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TMI Blog2023 (2) TMI 1335X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of Rs. 3,00,00,000/- on account of expenses on Corporate Social Responsibility merely on the ground that CSR expenses are not incidental to the business & are incurred for non-business purpose, CSR expenses are application of income & are not expenses at all without considering the facts & circumstances of the case. ii. That on facts as well as on law, the ld. CIT(A) has erred in confirming disallowance of Rs. 53,64,000/- on account of expenses on sustainable development merely on the ground that sustainable development expenses are not incidental to the business & are incurred for non-business purpose, sustainable development expenses are application of income & are not expenses at all without considering the facts & circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serted Explanation 2 to section 37(1) of the Income Tax Act w.e.f. 01.04.2015. As per Explanation 2, for the purposes of section 37(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 purpose of the business or profession from the AY 2015-16 onward. Therefore, this is not applicable for AY 2013-14 under scrutiny assessment. MECON has allocated fund of Rs. 202.04 lakhs during the financial year 2013-14 for CSR activities/programmes etc. in compliance with the guidelines issued by Department of Public Enterprises, Govt. of India on Corporate Social Responsibility f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts installing LED lights or planting trees in MECON Colony and the expenditure was part of the CSR expenditure as envisaged u/s 135 of the Companies Act. However, the AO did not agree to the claim of the expenditure and disallowed the same. On appeal, the ld. CIT(A) also concurred with the AO, we note that genuineness of the expenditure made by the assessee on account of CSR which is mandatory as per section 135 of the Companies Act, 2013 was not doubted by the AO as well as ld. CIT(A). However, the claim was disallowed only on the ground that the expenditure is not wholly and exclusively incurred for the purpose of the business expenditure. The ld. AR drew our attention to the coordinate bench decision in ACIT vs Jindal Power Ltd. (ITAT Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y event, as held by Hon'ble Supreme Court's five judge constitutional bench's landmark judgment, in the case of CIT Vs Vatika Townships Pvt Ltd [(2014) 367 ITR 466 (SC)], the legal position in this regard has been very succinctly summed up by observing that "Of the various rules guiding how legislation has to be interpreted, one established rule is that unless a contrary intention appears, legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction in the computation of income. This disallowance is restricted to the expenses incurred by the assessee under a statutory obligation under section 135 of Companies Act 2013, and there is thus now a line of demarcation between the expenses incurred by the assessee on discharging corporate social responsibility 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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