TECHNOSOFT ENGINEERING PROJECTS LTD, MUMBAI V. ASST CIT -OSD 8(3), MUMBAI

ITA 201/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3742 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 10-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: RAKESH MOHAN
• Keywords: Commercial expediency; Onus to prove
• Section: 142(1); 37(1); 80G; 37

Judgement Text

1 ITA 201/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI MAHAVIR SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.201/MUM/2017 (ASSESSMENT YEAR: 2012-13) M/S TECHNOSOFT ENGINEERING PROJECTS LTD , A-25, MIDC, MAROL INDL. AREA, ROAD NO.3, ANDHERI (E), MUMBAI-93 PAN : AABCT0886H VS ACIT-OAS, 8(3), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI RAKESH MOHAN RESPONDENT BY SHRI D.G. PANSARI DATE OF HEARING 06 -08-2018 DATE OF PRONOUNCEMENT 10-08-2018 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST ORDER OF THE CIT(A)-18, MUMBAI DATED 14-10-2016 AND IT PERTAINS TO AY 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- I. THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) - 18 , MUMBAI (HEREINAFTER REFERRED TO AS THE 'CIT (A )') ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.50,00,000/- (RUPEES. FIFTY LACS ONLY) MADE BY TH E ASSESSING OFFICER, CLAIMED BY YOUR APPELLANT U/S 37 (1) IN RESPECT OF AMOUNT GIVEN TO SHANTI SEVA NIDHI PROVID ING VOCATIONAL TRAINING AT MURBAD. II. THE LEARNED CIT (A) FURTHER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE FACT AND SUBMISSION OF YOUR AP PELLANT THAT 2 ITA 201/MUM/2017 THE AMOUNT GIVEN OF RS. 50,00,000/- (RUPEES FIFTY L ACS ONLY) FELL WITHIN THE PURVIEW OF 'COMMERCIAL EXPEDIENCY'. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT O F SOFTWARE INCLUDING ENGINEERING DESIGN AND OTHER RELATED INFORMATION TE CHNOLOGY ENABLED PRODUCTS AND SERVICES, FILED ITS RETURN OF INCOME F OR AY 2012-13 DECLARING TOTAL INCOME AT RS.1,69,20,396. THE CASE WAS SELEC TED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) OF THE ACT, WERE ISSU ED. IN RESPONSE TO NOTICES, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED VARIOUS DETAILS, AS CALLED FOR. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE HAS DEBITED AN AMOUNT OF RS.50 LAKHS UNDER THE HEAD OTHER EXPE NSES ON ACCOUNT OF SPENDING ON CORPORATE SOCIAL RESPONSIBILITY. THERE FORE, CALLED UPON THE ASSESSEE TO FURNISH NECESSARY DETAILS AND ALSO HOW IT IS HAVING NEXUS WITH ASSESSEES BUSINESS ACTIVITY. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT IT HAS PAID AN AMOUNT OF RS .50 LAKHS TO M/S SHANTI SEVA NIDHI TRUST, ENGAGED IN THE ACTIVITY OF CARRYING OUT EDUCATIONAL / TRAINING ACTIVITIES (RUNNING TECHNICA L COLLEGE CALLED AS NETUR TECHNICAL TRAINING INSTITUTE). THE ASSESSEE FURTHE R SUBMITTED THAT THE TRUST IS INVOLVED IN PROVIDING EDUCATION TO LOCAL P OOR CHILDREN, WHERE THE FACTORIES OF ASSESSEES PARENT COMPANY ARE SITUATED AND CHILDREN OF 3 ITA 201/MUM/2017 EMPLOYEES OF ASSESSEE AND ITS PARENT COMPANY WERE B ENEFICIARIES OF THE TRUST. THEREFORE, THERE IS A DIRECT NEXUS BETWEEN AMOUNT GIVEN TO TRUST AND BUSINESS ACTIVITY OF THE ASSESSEE AND HENCE, TH E SAME IS DEDUCTIBLE U/S 37(1) OF THE INCOME-TAX ACT, 1961. 