Security Printing & Minting Corporation of India Ltd., New Delhi V. DCIT, New Delhi

ITA 5102/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2890 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 16-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIT SINGH
• Assessee Lawyers: H P AGGARWAL CA SH Y K MAGHAN
• Keywords: Revenue expenditure; Capital expenditure
• Section: 37(1); 37; 6; 11

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI H.S SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5102 /DEL/201 4 A Y 2010 - 11 M/S SECURITY PRINTING & MINTING COPORATION OF INDIA LTD., 16 TH FLOOR, JAWAHAR VYAPAR BHAWAN, JANPATH PAN AA JCS6111J VS D CIT CIRCLE 8 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SH. H. P. AGGARWAL, CA SH. Y K MAGHAN, CA RESPONDENT BY: SH. SANJIT SINGH, CIT DR DATE OF HEARING 20 /0 3 /2018 DATE OF PRONOUNCEMENT 2 1 / 03/2018 O R D E R PER PRASHANT MAHARISHI, ACCOUNTANT MEMBER 1 . THIS APPEAL IS FILED BY ASSESSEE , AGAINST THE ORDER OF T HE COMMISSIONER O F INCOME TAX ( APPEALS ) - XI , NEW DELHI FOR A. Y. 2010 - 11 WHEREIN THE DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER OF RS. 72 , 28 , 051/ - ON ACCOUNT OF CORPORATE SOCIAL RESPONSIBILITY EXPENSES WAS CONFIRMED. 2 . THE ASSESSEE PREFERRED THE F OLLOWING GROUNDS OF APPEAL : - 2 ( I ) THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD BOTH ON LAW AND FACTS. ( II ) THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING DISALLOWANCE OF A SUM OF RS. 72,28,051/ - , DEBITED UNDER THE EXPENSE HEAD CORPOR ATE SOCIAL RESPONSIBILITIES UNDER THE MISTAKEN BELIEF THAT THE ABOVE EXPENDITURE IS INCURRED BY THE APPELLANT UNDER ANY STATUE WHICH IS NON - EXISTENCE, IN COMPLETE DISREGARD OF THE DETAILS PROVIDED REGARDING THE NATURE AND JUSTIFICATION OF SUCH EXPENDITURE INCURRED BY THE APPELLANT. IT HAS BEEN REITERATED TIME AND AGAIN IN THE SUBMISSIONS MADE TO THE LEARNED AUTHORITY THAT THE APPELLANT IS A PUBLIC SECTOR ENTERPRISE AND IS GOVERNED BY THE GUIDELINES PASSED BY THE DEPARTMENT OF PUBLIC ENTERPRISES (DPE). AS PE R DPE GUIDELINE NO. O.M. NO.3( 10)/2008 - DPE(MOU) DATED 26.12.2008, IT IS MANDATORY FOR EVERY CENTRAL PUBLIC SECTOR ENTERPRISE (CPSE) TO SIGN MEMORANDUM OF UNDERSTANING (MOU) WITH ITS RESPECTIVE MINISTRY/DEPARTMENT OF GOVT, OF INDIA. THE MOU GUIDELINES DEF INE CORPORATE SOCIAL RESPONSIBILITY (CSR) AS A PHILOSOPHY WHEREIN ORGANIZATIONS SERVE THE INTEREST OF THE SOCIETY BY TAKING RESPONSIBILITY FOR THE IMPACT OF THEIR ACTIVITIES ON CUSTOMERS, EMPLOYEES, SHAREHOLDERS, COMMUNITIES AND THE ENVIRONMENT IN ALL THE ASPECTS OF THEIR OPERATIONS. AS PER THE GUIDELINES, THE THRUST OF CSR IS CLEARLY ON CAPACITY BUILDING, EMPOWERMENT OF COMMUNITIES, INCLUSIVE SOCIO - ECONOMIC GROWTH, ENVIRONMENT PROTECTION, PROMOTION OF GREEN AND ENERGY EFFICIENT TECHNOLOGIES, DEVELOPMENT OF BACKWARD REGIONS, AND UPLIFTMENT OF THE UNDER - PRIVILEGED SECTIONS OF THE SOCIETY. IN MOU GUIDELINES, CSR WAS INCLUDED AS A COMPULSORY ELEMENT AND REQUIRE EVERY CPSE TO MAKE A BUDGETARY ALLOCATION FOR CSR ACTIVITIES, BEING SOME