TMI Blog2021 (10) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 11-8-2021 - SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI K.N. CHARY, JUDICIAL MEMBER Appellant by Sh. Ved Jain, Adv. Respondent by Sh. Vipul Kashyap, Sr.DR ORDER PER O.P. KANT, AM: This appeal by the assessee is directed against order dated 26/03/2018 passed by the Ld. Commissioner of Income- tax (Appeals)-28, New Delhi [in short the Ld. CIT(A) ] for assessment year 2014-15, raising following grounds: 1. On the facts and circumstances of the case, the order passed by learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and 2. (i) On the facts and circumstances of the case, the Id. CIT(A) has erred, both on facts and in law, in confirming the disallowance made by the Id. AO of₹ 572,32,442/- on account of expenses incurred on Corporate Social Responsibility. (ii)That the CIT(A) has erred in confirming the disallowance made by Ld. AO, rejecting the contention of the assessee that Explanation 2 to Section 37(1) having been inserted with effect from 01.04.2015 the same is not applicable in the relevant assessment year. (iii)That the disallowance has been confirmed despite the expenses having bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. In view of The Assessing Officer, the Explanation -2 to section 37(1) has prohibited allowance of corporate social responsibility expenses. According to the Assessing Officer, said explanation being classificatory in nature, it was applicable in the year under consideration also. The Ld. CIT(A) also upheld the finding of the Assessing Officer observing as under: 6.2 I have considered the facts of the issues, basis of disallowance made by AO and submissions of the appellant. It can be seen from the facts that the appellant has claimed CSR expenses of ₹ 575,32,442/- as expenditure incurred for the purpose of business and profession as per provisions of section 37(1) of the IT Act. However, it was clarified by the Legislature by inserting Explanation-2 in the said section with the initial words 'for the removal of doubts, it is hereby declared....' which means that clarification has been issued by this Explanation that the expenses incurred on CSR activities shall not be deemed to be an expenditure incurred for the purpose of business and profession. It has to mention here that the said Explanation is not an amendment to law which would be effective prosp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in case of M/s. HLL Lifecare Ltd. vs. ACIT in ITA No.123/Coch/2017 for AY 2012-13 order dated 11.06.2018 by returning following findings :- 9.5 The CSR expenses has been incurred as per the directions of Government of India. The Hon ble Kerala High Court in the case of Travancore Titanium Products Ltd. (supra) had held that a Government Undertaking is duty bound to comply with Governmental orders. The relevant findings of the Hon ble jurisdictional High Court reads as follows :- Being a company under the control of the Government, it is bound to comply with all the Government orders and the Board of Directors itself is constituted with the Government secretaries and other nominees as members. Therefore, the claim of deduction has to be considered with reference to the peculiar circumstances of the company which has no discretion in regard to the payment of the service charges to the government as it is bound to comply with the government orders. So much so, we are of the view that the parameters applicable in the case of a private company that too with respect to the claim for business expenditure, are exactly not applicable in the case of Public Sector C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the case of Mysore Kirloskar Ltd. v. CIT [1987J 166 ITR 836/ 30 Taxman 467. that while the basic requirements for invoking sections 37(/) and 80G are quite different , but nonetheless the two sections are not mutually exclusive. Thus, there are overlapping areas between the donations given by the assessee and the business expenditure incurred by the assessee. In other words, there can be certain amounts. though in the nature of donations, and nonetheless, these amounts may be deductible under section 37(1) as well. Therefore, merely because the expenditure in question was in the nature of donation, or, as per the words of the Commissioner (Appeals), prompted by altruistic motives , it did not cease to be an expenditure deductible under section 37(1). In the case of Mysore Kirloskar Ltd. (supra), the High Court had observed that even if the contribution by the assessee is in the form of donations, but if it could be termed as expenditure of the category falling in section 37(/), then the right of the assessee to claim the whole of it as a deduction under section 37(1) cannot be declined. What is material in this context is whether the expenditure in question was necessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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