3. THE AO, AFTER CONSIDERING RELEVANT SUBMISSIONS O F THE ASSESSEE HELD THAT THE ASSESSEE HAS FAILED TO FILE ANY EVIDE NCE TO PROVE NEXUS BETWEEN EXPENDITURE INCURRED UNDER THE HEAD COPORA TE SOCIAL RESPONSIBILITY AND BUSINESS ACTIVITY OF THE ASSESS EE. THE AO FURTHER OBSERVED THAT IN ORDER TO BE ELIGIBLE FOR DEDUCTION OF ANY EXPENDITURE, THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE SAME HAD BEEN LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. EXPEN DITURE INCURRED IN THE NATURE OF DONATION, BEING VOLUNTARY, CANNOT BE HELD TO BE FULFILLING THE CRITERIA OF BUSINESS EXIGENCY / COMMERCIAL EXPEDIEN CY, THEREFORE, HELD THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS BY F ILING NECESSARY EVIDENCE AND ACCORDINGLY MADE ADDITION OF RS.50 LAK HS TO THE TOTAL INCOME OF THE ASSESSEE. HOWEVER, THE AO HAS ALLOWE D ALTERNATIVE CLAIM OF THE ASSESSEE TOWARDS DONATION PAID TO TRUST U/S 80G OF THE INCOME-TAX ACT, 1961. 4. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS ON THE ISSUE OF DISALLOWANCE OF DONATION PAID TO 4 ITA 201/MUM/2017 SHANTI SEVA NIDHI WHICH HAS BEEN EXTRACTED BY THE L D.CIT(A) IN HIS ORDER AT PARA 3.3 ON PAGES 5 TO 25. THE ASSESSEE H AS FILED ELABORATE WRITTEN SUBMISSIONS ON THE ACTIVITY OF THE ASSESSEE AND ALSO THE ACTIVITIES CARRIED OUT BY SHANTI SEVA NIDHI AT MURBAD, THE BEN EFICIARY OF DONATION GIVEN BY THE ASSESSEE. THE ASSESSEE ALSO RELIED UP ON VARIOUS JUDICIAL PRECEDENTS TO SUPPORT ITS CASE. THE SUM AND SUBSTA NCE OF THE ARGUMENTS OF THE ASSESSEE ARE THAT EXPENDITURE INCU RRED UNDER THE HEAD CORPORATE SOCIAL RESPONSIBILITY BEING DONATION GI VEN TO SHANTI SEVA NIDHI AT MURBAD IS HAVING DIRECT NEXUS WITH ITS BUS INESS ACTIVITY AS THE TRUST IS CARRYING OUT VARIOUS EDUCATIONAL ACTIVITIE S BY OFFERING VARIOUS TECHNICAL COURSES TO POOR STUDENTS OF LOCAL RESIDEN TS WHERE THE FACTORIES OF ASSESSEE AND ITS PARENT COMPANIES ARE LOCATED. THE BENEFICIARIES OF THE TRUST INCLUDES CHILDREN OF ASSESSEE COMPANY AND ITS PARENT COMPANY. THEREFORE, THERE IS NO REASON FOR THE AO TO DISALLO W EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE MERELY FOR THE REASON THAT THE EXPENDITURE INCURRED IS IN THE NATURE OF DONATION BEING VOLUNTARY CONTRIBUTION TO A TRUST. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE HE LD THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO PROVE THE IMPUGNED EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. THERE IS NO NEXUS BETWEEN BUSINESS ACTIVITY OF THE ASSESSEE AND SUM 5 ITA 201/MUM/2017 SPENT UNDER THE HEAD CORPORATE RESPONSIBILITY. T HE IMPUGNED EXPENDITURE IS IN THE NATURE OF VOLUNTARY CONTRIBUT ION TO A TRUST. THEREFORE THE CLAIM OF THE ASSESSEE THAT THE SAME IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS DOES NOT HA VE ANY MERIT. ACCORDINGLY, UPHELD ADDITION MADE BY THE AO AND REJ ECTED GROUND TAKEN BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD .CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.50 LAKHS MADE BY T HE AO WITHOUT APPRECIATING THE FACT THAT THERE IS NO NEED OF DIRE CT NEXUS BETWEEN EXPENDITURE INCURRED BY THE ASSESSEE AND BUSINESS A CTIVITY OF THE ASSESSEE. WHAT IS RELEVANT IS WHETHER THE ASSESSEE IS DERIVING ANY BENEFIT OUT OF EXPENDITURE INCURRED OR NOT HAS TO B E SEEN. IN THIS CASE, THE ASSESSEE HAS PAID DONATION TO A TRUST WHICH IS INVOLVED IN PROVIDING EDUCATIONAL ACTIVITIES UNDER VARIOUS SUBJECTS WHICH IS DIRECTLY BENEFITTED TO THE ASSESSEE AS EMPLOYEES OF ASSESSEE AND THEIR CHILDREN ARE GETTING EDUCATION FROM THE TRUST. THE LD. AR FURTHER SUBMI TTED THAT THE ASSESSEE HAS PAID DONATION TO SET UP A TECHNICAL TRAINING