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TMI Blog2020 (3) TMI 1459X X X X Extracts X X X X X X X X Extracts X X X X ..... d 29/12/2016. 2. The grounds of appeal raised by the revenue are as under: 1. The ld. CIT(A) has erred in law in deleting the addition of Rs. 4,22,38,097/- made by the Assessing Officer on account of periphery Development Expenses which in any case is more than 5% of net profit as deemed contribution towards Periphery Development Expenses of the concerned district as per verification from the chairman and collector of Periphery Development society. As per mining provisions, Periphery Development Expenses are incurred on the nearby people of mining region and the assessee could not furnish and establish that these expenses are related to business activity as per the mining provisions. 2. The ld. CIT(A) has erred in judging the Sec. 37( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice to the assessee to explain the excess amount of Rs. 1,03,20,564/- (Rs.4,22,38,097 -Rs. 3,19,17,532). In response to the show cause notice, the assessee did not furnish any reason why that expenses claimed excess of 5% of net profit. However, the assessee furnished ledger copy of the said expenses before the Assessing Officer. As per the ledger copy of the expenses another fact was noticed by Assessing Officer that as per mining provision periphery development expenses is an expense that would be expenses on the territorial jurisdiction of the mining in lieu of excretion of mineral. The periphery development expenses should be incurred on the jurisdiction of the nearby mining people. However, Assessing Officer noticed from the led ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educational facilities to the children etc. The expenses incurred by the assessee were on welfare schemes only which are for malaria eradication, distribution of mosquito nets, construction of mandaps etc. Therefore, these expenses were wholly and exclusively for the business purpose. We note that Section 135 of Companies Act, 2013 provides that any company having Net Worth of Rs.500 crores or more, or turnover of Rs. 1000 crores or more, or Net Profit of Rs.5 crores or more is required to spend 2 per cent of average net profit earned in the immediately preceding 3 financial years, for Corporate Social Responsibility (CSR).However, w.e.f. asst. year 2015-16, an explanation to section 37(1) of the I.T. Act has been added which provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ledger account of the assessee. It is done in consultation with State Government authorities. The ld. A.R. has submitted details of vouchers incurred towards Periphearal Development Expenses. The ld. Assessing Officer has not doubted any of the vouchers or memos. He is only doubting the expenditure on account of the provisions of Income Tax Act, 1961. He has stated that expenditure above 5% is not permitted. 8. I am afraid the stand of the Assessing Officer cannot be accepted. The Periphery Development Expenses, if incurred have to be taken as a business expenditure. The maximum that was to be explained as per the ld. Assessing Officer was 5%. He has sort of accused the assessee for spending more that 5%. This stand of the ld. Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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