SPECIFIED PERCENTAGE OF PROFIT AFTER TAX OF PREVIOUS YEAR, WITH THE APPROVAL OF ITS BOARD OF DIRECTORS. THE LEARNED A UTHORITY HAS ERRED IN TAKING THE VIEW THAT EXPENSE UNDER THE HEAD CORPORATE SOCIAL RESPONSIBILITY' IS NOT INCURRED BY THE APPELLANT IN CONNECTION WITH THE BUSINESS OF THE APPELLANT AND THUS CANNOT BE TREATED AS REVENUE EXPENDIT URE U/S 37 OF T HE INCOME TAX ACT. THE ACTION OF THE LEARNED AUTHORITY IS NOT BASED 3 MERELY ON HYPOTHECATION, CONJECTURES, AND SUMERISE. ( III ) THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD ON L AW IN AS FAR AS SUSTAINING THE ADDITION OF THE IMPUGNED SUM OF RS. 72, 28,051/ - , WHICH ADDITION, THE LEARNED ASSESSING OFFICER HAD MADE BY DISALLOWANCE OF THE I MPUGNED SUM, BY TREATING THE EXPENDITURE INCURRED BY THE APPELLANT AND CLAIMED AS REVENUE EXPENDITURE, AS CAPITAL EXPENDITURE. ( IV ) THAT THE APPELLANT CRAVES LEAVE AND PRAY S THAT THE RELIEF CLAIMED ABOVE OR ANY OTHER RELIEF, TO WHICH THE APPELLANT IS ENTITLED, MAY KINDLY BE ALLOWED. 3 . THE SOLITARY ISSUE INVOLVED IN THIS APPEAL IS WHE THER CORPORATE SOCIAL RESPONSIBILITY EXPENSES INCURRED BY THE ASSESSEE IS AN ALLOWABLE EXPENDITURE OR NOT. BRIEF FACTS SHOWS THAT ASSESSEE IS , A GOVERNMENT UNDERTAKING , COMPANY WHO FILED ITS RETURN OF INCOME ON 30.09.2010 AT RS. 8 , 47 , 32,22,715/ - . THE ASSESSMENT U/S 143 (3) OF THE ACT WAS MADE ON 28.03.2013 AT RS. 8,51,74,75,656/ - . THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT DISALLOWANCE OF CORPORATE SOCIAL RESPONSIBILITY EXPENDITURE OF RS.72,28,051/ - MADE BY THE LD. ASSESSING OFFICER. IN SCHEDULE 11 OF THE PROFIT LOSS ACCOUNT ASSESSEE HAS DEBITED TH IS EXPENDITURE FOR THE FIRST TIME. THE LD. ASSESSING OFFICER HELD THAT (CSR) EXPENDITURE ARE FOR ENDURING LONG TERM BENEFIT FOR THE SOCIETY AND THEREFORE THEY ARE TO BE INCURRED BY THE ASSEESEE OUT OF THE CORPUS OF THE COMPANY AND HENCE HE HELD IT TO BE CAPITAL EXPENDITURE. 4 4 . THE LD . CIT (APPEAL) HELD THAT CORPORATE SOCIAL RESPONSIBILITY EXPENDITURE CANNOT BE DISALLOWED UNDER THE EXPLANATION (2) OF SECTION 37 (1) OF THE ACT AS SAME IS APPLICABLE W.E.F. 01.04.2015. FURTHER HE CONFIRMED THE DISALLOWANCE HOLDING THAT AS ASSESSEE HAS NOT GIVE N THAT HOW THE REQUIREMENT OF SECTION 37 IS FULFILLED. THEREFORE, ASSESSEE IS IN APPEAL BEFORE US. 5 . THE LD. AR SUBMITTED THAT ASSESSEE IS A COMPANY AND IT HA S INCURRED THESE EXPENDITURE IN THE VICINITY OF THE PLACES WHERE ASSESSEESS UNITS ARE LOCATED . THEREFORE, SUCH EXPENDITURE WERE INCURRED WITH DOMIN ANT OBJE C T OF WELFARE OF ITS EMPLOYEES. HE FURTHER SUBMITTED THAT THE EXPENDITURE FOR CONSTRUCTION OF HOSPITAL, PROVIDING AMBULANCE , REPAIRS OF SCHOOLS ETC ARE COVERED U / S 37 (1) OF THE ACT. HE THEREFOR E, SUBMITTED THAT TH IS EXPENDITURE IS ALLOWABLE TO THE ASSESSEE. ON THE INTRODUCTION OF THE EXPLANATION (2), HE SUPPORTED ORDER OF THE LD. CIT (APPEAL S ) . 6 . THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD. ASSESSING OFFICER AND SUBMITTED THAT AMENDMENT MADE U/S 37 (1) BY INTRODUCING EXPLANATION (2) IS R ETROSPECTIVE IN NATURE , AS IT IS CLARIFICATORY. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO P E RUSED THE ORDER S OF THE LOWER AUTHORITIES. THE ASSESSEE IS A CENTRAL GOVERNMENT PUBLIC SECTOR UNDERTAKING WORKING UNDER THE 5 MINISTRY OF FINANCE. ITS BUSINESS INCLUDES PRINTING OF CURRENCY NOTES AND COINS. IT ALSO PRINTS SEVERAL OTHER PAPERS SUCH A S STAMP PAPER, CHEQUES ETC. IT HAS SEVERAL UNITS ACROSS THE COUNTRY SUCH AS D EVAS NASIK, HYDERABAD, NOIDA, MUMBAI ETC. THE ASSESSEE HAS INCURRED THE EXPENDITURE OF RS. 72,28,051/ - AND DEBITED THE SAME UNDER THE HEAD CORPORATE SOCIAL RESPONSIBILITY EXPENDITU RE. THE ASSESSING OFFICER HAS DISALLOWED TH IS EXPENDITURE HOLDING IT TO BE CAPITAL EXPENDITURE H OLDING THAT CSR EXPENDITURE ARE TO BE INCURRED BY THE COMPANIES ACCORDING TO THE PROVISIONS OF SECTION 135 OF THE COMPANIES ACT , 2013 . THE LD. CIT (APPEALS) T HOUGH HELD THAT DISALLOWANCE UNDER EXPLANATION (2) CANNOT BE MADE FOR THIS YEAR . F URTHER HE HELD THAT EXPENDITURE INCURRED BY THE ASSESSEE ARE NOT ALLOWABLE U/S 37 (1) ITSELF. THE LD. AR HAS SUBMITTED THAT DETAIL OF THIS EXPENDITURE ARE AT PAGE 58 OF THE PAPER BOOK WHICH ARE IN FACT EXPENDITURE INCURRED ON WELFARE OF THE STAFF AS WELL AS VARIOUS LOCALITIES WHERE THE UNITS OF THE ASSESSEE COMPANY ARE SITUATED. ACCORDING TO US THESE EXPENDITURE ARE REQUIRED TO BE EXAMINED FIRSTLY FROM THE FACT THAT WHETHER T HESE EXPENDITURE HAVE BEEN LAID OUT OR EXPENDED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ITS BUSINESS OR NOT. NEITHER THE LD. ASSESSING OFFICER NOR LD. CIT (APPEALS) HAS EXAMINED THE EXPENSES FROM THIS ANGEL. FURTHERMORE EXPLANATION (2) SECTION 37 (1) OF THE ACT , INTRODUCE D BY THE FINANCE NO. 2 OF 2014 IS 6 STATED TO BE EFFECTIVE FROM 01.04.2015 I.E. FROM A. Y. 2015 - 16 ONLY. THEREFORE, FOR THE PRESENT A. Y. I.E. 2010 - 11 NO DISALLOWANCE THIS EXPLANATION TO SECTION 37(1) CAN BE MADE. IN VIEW OF THE ABOVE FACTS THE WHOLE ISSUE IS SET ASIDE TO THE FILE OF LD. ASSESSING OFFICER WITH DIRECTION TO EXAMINE THE NATURE OF THESE EXPENDITURE AND DECIDE WHETHER SAME ARE ALLOWABLE U/S 37 (1) OF THE ACT OR NOT. THE ASSESSEE IS ALSO DIRECTED TO PUT FORTH I TS CLAIM EXPLAINING TO THE ASSESSING OFFICER THAT EXPENDITURE ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. 8 . ACCORDINGLY, THE GROUND NO. 2 OF THE APPEAL IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WITH ABOVE DIREC TION. 9 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10 . ORDER PRONOUNCED IN THE OPEN COURT ON 2 1 .03.2018 . S D / - S D / - ( H. S SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 1 /03/2018 *NEHA* COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI 7 1. DRAFT DICTATED ON 2 0 .0 3 .2018 PS 2. DRAFT PLACED BEFORE AUTHOR 2 1 .0 3 .2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 2 1 . 0 3 . 2 0 1 8 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 2 1 . 0 3 . 2 0 1 8 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 2 1 . 0 3 . 2 0 1 8 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 1 . 0 3 . 2 0 1 8 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.