Case Law Details
NTPC Electric Supply Company Ltd. Vs ITO (ITAT Delhi)
The facts in brief are that the assessee-company is a wholly owned subsidiary company of NTPC Ltd., a government undertaking with the objective to make foray in supply and distribution of electricity. It was entrusted with rural electrification work under the scheme of Central Government. The assessee had debited sum of Rs.6,24,035/- on account of community development and welfare expenses.
Ld. Assessing Officer had disallowed the said expenditure on the ground that same is not wholly and exclusively for the purpose of business u/s.37(1). Further, the assessee has incurred his expenditure as per guidelines issued by Department of Public Enterprises that company who spend certain percentage of profits to discharge their corporate social responsibility. Accordingly, he made a disallowance.
It is seen that the Assessing Officer has made the disallowance by treating it to be expenditure in nature of CSR. It would be pertinent to note that Explanation-2 to Section 37(1) has been brought in the statute to prohibit expenditure on CSR for claiming u/s.37(1) by the Finance Act 2 of 2014 w.e.f. 01.04.2015, i.e., applicable from Assessment Year 2015-16. Here in this case, the Assessment Year involved in 2014-15, and therefore, Explanation 2 to Section 37(1) could not be applicable. This precise issue has been decided by the Tribunal in assessee’s own case for the Assessment Years 2012-13 and 2013-14 wherein it held that the expenditure on community development and welfare development is allowable because prior to the amendment the said explanation would be applicable.
FULL TEXT OF THE ORDER OF ITAT DELHI
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