TMI Blog2020 (11) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 - ITAT RAIPUR] ITAT held that the amendment in question is not retrospective. Expenditure incurred in CSR in accordance with guidelines issued by the Govt. of India is allowable as a deduction for both A.Y. 2013-14 and A.Y. 2014-15. In view of the above discussion, we are of the considered view that there is no error in the order of the Assessing Officer passed u/s 143(3) of the Act in both the assessment year, much less an error, in so far as it is prejudicial to the interest of Revenue. Thus we cancel the orders passed by the Pr. CIT u/s 263 - Decided i favour of assessee. There is no error in the order of the Assessing Officer passed u/s 143(3) of the Act in both the assessment year, much less an error, in so far as it is prejudicial to the interest of Revenue. Thus we cancel the orders passed by the Pr. CIT u/s 263 - Decided in favour of assessee. - I.T.A. Nos. 1099 & 1100/Kol/2018 - - - Dated:- 20-11-2020 - Shri J. Sudhakar Reddy, Hon ble Accountant Member And Ms. Madhumita Roy, Hon ble Judicial Member For the Assessee : Shri Sanjoy Bhattacharya, Advocate For the Revenue : Shri Vijay Shankar, CIT ORDER PER J. SUDHAKAR REDDY: AM Both thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim for deduction of CSR Expenses aggregating to ₹ 3,00,54,276. So, it may kindly be appreciated that during the assessment proceeding itself the Assessing Officer had enquired into the allowability of CSR Expenses and then decided upon allowing the same while making the assessment. As stated hereinabove, it may kindly be appreciated that it would be wrong to consider that the Assessing Officer had passed the Assessment Order without making enquiries or verification in regard to the allowability of CSR Expenses for the Assessment Year 2013-14. 2. As earlier explained by GRSE during the assessment proceedings before the Assessing Officer, the reason for incurring the CRSE Expenses, is being repeated hereunder: GRSE has been carrying on its business, i.e., Construction and Repairs of Ships mainly for the Indian Navy, in Reach and Kidderpore areas. For facilitating the business of GRSE in Garden Reach and Kidderpore areas, it had been necessary for GRSE to take up certain activities for the benefit of the people residing in the said locality. Accordingly, GRSE had to arrange for Vocational Training for local unemployed youths through Bengal National Engineering C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular Act became effective only from 1st April, 2014. Hence, the present Assessment Year being 2013-14 during which the above-mentioned Act of 2013 had not been applicable, there cannot be any application of this newly inserted Explanation 2 to section 37(1) in the case of GRSE. It is further submitted that since the Government brought the amendment by way of an insertion of new Explanation 2 to section 37(1) in relation to CRS Expenses that would be incurred on or after 01/04/2014, there cannot be any assumption as regards any alleged retrospective applicability of the said new Explanation 2. It is clear that the Government s desire had been to prohibit allowing of CSR Expenses only in respect of such expenses incurred on or after 01/04/2014 and therefore, any CSR Expense that had been incurred prior to 01/04/2014, should be considered as having been allowable u/s 37(1). It is needless to mention here that whenever any restriction is brought to any Statute, it is always understood that prior to making effective of that restriction from a particular date, the acts carried out before that date, have to be considered as not having any restriction of any nature. In this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court and Hon ble High Court and in accordance with the amendment made in section 263 of the Act with effect from 01.06.2015, I hold that the impugned assessment order dated 30.01.2016 passed by the AO is erroneous in so far as it is prejudicial to the interests of the revenue. I further hold, after giving the assessee an opportunity of being heard, that the impugned assessment order dated 30.01.2016 is liable to set aside. Therefore, I set aside the said assessment order directing the present A.O. to frame the assessment afresh after considering the aforesaid observations. Hon ble Supreme Court and Hon ble High Court decisions and as per law. Aggrieved the assessee is in appeal before us. 7. After hearing rival contention we hold that the issue in question is covered by the order of the Kolkata A Bench of the Tribunal in the case of Hindustan Copper Ltd. vs CIT, LTU-1, ITA No. 900/Kol/2018 order dated 29.01.2020 held as follows: 4. Coming to merits, we notice that the PCIT s revision directions under challenge have placed reliance on the statutory amendment in sec. 37 by way of Explanation-2 