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TMI Blog2023 (10) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... dama India Private Limited, Plot No. D-2/CH-1, GIDC Estate, Dahej, Tal-Vagra, Dahej, Bharuch-392130 Gujarat (hereinafter referred to as 'the appellant'), holding GSTIN: 24AABCM8797N1ZO, are suppliers of insecticides, fungicides and herbicides. 5. The appellant submitted that as per Section 135 of the Companies Act, 2013, it has been spending the mandatory amount on Corporate Social Responsibility [for short 'CSR'] activities in the form of donations to the Government relief funds/ educational societies, civil works or installation of plant and machinery items in schools or hospitals, distribution of food kits etc,; that the vendors who supply goods/services to the appellant for the purpose of undertaking the CSR activities charge GST on their output supplies; that the appellant intends to avail the Input Tax Credit (ITC) of the inputs and input services being procured for the purpose of undertaking the CSR activities. 6. The appellant sought advance ruling on the following questions: a. Whether the inputs and input services procured by the appellant, in order to undertake the mandatory CSR activities as required under the Companies Act, 2013, qualify as being in the course and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities undertaken in pursuance of normal course of business of the company" (b) No reasons has been provided by GAAR as to why the CSR activities are not done in the course and furtherance of business and are hence not eligible to be availed as ITC as per Section 16(1) of the CGST Act. The GAAR has simply relied upon the CSR Rules and has observed that the definition of CSR activities state that the same is not in the 'normal course of business' and therefore ITC for the said activities is also disallowed since the same is not in the "course and furtherance of business' as required under the GST law. However GAAR has failed to assign any nexus or relationship between the definition of CSR activities as provided in the CSR Rules and the criteria for availing the ITC enshrined in Section 16(1) of the CGST Act. (c) GAAR has grossly erred in interpreting the expressions "normal course of business' and "in the course of and furtherance of business'. It is pertinent to note that every registered person under GST can avail the ITC of inputs and input services subject to fulfilment of criteria laid down as per Section 16 of the CGST Act. However, inter-alia, the first and foremost c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipore India Pvt. Ltd. [2012 (26) STR 514 (Kar.)] wherein it was held by the Karnataka HC that the CSR expenses being a statutory obligation are connected with the business since its cost form part of the finished goods being manufactured by a business. (i) As mentioned in para 8 of the GAAR order, the SGST department concurs with the view of the appellant that CSR activities are used in the course and furtherance of business and therefore ITC of inputs and input services utilized towards the mandatory 2% spending of CSR fund as required under the Companies Act must be allowed to the appellant. Thus where the revenue department has agreed that the ITC pertaining to CSR activities can be availed by the appellant, they cannot Hip Hop and pronounce a contrary advance ruling inconsistent with their own view'. 9. During the course of virtual personal hearing held on 06.01.2023 and 26.07.2023, the authorized representative for the appellant, Shri Gorky Tiwari reiterated the submissions made in their appeal and also submitted that the GAAR, without assigning any reasons, denied the eligibility of ITC on CSR activities; that CSR related expenses are in course and furtherance of business; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the application for condonation of delay filed by the appellant alongwith the appeal, the appellant submitted that the delay has occurred on account of ill health of their staff looking after litigation work because of Covid-19 and thereafter the resources were fully engaged in GST year end activity, further due to Covid-19 pandemic, the company was operating on a limited staff. The appellant requested to condone the delay in terms of provisions to Section 100 of CGST Act, 2017, wherein the appellate authority has been vested with power to condone delay upto 30 days if the appellant was prevented by a sufficient cause from presenting the appeal within thirty days of receipt of order. We find sufficient cause to condone the delay of 30 days in filing the appeal after expiry of appeal period on 23.09.2021. 12. Even otherwise, as per Order dated 10.01.2022 of Hon'ble Supreme Court in Mise. Application No. 21 of 2022 in Misc. Application No. 665 of 2021 in Suo Moto Writ Petition (C) No.3 of 2020, the period from 15.03.2020 till 28.02.2022 shall stand excluded in computing the period of limitation and all persons shall have a limitation period of 90 days from 01.03.2022. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or India al international level; (iii) contribution of any amount directly or indirectly to any political party under section 182 of the Act; (iv) activities benefiting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019); (v) activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services; (vi) activities carried out for fulfilment of any other statutory obligations under any law in force in India;" As submitted by the appellant in their appeal memorandum they fulfill the criteria laid down under Section 135 of the Companies Act, 2013 as aforementioned; that they have been spending the mandatory amount on CSR activities in the form of donations to the Government relief funds/educational societies, civil works or installation of plant and machinery items in schools or hospitals, distribution of food kits etc.. 15. The appellant is therefore mandated to spend on CSR activities. Before examining whether ITC is available to the appellant for the inputs and input services procured to undertake mandatory CSR activities, it would be prudent to reproduce the relevant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 1961, any expenses incurred by an assessee on corporate social responsibility activities as given under Section 135 of the Companies Act, 2013 shall not be considered to be an expense incurred by the assessee for the objectives of the company or profession. Hence when the same does not amount to business expenditure and ITC cannot be claimed on such expenditure. 17. On going through the Agenda of the 48th GST Council Meeting dated 17.12.2022 [Volume l], Agenda Item 7(xvi), it is observed that the Law Committee in its meeting held on 5.12.2022 opined that ITC in respect of CSR expenditure. incurred by Companies u/s 135 of Companies Act, 2013, should not be allowed. The Law Committee further recommended that to unambiguously state such a position, such CSR expenditure may be included in the list of blocked credit u/s 17(5) of the CGST Act, 2017. Thereafter in the Minutes of the 48th Meeting of the GST Council, it is clearly mentioned that the Council agreed with the recommendation of the Law committee in the matter. This substantiates our finding above. We further find it apt to reproduce the wordings of the Hon'ble High Court of Delhi in the case of Manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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