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TMI Blog2023 (12) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... , the said sum was allowable under section 43B of the Income-tax Act, 1961 ('the Act"). (c) The appellant submits that CIT (A) erred in considering the provisions of section 40A(7) of the Act on a wrong understanding that the aforesaid amount of Rs.83,69,981/-, represents the amount of gratuity paid to employees. The appellant reiterates that the said amount represents amount contributed to approved gratuity fund on or before the due date of filing its return of income for Assessment Year 2017-18 and as such allowable under section 43B of the Act and ought to have been allowed as a deduction." 3. Brief facts are that the assessee had filed original return of income on 31.10.2017 with a returned income of Rs.110,64,34,870/- which was subsequently revised on 30.03.2019 with a revised returned income of Rs.111,27,87,919/-. The AO framed assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter "the Act") on 09.12.2019 determining the total income at Rs.125,81,98,990/- after making additions/disallowance on various issues like- * restricting the claim of deduction u/s 80IA of the Act on windmills to Rs.14,40,36,846/- as against Rs.28,86,33,063/- resulting in disallowance of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties and perused the records. At the outset, the Ld. AR brought to our notice that the Ld. CIT(A) has not appreciated the fact that the assessee's claim of deduction of Rs.83,69,981/- was allowable since it was employer's contribution paid towards approved gratuity fund. Therefore, according to him, the Ld. CIT(A) misdirected himself to hold that the aforesaid sum of Rs.83,69,981/- was not allowable u/s 43B of the Act, whereas, the fact was that the assessee has already made payment on or before the due date for furnishing the return of income u/s 139(1) of the Act. The Ld. AR also drew our attention of page no. 74 of PB which was filed with return of income (Form 3CD), and brought to our notice that the assessee has shown under para no. 26(i)(B)(a) the amount paid of Rs.1,19,07,199 before the due date of furnishing the return of income u/s 139(1) of the Act wherein an amount of Rs.1,19,07,199/- under sub-heading "nature of liabilities" is reflected as gratuity. According to the Ld. AR, the assessee had no choice of correct description of the entry because it is drop-down menu (Pre-programmed soft-ware of department) and so the assessee had no other choice but to select from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest paid in respect of capital borrowed for the purposes of the business or profession: (v) any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust." 7. Section 43B of the Act which reads as under: - Certain deductions to be only on actual payment. 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) ....... (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, (or) (c) ....... (d) ...... (f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee, (or) (g) any sum payable by the assessee to the Indian Railways for the use of railway assets shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fund. It is noted that assessee's case is that it has made contribution of Rs.83,69,981/- towards approved gratuity fund and therefore prima-facie the claim of the assesse need to be allowed since there is no fetter u/s 40A(7) of the Act. However, the Ld. DR brought to our notice that no verification of the fact has been under-taken by AO as to whether the assessee has made the actual payment on or before the due date of filing of return of income as well as whether the assessee has made payment to the approved gratuity fund which need to be verified by the AO. We find force in the submission of Ld. DR and in the light of the discussion (supra), we set aside the impugned order of Ld. CIT(A) and restore this issue back to the file of AO for the limited purpose of verification whether Rs.83,69,981/- was paid to the approved gratuity fund on or before the due date of filing of return; and the AO after verification find the claim to be correct to allow it. 11. Ground no. 2 is against the action of the Ld. CIT(A) disallowing deduction u/s 80G of the Act amounting to Rs.22,75,000/- on the ground that these are CSR expenditure. 