 2012-13. Vide consolidated order dated 16.09.2021 in ITA No. 3685 & 3686/Del/2017 for AYs 2012-13 and 2013-14, the Tribunal deleted the disallowance of Rs. 49,82,319/- under section 14A for AY 2012-13. The relevant paras are extracted hereunder:- "13. Coming to the disallowance u/s. 14A of Rs. 49,82,319/-, we find that in assessment year 2013-14, the Ld. CIT(A) has deleted the said addition on merits. In this year, the Ld. AO noted that assessee has made substantial investment in mutual fund dividend on which income is exempt. In response to the show cause notice, it was submitted that the dividend income earned during the year was Rs. 4,31,79,170/- from the investment in the units of mutual fund and no specific or any special effort was made nor any direct or indirect expenditure was incurred. Further assessee has not taken any loan for making any investment as same has been made out of surplus fund. Ld. AO without e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 3 relates to disallowance of CSR expenses of Rs. 3,96,00,919/- and without prejudice, denial of deduction under section 80G of Rs. 2.50 crore to CM relief fund out of aggregate CSR expenses is not justified. The Ld. AO made the impugned disallowance treating the CSR expenses as being capital in nature disregarding the contention of the assessee that no enduring benefit has either accrued or arisen to the assessee company and following the order of the Ld. CIT(A) in earlier years. 8.1. On appeal, the Ld. CIT(A) following the appellate order for the AY 2013-14 sustained the impugned disallowance. This has brought the assessee before us. 9. Identical issue has been considered by the Tribunal in its order in ITA Nos. 3685 & 3686/Del/2017 dated 16.09.2021 for AY 2012-13 and 2013-14 wherein the Tribunal recorded the finding that the impugned expenditure cannot be held to be capital and it is not in the nature of personal expenditure or for any violation of law. The relevant paras are reproduced herein below:- "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... landscaping. 59.71 11. Providing drinking water supply facility to Adhartimth Adharashram near Trambkashwar District Nashik Maharashtra. 10.83 12. Providing 16 Seater School Bus for visually impaired children to Sahyog Vishesh Aawasiya Vidyalaya Hoshangabad (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 Environment Protection at Hoshangabad (MP). 50.00 15. Project regarding construction of 10 Nos girls toilet in Sagar & Gosaba and one toilet in girls Hostel at Kakdwip West Bengal. 23.00 16. Payment to Jadavpur University and IIM Lucknow on account of independent third party evaluation. 15.25 6. The AO had made the disallowance on the ground that same is for enduring for long term benefits for communities, cultures and societies in which the assessee company operates. The relevant observations and findings of the Assessing Officer read as under:- "4.1 I have gone through the submissions of the assessee and find the same untenable. Corporate Social Responsibilities expenditure is made for enduring long term benefits for communities, culture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept 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 reported in audited annual accounts at page 21 OF CONSOLIDATED ANNUAL A/CS. • The nature & objectives of expenses are the same as were in earlier years i.e. AY 2010-11 & AY 2011-12. The management of the Corporation considered it BUSINESS necessity to incur theses expenses. The Corporation has a well framed CSR policy which is controlled and monitored by a CSR committee formed by corp. to frame & advise on these exp. THESE, EXPS. ARE INCURRED VOLUNTARILY BY APPELLANT. • These expenses were incurred as a business necessity and have been incurred wholly and exclusively for business purposes during the previous year. • In fact, in FY 2016-17 Annual Report, the Chairman underlying the importance of such expenses has commented tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2015-16. The allowability of expenditure section 37 (1) are otherwise fully applicable, once the Explanation 2 is not applicable for the impugned assessment year. Viewing from the nature of business activities of the assessee which is dealing in highly sensitive commodity i.e., currency, coins, security stationery, etc. Expenditure incurred is voluntarily as per board approval. Accordingly, such expenditure cannot be held to be capital as accepted by the authorities in the earlier years and it is not in the nature of personal expenditure or for any violation of law. ASSESSMENT YEAR 2012-13 12. In so far as appeal for the assessment year 2012-13 is concerned, first ground relates to disallowance of a sum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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