TMI Blog2022 (8) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... financial years on Corporate Social Responsibility. There is no pleading that the company has spent more than the amount as it was required to spend as per the provisions of Section 135 of the Companies Act in an earlier years which, as per the provisions of sub-Section 5 to Section 135 of the Companies Act, can be set off against the requirement of Corporate Social Responsibility in succeeding three financial years. Hence, there is nothing on the file to show that the assessee had incurred more than the required expenditure on CSR in earlier years which could have been set-off against the liability on CSR of the current year. Even otherwise, there is nothing on record to show that the assessee company was exempt from spending any amount on Corporate Social Responsibility as required under Section 135 of the Companies Act. The matter is restored to the file of the ld. AO to verify the aforesaid contention of the assessee that the assessee was not required to spend any amount under Section 135 of the Companies Act on Corporate Social Responsibility and, further, that whether the amount spent by the assessee on Corporate Social Responsibility during the year was over and ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Harendra Nath Biswas vs. DCIT in ITA No.186/Kol/2021 by the order dated 16.07.2021. The ld. D/R could not show any decision contrary to the case law cited by the ld. Counsel for the assessee. 3.1. We find that the issue is covered in favour of the assessee as the assessment year involved is AY 2017-18 and the Explanation- 5 inserted by Finance Act, 2021 to Section 43B w.e.f. 01.04.2021 is not applicable to the assessment year under consideration. The relevant portion of the Coordinate Bench decision of the Tribunal in the case of Harendra Nath Biswas vs. DCIT (supra) for the sake of reference is reproduced as under: 2.The sole grounds of appeal raised by the assessee is against the Ld. CIT(A) in confirming the action of AO who disallowed/added back a sum of Rs. 1,10,62,263/- on account of delayed deposit of employees contribution to PF and ESI under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961 ( hereinafter referred to as the Act) despite the assessee contributing/depositing the same before the due date of filing of return of income under Section 139(1) of the Act. 3.Brief facts of the case is that the CPC while processing the return dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition by the AO on account of Employees Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not. It appears that the Tribunal below, in view of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ITR 306, held that the deletion was justified. Being dissatisfied, the Revenue has come up with the present appeal. After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec 43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has submitted that the aforesaid expenditure was incurred by the assessee company for the purpose of business. He, in this respect has invited our attention to the submissions made before the ld. CIT(A, which read as under: Further it is submitted that the assessee company has to maintain adequate and cordial relationship with the local community, land owners and authorities in order to get their acceptability for the growth and sustenance of an organization. Most of assessee company s employees belong to local place where business facilities are situated. It becomes necessary to uplift their living standards, educate them and develop their skills so that company should not face any issues to get the required skilled manpower even in the future. Further, in order to attract, retain, motivate employees, increase employee morale and give a sense of belonging to the organization, the assessee company took initiatives to indulge itself in social activitiesfor its benefit. The assessee was of an opinion that good employee and community relations can lower its employee turnover rate and Improve employee motivation. Additionally, it will help firms in attracting new staff members. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than (i) above 3.01 2.52 Total 3.01 2.52 4.4. The ld. Counsel for the assessee inviting our attention to the above chart has submitted that the assessee was not required to spend Corporate Social Responsibility expenditure under Section 135 of the Companies Act. The aforesaid expenditure was incurred by the assessee in addition to any statutory liability to incur the same. He has, further, referring to above submissions, submitted that the aforesaid expenditure was incurred for the upliftment of living standards, education and development of skills of the locals for peaceful existence with the neighbouring locality to attract, retain and motivate employees and to create a healthy working atmosphere. He, in this respect, has relied upon the decision of the Hon ble Gujarat High Court in the case of PCIT vs. Narmada Valley Fertilizer and Chemicals Ltd. reported in [2020] 121 taxmann.com 82 (Gujarat) wherein the Hon ble Court, in similar circumstances, held that in respect of such expenditure where the disabling provision of Explanation 2 to Section 37(1) of the Act is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid provisions of Section 135 of the Companies Act, a company, having net worth of Rs. 500 Cr. or more, or turnover of Rs. 1000 Cr. or more, or net profit of Rs. 5 Cr. or more during any financial year, is obliged to spend at least 2% of the average net profits of the company made during the three immediate preceding financial years on Corporate Social Responsibility. 4.8. At this stage, it will also be relevant to reproduce Section 37(1) of the Act as amended vide Finance Act, 2014 with effect from 01.04.2015. Section 37(1) of the Income Tax Act: Any expenditure (not being expenditure of the nature described in section 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . [Explanation 1- For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany has spent more than the amount as it was required to spend as per the provisions of Section 135 of the Companies Act in an earlier years which, as per the provisions of sub-Section 5 to Section 135 of the Companies Act, can be set off against the requirement of Corporate Social Responsibility in succeeding three financial years. Hence, there is nothing on the file to show that the assessee had incurred more than the required expenditure on CSR in earlier years which could have been set-off against the liability on CSR of the current year. Even otherwise, there is nothing on record to show that the assessee company was exempt from spending any amount on Corporate Social Responsibility as required under Section 135 of the Companies Act. 4.12. In view of this, the matter is restored to the file of the ld. AO to verify the aforesaid contention of the assessee that the assessee was not required to spend any amount under Section 135 of the Companies Act on Corporate Social Responsibility and, further, that whether the amount spent by the assessee on Corporate Social Responsibility during the year was over and above its statutory liability under Section 135 of the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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