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TMI Blog2022 (12) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... lined to consider the question of law proposed on behalf of the appellant/revenue. Therefore, these appeals are admitted, and the following question of law is framed for consideration: "Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal [hereafter referred to as "Tribunal"] erred in allowing deduction of expenses undertaken under the Corporate Social Responsibility (CSR) endeavour under Section 37 of the Income Tax Act, 1961 [in short "Act"]?" 2. As would be evident from the cause title of the appeals before us, two orders in the aforementioned appeals i.e., ITA No.269/2022 and ITA No.270/2022 pertain to a company i.e., RITES Ltd. RITES Ltd is owned by the Government of India. The assessment years, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act by way of insertion of Explanation 2. The contention is that Explanation 2 appended to sub-section (1) of Section 37 of the Act is clarificatory in nature, and therefore would be applicable qua the assessment years in issue, concerning each of the respondents/assessees. 5. The Income Tax Appellate Tribunal [in short "Tribunal"], however, has taken a contrary view. 5.1 Inter alia, the Tribunal has relied upon Circular No.1 dated 21.01.2015 to reach a conclusion that the amendment brought about in Section 37(1) of the Act by way of Explanation 2 would not operate vis-à-vis the assessment years in issue. 5.2 The Tribunal's view, in this regard, emerges upon a perusal of paragraph 17 of the order dated 12.01.2021 passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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. xxx xxx xxx Explanation 1 ; xxx xxx xxx Explanation 2 ; For the removal of doubts , it is hereby declared that for the purposes of Sub section (1), any expenditure incurred by an assessee on the 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 business or profession." 7. A plain reading of the aforesaid extract of Section 37 would show, that in order to claim deduction under Section 37 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2015 and, accordingly, would apply in relation to assessment year 2015-2016 and the subsequent years. 10.1 This is plainly evident upon perusal of the following extract from the memorandum: "The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditures cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue, said section 37 has been amended to clarify that for the purposes of sub-section (1) of section 37 any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under said section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Income-tax Act shall be allowed as deduction under those sections subject to fulfillment of conditions, if any, specified therein. 13.4 Applicability:- This amendment takes effect from 1st April, 2015 and will, accordingly, apply in relation to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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