M/s Hindustan Copper Ltd., Kolkata V. DCIT, LTU-1, Kolkata, Kolkata

ITA 2409/KOL/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8238 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 05-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 148; 37; 2; 143(3); 115JB; 37(1); 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA 'A' BENCH, KOLKATA {VIRTUAL COURT HEARING} (Before Shri P.M. Jagtap, Hon’ble Vice-President, KZ & Shri Partha Sarathi Chaudhury, Hon'ble Judicial Member) ITA No. 2409/Kol/2019 Assessment Year: 2012-13 Hindustan Copper Ltd..........................................................................................................................Appellant Tamra Bhavan 1, Ashutosh Choudhury Avenue Kolkata - 700 019 [PAN: AAACH 7409 R] Vs. Deputy Commissioner of Income Tax, LTU-1, Kolkata................................................................Respondent ITA No. 2478/Kol/2019 Assessment Year: 2012-13 Asstt. Commissioner of Income Tax, LTU-1, Kolkata.....................................................................Appellant Vs. Hindustan Copper Ltd.......................................................................................................................Respondent Tamra Bhavan 1, Ashutosh Choudhury Avenue Kolkata - 700 019 [PAN: AAACH 7409 R] Appearances by: Shri Sanjay Bhattacharya, FCA, appeared on behalf of the assessee. ShriAmol Sudhirkamat. C1T, D/R & Shri Biswanath Das, Addl. CIT, D/R, appearing on behalf of the Revenue. Date of concluding the hearing: November 11 th , 2021 Date of pronouncing the order: November 17 th , 2021 ORDER Per P.M. Jagtap. Vice-President. KZ :- These two appeals, one filed by the assessee in ITA No. 2409/Kol/2019 and the other filed by the revenue being ITA No. 2478/Kol/2019, are cross-appeals which are directed against the order of the Id. Commissioner of Income Tax (Appeals) - 23 (hereinafter the 'Id. CIT(A)’), dt. 09/09/2019. 2. The solitary common issue involved in these appeals relates to the disallowance of Rs.4,48,12,000/- made by the Assessing Officer on account of Corporate Social Responsibility (CSR) expenses which is sustained by the Id. CIT(A) to the extent of Rs.2,86,00,000/-. 3. The assessee in the present case is a compan mining, manufacturing and sale of copper. The return of income for the year under consideration was filed by the assessee company on 26/09/2012 declaring total income of Rs. 487,99,20,280/- under the normal provisions 466,39,69,000/- u/s 115JB of the Act. In the assessment originally completed u/s 143(3) of the Act, vide an order dt. 12/03/2015, the total income of the assessee was determined by the Assessing Officer at Rs. 582,71,55,41 115JB of the Act. Subsequently, the assessment was reopened by the Assessing Officer and notice u/s 148 of the Act was issued by him on 29/12/2016 in reply to which a letter was filed by the assessee on 13/01/2 filed on 26/09/2012 may be treated as the return filed in response to the notice u/s 148. In the profit and loss account filed by the assessee company along with the return of income, a sum of Rs.1,62,12,000/- was debited on account of CSR expenses while a further amount of Rs.2,86,00,000/- was debited on account of a provision for CSR expenses. According to the Assessing Officer, as per Explanation 2 to Section 37(1) inserted in the statute by the Finance Act, 2014, any expenditure incurred by the assessee on the activities relating to CSR shall not be deemed to be an expenditure incurred by the assessee for the purposes of business or profession. In this regard, it was contended on behalf of the asse interalia that the said Explanation 2 to Section 37(1) inserted by the Finance Act, 2014, was applicable from the Assessment Year 2015 to the year under consideration i.e., Assessment Year 2012 assessee company was not found to be acceptable by the Assessing Officer and by relying on the Explanation 2 to Section 37(1), he made a disallowance of Rs.4,48,12,000/ account of CSR expenses in the assessment completed u/s 1 order dt. 13/06/2017. 2 Responsibility (CSR) expenses which is sustained by the Id. CIT(A) to the extent of The assessee in the present case is a company which is engaged in the business of mining, manufacturing and sale of copper. The return of income for the year under consideration was filed by the assessee company on 26/09/2012 declaring total income of under the normal provisions of the Act and book profit of Rs. u/s 115JB of the Act. In the assessment originally completed u/s 143(3) of the Act, vide an order dt. 12/03/2015, the total income of the assessee was determined by the Assessing Officer at Rs. 582,71,55,410/- and book profit at Rs.469,28,61,283/ 115JB of the Act. Subsequently, the assessment was reopened by the Assessing Officer and notice u/s 148 of the Act was issued by him on 29/12/2016 in reply to which a letter was filed by the assessee on 13/01/2017 stating therein that the return of income originally filed on 26/09/2012 may be treated as the return filed in response to the