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TMI Blog2023 (2) TMI 1335X X X X Extracts X X X X X X X X Extracts X X X X ..... RAIPUR] has already held that the introduction of explanation 2 to sec. 37(1) of the Act w.e.f. from 1st August, 2015 cannot be held to be retrospective in operation. Therefore, the expenditure incurred by assessee on account of CSR and substantive development expenses as envisaged u/s. 135 of the Companies Act, 2013 need to be allowed as deduction. CSR and substantive development expenses which the assessee company was obliged to discharge because it was a statutory obligation upon the assessee company so, the deduction should have been allowed as per the law in force for this assessment year and we direct the AO to allow the expenditure. Therefore, the appeal of assessee is allowed. - SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI SONJO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter connected, therefore, the sole issue of assessee in this appeal is against the action of ld. CIT(A) in forming the disallowance claimed by the assessee company as CSR sustainable development expenses u/s 37(1) of the Act (hereinafter referred to as the Act ) to the tune of Rs. 3,00,00,000/- and Rs. 53,64,000/- respectively. 3. Brief facts of the case are that on perusal of accounts submitted by the assessee, during the course of assessment proceedings, the AO observed that an amount of Rs. 3,00,00,000/- have been debited under the head Corporate Social Responsibility (CSR) and Rs. 53,64,000/- under the head of sustainable expenses. On a specific query raised by AO on these issues, the assessee in its submission dated 29.12.2015 submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no specific provision in the Act for disallowance of such expenses incurred by the assessee prior to AY 2015-16. The amendment in section 37(1) of the Act is not a retrospective amendment. 4. However, the AO was of the opinion that the CSR and substantive development expenditure are not allowable as deduction u/s 37(1) of the Act and added back the same to the total income of the assessee. 5. Aggrieved by the above order, assessee preferred an appeal before the ld. CIT(A) and confirmed the action of the AO and dismiss the appeal of the assessee. 6. Aggrieved assessee is in appeal before us. 7. We have heard the rival submission and gone through the facts and circumstances of the case, we note that the AO after taking note that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression of care and concern for the society at large and the locality in which business is located in particular. Being a good corporate citizen brings goodwill of the local community as also with the regulatory agencies and society at large, thereby creating an atmosphere in which the business can succeed in a greater measure with the aid of such goodwill (CIT v. Madras Refineries Ltd. [2004]266 ITR 170, Sri Venkata Satyanarayna Rice Mill Contractors Co. v. CIT [1997] 223 ITR 101, Hindustan Petroleum Corporation Ltd Vs DCIT [(2005) 96 ITO 186 (Bom)] (iii) The amendment in the scheme of Section 37(1), which has been introduced with effect from 1st April 2015, cannot be construed as to disadvantage to the assessee in the period prior to thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard not backward (iv) It may appear to be some kind of a dichotomy in the tax legislation but the well settled legal position is that when a legislation confers a benefit on the taxpayer by relaxing the rigour of pre-amendment law, and when such a benefit appears to have been the objective pursued by the legislature, it would a purposive interpretation giving it a retrospective effect but when a tax legislation imposes a liability or a burden, the effect of such a legislative provision can only be prospective. We have also noted that the amendment in the scheme of Section 37(1) is not specifically stated to be retrospective and the said Explanation is inserted only with effect from 1st April 2015. In this view of the matter also, there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot apply on the facts of this case. 8. Respectfully following the ratio laid by the Coordinate bench of this Tribunal, we note that since the CSR expenditure are mandatory for companies incorporated as per the Companies Act, 2013 and the expenditure have been incurred by the assessee as envisaged under the Companies Act, 2013. So we are of the opinion that it has to be allowed and we take note that the Tribunal in Jindal Power Ltd., (supra), has already held that the introduction of explanation 2 to sec. 37(1) of the Act w.e.f. from 1st August, 2015 cannot be held to be retrospective in operation. Therefore, the expenditure incurred by assessee on account of CSR and substantive development expenses as envisaged u/s. 135 of the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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