IN STITUTE IN COLLABORATION WITH NTTF, A RENOWNED SKILL DEVELOPMENT INSTITUTE W HICH INVOLVED IN PROVIDING TECHNICAL EDUCATION. THE TRUST IS CONDUC TING VARIOUS TECHNICAL COURSES WHICH DIRECTLY BENEFICIAL TO THE ASSESSEE A ND HENCE, THERE IS A 6 ITA 201/MUM/2017 DIRECT NEXUS BETWEEN EXPENDITURE INCURRED UNDER THE HEAD CORPORATE SOCIAL RESPONSIBILITY AND BUSINESS ACTIVITY OF THE ASSESSEE. THE LOWER AUTHORITIES, WITHOUT APPRECIATING THE FACT HAS MADE ADDITION TOWARDS DONATION GIVEN TO SHANTI SEVA NIDHI AT MURBAD. 6. ON THE OTHER HAND, THE LD.DR STRONGLY SUPPORTED ORDER OF THE LD.CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATER IAL AVAILABLE ON RECORD. THE FACTUAL MATRIX WHICH LEADS TO THE IMPU GNED DISPUTE ARE THAT THE ASSESSEE HAD GIVEN DONATION OF RS.50 LAKHS TO T O SHANTI SEVA NIDHI AT MURBAD, A TRUST INVOLVED IN PROVIDING VOCATIONAL TRAINING COURSE AT MURBAD. THE ASSESSEE NEVER DISPUTED THE FACT THAT THE EXPENDITURE INCURRED UNDER THE HEAD CORPORATE SOCIAL RESPONSIB ILITY IS A DONATION GIVEN TO A TRUST. BUT CLAIMS THAT EXPENDITURE INCU RRED UNDER THE HEAD CORPORATE SOCIAL RESPONSIBILITY IS HAVING DIRECT NEXUS WITH ITS BUSINESS ACTIVITY. THE ASSESSEE HAS GIVEN VARIOUS REASONS T O ESTABLISH NEXUS BETWEEN EXPENDITURE INCURRED UNDER THE HEAD CORPOR ATE SOCIAL RESPONSIBILITY AND BUSINESS ACTIVITY OF THE ASSESS EE. ACCORDING TO THE ASSESSEE, THE TRUST IS PROVIDING VARIOUS TECHNICAL COURSES WHICH HAS DIRECTLY BENEFITED ITS EMPLOYEES AND THEIR CHILDREN . THE AO HAS DISALLOWED EXPENDITURE INCURRED UNDER THE HEAD COR PORATE SOCIAL RESPONSIBILITY ON THE GROUND THAT IT IS IN THE NAT URE OF VOLUNTARY 7 ITA 201/MUM/2017 CONTRIBUTION WHICH CANNOT BE CONSIDERED AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE. 8. HAVING HEARD BOTH THE SIDES, WE FIND THAT EXPEND ITURE INCURRED BY THE ASSESSEE UNDER THE HEAD CORPORATE SOCIAL RESPO NSIBILITY IS IN THE NATURE OF DONATION BEING VOLUNTARY CONTRIBUTION GIV EN TO A TRUST WHICH IS INVOLVED IN PROVIDING VOCATIONAL TRAINING COURSE. THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO PROVE THAT THE IMPUGNED EXPEN SES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN ORDER TO BE ELIGIBLE FOR DEDUCTION OF ANY EXPENDITU RE, THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE SAME HAD BEEN LAID OUT W HOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. IN THIS CASE, THERE IS NO NEXUS BETWEEN IMPUGNED EXPENDITURE AND BUSINESS ACTIVITY OF THE ASSESSEE. THE SUM GIVEN TO A TRUST, VIZ. SHANTI SEVA NIDHI AT MURBAD IS A VOLUNTARY CONTRIBUTION DOES NOT PARTAKE THE CHARACTER OF EXPE NDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND WHICH IS HAVING BUSINESS EXIGENCY / COMMERCIAL EXPEDIENCY. SINCE, THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS TO PROVE NEXUS BETWEEN IMPUGNED EXPENDITURE AND ITS BUSINESS ACTIVITY, THE AO WAS R IGHT IN DISALLOWING SAID EXPENDITURE U/S 37(1) OF THE INCOME-TAX ACT, 1961. THE LD.CIT(A), AFTER CONSIDERING RELEVANT FACTS HAS RIGHTLY UPHELD ADDIT ION MADE BY THE AO. WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE LD.CIT(A). HENCE, 8 ITA 201/MUM/2017 WE ARE INCLINED TO UPHOLD THE FINDINGS OF LD.CIT(A) AND DISMISS APPEAL FILED BY THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2018. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 10 TH AUGUST, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER SR.PS, ITAT, MUMBAI