notice u/s 148. In the profit and loss account filed by the assessee company along with the return of income, a was debited on account of CSR expenses while a further amount of was debited on account of a provision for CSR expenses. According to the Assessing Officer, as per Explanation 2 to Section 37(1) inserted in the statute by the nance Act, 2014, any expenditure incurred by the assessee on the activities relating to CSR shall not be deemed to be an expenditure incurred by the assessee for the purposes of business or profession. In this regard, it was contended on behalf of the asse that the said Explanation 2 to Section 37(1) inserted by the Finance Act, 2014, was applicable from the Assessment Year 2015-16 and the same, therefore, was not applicable to the year under consideration i.e., Assessment Year 2012-13. This contentions of the assessee company was not found to be acceptable by the Assessing Officer and by relying on the Explanation 2 to Section 37(1), he made a disallowance of Rs.4,48,12,000/ account of CSR expenses in the assessment completed u/s 143(3)/148/251 of the Act vide ITA No. 2409/Kol/2019 Assessment Year: 2012-13 ITA No. 2478/Kol/2019 Assessment Year: 2012-13 Hindustan Copper Ltd. Responsibility (CSR) expenses which is sustained by the Id. CIT(A) to the extent of y which is engaged in the business of mining, manufacturing and sale of copper. The return of income for the year under consideration was filed by the assessee company on 26/09/2012 declaring total income of of the Act and book profit of Rs. u/s 115JB of the Act. In the assessment originally completed u/s 143(3) of the Act, vide an order dt. 12/03/2015, the total income of the assessee was determined by and book profit at Rs.469,28,61,283/- u/s 115JB of the Act. Subsequently, the assessment was reopened by the Assessing Officer and notice u/s 148 of the Act was issued by him on 29/12/2016 in reply to which a letter was 017 stating therein that the return of income originally filed on 26/09/2012 may be treated as the return filed in response to the notice u/s 148. In the profit and loss account filed by the assessee company along with the return of income, a was debited on account of CSR expenses while a further amount of was debited on account of a provision for CSR expenses. According to the Assessing Officer, as per Explanation 2 to Section 37(1) inserted in the statute by the nance Act, 2014, any expenditure incurred by the assessee on the activities relating to CSR shall not be deemed to be an expenditure incurred by the assessee for the purposes of business or profession. In this regard, it was contended on behalf of the assessee company that the said Explanation 2 to Section 37(1) inserted by the Finance Act, 2014, was 16 and the same, therefore, was not applicable . This contentions of the assessee company was not found to be acceptable by the Assessing Officer and by relying on the Explanation 2 to Section 37(1), he made a disallowance of Rs.4,48,12,000/- on 43(3)/148/251 of the Act vide 4. Against the order passed by the Assessing Officer u/s 143(3)/148/251 of the Act, an appeal was preferred by the assessee before the Id. CIT(A) challenging disallowance of Rs.4,48,12,000/ expenses. During the course of appellate proceedings before the Id. CIT(A), reliance was placed on behalf of the assessee company on the decision of the Tribunal in the c Misrilall Mines Pvt. Ltd. [ITA No. 738/Kol/2 assessee company’s claim of CSR expenses was decided by the Tribunal as under: "We have heard the arguments of both the sides and also perused the relevant mate on record. It is observed that the expenditure on peripheral development in question was incurred by the assessee as a part of corporate social responsibility as per the scheme framed under the Companies Act. As submitted by the learned coun actually incurred by the assessee during the year under consideration and it was not a creation of reserve by debit to the profit and loss account as alleged by the A.O. while treating the same as appropriation of profits. As a matter of fact, such expenditure on peripheral development as a part of CSR was incurred by the assessee even in the earlier years and the same was allowed by the A.O. even in the assessment made under section 143(3) vide an order dated 13. /Is regards the observation of the A.O. that the expenditure incurred for construction of schools, electrification of schools etc., it is submitted on behalf of the assessee before the Ld. CIT(A) as well as before the Tribunal nature as neither the ownership of the school belonged to the assessee nor it had any control over the running of school. The said expenditure for construction of a block by way of addition to the school building located in a village in the vicinity of mines was incurred for the benefit of its workers and general public. 