Case Law Details
NACL Industries Limited Vs ACIT (ITAT Hyderabad)
Conclusion: Expenditure incurred by the assessee was not merely philanthropic, but also had a business angle, therefore, deduction was allowable to assessee under section 37.
Held: in the instant case, AO held that social welfare expenses incurred by assessee were in the nature of “corporate social responsibility” (CSR), only such expenses which were incurred wholly and exclusively for the purpose of business could be allowed as a deduction and not the expenses in the nature of CSR. According to AO, the expenditure incurred by the assessee was only application of income and had nothing to do with the business of the assessee. It was held that there was some other purpose for the assessee to incur these expenses nearby their chemical plants other than to win the goodwill of the people in order to secure their cooperation in smooth running of the chemical plants and also to secure their participation by engaging them in their work in different capacities. Such a purpose would definitely be congenial to the working atmosphere of the assessee and could not be said that it is something foreign to the business purposes of the assessee. Hence, social welfare expenses incurred by assessee at their workplace and nearby villages was an allowable deduction under section 37(1).
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
Aggrieved by the order dated 02-12-2019, passed by the Learned Commissioner of Income Tax (Appeals)-4, Hyderabad (“Ld. CIT(A)”) in the case of M/s. NACL Industries Limited (“the assessee”) for the AY.2016-17, assessee preferred this appeal.
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