Case Law Details
Agappe Diagnostics Limited Vs DCIT (ITAT Mumbai)
The sole matrix of the disputed issue envisaged by the Ld. AR that the CIT(A) has overlooked the various factors, nature of the business operations of the assessee and assumed that the expenditure claimed is part of the CSR expenditure. The Ld. AR has emphatically submitted that the claim was incurred considering the welfare measures of the company employees at the manufacturing facilities and the social and economic facilities in the locality around the units and business activities. Further as per section 135 of the companies Act 2013, the assessee company is mandatorily required to spend at least 2% of the average net profits of the company made during three immediately preceding financial years in pursuance to its corporate social responsibility (CSR policy) and the assessee has mandatorily spent ₹ 18,43,813/- and was disallowed in the computation of income. whereas the remaining amount of ₹ 2,09,214/- is spent voluntarily and was claimed as deduction of business expenditure in the return of income tax filed which was incurred wholly and exclusively for the purpose of business.
We find Hon’ble ITAT Raipur Bench in the case on ACIT Vs. Jindal Power Ltd. (179 TTJ 736) has held in terms of explanation 2 to Section 37(1) of the Act, the disallowance is restricted to expenses incurred by assessee under the statutory obligation u/s.135 of the companies Act 2013 and it doesn’t apply to the expenditure incurred in discharge of corporate social responsibility (CSR) on voluntarily basis.
We considering the facts, submissions, provisions of the Act and the judicial decisions relied by the Ld. AR find the action of the assessee incurring the expenditure voluntarily to maintain harmony at the vicinity of the factory area and is not a personal expenditure, further the assessing officer has not doubted genuineness of the expenditure but only on the nature of the expenditure was not incurred for the purpose of business. The assessee has filed the details of CSR expenditure which cannot be overlooked and the AO has accepted such claim and the assessee has made a voluntarily disallowance of CSR expenditure under section 37(1) of the Act in restricting expenses under the statutory obligations of CSR policy. Accordingly, we set-aside the order of the CIT(A) on this disputed issue and direct the Assessing officer to delete the addition and allow this ground of appeal in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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