2 to Section 37 of the Income Tax Act, the Raipur Bench of t ofjindal Power Ltd. (supra) that the said explanation inserted by the Finance Act, 2014 with effect from 01.04.2015 is not retrospective. Keeping in view all these aspects of the matter, we are of the view that the action of the A.O. in disallowing the claim of the assessee for peripheral development expenditure as a part of CSR was not well founded and the Ld. CIT(A) was not justified in confirming the said disallowance. We, therefore, delete the said disallowance and allow this appeal of the assessee." 5. Keeping in view the decision of the Tribunal in the case of (supra) wherein it was held that Explanation 2 to Section 37 of the Income Tax Act inserted by the Finance Act, 2014, was applicable disallowance made by the Assessing Officer on account of CSR expenses to the extent of expenditure actually incurred by the assessee company amounting to Rs. 1,62,12,000/ regards the claim of the assessee Rs.2,86,00,000/- representing a provision made, the ld. CIT(A] held that the same had not 3 Against the order passed by the Assessing Officer u/s 143(3)/148/251 of the Act, an appeal was preferred by the assessee before the Id. CIT(A) challenging disallowance of Rs.4,48,12,000/- made by the Assessing Officer on account of CSR expenses. During the course of appellate proceedings before the Id. CIT(A), reliance was placed on behalf of the assessee company on the decision of the Tribunal in the c Misrilall Mines Pvt. Ltd. [ITA No. 738/Kol/2017] wherein a similar issue related to the assessee company’s claim of CSR expenses was decided by the Tribunal as under: "We have heard the arguments of both the sides and also perused the relevant mate on record. It is observed that the expenditure on peripheral development in question was incurred by the assessee as a part of corporate social responsibility as per the scheme framed under the submitted by the learned counsel for the assessee, the said expenditure was actually incurred by the assessee during the year under consideration and it was not a creation of reserve by debit to the profit and loss account as alleged by the A.O. while treating the same as a matter of fact, such expenditure on peripheral development as a part of CSR was incurred by the assessee even in the earlier years and the same was allowed by the A.O. even in the assessment made under section 143(3) vide an order dated 31.03.2014 for A.Y. 2012 regards the observation of the A.O. that the expenditure incurred for construction of schools, electrification of schools etc., it is submitted on behalf of the assessee before the Ld. CIT(A) as well as before the Tribunal that the said expenditure cannot be treated as capital in nature as neither the ownership of the school belonged to the assessee nor it had any control over the running of school. The said expenditure for construction of a block by way of addition to the chool building located in a village in the vicinity of mines was incurred for the benefit of its As regards the reliance of the Assessing Officer placed on Explanation 2 to Section 37 of the Income Tax Act, the Raipur Bench of this Tribunal has held in the case ofjindal Power Ltd. (supra) that the said explanation inserted by the Finance Act, 2014 with effect from 01.04.2015 is not retrospective. Keeping in view all these aspects of the matter, we are of the of the A.O. in disallowing the claim of the assessee for peripheral development expenditure as a part of CSR was not well founded and the Ld. CIT(A) was not justified in confirming the said disallowance. We, therefore, delete the said disallowance and w this appeal of the assessee." Keeping in view the decision of the Tribunal in the case of Misrilall Mines Pvt. Ltd. wherein it was held that Explanation 2 to Section 37 of the Income Tax Act inserted by the Finance Act, 2014, was applicable w.e.f. 01/04/2015, the ld. CIT(A) deleted the disallowance made by the Assessing Officer on account of CSR expenses to the extent of expenditure actually incurred by the assessee company amounting to Rs. 1,62,12,000/ regards the claim of the assessee company for the balance CSR expenditure of representing a provision made, the ld. CIT(A] held that the same had not ITA No. 2409/Kol/2019 Assessment Year: 2012-13 ITA No. 2478/Kol/2019 Assessment Year: 2012-13 Hindustan Copper Ltd. Against the order passed by the Assessing Officer u/s 143(3)/148/251 of the Act, an appeal was preferred by the assessee before the Id. CIT(A) challenging interalia the made by the Assessing Officer on account of CSR expenses. During the course of appellate proceedings before the Id. CIT(A), reliance was placed on behalf of the assessee company on the decision of the Tribunal in the case of wherein a similar issue related to the assessee company’s claim of CSR expenses was decided by the Tribunal as under:- "We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the expenditure on peripheral development in question was incurred by the assessee as a part of corporate social responsibility as per the scheme framed under the sel for the assessee, the said expenditure was actually incurred by the assessee during the year under consideration and it was not a creation