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TMI Blog2023 (8) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee in ITA No.47/RPR/2023 are as under: 1. On the facts and circumstances of the case whether the ld. CIT(A), NFAC erred in law in deleting the disallowance of CSR expenses of Rs. 5,39,76,720/- made by the AO for calculating book profit to arrive at MAT u/s 115JB, since CSR expenses is as per the Company Act and the same is not wholly and exclusively for the purpose of business within the explanation 2 of Section 37(1) of the Income Tax Act, 1961 2. On the facts and circumstances of the Id. CIT(A), NFAC has erred in law by holding the decision in favour of assessee and against the revenue, though there is no nexus between the conclusion of the fact and primary fact upon which that conclusion is based? 3. On the facts and circumstances of the Id. CIT(A), NFAC has erred in law in drawing a conclusion which cannot be drawn by any reasonable person or authority, on the material and facts placed before it? 4. The order of the Id. CIT(A), NFAC is erroneous both in law and on facts. 5. Any other ground that may be adduced at the time of hearing. 2. The brief facts of the case are that the assessee is a company filed its return of income disclosing book profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under the provisions of MAT." The contention of the assessee is not acceptable as CSR was not expended wholly and exclusively for the purpose of business of the assessee. Further the explanation 2 to section 37(1) of the IT Act is clarificatory and not amendatory as it was inserted to remove the doubts. As the mistake is apparent from record, therefore, the same is rectified and the Impugned amount is added back to the assessed Book Profit of the assesses. Income as assessed u/s 143(3) Rs. 123,42,91,452/- Assessed Book Profit vide order dated 01/03/2013 Rs. 2823,43,92,054/- Add: On account of Corporate Social Responsibility (for determination of book profit) (as discussed above) Rs. 5,39,76,720/- Total assessed Book Profit after rectification Rs. 2828,83,68,774/- Revise the book profit accordingly. Give credit to the prepaid taxes. Charge interest as per law. Issue demand notice. 3. Aggrieved by the aforesaid order u/s. 154 of the Act, the assessee preferred an appeal before the Ld.CIT(A), NFAC, wherein, the Ld.CIT(A) has accepted the contentions of the assessee and has observed that expenditure incurred on CSR shall be subject to disallowance u/s. 37(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of any specific provision given in section 115JB, whether CSR expenditure can be added back for computing the Book Profit, it is apparent that the addition of Rs 5,39,76,720/- to book profit on account of disallowance on Community Welfare Expense/ CSR is bad in law. Respectfully following the decision of the Tribunal on this issue in assessee's own case and CBDT circular no. 1/2015, the ground of appeal raised by the appellant is hereby allowed. Since, the relief was granted by the Ld.CIT(A), now the Revenue is in appeals with the contention that Ld.CIT(A), NFAC, has erred in law in deleting the disallowance of CSR expenses of Rs. 5,39,76,720/- made by the AO for calculating book profit to arrive at MAT u/s. 115JB of the Act. 4. At the outset, the Ld.CIT-DR vehemently and strongly supported the order of the AO passed u/s. 154 of the Act and has prayed to set aside the order of the Ld.CIT(A), NFAC and restore the disallowance made by the AO. 5. On the contrary, The Ld.AR of the assessee while representing the cases of the assessee has submitted that the issue in the present appeals is squarely covered by the decision of the co-ordinate Bench, ITAT Raipur in ITA No. r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115J........". 8. On the contrary to the submissions of the Ld.AR, the CIT-DR vehemently supported the order of the AO and requested to decide the issue on its merits. 9. After hearing the rival contentions and on perusal of materials available on records, case laws placed before us to be considered while deciding the issue. The sole ground of the controversy raised by the Revenue in the present appeals pertains to deleting the disallowance of CSR expenses by Ld CIT(A), made by the AO for calculating book profit to arrive at MAT u/s. 115JB of the Act, alleging that CSR expenses as per the Companies Act, when the same has not wholly and exclusively for the purpose of business of the assessee should be added to assessable income under the scheme of working of book profit u/s 115JB. Further, in the present appeal, Ld AO has interpreted that the explanation-2 to sec. 37(1) of the Act is clarificatory and not mandatory as it was inserted to remove the doubts, therefore the mistake is appar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of expenditure relatable to income, being share of the assessee in the income of an association of persons or body of individuals, on which no income-tax is payable in accordance with the provisions of section 86; or (fb) the amount or amounts of expenditure relatable to income accruing or arising to an assessee, being a foreign company, from,- (A) the capital gains arising on transactions in securities; or (B) the interest, royalty, or fees for technical services chargeable to tax at the rate or rates specified in Chapter XII, if the income-tax payable thereon in accordance with the provisions of this Act, other than the provisions of this Chapter, is at a rate less than the rate specified in sub-section (1); or (fc) the amount representing notional loss on transfer of a capital asset, being share of a special purpose vehicle, to a business trust in exchange of units allotted by the trust referred to in clause (xvii) of section 47 or the amount representing notional loss resulting from any change in carrying amount of said units or the amount of loss on transfer of units referred to in clause (xvii) of section 47; or (fd) the amount or amounts of expenditure rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (iic) the amount of income, being the share of the assessee in the income of an association of persons or body of individuals, on which no income-tax is payable in accordance with the provisions of section 86, if any, such amount is credited to the statement of profit and loss; or (iid) the amount of income accruing or arising to an assessee, being a foreign company, from,- (A) the capital gains arising on transactions in securities; or (B) the interest, royalty or fees for technical services chargeable to tax at the rate or rates specified in Chapter XII, if such income is credited to the statement of profit and loss and the income-tax payable thereon in accordance with the provisions of this Act, other than the provisions of this Chapter, is at a rate less than the rate specified in sub-section (1); or (iie) the amount representing,- (A) notional gain on transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust referred to in clause (xvii) of section 47; or (B) notional gain resulting from any change in carrying amount of said units; or (C) gain on transfer of units referred to in clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary of another company, if such other company holds more than half in the nominal value of equity share capital of the company; (iv) "loss" shall not include depreciation; or (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account in case of a company other than the company referred to in clause (iih). Explanation.-For the purposes of this clause,- (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or (iv) to (vi) [***] (vii) the amount of profits of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.-For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while deciding the issue for year under consideration and has decided that the additions to book profit on account of disallowance on community welfare expenses/CSR is bad in law. Also, in terms of provisions of sec. sec. 115JB of the Act and explanation thereto CSR expenses is not specific items which has to be added back while determining the book profit. 14. In view of the aforesaid binding judicial pronouncements and our observations hereinabove since the department has not raised any argument with respect to preparation of account of the company or doubted on audited accounts of the assessee that the same are not in accordance with the provisions of the Companies Act. Respectfully following the ratio of law laid down by the Hon'ble Apex Court in the case of Apollo Tyers (supra) which was further followed by the ITAT Delhi Tribunal in the case of GE Powers Systems India Pvt. Ltd (supra), we are of the considered opinion that the adjustment made by the AO by invoking provisions of sec. 154 making addition of CSR expenses to the book profit of the company while determining the book profit u/s. 115JB was bad in law which was rightly deliberated and comprehended by the Ld.CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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