Case Law Details
ACIT Vs Eastern Coalfields Ltd. (ITAT Kolkata)
It is noted that the assessee is a Public Sector Undertaking and its accounts are audited by the CAG. It has been brought to our notice that the expenditure were made after approval of the competent authority and expenditure is towards the contribution to school and development of infrastructure for the welfare of the employees and workmen of the company. It is brought to our notice that in assesse’s own case no such disallowance on CSR expenditure was made in the earlier and subsequent years. It was also brought to our notice that this expenditure is also necessary in view of the National Coal Wage Agreement between the management and the employees’ Union. It was clarified by the Ld. AR that the CSR expenses incurred by the assessee is not covered by the amendment in section 37(1) of the Act and the Explanation 2 to section 37(1) comes into play w.e.f. 01.04.2015 and is not retrospective in operations. It was brought to our notice that the coordinate bench of this Tribunal Nagpur Bench in the case of assessee’s sister concern Southern Coalfields Vs. JCIT reported in 260 ITR (AT) 1 had an occasion to adjudicate similar issue and at pages 83-85 has directed to allow such expenditure as revenue expenditure. We note that the expenditure was incurred by the assessee company to comply with the contractual obligation as per National Coal Wage Agreement which is joint by-partite committee for the coal industry dated 15.07.2005 in para 10.8 wherein it was agreed by the assessee to carry out welfare activities. We note that the assessee expended CSR expenses of Rs.9.11 cr. However, the AO has disallowed 50% of the expenditure and made an addition of Rs.4,55,50,000/- being 50% of the expenses on account of CSR. The AO has disallowed the claim on the ground that the assessee did not file ledger copy of the expenses booked under the CSR. According to the AO, in the absence of date wise expenses with detail narration, the expenses remained unverifiable and as such resorted to estimated disallowance of 50% of such expenses. According to the Ld. AR, the books of the assessee are audited by different auditors as well as the CAG. It was pointed out by the assessee that contributions made with the proper approval of the competent authority to develop proper educational infrastructure not only for the children of the workmen of the company but also for the benefit of public at large. This expenditure are made partly as staff welfare expenditure and partly as social cause as per its commitment to the society in the form of CSR activities which the assessee is duty bound to oblige as per the Companies Act, 1956. We note that the assessee is a Public Sector Undertaking and since its operational base are located in remote areas, the assessee company is under obligation to incur expenses on education, sports and recreation activities for welfare of the employees as well as to the local persons residing nearby the company. It was also pointed out that this expenditure is also for maintenance of good health on the part of the employees as well as for the general development of the locality and for facilities for medical etc. which in turn contributes to the growth of the assessee’s business. We note that the expenditure claimed by the assessee is also necessary in view of the National Coal Wage Agreement entered into between the management and employees’ union and also as per the Companies Act, 1956 as well as Companies Act, 2013. We note that the amendment in section 37(1) of the Act has been introduced w.e.f. 1st April, 2015 and does not apply on the facts of the case and the disabling provision as stated in Explanation 2 to section 37(1) refers only to such corporate social responsibility expenditure as u/s. 135 of the Companies Act, 2013 and as such it cannot have any application for the period not covered by the statutory provision which itself came into existence in the year 2013. And any way this disabling provision cannot be held to be retrospective in operation.
FULL TEXT OF THE ITAT JUDGEMENT
These are cross appeals of the revenue and assessee respectively against the separate orders of the Ld. CIT(A)-Asansol dated 02.01.2019 for AYs. 2009-10 and 2012-13 respectively. Since issues are interconnected and arises out of the same order of Ld. CIT(A) and also heard together, we dispose of all these four appeals by this consolidated order for the sake of convenience.
2. Ground nos. 1 and 2 of the assessee’s appeals are dismissed as not pressed.
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