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TMI Blog2022 (12) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... HELD THAT:- provisions of section 37(1) and 80G of the Act are not mutually exclusive if the contribution by the assessee in the form of donation of the category specified in section 80G of the Act but if it could be termed as an expenditure of the category falling under section 37(1) of the Act, then the right of the assessee to claim the whole of it as allowance under section 37(1) of the Act cannot be denied but such money must be laid out wholly or exclusively for the purpose of business. The decision of the Hon ble Calcutta High Court in the case of CIT Vs. Eastern Coalfields Ltd. 2022 (11) TMI 982 - CALCUTTA HIGH COURT where Government of India framed guidelines on corporate social responsibility for central public sector enterprises, such public sector is bound to formulate a policy in terms of the said guidelines and if an obligation springs from complying with the said guidelines, it has to be regarded as expenditure incurred on grounds of commercial expediency and allowed as a deduction. Therefore the expenditure in question, on the facts of the present case, satisfies the requirements of Sec.37(1) of the Act. In view of the facts and circumstances of the given case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit and Loss Account. It was the case of the assessee that as per the provision of Finance Act, 1994 and the CENVAT Credit Rules, 2004, no depreciation should be claimed on the amount of CENVAT credit availed. It was the plea of the assessee that it is because of this legal requirement that the assessee did not capitalize the aforesaid amount to the capital asset but charged the same in the Profit and Loss Account. This claim for deduction on the basis of write off of CENVAT credit to the profit and loss account was rejected by both the AO as well as the CIT(A). At the time of hearing, learned Counsel for the assessee submitted that identical issue came up for consideration in assessee s own case in Assessment Year 2015-16 in ITA nos.1109 and 164/Bang/2019 and the Tribunal by its order dated 15.03.2022 upheld the order of the Revenue authorities observing as follows: 15.6. We have heard the rival submissions and perused the materials on record. As submitted by the AR it is undisputed fact that CENVAT credit availed by the assessee is relating to capital goods. Therefore the issue to be decided here is whether the 50% of the CENVAT Credit paid is to be debited to the Profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduced from the capitalized cost of the asset. In the given case assessee has paid an amount of Rs.1,28,01,784 being 50% of the CENVAT credit which not eligible to claim credit as per the Rule 63B of CENVAT credit Rules 2004 (Rs.20 in our example above). Hence the amount so paid and not eligible for credit should be added to the cost of the asset. Hence, we uphold the order of the CIT(A) in restricting the disallowance to the amount debited to the P L account as said amount needs to be capitalized and not claimed as an expenditure as per the provisions of Explanation 9 to sec.43 of the Act. 4. In view of the aforesaid order of the Tribunal holding that unutilized CENVAT credit has to be capitalized to the cost of the Asset in relation to which the CENVAT credit became available to the assessee, the Revenue authorities were justified in rejecting the claim of the assessee for deduction on account of unutilized CENVAT credit which was claimed as deduction in computing income from business of the assessee. Consequently, ground No.2 raised by the assessee is dismissed. 5. Ground No.3 raised by the assessee reads as follows: 3. The learned Commissioner of Income Tax (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RSETIs) issued by Government of India, Ministry of Rural Development, New Delhi. In the aforesaid circular, the Government after explaining the intention of the government in providing sustainable income to rural BPL families and the setting up of rural development and self employment training institute in Dharmasthala in Karnataka, has also observed that these institutions will be bank led institutions and will be managed and run by public sector / private sector banks with active co-operation from the State Government. Learned Counsel for the assessee submitted that it was only in pursuance to the aforesaid directions of the Government that the payment in question was made to M/s. Corporation Bank Economic Development Foundation. Copy of the trust deed dated 26.02.1992 was also filed before us to show the objects of the trust. It was submitted that similar payments have been considered as wholly and exclusively for the purpose of business. It was submitted that the Hon ble Karnataka High Court in the case of CIT Vs. Infosys Technologies Ltd., 360 ITR 714 (Karnataka) has examined the question whether a payment which is covered by deduction under section 80G of the Act would stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention was also drawn to decision of the ITAT, Hyderabad Bench in the case of Andhra Bank Vs. DCIT ITA No.42/Hyd/2015 and ITA No.31/Hyd/2015 order dated 24.04.2015. In the aforesaid decision, the Tribunal on identical facts where Andhra Bank made contribution to Andhra Bank Rural Development Trust for training of unemployed rural youth and claimed the said sum as deduction under section 37(1) of the Act. The Tribunal examined the issue and held following the decision of the Hon ble Karnataka High Court in the case of Infosys Technologies Ltd., (supra) that the expenditure was incurred by the assessee in discharge of its social responsibilities which also facilitated the business of the assessee and hence allowable as deduction under section 37(1) of the Act. Reference was also made to decision of ITAT Raipur Bench in the case of ACIT Vs. Jindal Power Ltd., (2016) 70 taxmann.com 389 (Raipur Tribunal). In this decision, the Tribunal held as follows: This disallowance is restricted to the expenses incurred by the assessee under a statutory obligation under section 135 of Companies Act 2013, and there is thus now a line of demarcation between the expenses incurred by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80G of the Act but if it could be termed as an expenditure of the category falling under section 37(1) of the Act, then the right of the assessee to claim the whole of it as allowance under section 37(1) of the Act cannot be denied but such money must be laid out wholly or exclusively for the purpose of business. The decision of the Hon ble Calcutta High Court in the case of CIT Vs. Eastern Coalfields Ltd., (supra) where Government of India framed guidelines on corporate social responsibility for central public sector enterprises, such public sector is bound to formulate a policy in terms of the said guidelines and if an obligation springs from complying with the said guidelines, it has to be regarded as expenditure incurred on grounds of commercial expediency and allowed as a deduction. Therefore the expenditure in question, on the facts of the present case, satisfies the requirements of Sec.37(1) of the Act. In view of the facts and circumstances of the given case, we are of the view that the deduction claimed by the assessee should be allowed in full. We hold and direct accordingly and allow ground No.3 raised by the assessee. 12. Ground No.4 raised by the assessee reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t prejudice to the above, the learned Deputy Commissioner failed to appreciate the fact that the closing balance in the 36(1) (viia) account upto 31.03.2013 was only for Rural Advances and no non rural write off can be adjusted against that provision. 4.13Without prejudice to the above, the learned Deputy Commissioner erred in taxing an amount of Rs. 106,45,47, 126 being recovery in written off accounts in respect of which deduction under section 36(1) (vii) was not allowed in earlier years. 14. The assessee also raised ground No.5 before the CIT(A). 5. Without prejudice to the above two grounds, the learned Deputy Commissioner erred in not considering the revised claims under section 36(1)(vii) and 36(1)(viia) made during the Assessment proceedings. 15. The CIT(A) considered ground No.5 raised by the assessee as an alternative ground whereas it was a ground in which the assessee made an additional claim for deduction under sections 36(1)(vii) and 36(1)(viia) of the Act. The observations of the CIT(A) on ground No.5 were as follows: Ground no. 3 challenges the addition of Rs. 647,44,16,108 on account of disallow-ance u/s 36(1) (viia).Ground no. 4 challenges the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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