of reserve by debit to the profit and loss account as alleged by the A.O. while treating the same as a matter of fact, such expenditure on peripheral development as a part of CSR was incurred by the assessee even in the earlier years and the same was allowed by the A.O. 31.03.2014 for A.Y. 2012- regards the observation of the A.O. that the expenditure incurred for construction of schools, electrification of schools etc., it is submitted on behalf of the assessee before the Ld. that the said expenditure cannot be treated as capital in nature as neither the ownership of the school belonged to the assessee nor it had any control over the running of school. The said expenditure for construction of a block by way of addition to the chool building located in a village in the vicinity of mines was incurred for the benefit of its regards the reliance of the Assessing Officer placed on Explanation his Tribunal has held in the case ofjindal Power Ltd. (supra) that the said explanation inserted by the Finance Act, 2014 with effect from 01.04.2015 is not retrospective. Keeping in view all these aspects of the matter, we are of the of the A.O. in disallowing the claim of the assessee for peripheral development expenditure as a part of CSR was not well founded and the Ld. CIT(A) was not justified in confirming the said disallowance. We, therefore, delete the said disallowance and Misrilall Mines Pvt. Ltd. wherein it was held that Explanation 2 to Section 37 of the Income Tax Act inserted the ld. CIT(A) deleted the disallowance made by the Assessing Officer on account of CSR expenses to the extent of expenditure actually incurred by the assessee company amounting to Rs. 1,62,12,000/-. As company for the balance CSR expenditure of representing a provision made, the ld. CIT(A] held that the same had not been actually incurred by the assessee company. In this regard, he relied on the decision of the Tribunal in the case of creation of reserve for CSR expenses by debiting to the profit and loss account was not liable as deduction and sustained the disallowance made by extent of Rs.2,86,00,000/- which represented provision made by the assessee company by debiting to the profit and loss account. Against the order of the Id. CIT(A) on this issue, the assessee and revenue both are in appeal before the Tribunal. 6. We have heard the arguments of material available on record. As regards the appeal of the revenue challenging the deletion by the Id. CIT(A) of the disallowance of Rs.1,62,12,000/ account of CSR expenses actually incurred by the assessee, the Id. representatives of both the sides have agreed that the same is squarely covered in favour of the assessee by the decision of this Tribunal in the case of that deduction claimed by the assessee on account of CSR expenses actually incurred can be disallowed by invoking Explanation 2 to Section 37(1] of the Act, only from Assessment Year 2015-16 as the same was applicable prospectively 7. As regards the assessee's appeal involving the disallowance of Rs.2,86,00,000/ made by the Assessing Officer and sustained by the Id. CIT(A] on account of provision made for CSR expenses, the Id. Counsel for the assessee has contended that the decision Tribunal in the case of Misrilall Mines Pvt. Ltd. (supra) observations made by the Tribunal in the said case were in the context of a reserve created for CSR expenses by debiting to the profit and loss account whereas provision was made by the assessee company for CSR expenses which represented the ascertained liability. In this regard, he furnished at page no. 64 of the paper book to show that provided by the assessee company represented actual expenditure on CSR expenses. As rightly pointed out by the Id. D/R, this claim of the Id. Counsel for the assessee requires verification by the Assessing Officer inasmuch a 4 been actually incurred by the assessee company. In this regard, he relied on the decision of the Tribunal in the case of Misrilall Mines Pvt. Ltd. (supra) wherein it was held that a creation of reserve for CSR expenses by debiting to the profit and loss account was not liable as deduction and sustained the disallowance made by the Assessing Officer to the which represented provision made by the assessee company by debiting to the profit and loss account. Against the order of the Id. CIT(A) on this issue, the assessee and revenue both are in appeal before the Tribunal. We have heard the arguments of both the sides and also perused the relevant material available on record. As regards the appeal of the revenue challenging the deletion by the Id. CIT(A) of the disallowance of Rs.1,62,12,000/- made by the Assessing Officer on ually incurred by the assessee, the Id. representatives of both the sides have agreed that the same is squarely covered in favour of the assessee by the decision of this Tribunal in the case of Misrilall Mines Pvt. Ltd. (supra), duction claimed by the assessee on account of CSR expenses actually incurred can be disallowed by invoking Explanation 2 to Section 37(1] of