inserted by the Finance (No.2) Act,2014 w.e.f. 01.04.2015 that such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment of the Hon ble jurisdictional High Court in the case of Travancore Titanium Products Ltd. (187 Taxman 81) for the proposition that when Government issues orders, the assessee being a Government company, was duty bound to comply with such orders. It was further explained that Explanation 2 to section 37(1) of the I.T. Act was applicable only for and from assessment year 2015-2016 and for the relevant assessment year, the said Explanation does not have any application. The assessee also relied on the order of the Raipur Bench of the Tribunal in the case of ACIT v. Jindal Power Limited [ITA No.99/BLPR/2012 order dated 23rd June, 2016]. 6. The CIT, however, rejected the contentions / objections of the assessee and passed order u/s 263 of the I.T. Act on 09.02.2017. The CIT set aside the assessment order u/s 143(3) for fresh examination on the limited issue of deduction of ₹ 44.69 lakh claimed as CSR expenses. 7. Aggrieved by the order of the CIT passed u/s 263 of the I.T. Act, the assessee has filed the present appeal before the Tribunal. The learned AR has filed paper book comprising of 55 pages including the ledger account. Copy of the CSR expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he activities relating 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 the business or profession. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years. (emphasis supplied) 9.3 The ITAT, Raipur Bench in the case of Jindal Power Ltd (supra) had held that Explanation 2 to section 37(1) of the I.T. Act is prospective. The relevant findings of the Tribunal reads as follows:- This disabling provision, as set out in Explanation 2 to Section 37(1), refers only to such corporate social responsibility expenses as under Section 135 of the Companies Act, 2013, and, as such, it cannot have any application for the period not covered by this statutory provision which itself came into existence in 2013. Explanation 2 to Section 37(1) is, therefore, inherently incapable of retrospective application any further. 9.4 It was specifically mentioned in the notes on clauses explaining the Finance Bill 2014, that the Explanation 2 is applicable only from the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income tax had mentioned in his order that the Apex Court (313 ITR 334 SC) CIT Vs Madras Refineries Ltd., while hearing the allowability of CSR expenses observed that neither the High Court nor the Tribunal concerned had given specific finding to the effect that the said CSR expenditure is allowable as business expenditure . In the above mentioned case, the Apex court has not given any decision on merits of the case. It had only given an observation and remitted the issue back to the Tribunal to give specific finding to the effect that the said CSR expenditure is allowable as business expenditure. 9.8 Since, the assessee had incurred CSR expenses to comply with the directions of Govt. of India, following the above observations made by High Court of Kerala and ITAT, Mumbai Bench, the expenditure incurred is incidental to the assessee s business and ought to be allowed as deduction u/s 37 of the I.T. Act. 9.9 Therefore, the A.O. had taken a possible view and the assessment order cannot be stated to be erroneous or prejudicial to the interest of the Revenue, warranting interference u/s 263 of the I.T. Act. Therefore, we set aside the impugned order of the CIT pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer had called for and obtained explanation for CSR expenses incurred by the assessee. The explanation given by the assessee before the AO is extracted by it, in its reply to the Principal Commissioner of Income Tax u/s 263 of the Act. This is not a case where there was no enquiry on this issue by the A.O. It is also not a case of non-application of mind nor in the case where the Assessing Officer had not examined these particular expenses claimed by the assessee, as alleged in point No. (ii) of the show cause notice by the Pr. CIT. Though the Pr. CIT had made this allegation in his Show Cause Notice, no such finding has been given by the Pr. CIT in his order u/s 263 of the Act. Admittedly, the expenditure in question is audited and is allowable as deduction. The amendment brought about by way of Explanation 2 to section 37 by Finance Act, 2014, was only with effect from 01.04.2015. In the case of Misrilall Mines Pvt. Ltd. ITA No. 738/Kol/2017 and in the case of ACIT vs Jindal Power Ltd., Raipur Bench, ITA No. 99/BLPR/2012 order dated June 23rd, 2016, the ITAT held that the amendment in question is not retrospective. Expenditure incurred in CSR in accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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