TMI Blog2022 (12) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessment year 2015-2016 and the subsequent years. If there was any doubt, the same has been removed both by the memorandum issued along with the Finance Bill, as well as the aforementioned circular issued by the CBDT. It is well established that circulars are binding on the revenue. [See: Catholic Syrian Bank [ 2012 (2) TMI 262 - SUPREME COURT] ] Therefore, for the appellant/revenue to contend in the aforementioned appeals, that the Tribunal had erred in law in sustaining the deduction claimed by the respondents/assessees u/s 37(1) of the Act is an argument, which cannot be accepted. Accordingly, the question of law is decided against the appellant/revenue and in favour of the respondents/assessees. - ITA 268/2022 ITA 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. ITA No.268/2022 2013-2014 2. ITA No.269/2022 2014-2015 3. ITA No.270/2022 2013-2014 3. The expenses incurred by the respondents/assessees in the aforementioned Assessment Years (AYs), which were disallowed by the assessing officer in each of the assessment years are detailed out hereafter: Item No. Title of the case Assessment Year Amount of CSR expenditure in question 1. PCIT-7 Vs PEC Limited 2013-2014 Rs. 3,79,19,732- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Tribunal has relied upon Circular No.1 dated 21.01.2015 to reach a conclusion that the amendment brought about in Section 37(1) of the Act by way of Explanation 2 would not operate vis- -vis the assessment years in issue. 5.2 The Tribunal s view, in this regard, emerges upon a perusal of paragraph 17 of the order dated 12.01.2021 passed in ITA No.269/2022. For the sake of convenience, the said observations are extracted hereafter: 17. AO has disallowed claim of the assessee company qua CSR expenditure by misinterpreting the provisions contained under section 37(1) of the Act by observing that since CSR expenditure is not incurred for the purpose of carrying on the business, such expenditure cannot be allowed under the exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to corporate social 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 business or profession. 7. A plain reading of the aforesaid extract of Section 37 would show, that in order to claim deduction under Section 37 of the Act, the expenditure incurred should be one that: (i) Does not fall in any of the provisions referred to therein i.e., Sections 30 to 36. (ii) Should not be in the nature of a capital expenditure or personal expenses of the assessee. (iii) And lastly, the expenditure should have been laid out or expended wholly or exclusively for the purposes of business or profession. 7.1 If these conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditures cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under section 37. However, the CSR expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under said section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Income-tax Act shall be allowed as deduction under those sections subject to fulfillment of conditions, if any, specified therein. 13.4 Applicability:- This amendment takes effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years. [ Emphasis is ours] 12. Clearly, if there was any doubt, the same has been removed both by the memorandum issued along with the Finance Bill, as well as the aforementioned circular issued by the CBDT. 13. It is well established that circulars are binding on the revenue. [See: Catholic Syrian Bank Vs. C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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