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TMI Blog2024 (12) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... for undertaking CSR activities had been duly obtained by the assessee, for the impugned assessment year. Assessee is not able to utilise the funds for carrying out the CSR activities, then whether this would have implications u/s 68 - Looking into the specific provisions of section 68 in our view, section 68 has no applicability of the instant set of facts for the reasons that the identity and creditworthiness of the lender has been duly established, the purpose for which the amount was given to the assessee has also been established and the same has not been doubted, the assessee had also obtained the requisite approvals for carrying out CSR activities for the impugned year under consideration, the lender has also not claimed deduction in respect of this amount from its taxable income and also there is no specific assertion that this amount has flown back to the lender in any form whatsoever. Accordingly, CIT(Appeals) erred in facts and in law in confirming the applicability of section 68 - Assessee appeal allowed. - Smt. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Appellant : Shri Tushar Hemani, Sr. Advocate Shri Parimalsinh B. Parm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, nor did it provide any supporting documents concerning the utilization of the CSR funds. Given the assessee's failure to substantiate the genuineness of the transactions with documentary evidence, the AO treated the total amount of Rs. 9,60,00,000 received from Madhu Silica Pvt. Ltd. as unexplained cash credits under Section 68 of the Income Tax Act. The AO imposed tax on this amount at the rate of 60% as per Section 115BBE of the Income Tax Act. 4. In appeal, Ld. CIT(Appeals) observed that the assessee was incorporated only on October 25, 2021, and received large sums from Madhu Silica Pvt. Ltd. for CSR activities in March 2022, just a few months after its incorporation. The AO had highlighted in assessment order that the assessee was not registered under Section 12AA and had its application for approval under Section 80G had also been rejected. As a result, the AO had concluded that the assessee was not eligible to receive such large amounts under CSR and that these sums were not being utilized for the intended CSR purposes. Before Ld. CIT(Appeals), the assessee submitted that the assessee i.e. was Madhu Silica Foundation is an entity incorporated by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided the return of income for Madhu Silica Foundation and not the return filed by MSPL. Ld. CIT(Appeals) was of the view that the assessee received the CSR fund from MSPL, but no CSR activities were carried out during the financial year 2021-22, relevant to AY 2022-23. The amount received was simply kept in fixed deposits, and no portion of the funds was spent on actual CSR activities. This raised suspicions that the funds were being diverted from MSPL to its own group entity, i.e. the assessee, under the pretext of CSR expenditure, effectively circumventing the true purpose of CSR funds. Accordingly, Ld. CIT(Appeals) held that the AO had rightfully invoked the provisions of Section 68 of the Income Tax Act and treated the receipt of Rs. 9,60,00,000 as unexplained cash credits. This was for the reason that the assessee failed to provide adequate evidence to substantiate that the funds were utilized for CSR activities, as required by law. The appeal of the assessee was dismissed. 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). The Counsel for the assessee submitted that during the assessment proceedings, the AO did not question the id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving the identity and credibility of MSPL, the addition made by the AO under Section 68 was liable to be deleted. 6. In response, the Ld. DR placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order. The DR submitted that Ld. CIT(Appeals) has specifically observed that during the impugned year under consideration, it was only at the fag end of the year that the amount was received by the assessee. Further, it was submitted before us that the requisite approval for acting as CSR agency had not been received by the assessee at the time the funds were received by the assessee during the impugned year under consideration. It was only in the subsequent year that the approval for utilising the funds which were received by the assessee, was obtained. Further, from the facts placed on record, Ld. CIT(Appeals) also observed that the assessee has not been able to substantiate that it had duly fulfilled its obligation towards utilising the funds which were received, for carrying out corporate social responsibility even in the subsequent years. Therefore, looking into the instant facts, Ld. CIT(Appeals) had correctly confirmed the addition in the hands of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unable to utilise the funds for CSR activities, even then this amount would only partake the character of loan and not the income of the assessee and the assessee is under an obligation to return this amount back to the parent company, from whom the funds were received. Further, it was submitted before us by the counsel for the assessee that the amounts received by the assessee for CSR activities, had been utilised for the above purposes by the assessee, during the subsequent assessment years. However, looking into the specific provisions of section 68 of the Act, in our view, section 68 has no applicability of the instant set of facts for the reasons that the identity and creditworthiness of the lender has been duly established, the purpose for which the amount was given to the assessee has also been established and the same has not been doubted, the assessee had also obtained the requisite approvals for carrying out CSR activities for the impugned year under consideration, the lender has also not claimed deduction in respect of this amount from its taxable income and also there is no specific assertion that this amount has flown back to the lender in any form whatsoever. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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