the Act, only from Assessment 16 as the same was applicable prospectively w.e.f. 01/04/2015. As regards the assessee's appeal involving the disallowance of Rs.2,86,00,000/ made by the Assessing Officer and sustained by the Id. CIT(A] on account of provision made for CSR expenses, the Id. Counsel for the assessee has contended that the decision Misrilall Mines Pvt. Ltd. (supra) is not applicable because the observations made by the Tribunal in the said case were in the context of a reserve created for CSR expenses by debiting to the profit and loss account whereas in the present case provision was made by the assessee company for CSR expenses which represented the ascertained liability. In this regard, he has invited our attention to the relevant details furnished at page no. 64 of the paper book to show that expenditure of Rs.2,86,00,000/ provided by the assessee company represented actual expenditure on CSR expenses. As rightly pointed out by the Id. D/R, this claim of the Id. Counsel for the assessee requires verification by the Assessing Officer inasmuch as if the provision made by the assessee is ITA No. 2409/Kol/2019 Assessment Year: 2012-13 ITA No. 2478/Kol/2019 Assessment Year: 2012-13 Hindustan Copper Ltd. been actually incurred by the assessee company. In this regard, he relied on the decision of wherein it was held that a creation of reserve for CSR expenses by debiting to the profit and loss account was not the Assessing Officer to the which represented provision made by the assessee company by debiting to the profit and loss account. Against the order of the Id. CIT(A) on this issue, the both the sides and also perused the relevant material available on record. As regards the appeal of the revenue challenging the deletion made by the Assessing Officer on ually incurred by the assessee, the Id. representatives of both the sides have agreed that the same is squarely covered in favour of the assessee by the wherein it was held duction claimed by the assessee on account of CSR expenses actually incurred can be disallowed by invoking Explanation 2 to Section 37(1] of the Act, only from Assessment w.e.f. 01/04/2015. As regards the assessee's appeal involving the disallowance of Rs.2,86,00,000/- as made by the Assessing Officer and sustained by the Id. CIT(A] on account of provision made for CSR expenses, the Id. Counsel for the assessee has contended that the decision of this is not applicable because the observations made by the Tribunal in the said case were in the context of a reserve created in the present case, the provision was made by the assessee company for CSR expenses which represented the invited our attention to the relevant details expenditure of Rs.2,86,00,000/- provided by the assessee company represented actual expenditure on CSR expenses. As rightly pointed out by the Id. D/R, this claim of the Id. Counsel for the assessee requires the provision made by the assessee is found to be ascertained liability representing actual expenditure incurred by the assessee on CSR, the same is allowable as deduction as held by this Tribunal in the case of Mines Pvt. Ltd. (supra). We, therefore, restore this for deciding the same afresh after necessary verification from the relevant record. 8. In the result, appeal of the assessee is treated as allowed for statistical purposes while the appeal of the revenue is dismissed. Kolkata, the Sd/- [Partha Sarathi Chaudhury Judicial Member Dated: 17.11.2021 {SC SPS} Copy of the order forwarded to: 1. Hindustan Copper Ltd Tamra Bhavan 1, Ashutosh Choudhury Avenue Kolkata - 700 019 2. Deputy Commissioner of Income Tax, LTU 3. Asstt. Commissioner of Income Tax, LTU 4. CIT(A)- 5. CIT- , 6. CIT(DR), Kolkata Benches, Kolkata. 5 found to be ascertained liability representing actual expenditure incurred by the assessee on CSR, the same is allowable as deduction as held by this Tribunal in the case of therefore, restore this issue to the file of the Assessing Officer for deciding the same afresh after necessary verification from the relevant record. In the result, appeal of the assessee is treated as allowed for statistical of the revenue is dismissed. Kolkata, the 17 th day of November, 2021. Chaudhury] Judicial Member 1, Ashutosh Choudhury Avenue Deputy Commissioner of Income Tax, LTU-1, Kolkata Asstt. Commissioner of Income Tax, LTU-1, Kolkata . CIT(DR), Kolkata Benches, Kolkata. Assistant Registrar/DDO ITAT, Kolkata Benches ITA No. 2409/Kol/2019 Assessment Year: 2012-13 ITA No. 2478/Kol/2019 Assessment Year: 2012-13 Hindustan Copper Ltd. found to be ascertained liability representing actual expenditure incurred by the assessee on CSR, the same is allowable as deduction as held by this Tribunal in the case of Misrilall issue to the file of the Assessing Officer for deciding the same afresh after necessary verification from the relevant record. In the result, appeal of the assessee is treated as allowed for statistical Sd/- [P.M. Jagtap] Vice-President True copy By order Assistant Registrar/DDO ITAT, Kolkata Benches