12. Brief facts are that this claim was also not made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.11.2021 (T Mum) (ii) JMS Mining (P.) Ltd. PCIT (2021) 191 ITR (T) 80, order dated July 22, 2021) (Kol). (iii) DCIT Vs. Peerless General Finance & Investment & Co. Ltd. (2019) (112 taxmann.com 410, order dated December 5, 2019) (Kol) (iv) Allegis Services (India) Pvt. Ltd. Vs. ACIT (ITA. No. 1762/Bang/2019, order dated April, 29 2020) (Bang) (v) First American (India) Pvt. Ltd. V ACIT (ITA. No. 1762/Bag/2019, order dated April 29, 2020) (Bang) (vi) M/s. FNF India Pvt. Ltd. Vs. ACIT (133 taxmann.com 251, order dated January 5, 2021) (Bang) (vii) M/s. Goldman Sachs Services Pvt. Ltd. V JCIT (2020) (117 taxmann.com 535, order dated June 15, 2020) (viii) Infinera India (P) Ltd. V JCIT (2022) (194 ITD 463, order dated February 23, 2022) (Bang) (ix) Sling Media (P.) Ltd. V DCIT (2022) (194 ITD 1, order dated November 30,2021) (Bang) 15. We note that similar issue had cropped up before Co-ordinate Bench of this Tribunal [Kolkata Bench in the case of M/s JMS Mining Pvt. Ltd. Vs. PCIT ITA. No. 146/Kol/2021 for AY. 2016-17] (2021) (130 taxmann.com 118) wherein the Tribunal has held as under: - "17. Coming next to the legality/correctness of the deduction allowed by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80G of the Act to arrive at the "Total Income" in terms of Chapter VI of the Act, and AO has allowed it, which action of AO has been found fault by Ld PCIT, which issue need to be examined. For examining the same let us look in to the relevant provisions which we need to be taken in to consideration. 20. The provisions of Section 135(5) of the Companies Act, 2013 read as under: "The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:" 21. Let us also look at section 80G of the Act (relevant portions) which reads as under: Section 80G : Deduction in respect of donation to certain funds, charitable institution, etc. (1) In computing the total income of an assessee, there shall be deducted in accordance with and subject to the provision of this section (i) ..... (ii) ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f deduction in respect of two (2) donations are expressly seen in this Section. So the Parliament has expressed its intention clearly by bringing in restriction in respect of expenditure classified by an assessee company while claiming deduction u/s. 80G of the Act i.e. CSR expenditure related to Swachh Bharat Kosh and Clean Ganga Fund. So if an assessee makes some donation to these projects and include/classify it as CSR expenditure while claiming deduction u/s. 80G of the Act then it will be allowed only the amount that is other than the sums spent by the assessee in pursuance of CSR u/s. 135 of the Companies Act. In other words, if an assessee company spends only the mandatory expenditure of 2% of net profit for CSR activity, which includes the amount of donation to Swach Bharat Kosh & Clean Ganga Fund (iiihk) and (iiihi) of clause (a) of sub-section (2) of section 80G of the Act, then deduction u/s. 80G of the Act is not allowable, which can be illustrated by giving certain examples (infra). However, in a case scenario, wherein the assessee expends the mandatory expenditure and gives donation to these two projects i.e. over and above the mandatory CSR expenditure u/s. 135 of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s towards construction of roads & schools in the vicinity of the backward area where the factory is located. Tax Treatment: The entire CSR expenditure of Rs.2 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act. Situation 2 : The company has contributed Rs.3 crores to Swach Bharat Kosh. Tax Treatment: The entire CSR expenditure of Rs.3 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act. In terms of Section 135(5) of the Act read with Section 80G(iiihk) only the excess sum paid amounting to Rs. 1 crores [ 3 crores - 2% of 100 crores] can be availed as deduction u/s 80G of the Act. Situation 3 : The company has contributed Rs.l crore to Swach Bharat Kosh and Rs.1 crore to any other charitable trust registered u/s 80G(5) of the Act. Tax Treatment: The entire CSR expenditure of Rs.2 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act. In terms of Section 135(5) of the Act read with Section 80G(iiihk) the donation of Rs.l crores made to Swach Bharat Kosh is not eligible for deduction u/s 80G of the Act. The company can claim deduction of fifty perc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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