TMI Blog2020 (5) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing Total Taxable Income cannot be denied to assessee, subject to fulfillment of necessary conditions therein. AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, Income from Business and Profession . It has been submitted that some payments forming part of CSR were claimed as deduction under section 80G of the Act, for computing Total taxable income , which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing Total Taxable Income . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 80G of the Act provided the payment is made to eligible entities listed in Section 80G of the Act. 4. That the AO/CIT(A) failed to appreciate the fact that the obligations to incur expenditure on CSR activities flows from the Companies Act, 2013 which has no linkage with Section 80G of the Act. 5.That the AO erred in levying interest under Section 234C of the Act. 6.That the AO erred in initiating penalty proceedings under Section 271(1)(c) of the Act. The Appellant submits that the above grounds are independent of and without prejudice to one another. The Appellant craves leave to add to or alter, by deletion, substitution or otherwise, the above grounds of appeal, at any time before or during the hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an essential element to treat the amount to be donation. The disallowance made by Ld.AO was thus upheld. 6. Aggrieved by order of Ld.CIT (A), assessee is in appeal before us now. 7. Ld.AR submitted that all grounds raised are in connection to disallowing donation under section 80 G of the Act by holding it to be CSR expenses. 8. She submitted that sum of ₹ 1,81,63,031/- is debited to profit and loss account under schedule 24, as expenditure towards CSR responsibility. He submitted that out of the total expenditure a sum of ₹ 90,81,516/- is eligible for deduction under section 80 G of the Act. She submitted that donation are in the nature of donation under section 80G of the Act and therefore is eligible for deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. 12. This amendment will take effect from 1/04/2015 and will, accordingly, apply to assessment year 2015-16 and subsequent years. 13. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head Income form Business and Profession . Further, clarification regarding impact of Explanation 2 to section 37(1) of the Income Tax Act in Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as under: The existing provisions of section 37(1) of the Act provide that deduction for any expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of plant, machinery and furniture Section 32 provides for depreciation on tangible assets like building, machinery, plant, furniture and also on intangible assets like know-how, patents, trademarks, licenses. Section 33 allows development rebate on machinery, plants and ships. Section 34 states conditions for depreciation and development rebate. Section 35 grants deduction on expenditure for scientific research and knowledge extension in natural and applied sciences under agriculture, animal husbandry and fisheries. Payment to approved universities/research institutions or company also qualifies for deduction. In-house R D is eligible for deduction, under this section. Section 35CCD provides deduction for skill d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, Income from Business and Profession . 17. For claiming benefit under section 80G, deductions are considered at the stage of computing Total taxable income . Even if any payments under section 80G forms part of CSR payments( keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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