TMI Blog2019 (7) TMI 1939X X X X Extracts X X X X X X X X Extracts X X X X ..... acts being identical and the grounds of appeal being same, our decision for AY 2011-12 applies mutatis mutandis to AY 2012-13. Corporate social responsibility expenses - allowable business expenses u/s 37(1) - expenses as explained by the assessee before the AO were mainly related to expenses incurred on construction of school building, devasthan/temple, drainage, barbed wire fencing, education schemes and distribution of clothes etc. voluntarily - HELD THAT:- We are of the considered view that the Ld. CIT(A) has rightly allowed u/s 37(1) the expenses claimed by the assessee. Moreover, the decision in Jindal Power Ltd. [ 2016 (7) TMI 203 - ITAT RAIPUR] is applicable to the instant case. Accordingly, we dismiss the above grounds of appeal. - ITA No. 2808/MUM/2018, ITA No. 2809/MUM/2018, ITA No. 3334/MUM/2018 - - - Dated:- 24-7-2019 - Shri Ravish Sood (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Revenue : Mr. Manjunath Swami, CIT-DR. For the Assessee : Mr. Karthik Natrajan, AR. ORDER PER N.K. PRADHAN, AM The captioned appeal for the assessment year 2013-14 by the Revenue and cross appeals- one filed by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the assessee in the form of refund of VAT after the commencement of commercial production and on the basis of sales is nothing but revenue receipt which helps the assessee to reduce the cost of business and run the business profitably. Therefore, the AO treated the IPS subsidy of Rs.179,77,51,676/- as revenue receipt and added it back to the total income of the assessee. 2.2 In appeal, the Ld. CIT(A) followed the order of his predecessor-in-office for AY 2011-12 and AY 2012-13 and held that subsidy received by the assessee was capital in nature because the same was received for setting up of or for expanding existing industries in the developing reasons of Maharashtra. Therefore, he directed the AO to delete the addition of Rs.179,77,51,676/-. 2.3 Before us, the Ld. counsel of the assessee submits that the above issue is decided in favour of the assessee by the order of the Tribunal dated 28.01.2018 in assessee s own case for AY 2011-12 and AY 2012-13. On the other hand, the Ld. DR supports the order passed by the AO. 2.4 We have heard the rival submissions and perused the relevant materials on record. The same issue arose before the Tribunal in asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods manufactured in an industrial unit which is a new unit located in a specified backward area, and such exemption was allowed for a period of six years. In the year 1990, a new subsidy regime for industrial promotion was evolved. This envisioned various incentives to new units that were to be encouraged in certain parts of the State. The assessee s unit came up in a backward area and thus the enterprise setting up a new unit, could claim sales tax exemption for a certain number of years. The scheme did not place any condition but merely stated that the collection could be retained to the extent of 100 per cent. of capital expenditure. The Assessing Officer held that the amount received by way of sales tax exemption was taxable. On appeal the Commissioner (Appeals) allowed the assessee s claim. The Commissioner (Appeals) held that the amount of sales tax collected as incentive for setting up industries in backward areas was not subject to tax as a trading receipt; but rather was to be towards establishment of the new unit and buy machinery. Consequently, the Commissioner (Appeals) deleted the amount added by the Assessing Officer. The Revenue s appeal before the Appellate Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is a 100% subsidiary of Mahindra Mahindra Ltd. Between 2008 and 2010, it set up a plant for the manufacture of four wheelers, trucks and construction equipment. Commercial production from this new unit started on 13.01.2010. As per page 40-68 of the P/B, the Government of Maharashtra, Industries, Energy and Labour Department, continuing with the practice followed by it since 1964, passed a resolution on 30.03.2007, enhancing what is popularly known as the Package Scheme of Incentives 2007. As per the EC issued by the Directorate of Industries on 24.01.2011, the assessee was entitled to IPS equivalent to 100% of the eligible amount of fixed capital investment made by it or the taxes paid by the assessee to the GOM within a period of 20 years, whichever is lower. As per item 12 of the EC, period for making admissible investment is from 16.01.2007 to 15.01.2015. It is found that 16.01.2007 is the date of the MOU entered into with GOM as referred to in the EC itself. Therefore, the origin of the entire arrangement dates back to pre-setting up of the new unit and not to the commencement of commercial production. Upon receipt of the EC, the Directorate of industries disbursed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us the 1st 2nd grounds of appeal filed are dismissed. 3. The remaining grounds of appeal relate to CSR expenditure and these are as under: 3. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in allowing the expenses incurred for medical camps, schools provision of water supply after holding that these were incurred for the purpose of the business without appreciating that these expenses were social and medical in nature and were not incurred wholly and exclusively for the purpose of business of the assessee. 4. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in allowing the expenses incurred for medical camps, schools provision of water supply after holding that these were incurred for the purpose of the business without appreciating that that the assessee has not provided the documents to establish that the end user of these expenses were the employees of the assessee company. 5. On the facts and in the circumstances of the case and in taut, Ld. CIT(A) has erred in allowing the expenses incurred for donating the bus electric vehicle after holding that these were incurred for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee helmets to promote the safety while driving, expenditure of Rs.6,40,080/- incurred on custom driving simulator, expenditure of Rs.2,71,256/- incurred on electric vehicle given to Nehru Centre for advertisement purpose, expenditure of Rs.9,75,053/- on bus donation to Bandhavgarh National Park for advertisement and creating awareness about fuel efficiency can easily be held for the purpose of business and thus allowable u/s 37(1), (ii) so far as expenditure of Rs.20,09,308/- incurred on project Bandhan is concerned, since the camp was organized in the area around the factory, employees have also benefited from the same and expenditure creates goodwill for the assessee and accordingly the same is allowable as business expenses, (iii) the same is true for other expenditure of Rs.22,78,196/- incurred by the assessee mainly towards bore wells and pipeline to restore water supply to village Padali-Parner Taluka, where the employees of the company reside and activities with PCMC traffic police for road safety awareness programme, which is allowable u/s 37(1) and (iv) so far as expenditure of Rs.4,00,000/- towards door step school is concerned, the same has been incurred for books dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction of school building, devasthan/temple, drainage, barbed wire fencing, education schemes and distribution of clothes etc. voluntarily. The Tribunal vide order dated 23.06.2016 held as under: We have also noted that the amendment in the scheme of Section 37(1) is not specifically stated to be retrospective and the said Explanation is inserted only with effect from 1st April 2015. In this view of the matter also, there is no reason to hold this provision to be retrospective in application. As a matter of fact, the amendment in law, which was accompanied by the statutory requirement with regard to discharging the corporate social responsibility, is a disabling provision which puts an additional tax burden on the assessee in the sense that the expenses that the assessee is required to incur, under a statutory obligation, in the course of his business are not allowed deduction in the computation of income. This disallowance is restricted to the expenses incurred by the assessee under a statutory obligation under section 135 of Companies Act 2013, and there is thus now a line of demarcation between the expenses incurred by the assessee on discharging corporate social re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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