NTPC- SAIL Power Co. Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 1859/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7570 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 16-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV PUNDIR
• Keywords: Revenue expenditure; Set aside
• Section: 143(3); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI E BEN CH, NEW DELHI BEFORE SHRI O. P. KANT, ACCOUNTANT MEMBER AND SHRI K. N. CHARY, JUDICIAL MEMBER ITA NO.1859/DEL/2018 A.Y. 2014-15 NTPC-SAIL POWER CO. PVT. LTD. VS. ACIT 4 TH FLOOR, NBCC TOWER, 15, BHIKAJI CIRCLE 18 (2) CAMA PLACE, NEW DELHI NEW DELHI PAN NO.AABCN5467A APPELLANT BY : SH. M. P. RASTOGI, ADVOCATE RESPONDENT BY : SH. GAURAV PUNDIR, SR. D R DATE OF HEARING : 16.08.2021 DATE OF PRONOUNCEMENT : 27. 08.2021 ORDER PER O.P. KANT , AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER DATED 12/02/2018 PASSED BY THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-6, DELHI [IN SHORT THE LD. CIT(A)] FOR AS SESSMENT YEAR 2014-15 RAISING FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.169.55 LAKHS ON CORPORATE SOCIAL RESPONSIBILITY (CSR FOR SHORT) BY AO, THE CSR EXPENSES INCURRED UNDER THE DIRECTIONS OF BPE GOVT. OF INDIA REQUIRING COMPANIES TO SPEND A PRESCRIBED PER CENTAGE OF ITS PROFITS ON CSR- AND NOW ALSO MADE MANDATORY UNDER T HE COMPANIES ACT. 2. THAT THE APPELLANT SEEKS LEAVE TO ADD, AMEND, ALTER , ABANDON OR SUBSTITUTE ANY OF THE ABOVE GROUNDS AT THE TIME OF HEAVY OF APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS A JOINT-VENTURE COMPANY OWNED EQUALLY BY NTPC LT D AND STEAL AUTHORITY OF INDIA. BOTH THESE JOINT-VENTURE PARTNE RS ARE PUBLIC SECTOR UNDERTAKING OWNED BY GOVERNMENT OF INDIA. FO R THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF I NCOME ON 26/09/2014 DECLARING TOTAL INCOME OF RS.350,86,03,3 40/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT. THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT) WAS COMPLETED ON 1 6/12/2016 AFTER MAKING CERTAIN DISALLOWANCES. ON FURTHER APPEAL THE LD. CIT(A) ALLOWED PART RELIEF TO THE ASSESSEE AND SUSTAINED T HE DISALLOWANCE OF RS.1,69,55,406/- ON THE ISSUE OF THE CORPORATE SOCI AL RESPONSIBILITY (CSR). 3. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 4. BEFORE US THE PARTIES APPEARED THROUGH VIDEOCONF ERENCING FACILITY AND FILED SYNOPSIS AND CASE LAWS RELIED UP ON THROUGH EMAIL. 5. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED TH AT IDENTICAL DISALLOWANCE MADE IN THE EARLIER YEAR HAS BEEN DELE TED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE AND THEREFORE ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE. 6. THE LEARNED DR ON THE OTHER AND SUBMITTED THAT I N VIEW OF THE EXPLANATION-2 INSERTED UNDER SECTION 37 (1) OF THE ACT, EXPENSES INCURRED ON CORPORATE SOCIAL RESPONSIBILITY (CSR) A RE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 37 OF THE ACT. 7. