TMI Blog2023 (8) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). Therefore, the order of the Ld.CIT(A) cannot be held as erroneous, thus, the same deserves to be sustained, and we do so. In the result, appeal filed by the Revenue stands dismissed. - Shri Ravish Sood, Judicial Member And Shri Arun Khodpia, Accountant Member For the Department : Smt.Ila M. Parmar, CIT-DR For the Assessee : Mr.Salil Kapoor, Adv. And Mr.Vibhu Jain, Adv. ORDER PER BENCH: The above appeals were filed by the Revenue against the order of the Commissioner of Income Tax (Appeals), Income Tax Department, National Faceless Appeal Centre, New Delhi, vide orders dated 15.12.2022, for the AYs 2010-11 to 2012-13. CO Nos.16 to 18/RPR/2023 for the AYs 2010-11 to 2012-13 are the Cross-Objections filed by the assessee against the Revenue appeals in ITA Nos.47-49/RPR/2023. Since, the issue involved in the present appeals and cross-appeals are identical, and therefore, we are dealing with these appeals under common order. For the sake of brevity, we are taking ITA No.47/RPR/2023 for the AY 2010-11 as lead case. Grounds of appeal filed by the assessee in ITA No.47/RPR/2023 are as under: 1. On the facts and circumstances of the case whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for increasing book profit u/s 115JB which resulted in under assessment of book profit by Rs. 5,39,76,720/- and is proposed to be added with the assessed book profit of the assessee Notice u/s. 154 dated 20.03.2017 was issued to the assessee for the proposed rectification of the above mistake fixing the case for hearing on 23.03.2017. In compliance to this notice, Shri Deepak Garg, CA of the assessee filed a reply which is placed on record. Submission of the counsel is as under:- any amount of expenditure may be disallowed under assessment proceedings but as long as Book Profit is determined by following the provisions of Companies Act, relevant Accounting Standards etc., and which is duly certified by the auditor of the company as having been maintained in accordance with the provision of the Companies Act and which account has been accepted in the General Meeting of the Company as well as by the registrar of Companies then such disallowance of expenditure no way affected the Book Profit and AO has to accept the Book Profit without any modification for computing tax liability under the provisions of MAT. The contention of the assessee is not acceptable as C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsibility under such a statutory obligation and under a voluntary assumption of responsibility. As for the former, the disallowance under Explanation 2 to Section 37(1) comes into play, but, as for latter, there is no such disabling provision as long as the expenses, even in discharge of corporate social responsibility on voluntary basis, can be said to be wholly and exclusively for the purposes of business . There is no dispute that the expenses in question are not incurred under the aforesaid statutory obligation. For this reason also, as also for the basic reason that the Explanation 2 to Section 37(1) comes into play with effect from 1st April 2015, we hold that the disabling provision of Explanation 2 to Section 37(1) does not apply on the facts of this case. The appellant has submitted that the above-mentioned order was challenged by the revenue before the Hon'ble High Court of Chhattisgarh in TAXC No.15/2017 and the High court dismissed the said appeal and thereby affirmed the order in favour of the Assessee regarding the admissibility of claim of CSR expense. 5.2 From the above discussion it is clear that the explanation 1 to section 37 ruling CSR expenses was ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses have to be added to book profit. Except for the wild imagination of the Assessing Officer by no stretch of imagination, it can be said expenditure on CSR expenses is a transfer to/from reserve. Hon'ble Apex Court in Apollo Tyers (supra) have clearly laid down that the Assessing Officer or assessee, none can tinker with book profit disclosed in audited account. It is not the case that the accounts have not been prepared as per accepted accounting principle. Once the accounts have been prepared in accordance with standards in this regard, this tinkering by the Assessing Officer has no sanction of law. We have no hesitation in setting aside the addition to book profit in this regard. 7. The Ld.AR further drew our attention to Page Nos.115-122 of case law compilation, wherein, the Hon ble Apex Court in the case of Apollo Tyers Ltd. v. CIT reported in [2002] 258 ITR 273 (SC) was held as under: Therefore, we are of the opinion that the Assessing Officer while computing the income under section 115J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012, is less than eighteen and one-half per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of eighteen and one-half per cent. Explanation 1. For the purposes of this section, book profit means the profit as shown in the statement of profit and loss for the relevant previous year prepared under sub-section (2), as increased by (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves, by whatever name called, other than a reserve specified under section 33AC; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed ; or (f) the amount or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss, and as reduced by, (i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the statement of profit and loss), if any such amount is credited to the statement of profit and loss: Provided that where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation or Explanation below the second proviso to section 115JA, as the case may be; or (ii) the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply, if any such amount is credited to the statement of profit and loss; or (iia) the amount of depreciation debited to the statement of profit and loss (excluding the depreciation on account of revaluation of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the purposes of this clause, the expression Adjudicating Authority shall have the meaning assigned to it in clause (1) of section 5 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) and the loss shall not include depreciation; or] Following clause (iih) shall be substituted for the existing clause (iih) of Explanation 1 to sub-section (2) of section 115JB by the Finance (No. 2) Act, 2019, w.e.f. 1-4-2020 : (iih) the aggregate amount of unabsorbed depreciation and loss brought forward in case of a (A) company, and its subsidiary and the subsidiary of such subsidiary, where, the Tribunal, on an application moved by the Central Government under section 241 of the Companies Act, 2013 (18 of 2013) has suspended the Board of Directors of such company and has appointed new directors who are nominated by the Central Government under section 242 of the said Act; (B) company against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under section 7 or section 9 or section 10 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016). Explanation. For the purposes of this clause, (i) Adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Companies Act as having been properly maintained in accordance with Companies Act, and thereafter, he has limited power of making additions and deductions provided for in Explanation to said section Held. Yes Whether, therefore, the AO does not have jurisdiction to go behind net profit shown in P L A/c except to extent provided in explanation to sec. 115J - Held Yes . 12. Issue pertaining to disallowance of CSR expenses prior to amendment came in to effect on 01.04.2015, was discussed and decided in the assessee s own case for the AY 2008-09 referred to supra, wherein, the co-ordinate Bench of ITAT, Raipur has held that disallowance is restricted to expenses incurred by the assessee under statutory obligation u/s. 135 of Companies Act, 2013 and it does not apply to expenditure incurred in discharge of CSR on voluntarily basis Held, Yes Whether, in view of aforesaid legal position, expenditure incurred by the assessee on CST on voluntarily basis such as construction of school building, drainage, barbed wire fencing etc., was to be allowed as deduction u/s. 37(1) Held, Yes. 13. The impugned issue was carried to the Hon ble jurisdictional High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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