TMI Blog2021 (3) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made by the AO on account of disallowance of CSR expenditure. Revenue recognition - Interest on mobilisation advance - interest on the mobilization amount claimed by the assessee - hybrid method of accounting adopted over the years, the interest amount had to be treated as income HELD THAT:- An identical issue was considered by the Hon'ble Delhi High Court in assessee s own case [ 2016 (12) TMI 1842 - DELHI HIGH COURT] the entire matter is contentious in the sense that the third party - RPCL - which was awarded the contract claimed that it had performed it in accordance with the agreement with the parties. The assessee, however, felt otherwise and terminated the contract. There could be several likely outcomes in these proceedings many of them possibility impinging upon the rights of the assessee to receive advance amount itself along with interest either in whole or in part. In these circumstances, the ITAT s conclusions that there was no crystallized right to receive any particular amount or amounts, cannot be faulted. No question of law arises. Disallowance made u/s 14A - Non recording of satisfaction - HELD THAT:- As decided in own case 2021 (1) TMI 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excel Industries Ltd.(2013)358 ITR 295. (iii) That alleged claims is of contingent nature and there is no justification for any addition on factual or legal basis. (iv) That in any case, the impugned addition is in total disregard to decision of Hon ble Delhi High Court in appellant s own case for AY 2008-09 wherein deletion of identical addition by Hon ble ITAT has been upheld by High Court. 3(i). That on the facts and circumstances of the case, the CIT(A) was not justified in confirming disallowance u/s. 14A read with rule 8D to the extent of ₹ 57,52,225/-. (ii) . That impugned disallowance is without recording any satisfaction in terms of provisions of ' sub-section 2 3 of sec. 14A of the Income Tax Act, 1961 or any finding regarding claim of any such expenses. (iii) That even otherwise, there being no case of any claim of expenses in connection with earning of exempt income, the impugned disallowance is on illegal and arbitrary basis. 3. At the very outset, the ld. counsel for the assessee stated that all the issues involved in the appeal are fully covered in favour of the assessee and against the Revenue by the order of the Hon'ble Delhi High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of case. Neither AO nor ld. DR for the Revenue has controverted this fact. 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 existing provisions of section 37 of the Act. Even Explanation 2 to section 37(1) of the Act is prospective in nature to be effective from 01.04.2015 and is applicable to the expenses incurred with reference to section 135 of the Companies Act, 2013 that too after 01.04.2015, so Explanation (2) to section 37(1) of the Act is not applicable to the present case also. Moreover, expenses claimed by the assessee company have been incurred as per guidelines of the Ministry concerned with approval of the Board to the best business interest of the assessee company. So AO, without examining the nature of the expenses, disallowed the claim mechanically even by ignoring the rule of consistency. 18. Moreover, CSR expenses have been incurred by the assessee on the direction of the Government of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture deductible under s. 37(1). 9.7 The Commissioner 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. 19. Identical issue has also been decided by the coordinate Bench of the Tribunal in Hindustan Petroleum Corporation Ltd. vs. DCIT (2005) 96 ITD 186 (Mum.) by returning following findings:- It had been h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss can succeed in a greater measure with the aid of such goodwill'. [Para 9] Just because the expenditure was voluntary in nature and was not forced on the assessee by a statutory obligation, it could not cease to be a business expenditure. Therefore, the authorities below indeed erred in law in declining deduction of the expenditure incurred on 20-Point Programme which was, beyond dispute or controversy, at the instance of the Government, and was to discharge the assessee s obligations towards society as a responsible corporate citizen. [Para 10] 20. So, we find no illegality or perversity in the findings returned by the ld. CIT (A) in deleting the addition made by the AO on account of disallowance of CSR expenditure for AYs 2013- 14 2014-15. Ground No.2 of both the appeals filed by the Revenue are determined against the Revenue 8. Respectfully following the aforementioned findings, Ground No. 1 with all its sub-grounds is allowed. 9. Ground No. 2 relates to the disallowance of interest on mobilisation advance. 10. An identical issue was considered by the Hon'ble Delhi High Court in assessee s own case in ITA No. 404 of 2016 for A.Y 2008-09. The relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitrability of the dispute was questioned as there could be no doubt that under the contract, the mobilization advance was given by the assessee and therefore it was entitled to the interest. 4. It is evident from the above discussion that the entire matter is contentious in the sense that the third party - RPCL - which was awarded the contract claimed that it had performed it in accordance with the agreement with the parties. The assessee, however, felt otherwise and terminated the contract. There could be several likely outcomes in these proceedings many of them possibility impinging upon the rights of the assessee to receive advance amount itself along with interest either in whole or in part. In these circumstances, the ITAT s conclusions that there was no crystallized right to receive any particular amount or amounts, cannot be faulted. No question of law arises. The appeal is, therefore, dismissed. 11. Respectfully following the aforementioned findings of the Hon'ble Jurisdictional High Court, Ground No. 2 with all its sub grounds is allowed. 12. Ground No. 3 relates to disallowance made u/s 14A of the Act. 13. An identical issue was considered by the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so perused the orders of the lower authorities. During the course of assessment proceedings the assessee was asked that why provisions of Rule 8D should not be applied for disallowing some under section 14 A of the income tax act, despite the claim of the assessee that it has not incurred any expenditure for earning exempt income. According to the provisions of section 14A(2), the Ld. assessing officer before invoking the applicability of Rule 8D should have explained as to why the voluntary disallowances or no disallowances made by the assessee was unreasonable and unsatisfactory. We failed to find any such satisfaction recorded by the Ld. assessing officer. The satisfaction is mandatory in view of the judicial precedents of the jurisdictional High Court laid down before us by the Ld. authorized representative. Therefore, respectfully following the judicial precedent of the jurisdictional High Court we direct the Ld. assessing officer to delete the disallowance of ₹ 1125844/- under section 14A of the income tax act applying the provisions of Rule 8D of the Income Tax Rules, 1962. Reversing the finding of the Ld. first appellate authority, we allow ground No. 2 of the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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