TMI Blog2019 (4) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Fund (CBF) is undeniably out of sanctioned bill for contract works executed by the assessee. The business of the assessee, being execution of civil contracts of the State Government of Karnataka, in our view, the deduction of 0.1% thereof towards the Contractors Benevolent Fund (CBF) by the PWD / user Department on instructions of the State Government, even though not voluntary, is an amount incurred by the assessee wholly and exclusively in the furtherance and in the course of the assessee s business and consequently is expenditure to be allowed under section 37(1) - We consequently delete the disallowances for Assessment Year 2014-15 and Assessment Year 2015-16 made / upheld in respect of amounts incurred by the assessee toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein the assessee s income was determined at ₹ 5,68,44,360/-, in view of disallowance of expenditure of ₹ 8,14,397/- claimed towards Contractors Benefit Fund (CBF). The assessee s appeal was dismissed by CIT(A), Gulbarga vide order dated 29.11.2017. For Assessment Year 2015-16 , the assessee filed its return of income on 30.09.2015 declaring income of ₹ 7,60,66,840/-. The case was selected for scrutiny for this Assessment Year and the assessment was concluded under section 143(3) of the Act, vide order dated 29.11.2017 wherein the assessee s income was determined at ₹ 7,79,95,570/- in view of disallowance of expenditure of ₹ 9,28,728/- claimed under the head Contractors Benevolent Fund (CBF). The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be set aside and cancelled. DISALLOWANCE OF EXPENDITURE. 2.1. The Learned AO erred in disallowance the amount of ₹ 9,28,328/-, which was paid to the Contractors Benevolent Fund(CBF). 2.2. The Learned AO and the Learned CIT (A) have failed to appreciate that the expression, for the purpose of business appearing in section 37 is wider in scope than the expression, for the purpose of earning income, profits or gains , and expenditure voluntarily incurred for commercial expediency is allowable under the said section. 2.3. The Learned CIT(A) has failed to consider and adjudicate or distinguish the ratio decidendi of the decisions relied upon by the appellant in support of the contention that contribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been contributed voluntarily by the assessee, the said amounts having been deducted directly by the PWD from the bill amount sanctioned against civil contracts executed by the assessee, the same are to be allowed as a deduction under section 37(1) of the Act as the said expenditure towards Contractors Benevolent Fund (CBF) is incurred wholly and exclusively in connection with the assessee s business. 3.2.2 In support of the proposition that contribution by the assessee towards benevolent fund is entitled to deduction even though there is no compulsion to do so under any law, the learned AR placed reliance on the decision of the Hon ble Karnataka High Court in the case of CIT Vs. Motor Industries Co. Ltd., (2014) 43 taxmann.com 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y declared that for the purposes of sub-section (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 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. 3.4.3 The undisputed facts as emanate from the records and orders of the authorities below are that the assessee company is engaged in the business of executing civil contract works primarily for the State Government of Karnataka. It is also not disputed by the authorities below that the State Government of Karnataka had directed the PWD / user Department to deduct 0.1% of the sanctioned bill towards Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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