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON RECORD . WE FIND THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS IN CURRED RS.169.55 LAKHS ON CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES, THE DETAIL OF WHICH IS AS UNDER: (I) TREE PLANTATION IN THE VICINITY OF PLANTS RS.5 3,34,854/- (II) TREE PLANTATION - RS.1,11,000/- (III) TREE PLANTATION- TOWNSHIP RS.2,62,106/- (IV) COMMUNITY DEVELOPMENT RS.61,64,064/- (V) OTHER CSR EXPENSES RS.50,83,382/- 8. WE FIND THAT IDENTICAL EXPENSES INCURRED ON CORP ORATE SOCIAL RESPONSIBILITY HAS BEEN ALLOWED BY THE TRIBUNAL IN ITA 2146/DEL/2017 FOR ASSESSMENT YEAR 2013-14 OBSERVING AS UNDER: [E] AS MENTIONED EARLIER, BOTH SIDES HAVE AGREED BE FORE US AT THE TIME OF HEARING THAT THE DISPUTE REGARDING ALLOWABI LITY OF CSR EXPENSES IS COVERED IN FAVOUR OF THE ASSESSEE BY AF ORESAID ORDERS DATED 27.4.2018 AND 29.11.2018 IN ASSESSEES OWN CA SE, IN IDENTICAL FACTS AND CIRCUMSTANCES, IN ASSESSEESFAV OUR. NEITHER SIDE HAS BROUGHT ANY DISTINGUISHABLE FACTS NOR CIRCUMSTA NCES TO OUR ATTENTION TO PERSUADE US TO TAKE A VIEW DIFFERENT F ROM THE VIEW TAKE IN THE AFORESAID ORDERS DATED 27.4.2018 AND 29.11.2 018 OF CO- ORDINATE BENCHES OF ITAT, DELHI. THE RELEVANT PORTI ONS FROM THE AFORESAID ITA NOS. 5687/DEL/2014 & 4733/DEL/2015 OF COORDINATE BENCHES OF ITAT DELHI ARE REPRODUCED AS UNDER:- ITA NO. 5687/DEL/2014 7.1 COMING TO GROUND NO. 2 OF THE ASSESSEES APPEAL WHICH CHALLENGES THE EXPENSES INCURRED TOWARDS CORPORATE SOCIAL RESPONSIBILITY, WE FIND THAT THE RAIPUR BENCH OF IT AT IN THE CASE OF ACIT VS. JINDAL POWER LTD. IN ITA NO. 99/DEL/2012 H AS ALLOWED CSR EXPENSES IN ASSESSMENT YEAR 2008-09. THE RAIPU R BENCH HAS FURTHER HELD THAT EXPLANATION (2) TO SECTION 37 OF THE ACT, INSERTED BY FINANCE ACT, 2012 HAS BEEN BROUGHT INTO THE STATUTE W.E.F. 1.4.2013 AND THIS AMENDMENT IS PROSPECTIVE IN NATURE AND ACC ORDINGLY PRIOR TO 1.4.2013, CSR EXPENSES ARE REVENUE IN NATURE AND ALLOWABLE. WE HAVE GONE THROUGH THE DETAILS OF CSR EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION I. E. ASSESSMENT YEAR 2011-12 AND WE FIND THAT THE EXPENSES HAVE BEE N INCURRED IN RESPECT OF TREE PLANTATION/ENVIRONMENT PROTECTION, CONSTRUCTION OF ZOOLOGY LAB IN ROURKELA, CONSTRUCTION OF SPECIAL WI NGS FOR CEREBRAL PALSY CHILDREN IN ROURKELA, MEDICAL CAMPS IN SIRSA VILLAGE IN BHILAI, DEVELOPMENT OF DONGIA POND IN A VILLAGE NEAR BHILAI , CONSTRUCTION OF BUS STOP SHED IN THE CITY OF ROURKELA, CREATING AWA RENESS AGAINST DRUG ABUSE IN BHILAI, CONSTRUCTION OF ROAD IN DURGA PUR ETC. BESIDES OTHER EXPENSES INCURRED UNDER THE HEAD. IT IS NOT IN DISPUTE THAT THESE EXPENSES HAVE BEEN INCURRED AND THE ONLY REAS ON THEY WERE DISALLOWED BY THE ASSESSING OFFICER AND SO CONFIRME D BY THE LD. COMMISSIONER OF INCOME TAX (A) WAS THAT THIS EXPEND ITURE WAS NOT EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF B USINESS OF THE ASSESSEE. ALTHOUGH, IT IS UNDISPUTED THAT THE ASSE SSEE HAD INCURRED THIS EXPENDITURE ON THE BASIS OF GUIDELINE S ISSUED BY BUREAU OF PUBLIC ENTERPRISES, GOVT. OF INDIA, THE D EPARTMENT WAS OF THE VIEW THAT SINCE THE EXPENDITURE WAS NOT MANDATO RY IN NATURE, THE SAME COULD NOT BE ALLOWED. HOWEVER, WE ARE UNA BLE TO CONCUR WITH THE FINDINGS OF THE LOWER AUTHORITIES ON THIS ISSUE AND WE HOLD THAT THE DISALLOWANCE UNDER EXPLANATION (2) TO SECT ION 37(1) WILL NOT COME INTO PLAY AND THERE IS NO SUCH DISABLING PROVI SION EVEN IF THE EXPENSES IN DISCHARGE OF CORPORATE SOCIAL RESPONSIB ILITY ARE INCURRED ON VOLUNTARY BASIS. EXPLANATION (2) TO SECTION 37( 1) COMES INTO PLAY ONLY W.E.F. 1.4.2015 ALLOWABLE AS REVENUE EXPENDITU RE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. COMM ISSIONER OF INCOME TAX (A) ON THIS ISSUE AND DIRECT THE ASSESSI NG OFFICER TO ALLOW THE EXPENSES INCURRED TOWARDS CORPORATE SOCIA L RESPONSIBILITY AND ACCORDINGLY, EXPENSES INCURRED TOWARDS CORPORAT E SOCIAL RESPONSIBILITY INCURRED PRIOR TO THIS DATE WILL NEC ESSARILY BE. ITA NO. 4733/DEL/2015 2. COMING TO GROUND NO. 2 OF THE ASSESSEES APPEAL WHICH CHALLENGES THE EXPENSES INCURRED TOWARDS CORPORATE SOCIAL RESPONSIBILITY, WE FIND THAT THE RAIPUR BENCH OF IT AT IN THE CASE OF AC1T VS. JINDAL POWER LTD. IN ITA NO. 99/DEL/2012 H AS ALLOWED CSR EXPENSES IN ASSESSMENT YEAR 2008-09. THE RAIPUR BENCH HAS FURTHER HELD THAT EXPLANATION (2) TO SECTION 37 OF THE ACT, INSERTED BY FINANCE ACT, 2012 HAS BEEN BROUGHT INTO THE STATUTE W.E.F. 1.4.2013 AND THIS AMENDMENT IS PROSPECTIVE IN NATURE AND ACC ORDINGLY PRIOR TO 1.4.2013, CSR EXPENSES ARE REVENUE IN NATURE AND ALLOWABLE. WE HAVE GONE THROUGH THE DETAILS OF CSR EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION I. E. ASSESSMENT YEAR 2011-12 AND WE FIND THAT THE EXPENSES HAVE BEE N INCURRED IN RESPECT OF TREE PLANTATION/ENVIRONMENT PROTECTION, CONSTRUCTION OF ZOOLOGY LAB IN ROURKELA, CONSTRUCTION OF SPECIAL WI NGS FOR CEREBRAL PALSY CHILDREN IN ROURKELA, MEDICAL CAMPS IN SIRSA VILLAGE IN BHILAI, DEVELOPMENT OF DONGIA POND IN A VILLAGE NEAR BHILAI , CONSTRUCTION OF BUS STOP SHED IN THE CITY OF ROURKELA, CREATING AWA RENESS AGAINST DRUG ABUSE IN BHILAI, CONSTRUCTION OF ROAD IN DURGA PUR ETC. BESIDES OTHER EXPENSES INCURRED UNDER THE HEAD. IT IS NOT I N DISPUTE THAT THESE EXPENSES HAVE BEEN INCURRED AND THE ONLY REAS ON THEY WERE DISALLOWED BY THE ASSESSING OFFICER AND SO CONFIRME D BY THE LD. COMMISSIONER OF INCOME TAX (A) WAS THAT THIS EXPEND ITURE WAS NOT EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF B USINESS OF THE ASSESSEE. ALTHOUGH, IT IS UNDISPUTED THAT THE ASSES SEE HAD INCURRED THIS EXPENDITURE ON THE BASIS OF GUIDELINES ISSUED BY BUREAU OF PUBLIC ENTERPRISES, GOVT, OF INDIA, THE DEPARTMENT WAS OF THE VIEW THAT