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2022 (6) TMI 681 - ITAT DELHIDisallowance of Corporate Social Responsibility (CSR) expenses u/s 37(1) - HELD THAT:- As per section 135 of the Companies Act, 2013, every company having net worth of Rs. 500/- crores or more, or turnover of Rs. 1000/- crores or more, or a net profit of Rs. 5 crores or more during the immediately preceding financial year has to spent a certain percentage out of their profit towards CSR activities. Prior to amendment to section 37(1) of the Act by the Finance Act, 2014 by insertion of Explanation – 2, CSR expenses were allowed as deduction under section 37(1) of the Act, as, there was no specific bar either u/s 37(1) of the Act or under any other provision for claiming deduction for CSR expenses. There are number of judicial precedents which have expressed the aforesaid view, some of these decisions have been cited before us by learned counsel for the assessee. Thus, prior to insertion of Explanation – 2 to section 37(1) of the Act, w.e.f., 01.04.2014, as per settled legal position, it is an allowable expenditure under Section 37(1). A specific bar for allowing such expenditure u/s 37(1) of the Act was brought to the statue by Finance Act, 2014 effective from 01.04.2014. The amendment, no doubt, will apply prospectively. Thus, following the various judicial precedents cited before us, we hold that CSR expenses incurred by the assessee are allowable as deduction under section 37(1). Disallowance made under section 14A read with Rule 8D - assessee suo motu worked out the disallowance under section 14A by applying the methodology provided under Rule 8D(2)(iii) - HELD THAT:- Undisputedly, while computing the income in the return of income filed for the impugned assessment year, the assessee has suo motu disallowed an amount of Rs.3.50 crores under section 14A read with Rule 8D. However, in course of assessment proceeding, the assessee filed a revised working of disallowance under rule 8D(2)(iii) by computing the disallowance of Rs.5.33 lakhs. While AO completely ignored the revised computation - Commissioner (Appeals) rejected assessee’s claim. Before us, learned counsel for the assessee submitted that the methodology adopted by the assessee in the revised computation of disallowance under section 14A read with Rule 8D was also adopted by the assessee in assessment years 2008-09 and 2009-10 and while giving effect to the direction of the learned Commissioner (Appeals), the AO has adopted such methodology and computed disallowance under Section 14A read with Rule 8D. We direct the Assessing Officer to examine the revised computation of disallowance under section 14A read with Rule 8D of the Act as filed by the assessee and if it is found similar to the methodology adopted by the assessee in assessment years 2008-09 and 2009- 10, which, as submitted, were accepted by the AO while giving effect to the orders of Commissioner (Appeals) in assessment year 2008-09 and 2009-10, assessee’ claim may be accepted. Appeal is allowed for statistical purposes. We direct the AO to examine the revised computation of disallowance under section 14A read with Rule 8D of the Act as filed by the assessee and if it is found similar to the methodology adopted by the assessee in assessment years 2008-09 and 2009- 10, which, as submitted, were accepted by the AO while giving effect to the orders of Commissioner (Appeals) in assessment year 2008-09 and 2009-10, assessee’ claim may be accepted. Needless to mention, assessee must be provided due opportunity of being heard before deciding the issue. This ground is allowed for statistical purposes.
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