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TMI Blog2023 (1) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... is a delay of 146 days in filing the appeal. 1.2 The impugned order, which has been passed by the Income Tax Appellate Tribunal [in short, "Tribunal"] is dated 28.02.2022. 2. Except for a laconic assertion made in paragraph 3 of the application, that the delay occurred on account of "administrative reasons beyond the control of the Appellant", there is no explanation given in the application. 3. Mr Puneet Rai, learned senior standing counsel, who appears on behalf of the appellant/revenue, however, across the bar, says that the delay occurred in the instant matter and several other matters as well, because of the pendency of the matters in which appeals could not to be filed during the period when Covid-19 was raging. 4. Although the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denied on two grounds. 10.1 First, that it was in the nature of capital expenditure. 10.2 Second, that Explanation 2, which was inserted to Section 37(1) by Finance Act, 2014, would come in the way of the respondent/assessee. 11. Insofar as the first aspect is concerned, as to whether the expenditure was in the nature of capital expenditure, the AO, without detailing out which part of the CSR expenditure was directed towards capital assets, straightaway concluded that the expenditure on account of social responsibility is to be treated as capital expenditure by taking into account, albeit illustratively, the purposes for which the recipient utilized the funds. The error in the AO's approach is apparent from the following: Firstly, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal expenditure and added back to the total income of the assessee. Assessee further contended that explanation 2 to section 37(1) of Income Tax Act introduced by Finance Act, 2014 is not retrospective...." 12. Since the AO ruled against the respondent/assessee, an appeal was filed with the CIT(A). 12.1 The respondent/assessee specifically raised the issue with regard to the expense incurred as not being in the nature of capital expenses. 13. The CIT(A), concededly, concentrated on whether or not the expenditure towards CSR was wholly and exclusively incurred for business purposes. 13.1 This is evident from the following observations made in the CIT(A)'s order: "9.2 I have gone through facts of the case, the order of the AO and submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the assessee has not explained that if it was a case of business expenditure, in that case, the question of issuing mandate by Department of Public Enterprises would have not arisen. Accordingly, the AO has rightly disallowed CSR expenses in the case..." 14. Being aggrieved, the respondent/assessee preferred an appeal with the Tribunal. 14.1 The Tribunal, after noticing the grounds on which the appellant/revenue had disallowed the expenses incurred by the respondent/assessee towards CSR, which was that it was not in the nature of capital expenses and not wholly and exclusively incurred for the purpose of business, also adverted to whether or not Explanation 2 of Section 37(1) was retrospective in nature. 14.2 This aspect of the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 effective from 01.04.2014. Therefore, the amendment, no doubt, will apply prospectively. Thus, following the various judicial precedents cited before us, we hold that CSR expenses incurred by the assessee are allowable as deduction under section 37(1) of the Act. This ground is allowed." 15. In our view, as indicated above, Mr Rai's arguments vis-a-vis the allowability of deduction concerning expenses on CSR are flawed, for the following reasons: (i) Insofar as whether or not expenditure is capital in nature, as observed hereinabove, apart from a bald conclusion by the AO, there is nothing on record, which would show that the respondent/assessee had directed investment of funds, which were offered in fulfilment of discharge of its le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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