SINCE THE EXPENDITURE WAS NOT MANDATORY IN NAT URE, THE SAME COULD NOT BE ALLOWED. HOWEVER, WE ARE UNABLE TO CON CUR WITH THE FINDINGS OF THE LOWER AUTHORITIES ON THIS ISSUE AND WE HOLD THAT THE DISALLOWANCE UNDER EXPLANATION (2) TO SECTION 37(1) WILL NOT COME INTO PLAY AND THERE IS NO SUCH DISABLING PROVISION EVEN IF THE EXPENSES IN DISCHARGE OF CORPORATE SOCIAL RESPONSIB ILITY ARE INCURRED ON VOLUNTARY BASIS. EXPLANATION (2) TO SECTION 37(1 ) COMES INTO PLAY ONLY W.E.F. 1.4.2015 AND ACCORDINGLY, EXPENSES INCU RRED TOWARDS CORPORATE SOCIAL RESPONSIBILITY INCURRED PRIOR TO T HIS DATE WILL NECESSARILY BE ALLOWABLE AS REVENUE EXPENDITURE. A CCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENSES INCURRED TO WARDS CORPORATE SOCIAL RESPONSIBILITY. [F] RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENTS VIDE ORDERS DATED 27.4.2018 AND 29.11.2018 OF COORDINATE BENCHE S OF ITAT, DELHI; IN ASSESSEES OWN CASE; IN IDENTICAL FACTS A ND CIRCUMSTANCES; AND FURTHER CONSIDERING THAT BOTH SIDES AGREE THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY AFORESAID ORDERS DATED ORDERS DATED 27.4.2018 AND 29.11.2018, WE SET ASIDE THE AFORESAID IMPUGNED APPELLATE ORDER DATED 16.01. 2017 OF THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE ASSESSEES CLAIM FOR EXPENDITURE AMOUNTING TO RS. R S. 237.80,958/- ON ACCOUNT OF CORPORATE SOCIAL RESPONSIBILITY. THE APPEAL IS ALLOWED. 9. WE FIND THAT IDENTICAL EXPENSES ON TREE PLANTATI ON ETC HAVE BEEN ALLOWED BY THE TRIBUNAL (SUPRA) UNDER SECTION 37 OF THE ACT INCURRED AS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THUS, RESPECTFULLY FOLLOWING THE SAME, THE EXPENSES INCURRED IN THE YEAR UNDER CONSIDERATION ARE ALSO ELIGIBLE FOR DEDU CTION UNDER SECTION 37 OF THE ACT. 10. AS REGARD THE CONTENTION OF THE LEARNED DR THAT IN VIEW OF THE EXPLANATION-2 TO SECTION 37(1), THE CSR EXPENSES AR E NOT ALLOWABLE, IS CONCERNED, WE FIND THAT SAID EXPLANATION-2 HAS B EEN INSERTED BY WAY OF FINANCE ACT 2014 WITH EFFECT FROM 01/04/2015 , I.E. THE ASSESSMENT YEAR 2015-16. THE TRIBUNAL IN THE CASE O F ACIT VS JINDAL POWER LTD IN ITA NO.99//BLPR/2012 FOR AY 200 8-09HELD THAT THE EXPLANATION NO.2 TO SECTION 37 (1) OF THE INCOME TAX ACT 1961, IS APPLICABLE FROM 1-4-2015 (I.E. AY 2015-16) ONWARDS ONLY . THEREFORE IN THE YEAR UNDER CONSIDERATION, CORPORAT E SOCIAL RESPONSIBILITY EXPENSES CANNOT BE DISALLOWED INVOKI NG EXPLANATION- 2 TO SECTION 37(1) OF THE ACT. 11. IN VIEW OF ABOVE DISCUSSION, THE SOLE GROUND RA ISED BY THE ASSESSEE, IS ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.08.2021. SD/- SD/- ( K. NARASIMHA CHARY ) (O.P KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:27.08.2021 *NEHA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR ITAT, NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 27.08.2021 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER