Assistant Commissioner of Income Tax, Circle - Shillong, Shillong V. M/s. North Eastern Electric Power Corporation Ltd., Shillong

ITA 192/GTY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7633 (ITAT-GUWAHATI)
• Duration Of Justice: 1 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 18-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M HAOKIP J
• Keywords: Capital asset; Business income; Retrospective amendment; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 143(3); 36 (1) (iii); 37(1); 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI BENCH, GUWAHATI BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 158 - 160 / GAU / 2016 ASSESSMENT YEARS :2010-11 & 2011- 12 & 2013-14 ACIT, CIRCLE, SHILLONG, AAYAKAR BHAWAN, SHILLONG V/S . M/S NORTH EASTERN ELECTRIC POWER CORPORATION LTD., LOWER NEW COLONY, LAITUMKHRAH, SHILLONG- MEGHALAYA-793003 [ PAN NO.AACN 9991 J ] /APPELLANT .. / RESPONDENT ITA NO. 191 - 192 / GAU / 2018 ASSESSMENT YEARS :2011-12 & 2012- 13 ACIT, CIRCLE, SHILLONG, AAYAKAR BHAWAN, SHILLONG V/S . NORTH EASTERN ELECTRIC POWER CORPORATION LTD., [NEEPCO] BROK LAND COMPOUND, LOWER NEW COLONY, LAITUMKHRAH, SHILLONG, MEGHALAYA [ PAN NO.AACN 9991 J ] /APPELLANT .. / RESPONDENT /BY ASSESSEE B. MAHARANA, CHIEF GENERAL MANAGER /BY REVENUE SHRI M. HAOKIP, JCIT-DR /DATE OF HEARING 02-07-2019 /DATE OF PRONOUNCEMENT 12-07-2019 / O R D E R ITA NO. 158-160/GAU/16 & 191-192/GAU/18 A.YS.10-11-11-12, 13-14, 12-13 ACIT, CIR-SHILLONG VS. NEEPC LT. &NEEPCO PAGE 2 PER BENCH:- THESE FIVE REVENUES APPEAL(S) FOR ASSESSMENT YEAR (S) 2010-11, 2011- 12,2013-14,2011-12 &2012-13 ARISE AGAINST THE COMMI SSIONER OF INCOME TAX (APPEALS)-SHILLONGS SEPARATE ORDERS DATED 23.09.20 16,, 27.09.2016, & 26.04.2018 PASSED IN CASE NOS. SHILL-69/2013-14,SHI LL-26/2014-15, SHILL- 334/2015-16 & CIT(A)/SHG/10008 & 10009/2017-18 U/S 143(3) R.W.S.154 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. WE COME TO REVENUES SOLE SUBSTANTIVE GRIEVANCE IN FORMER TWO CASES ITS ITA NO. 158 & 159/GAU/2016 SEEK TO REVIVE THE A SSESSING OFFICERS DISALLOWING THE ASSESSEES EXPENSES CLAIM(S) INVOLV ING VARYING SUMS PERTAINING TO ITS TUIRIAL HYDRO ELECTRIC PROJECT (T RHEP). THE REVENUES SOLE ARGUMENT IS THAT THE SAID EXPENSE HAD BEEN INCURRED BEFORE COMMENCMENT OF THE BUSINESS AND THEREFORE, THEY ARE CAPITAL AND NO T REVENUE IN NATURE. BOTH THE LEARNED REPRESENTATIVES TAKE US TO THE CIT(A)S DETAILED DISCUSSION TAKING INTO CONSIDERATION THE ASSESSMENT FINDINGS, THE ASS ESSEES SUBMISSIONS A CATENA OF CASE LAW AS WELL AS CORRESPONDING AS FOLL OWS:- 4.THE ASSESSING OFFICER DISALLOWED THE IEDC AND IN TEREST & FINANCE CHARGES BOOKED AGAINST THESE TWO PROJECTS CONSIDERING THE P ROJECTS WERE ONGOING ONLY ON THE BASIS OF CHAIRMANS SPEECH IN THE ANNUAL GENERAL ME ETING HELD AFTER CLOSE OF YEAR AND PRIOR TO FORMAL RECEIPT OF THE COMMUNICATION FO RM THE MINISTRY FOR REVIVAL OF THE TRHEP PROJECT. DURING THE PERIOD OF SUSPENSION THER E WAS COMPLETE HALT ON CONSTRUCTION ACTIVITIES HENCE, CREATION OF ASSETS O F ENDURING BENEFIT DOES NOT ARISE. THE OBSERVATION OF THE AO THAT THE EXPENDITURE OUGH T TO HAVE BEEN CAPITALIZED WAS NOT BASED ON THE PRINCIPLE LAID DOWN BY THE HON'BLE APEX COURT IN ABSENCE OF ANY SPECIFIC DEFINITION OF CAPITAL AND REVENUE EXPENDIT URE. THE ASSESSEE APPELLANT ALSO SUBMITTED. A) THAT THE CHAIRMAN'S SPEECH WAS GIVEN IN THE MEET ING OF THE SHAREHOLDERS BASED ON DECISION OF THE GOL ON 07.09.2010 AND FORMAL COM MUNICATION FOR REVIVAL WAS COMMUNICATED ON 14.01.2011. THEREAFTER, THE ASSESSE E HAS STARTED CONSTRUCTION ACTIVITIES AND ALL THE EXPENDITURE WERE DULY CAPITA LIZED. IT IS A COMMON PRACTICE TO COMMUNICATE TO THE SHAREHOLDER ABOUT THE FUTURE BUS INESS PLAN, STRATEGY OR ANY GOOD NEWS ABOUT THE BUSINESS BY THE CHAIRMAN AND THE DIR ECTORS IN THE AGM. THE ASSESSING OFFICER HAS TO EXAMINE THE ALLOW ABILITY OF AN EXPENDITURE WITHIN THE PROVISIONS OF STATUTE AND NATURE OF EXPENDITURE INC URRED AND MERE PRESUMPTION AND PUTTING HIS LOGIC WITHOUT PROVISIONAL BACKUP IS NOT HING BUT IT WOULD BE CASE OF EXERCISING EXCESSIVE JURISDICTION WHICH THE LAW DOE S NOT PERMIT. ITA NO. 158-160/GAU/16 & 191-192/GAU/18 A.YS.10-11-11-12, 13-14, 12-13 ACIT, CIR-SHILLONG VS. NEEPC LT. &NEEPCO PAGE 3 B) THE DISALLOWABILITY AND ADDITION OF EXPENDITURE TO THE TOTAL INCOME WAS BASED ON CONTRARY VIEW OF THE ASSESSING OFFICER IN SPITE OF FACT THAT THE PROOF OF DECISION FOR SUSPENSION AND ABANDONMENT OF THE PROJECTS WAS ON T HE RECORD AND THE APPELLANT WAS NOT IN POSITION TO DISREGARD THE ORDER OF THE G OI. IT IS ALSO PERTINENT TO NOTE THAT THE APPELLANT COMPANY WAS NOT IN POSITION TO TAKE A NY DECISION IN THE MEETING OF BOARD OR IN THE MEETING OF SHAREHOLDER AS THE 100% SHAREHOLDING WAS IN THE NAME OF THE PRESIDENT AND BOARD ALSO COMPRISING WITH NOMINE E DIRECTORS OF THE GOVERNMENT. IN OTHER WORD THE DECISIONS WERE BINDING FOR THE AP PELLANT C) THAT THE ORDER OF THE ASSESSING OFFICER WAS NON SPEAKING AS ALL THE FACTS WERE EITHER NOT APPRECIATED IN TRUE PERSPECTIVE OR REJEC TED BY STATING IRRELEVANT. THE APPELLANT SUBMITTED FOLLOWING CASE REFERRED IN SUPP ORT OF THE ALLOWABILITY OF THE EXPENDITURE: I. D TAJ MAHAL HOTEL V CIT (1967) 67 ITR 303 II. CIT V. MADRAS AUTO SERVICE 156 ITR 740 III. DALMIA LAIN & CO. LTD V CIT (1971) 81 ITR 754 (SC) IV. K.T.M.T.M ABDUL KAY000M V CIT (1962) 441TR 689 (SC) D) THAT THE APPELLANT ALSO SUBMITTED THAT THE ALLOW ABILITY OF THE EXPENDITURE NEEDS TO BE CONSIDERED AND DECIDED ON BASIS OF THE SETTLED L AW IN ABSENCE OF ANY SPECIFIC DEFINITION OF CAPITAL OR REVENUE EXPENSES IN THE AC T. THE CLASSIFICATION OF THE EXPENDITURE IS NOT RES INTEGRA AS THE APEX COURT HA S LAID DOWN PRINCIPLE FOR CLASSIFICATION OF EXPENDITURE IN A SERIES OF JUDGME NTS. FURTHER, THE APPELLANT SUBMITTED THAT COMMERCIAL EXPEDIENCY, NATURE OF BUS INESS, AREA OF THE OPERATION HAS TO BE CONSIDERED FROM THE EYES OF A PRUDENT BUSINES SMEN. THE ASSESSING OFFICER SHOULD NOT STEP INTO THE SHOE OF A BUSINESSMAN. QUA NTUM AND EXPEDIENCY OF THE EXPENDITURE ARE NOT RELEVANT TO DECIDE ITS ALLOWABI LITY AS PER THE SETTLED LAW. E) SINCE THERE WAS A COMPLETE RESTRICTION TO CONTIN UE WITH THE CONSTRUCTION ACTIVITIES HENCE, PRESUMPTION OF THE ASSESSING OFFI CER ABOUT ONGOING WAS ARBITRARY. F) THAT THE RELIANCE PLACED BY THE ASSESSING OFFICE R ON THE APEX COURT JUDGMENT IN CIT V MADRAS AUTO SERVICES 156 ITR 740 WAS IN TH E CONTRARY TO THE VIEW AND SUBMISSION OF THE ASSESSEE DURING THE COURSE OF HEA RING AND APPEAL MEMO WHEREIN THE HON'BLE APEX COURT LAID DOWN PRINCIPLE FOR CLAS SIFICATION OF THE EXPENDITURE. G. THE RELIANCE PLACED BY THE AO ON TUTICORIN ALKAL I CHEMICALS AND FERTILIZER LTD. V CIT (I1997) 227 ITR 172 WHEREIN IT WAS HELD THAT ......ARGUMENT BASED ON ACCOUNTANCY PRACTICE HAS LITTLE MERIT PRACTICE CANN OT BE JUSTIFIED BY ANY PROVISION OF THE STATUTE OR IS CONTRARY TO IT.' DOES NOT HELP TH E ASSESSING OFFICER, AS I FOUND THAT THE DISALLOWANCE WAS BASED ON THE HEADING USED IN T HE ANNUAL ACCOUNTS BY THE APPELLANT-ASSESSEE. FURTHER, THE APPELLANT RELIED O N JUDGMENT OF JURISDICTIONAL HIGH COURT (AT THAT POINT OF TIME) MKB ASIA (P) LTD V. C IT (2008) 167 TAXMAN 256 (GAIT) WHICH IN FACT:: CONTRARY TO THE DECISION OF THE APE X COURT. THE HIGH COURT 'HELD THAT THAT WHERE AN ACCOUNTING SYSTEM WHICH IS APPROVED B Y THE ICAI HAS BEEN ADOPTED BY THE ASSESSEE, THE INCOME TAX AUTHORITY HAS NO OPTIO N/JURISDICTION TO MEDDLE IN THE MATTER EITHER BY DIRECTING THE ASSESSEE TO MAINTAIN ITS ACCOUNTS IN PARTICULAR MANNER OR TO ADOPT A DIFFERENT METHOD. H. THE APPELLANT ALSO SUBMITTED THAT NOT ONLY THE E XPENDITURE CLAIMED AS ALLOWABLE EXPENDITURE BUT ALSO OFFERED FOR TAX WAIVER OF INTE REST ALLOWED AS EXPENDITURE IN THE EARLIER YEAR AGAINST THE TRHEP PROJECT AMOUNTING TO RS. 16.13. CRORE. I) THE FACT THAT THE TGBP PROJECT WAS SUBSEQUENTLY APPROVED BY THE CCEA IS IN FACT SUPPORTING THE VIEWS THAT THE PROJECT WAS CLOSED AN D A NEW PROJECT AWARDED AND APPROVED AND FOR WHICH NEW EPC CONTRACT WAS ALSO EN TERED WITH THE CONTRACTOR. ITA NO. 158-160/GAU/16 & 191-192/GAU/18 A.YS.10-11-11-12, 13-14, 12-13 ACIT, CIR-SHILLONG VS. NEEPC LT. &NEEPCO PAGE 4 4.5. I HAVE CAREFULLY CONSIDERED THE MATTER. COMING FIRST TO THE CASE OF TGBP, PER THE ANNUAL REPORT FOR F.Y. 2009-10, IT IS SEEN THAT THE PROJECT WAS CONCEIVED AS A 500 MW GAS-BASED POWER PLANT IN 2001. THE PROJECT WAS S CALED DOWN TO 280MW IN 2003. FURTHER, IT WAS SCALED DOWN TO 100MW IN 2005. AND AS PER WRITTEN SUBMISSION GIVEN, THE PROJECT WAS ABANDONED AS PER DIRECTION O F THE GOVERNMENT COMMUNICATED VIDE LETTER DATED 24.11.2005. THEREAFTER, A 100 (+- 20) MW PLANT WAS APPROVED BY THE CCEA ON 14.07.2009. PARA 12 OF THE NOTES ON ACC OUNTS STATED THAT IN COMPLIANCE TO AS 16 INTEREST ON BORROWINGS FOR THE PERIOD 01.04.2009 TO 13.07.2009 HAD BEEN CHARGED TO REVENUE. SIMILARLY, IEDC EXPENS ES FOR THAT PERIOD WAS CHARGED TO REVENUE ACCOUNT. ACCORDINGLY, A SUM OF RS. 35.72 ON ACCOUNT OF IEDC AND ANOTHER SUM OF RS. 82.14 ON ACCOUNT OF INTEREST WAS CHARGED TO REVENUE. 4.5.1 IN CASE OF TR HEP, CONSTRUCTION WORK WAS SUSP ENDED FROM 09.06.2004. MANDATORY REVIEW COMMITTEE OF THE MINISTRY OF POWER (MOP) HAD DECIDED THAT NO FURTHER EXPENDITURE OF THE PROJECT MAY BE INCURRED APART FROM SAFETY AND NORMAL UPKEEP OF ASSETS ALREADY CREATED TILL THERE IS A DE CISION ON REVIVAL OF THE PROJECT WAS ARRIVED AT. DURING THE YEAR, THE APPELLANT HAD INCU RRED TED EXPENSES OF RS. 553.55 LAKH AND INTEREST EXPENSES OF RS.453 LAKH. 4.5.2 THIS INTEREST ON BORROWED CAPITAL IS SPECIFIC ALLY PROHIBITED FOR BEING DEBITED IN THE REVENUE ACCOUNT' BY THE PROVISION OF SECTION 36 (1) (III) OF THE ACT. APPELLANT MAY EMPLOY ACCOUNTING STANDARD PRESCRIBED BY ICAI IN TR EATING THE EXPENSES SO INCURRED. BUT SPECIFIC PROVISION MADE IN THE ACT FOR COMPUTAT ION OF PROFIT CANNOT BE OVERRULED BY THE ACCOUNTING STANDARD FOLLOWED BY APPELLANT. I N VIEW OF THIS SINGULAR REASON, THERE IS NO NEED TO DISCUSS THE ISSUE AT LENGTH. IN THE CASE OF NARASU'S SPINNING MILLS V ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(2) , CHENNAI [2016] 66 TAXMANN.COM 277(CHENNAI TRIBUNAL), 'ASSESSEE WAS AC QUIRING WINDMILL FOR EXTENSION OF EXISTING BUSINESS OF GENERATION OF ELECTRICITY T HROUGH WINDMILL. THE HON'BLE TRIBUNAL HELD THAT INTEREST ON BORROWED CAPITAL COU LD NOT BE ALLOWED TILL CAPITAL ASSET ACQUIRED BY THE ASSESSEE WAS PUT TO USE. IN THE PRE SENT CASE ALSO, CAPITAL ASSETS WERE NOT PUT TO USE. CONSIDERING THE EXPRESSED PROV ISION OF THE ACT, INTEREST ON BORROWED CAPITAL DEBITED IN THE ACCOUNT HAS TO BE T O BE DISALLOWED AS DONE BY THE AO. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY REIT ERATES THE REVENUES STAND THAT THE ASSESSING OFFICER FOUND ASSESSEE NOT TO HAVE COMMENCED ITS BUSINESS AND THEREFORE, THIS IMPUGNED EXPENSES UNDE R VARIOUS HEAD(S) HAD BEEN RIGHTLY DISALLOWED TO BE CAPITAL EXPENDITURE I N NATURE. WE FIND NO MERIT IN REVENUES INSTANT ARGUMENT. IT HAS COME ON RECORD T HAT ASSESSEE HAD DULY SET UP ITS BUSINESS AS A PSU AT THE RELEVANT SITE . ALL OF ITS OPERATIONS WERE READY TO START SUBJECT TO VARIOUS APPROVAL FROM THE CORRESPONDING MINISTRIES/DEPARTMENTS. THE CIT(A) HAS ALREADY DISC USSED THE RELEVANT CASE LAW (SUPRA) AT LENGTH IN COMING TO CONCLUSION THE I MPUGNED EXPENDITURE, WHEREIN THE ASSESSEE HAS SET UP ITS BUSINESS, DESER VES TO BE ALLOWED. WE THEREFORE AFFIRM THE CIT(A)S FINDINGS UNDER CHALLE NGE DELETING THE IMPUGNED ITA NO. 158-160/GAU/16 & 191-192/GAU/18 A.YS.10-11-11-12, 13-14, 12-13 ACIT, CIR-SHILLONG VS. NEEPC LT. &NEEPCO PAGE 5 EXPENDITURE FORMING THE SUBJECT-MATTER IN REVENUE S SOLE SUBSTANTIVE GRIEVANCE AS WELL AS MAIN CASES ITA NOS 158 & 159/G AU/2016 FAIL. 4. THE REVENUES NEXT THREE APPEAL(S) ITA NO.160/GA U/2016, 191 & 192/GAU/2018 SEEK TO REVERSE THE CIT(A)S CORRESPON DING FINDINGS DELETING THE CORPORATE SOCIAL RESPONSIBILITY (CSR) DISALLOWA NCE(S) DECLINED IN CORRESPONDING ASSESSMENT(S) FRAMED IN ASSESSEES CA SE INVOLVING VARIOUS SUMS. THE CIT(A)S DETAILED DISCUSSION IN ASSESSMEN T YEAR 2013-14 DELETING THE IMPUGNED CSR DISALLOWANCE READS AS UNDER:- GROUND NO. 1, 2 AND 3 ALL THE THREE GROUNDS ARE DIRECTED AGAINST THE DISA LLOWANCE OF RS.435.75 LAKHS WHICH THE APPELLANT HAD CLAIMED TO HAVE SPENT UNDER THE H EAD, CORPORATE SOCIAL RESPONSIBILITY (CSR IN SHORT). 5.1. IN THE COURSE OF ASSESSMENT PROCEEDING, THE AO REQUESTED THE APPELLANT TO EXPLAIN AS TO WHY THE EXPENSES UNDER CSR SHOULD NOT BE DISALLOWED IN VIEW OF THE PROVISION OF SECTION 37 OF THE ACT AS WELL AS SECTI ON 135(1) OF THE COMPANIES ACT, 1956. BEFORE THE AO, IT WAS CLAIMED THAT EXPLANATIO N 2 TO SECTION 37(1) WAS INTRODUCED W.E.F. 01.04,2015 AND APPLICABLE FROM A. Y. 2015-16 ONLY. AS SUCH, IT WAS ARGUED THAT IT COULD NOT HAVE IMPACT FOR THE PRESEN T YEAR UNDER CONSIDERATION. FURTHER, IT WAS SUBMITTED THAT THE EXPENDITURES WER E WHOLLY FOR BUSINESS PURPOSES AND GUIDED BY THE DIRECTIVES OF DIFFERENT AUTHORITI ES OF THE GOVERNMENT OF INDIA. THE AO REFUSED TO BUY THE ARGUMENT PUT FORTH AND ACCORD INGLY DISALLOWED THE SUM OF RS. 435.75 IAKH. 5.2. THE A/R VEHEMENTLY CHALLENGED THE ORDER OF THE AO. IN THE STATEMENT OF FACTS ITSELF, THE APPELLANT ADVANCED DETAILED ARGUMENT AG AINST THE ACTION OF THE A0 THE APPELLANT SUBMITTED THAT ALL THE EXPENDITURES WERE CONSISTENTLY ALLOWED AS REVENUE EXPENDITURE. THE EXPENDITURE SHOWN UNDER THE CSR HE AD WAS INCURRED AS A PRUDENT BUSINESSMAN AND UNDER COMMERCIAL EXPEDIENCY AS WELL AS IN COMPLIANCE WITH THE MANDATORY GUIDELINES OF THE DEPARTMENT OF PUBLIC EN TERPRISE, GOVERNMENT OF INDIA. HENCE, THE DISALLOWANCE OF THE EXPENDITURES AS NOT BEING INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND BASED O N THE AMENDMENT IN THE ACT I.E. 01.04.2015 WAS CONTRARY TO THE FACTS AND LAW. THE I TEM WISE DETAILS OF EXPENDITURES CHARGED TO P&L WERE PRODUCED BEFORE THE ASSESSING O FFICER DURING THE PROCEEDING U/S 143 (3) AS WELL AS BEFORE ME. THE APPELLANT CLA IMED THAT ASSESSING OFFICER HAD NEITHER EXAMINED THE NATURE, MOTIVES, OBJECTIVES, F ACTS AND CIRCUMSTANCES OF THE EXPENDITURE INCURRED, NOR STATED ANY REASON FOR HIS BELIEF FOR DISALLOWING THE EXPENDITURES. IT WAS ARGUED THAT ALL THE EXPENSES W ERE INCURRED WHOLLY FOR BUSINESS PURPOSES. SEVERAL CASE LAWS IN SUPPORT OF ARGUMENT WERE CITED INCLUDING DECISION OF THE HON'BLE TRIBUNAL, RAIPUR BENCH IN THE CASE OF A CIT, CIRCLE (1), BILASPUR V JINDAL POWER LTD. [2016] 70 TAXRNANN.COM 389( RAIPUR-TRIB. )] DECIDED ON 23.06.2016. 5.3. THE MATTER HAS BEEN CAREFULLY CONSIDERED. APPE LLANT HAD ADVANCED A TWO- PRONGED ARGUMENT. FIRSTLY, IT IS STATED THAT THE AC TION OF THE AO WAS WRONG IN SO FAR AS EQ1ANATION 2 TO SECTION 37(1) WAS INSERTED WITH EFF ECT FROM 01 04 2015 AND THE SAME WAS NOT WITH RETROSPECTIVE EFFECT SECONDLY, THE EXP ENSE INCURRED UNDER CSR HAD COMMERCIAL EXPEDIENCY ALSO. FOR THIS SAKE OF BREVIT Y, THE DECISION IN CASE OF JINDAL ITA NO. 158-160/GAU/16 & 191-192/GAU/18 A.YS.10-11-11-12, 13-14, 12-13 ACIT, CIR-SHILLONG VS. NEEPC LT. &NEEPCO PAGE 6 POWER (SUPRA) MAY DIRECTLY BE REFERRED TO AS THE IS SUE DECIDED IN THAT CASE IS IDENTICAL TO THE ISSUE AT HAND. RELEVANT PARTS OF T HE JUDGMENT OF THE HONBLE TRIBUNAL AS APPEARING IN PARAS 18 AND 19 ARE REPRODUCED AS U NDER: 18. WE HAVE ALSO TAKE NOTE OF THE FACT THAT IN VIE W OF INSERTION OF EXPLANATION 2 TO SECTION 37(1), WITH EFFECT FROM 1ST APRIL 2015 , WHICH PROVIDES THAT 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT FOR T HE PURPOSES OF SUB-SECTION (1), ANY EXPENDITURE INCURRED BY AN ASSESSEE ON THE ACTIVITIES RELATING TO CORPORATE SOCIAL RESPONSIBILITY REFERRED TO IN SECT ION 135 OF THE COMPANIES ACT, 2013 (18 OF 2013) SHALL NOT BE DEEMED TO BE AN EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PR OFESSION', THE EXPENSES INCURRED IN DISCHARGING CORPORATE SOCIAL RESPONSIBI LITY ARE NOT DEDUCTIBLE IN COMPUTATION OF BUSINESS INCOME. LEARNED DEPARTMENTA L REPRESENTATIVE SUBMITS THAT THIS AMENDMENT SHOULD BE TREATED AS CL ARIFICATORY IN NATURE, AS IT IS STATED TO BE IN SO MANY WORDS, AND WE SHOULD, TH EREFORE, HOLD THAT THE EXPENSES IN DISCHARGING CORPORATE SOCIAL RESPONSIBI LITY WERE OUTSIDE THE AMBIT OF EXPENSES DEDUCTIBLE UNDER SECTION 37(1). 19. WE ARE UNABLE TO SEE LEGALLY SUSTAINABLE MERITS IN THIS PLEA EITHER. THE AMENDMENT IN THE SCHEME OF SECTION 37(1), WHICH HAS BEEN INTRODUCED WITH EFFECT FROM 1ST APRIL 2015, CANNOT BE CONSTRUED AS TO DISADVANTAGE TO THE ASSESSEE IN THE PERIOD PRIOR TO THIS AMENDMENT. THI S DISABLING PROVISION, AS SET OUT IN EXPLANATION 2 TO SECTION 37(1), REFERS O NLY TO SUCH CORPORATE SOCIAL RESPONSIBILITY EXPENSES AS UNDER SECTION 135 OF THE COMPANIES ACT, 2013, AND, AS SUCH, IT CANNOT HAVE ANY APPLICATION FOR TH E PERIOD NOT COVERED BY THIS STATUTORY PROVISION WHICH ITSELF CAME INTO EXISTENC E IN 2013. EXPLANATION 2 TO SECTION 37(1) IS, THEREFORE, INHERENTLY INCAPABLE O F RETROSPECTIVE APPLICATION ANY FURTHER. IN ANY EVENT, AS HELD BY HON'BLE SUPRE ME COURT'S FIVE JUDGE CONSTITUTIONAL BENCH'S LANDMARK JUDGMENT, IN THE CA SE OF CIT V. VATIKA TOWNSHIPS PVT LTD (2014) 367 ITR 466/227 TAXMAN 121/49 TAXMANN.COM 249 (SC), THE LEGAL POSITION IN THIS REGARD HAS BEEN VERY SUCCINCTLY SUMMED UP BY OBSERVING THAT 'OF THE VARI OUS RULES GUIDING HOW LEGISLATION HAS TO BE INTERPRETED, ONE ESTABLISHED RULE IS THAT UNLESS A CONTRARY INTENTION APPEARS, LEGISLATION IS PRESUMED NOT TO B E INTENDED TO HAVE A RETROSPECTIVE OPERATION. THE IDEA BEHIND THE RULE I S THAT A CURRENT LAW SHOULD GOVERN CURRENT ACTIVITIES. LAW PASSED TODAY CANNOT APPLY TO THE EVENTS OF THE PAST. IF WE DO SOMETHING TODAY, WE DO IT KEEPING IN VIEW THE LAW OF TODAY AND IN FORCE AND NOT TOMORROW'S BACKWARD ADJUSTMENT OF IT. OUR BELIEF IN THE NATURE OF THE LAW IS FOUNDED ON THE BEDROCK THAT EVERY HUM AN BEING IS ENTITLED TO ARRANGE HIS AFFAIRS BY RELYING ON THE EXISTING LAW AND SHOULD NOT FIND THAT HIS PLANS HAVE BEEN RETROSPECTIVELY UPSET. THIS PRINCIP LE OF LAW IS KNOWN AS LEX PROSPICIT NON RESPICIT: LAW LOOKS FORWARD NOT BACKW ARD. AS WAS OBSERVED IN PHILLIPS V. EYRE [, A RETROSPECTIVE LEGISLATION IS CONTRARY TO THE GENERAL PRINCIPLE THAT LEGISLATION BY WHICH THE CONDUCT OF MANKIND IS TO BE REGULATED WHEN INTRODUCED FOR THE FIRST TIME TO DEAL WITH FUT URE ACTS OUGHT NOT TO CHANGE THE CHARACTER OF PAST TRANSACTIONS CARRIED ON UPON THE FAITH OF THE THEN EXISTING LAW.' IT MAY APPEAR TO BE SOME KIND OF A D ICHOTOMY IN THE TAX LEGISLATION BUT THE WELL SETTLED LEGAL POSITION IS THAT WHEN A LEGISLATION CONFERS A BENEFIT ON THE TAXPAYER BY RELAXING THE RIGOUR OF PRE-AMENDMENT LAW, AND WHEN SUCH A BENEFIT APPEARS TO HAVE BEEN THE OBJECT IVE PURSUED BY THE LEGISLATURE, IT WOULD BE A PURPOSIVE INTERPRETATION GIVING IT A RETROSPECTIVE EFFECT BUT WHEN A TAX LEGISLATION IMPOSES A LIABILI TY OR A BURDEN, THE EFFECT OF SUCH A LEGISLATIVE PROVISION CAN ONLY BE PROSPECTIV E. WE HAVE ALSO NOTED THAT THE AMENDMENT IN THE SCHEME OF SECTION 37(1) IS NOT SPECIFICALLY STATED TO BE RETROSPECTIVE AND THE SAID EXPLANATION IS INSERTED ONLY WITH EFFECT FROM 1ST APRIL 2015. IN THIS VIEW OF THE MATTER ALSO, THERE IS NO REASON TO HOLD THIS ITA NO. 158-160/GAU/16 & 191-192/GAU/18 A.YS.10-11-11-12, 13-14, 12-13 ACIT, CIR-SHILLONG VS. NEEPC LT. &NEEPCO PAGE 7 PROVISION TO BE RETROSPECTIVE IN APPLICATION. AS A MATTER OF FACT, THE AMENDMENT IN LAW, WHICH WAS ACCOMPANIED BY THE STAT UTORY REQUIREMENT WITH REGARD TO DISCHARGING THE CORPORATE SOCIAL RESPONSI BILITY, IS A DISABLING PROVISION WHICH PUTS AN ADDITIONAL TAX BURDEN ON TH E ASSESSEE IN THE SENSE THAT THE EXPENSES THAT THE ASSESSEE IS REQUIRED TO INCUR UNDER A STATUTORY OBLIGATION IN THE COURSE OF HIS BUSINESS ARE NOT AL LOWED DEDUCTION IN THE COMPUTATION OF INCOME. THIS DISALLOWANCE IS RESTRIC TED TO THE EXPENSES INCURRED BY THE ASSESSEE UNDER A STATUTORY OBLIGATI ON UNDER SECTION 135 OF COMPANIES ACT 2013, AND THERE IS THUS NOW A LINE OF DEMARCATION BETWEEN THE EXPENSES INCURRED BY THE ASSESSEE ON DISCHARGIN G CORPORATE SOCIAL RESPONSIBILITY UNDER SUCH A STATUTORY OBLIGATION AN D UNDER A VOLUNTARY ASSUMPTION OF RESPONSIBILITY. AS FOR THE FORMER, TH E DISALLOWANCE UNDER EXPLANATION 2 TO SECTION 37(1) COMES INTO PLAY, BUT , AS FOR LATTER, THERE IS NO SUCH DISABLING PROVISION AS LONG AS THE EXPENSES, E VEN IN DISCHARGE OF CORPORATE SOCIAL RESPONSIBILITY ON VOLUNTARY BASIS, CAN BE SAID TO BE ' WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS' . THERE IS NO DISPUTE THAT THE EXPENSES IN QUESTION ARE NOT INCURRED UNDER THE AFORESAID STATUTORY OBLIGATION. FOR THIS REASON ALSO, AS ALSO FOR THE B ASIC REASON THAT THE EXPLANATION 2 TO SECTION 37(1) COMES INTO PLAY WITH EFFECT FROM 1ST APRIL 2015, WE HOLD THAT THE DISABLING PROVISION OF EXPLANATION 2 TO SECTION 37(1) DOES NOT APPLY ON THE FACTS OF THIS CASE. THE ABOVE DECISION OF THE HON'BLE TRIBUNAL SQUARELY COVERS THE CASE OF THE APPELLANT. IN TERMS OF EXPLANATION 2 TO SECTION 37(1), DISALLO WANCE OF CSR EXPENSES CAN BE RESTRICTED ONLY TO STATUTORY OBLIGATION COVERED UND ER SECTION 135 OF THE COMPANIES ACT, 2013 AND THIS DISALLOWANCE CAN BE MADE ONLY FR OM A.Y. 2015-16. THEREFORE, CSR EXPENSES INCURRED UNDER SECTION 135 OF THE COMP ANIES ACT CANNOT BE DISALLOWED IN THE YEAR UNDER CONSIDERATION. HON'BLE TRIBUNAL ALSO HELD THAT CSR EXPENSES INCURRED VOLUNTARILY IN THE FORMS OF CONST RUCTION OF SCHOOLS, DRAINAGES, FENCING ETC. HAVE TO BE ALLOWED U/S 37(1) OF THE AC T. IN ABSENCE OF CONTRADICTORY REPORTED JUDGEMENTS OF OTHER BENCHES OF HON'BLE TRI BUNAL OR OF HON'BLE HIGH COURT OR THAT OF HON'BLE APEX COURT, I AM BOUND BY THIS R ECENT DECISION OF THE HON'BLE TRIBUNAL. RESPECTFULLY FOLLOWING THE SAME, CSR EXPE NSE INCURRED BY THE APPELLANT IS ALLOWED. GROUNDS PREFERRED ARE THEREFORE DECIDED IN FAVOUR OF APPELLANT. 5. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY AR GUES IN SUPPORT OF REVENUES GROUND THAT CIT(A) HAS ERRED IN LAW AS WE LL AS ON FACTS IN ALLOWING ASSESSEES CLAIM IN ASSESSMENT YEARS PRIOR TO AY 20 15-16. WE FIND THAT THIS TRIBUNALS DECISION RELIED UPON LOWER APPELLATE PRO CEEDINGS HAS ALREADY DECLINED REVENUES IDENTICAL ARGUMENT. IT FURTHER E MERGES THAT ASSESSEES CSR CLAIM IN ISSUE VERY WELL SATISFIES THE RELEVANT PROVISION ENSHRINED IN SEC. 135 OF THE COMPANIES ACT, 1957. THIS TRIBUNALS YE T ANOTHER CO-ORDINATE BENCH DECISION IN ITA NO.1367/DEL/2016 THE NATIONAL SMALL INDUSTRIES CORP. LTD. VS. DCIT DECIDED ON 25.02.2019 ALSO DECIDED THE VERY ISSUE IN ASSESSEES FAVOUR AS UNDER:- ITA NO. 158-160/GAU/16 & 191-192/GAU/18 A.YS.10-11-11-12, 13-14, 12-13 ACIT, CIR-SHILLONG VS. NEEPC LT. &NEEPCO PAGE 8 6.2. LD.SR.DR HAS ALLEGED THAT, BY WAY OF AMENDMENT INSERTED BY FINANCE ACT (NO. 2) 2014, NO EXPENSES ARE DEDUCTIBLE INCURR ED TOWARDS CSR AGAINST BUSINESS INCOME. HE SAID THAT THESE SHOULD BE TREAT ED AS CLARIFICATORY IN NATURE, AND THEREFORE EXPENSES DISCHARGING CORPORAT E SOCIAL RESPONSIBILITY WERE OUTSIDE THE AMBIT OF EXPENSES DEDUCTIBLE UNDER SECTION 37 (1), BY VIRTUE OF EXPLANATION 2 INSERTED BY FINANCE ACT (NO. 2) 20 14. IT IS OBSERVED THAT LD. AO/CIT (A) PROCEEDED TO MAKE ADDITION ON THE PREMIS ES THAT EXPLANATION 2 TO SECTION 37(1) WAS APPLICABLE TO THE PRESENT YEAR UN DER CONSIDERATION. 7. WE ARE UNABLE TO AGREE WITH PLEA ADVANCED BY LD. SR.DR. IN OUR OPINION EXPLANATION 2 HAS BEEN INSERTED IN THE SECTION 37 ( 1) W.E.F 01/04/15 AND IS PROSPECTIVE IN NATURE. IN OUR CONSIDERED OPINION AM ENDMENT BY WAY OF EXPLANATION 2 TO SEC.37(1) CANNOT BE CONSTRUED AS D ISADVANTAGE TO THE ASSESSEE IN THE PERIOD PRIOR TO THE AMENDMENT. IT I S A DISABLING PROVISION, AS SET OUT IN EXPLANATION 2 TO SEC.37(1), AND REFERS T O SUCH CORPORATE SOCIAL RESPONSIBILITY EXPENSES U/S 135 OF COMPANIES ACT, 2 013 AND AS SUCH CANNOT HAVE APPLICATION FOR PERIOD NOT COVERED BY THIS STA TUTORY PROVISION WHICH ITSELF CAME INTO EXISTENCE IN 2013. WE DRAW OUR SUPPORT FR OM THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. VATIKA TOW NSHIPS PVT. LTD. REPORTED IN (2014) 367 ITR 466, WHEREIN HONBLE COU RT HELD AS UNDER: OF THE VARIOUS RULES GUIDING HOW LEGISLATION HAS TO BE INT ERPRETED, ONE ESTABLISHED RULE IS THAT UNLESS A CONTRARY INTENTION APPEARS, L EGISLATION IS PRESUMED NOT TO BE INTENDED TO HAVE A RETROSPECTIVE OPERATION. THE IDEA BEHIND THE RULE IS THAT A CURRENT LAW SHOULD GOVERN CURRENT ACTIVITIES. LAW PASSED TODAY CANNOT APPLY TO THE EVENTS OF THE PAST. IF WE DO SOMETHING TODAY , WE DO IT KEEPING IN VIEW THE LAW OF TODAY AND IN FORCE AND NOT TOMORROWS BA CKGROUND ADJUSTMENT OF IT. OUR BELIEF IN THE NATURE OF THE LAW IS FOUNDED ON T HE BED ROCK THAT EVERY HUMAN BEING IS ENTITLED TO ARRANGE HIS AFFAIRS BY R ELYING ON THE EXISTING LAW AND SHOULD NOT FIND THAT HIS PLANS HAVE BEEN RETROS PECTIVELY UPSET. THIS PRINCIPLE OF LAW IS KNOWN AS LEXPROSPICIT NON RESPE CT LAW LOOKS FORWARD NOT BACKWARD. AS WAS OBSERVED IN PHILLIPS VS. EYRE: A R ETROSPECTIVE LEGISLATION IS CONTRARY TO THE GENERAL PRINCIPLE THAT LEGISLATION BY WHICH THE CONDUCT OF MANKIND IS TO BE REGULATED WHEN INTRODUCED FOR THE FIRST TIME TO DEAL WITH FUTURE ACTS OUGHT NOT TO CHANGE THE CHARACTER OF PA ST TRANSACTIONS CARRIED ON UPON THE FAITH OF THE THEN EXISTING LAW. THUS WE REJECT THIS ARGUMENT OF LD.SR.DR AND HOLD T HAT THIS AMENDMENT WOULD NOT AFFECT ALLOWABILITY OF SUCH EXPENSES FOR THE YEAR UNDER CONSIDERATION, BEING ASSESSMENT YEAR 2012-13. IT IS OBSERVED THAT AUTHORITIES BELOW REJECTED CLAIM OF ASSESSEE ONLY ON THE GROUND THAT EXPLANATION 2 TO SEC.37(1) IS APPLICABLE TO YEAR UNDER CONSIDERATION . 8. WE THEREFORE ALLOW GROUNDS RAISED BY ASSESSEE. A S WE HAVE ALREADY ALLOWED THE SAID EXPENSES UNDER SECTION 37(1) FOR T HE YEAR UNDER CONSIDERATION, THE ALTERNATE CLAIM RAISED BY ASSESS EE UNDER SECTION 35AC AND 80 G OF THE ACT BECOMES ACADEMIC IN NATURE. WE ADOPT THE ABOVE DETAILED REASONING MUTATIS MUTAN DIS AND CONCLUDE THAT THE CIT(A) HAS RIGHTLY DELETED THE IMPUGNED CSR DIS ALLOWANCE MADE IN ITA NO. 158-160/GAU/16 & 191-192/GAU/18 A.YS.10-11-11-12, 13-14, 12-13 ACIT, CIR-SHILLONG VS. NEEPC LT. &NEEPCO PAGE 9 CORRESPONDING THREE ASSESSMENT(S). THE REVENUES IN STANT AS MANY APPEAL(S) ITA 160/GAU/2016, AND ITA 191-192/GAU/2018 ALSO FAI L ACCORDINGLY. 6. TO SUM UP, REVENUES FIVE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 12/ 07/2019 SD/- SD/ - ( ) (&' ) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) GUWAHATI, *DKP (- 12 / 07 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S NORTH EASTERN ELECTRIC POWER CORPN. L TD. LOWER NEW COLONY, LAITUMKHRAH, SHILL OLNG-MEGHALAYA-793003/NORTH EASTERN ELECTRIC POWER CORPN. LTD. BROOK LAND COMPOUND, LOWER NEW COLONY, SHILLONG-793003 2. /REVENUE-ACIT, CIR-SHILLOLNG, AYAKAR BHAWAN, SHILLO LNG 3. 3 4 9 / CONCERNED CIT GUWAHATI 4. 4- / CIT (A) GUWAHATI 5. < ''3, 3, 9 / DR, ITAT, GUWAHATI 6. B / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY (ON TOUR) 3,