PAWAN HANS LTD., NEW DELHI V. DCIT, CIRCLE- 19(2), NEW DELHI

ITA 7388/DEL/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 9507 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 08-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 115JB; 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F: NEW DELHI BEFORE, SHRI G. S. PANNU, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER I.T.A NO.7388/DEL/2017 (ASSESSMENT YEAR -2014-15) M/S PAWAN HANS LTD. CORPORATE OFFICE, SAFDARJUNG AIRPORT, NEW DELHI. PAN-AAACP 1561A VS. DY. CIT, CIRCLE-19(2), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. VED JAIN, CA RESPONDENT BY SH. SANDEEP KUMAR, SR. DR DATE OF HEARING 21.12.2020 DATE OF PRONOUNCEMENT 18.03.2021 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAI NST ORDER DATED 18.09.2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-7, NEW DELHI {CIT(A)} FOR ASSESSMENT Y EAR 2014-15. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A PUBLIC SECTOR UNDERTAKING. FOR THE YEAR UNDER CONSI DERATION, THE 2 ITA NO.7388/DEL/2017 M/S. PAWAN HANS LTD . VS. DCIT RETURN OF INCOME WAS FILED DECLARING A LOSS OF RS.1, 89,90,55,165/- UNDER THE NORMAL PROVISIONS OF INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). THE ASSESSEE COMPANY PAID TAXES UNDER THE PROVISIONS OF MINIMUM ALTERNATE TAX (MAT) ON DECLA RED BOOK PROFIT OF RS.66,18,51,561/-. THE CASE OF THE ASSESSEE WAS S ELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE H AS CREATED A PROVISION FOR CORPORATE SOCIAL RESPONSIBILITY (CSR) IN THE BOOKS OF ACCOUNT. THE AO WAS OF THE VIEW THAT THE SAID PROVIS ION WAS AN UNASCERTAINED LIABILITY AS THE ASSESSEE HAD ONLY CR EATED THE PROVISION BUT WHERE THE AMOUNT WAS TO BE SPENT WAS UNASCERTAINED. IT WAS THE ASSESSEES CONTENTION THAT THE PROVISION HAD BEEN CREATED ON THE BASIS OF THE GUIDELINES ISS UED BY THE DEPARTMENT OF PUBLIC ENTERPRISES WHICH THE ASSESSEE WAS BOUND TO FOLLOW. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSEE S CONTENTION AND DISALLOWED THE PROVISION OF CSR U/S 115JB OF TH E ACT CONSIDERING IT AS AN UNASCERTAINED LIABILITY. 3 ITA NO.7388/DEL/2017 M/S. PAWAN HANS LTD . VS. DCIT 2.1 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. FIR ST APPELLATE AUTHORITY. THE LD. CIT (A), WHILE HOLDING THE DISALLOWANCE TO BE JUSTIFIED, NOTED THAT THE GUIDELINES ISSUED B Y THE DEPARTMENT OF PUBLIC ENTERPRISES WERE NOT DETERMINATIVE FACTOR TO DECIDE THE ALLOWABILITY OF THE PROVISIONS. 2.2 NOW, THE ASSESSEE HAS APPROACHED THIS TRIBUN AL CHALLENGING THE ORDER OF THE LD. CIT (A) BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) [CIT (A)] IS BAD, BOTH IN THE EYES OF LAW AND ON FA CTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW, IN CONF IRMING ADDITION OF AN AMOUNT OF RS.35,09,480/- MADE BY AO ON ACCOUNT OF PROVISION FOR CORPORATE SOCIAL RESPONSIB ILITY FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 3. THAT THE ADDITION HAS BEEN CONFIRMED REJECTING THE CONTENTION OF THE ASSESSEE THAT THE PROVISION BEING AN 4 ITA NO.7388/DEL/2017 M/S. PAWAN HANS LTD . VS. DCIT ASCERTAINED LIABILITY THE SAME IS ALLOWABLE FOR COM PUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR A LTER ANY OF THE GROUNDS OF APPEAL . 3.0 THE LD. AUTHORIZED REPRESENTATIVE (AR) SUBMITTED THAT THE ASSESSEE WAS A COMPANY INCORPORATED UNDER T HE PROVISIONS OF INDIAN COMPANIES ACT, 1956 AND WAS BOUND TO INCUR EXPENDITURE TOWARDS CORPORATE SOCIAL RESPONSIBILITY. IT WAS SUBMI TTED THAT IT BEING A PUBLIC SECTOR ENTITY, THE ASSESSEE COMPANY WAS ALSO GOVERNED BY THE GUIDELINES LAID DOWN BY THE DEPARTME NT OF PUBLIC ENTERPRISES. IT WAS SUBMITTED THAT ACCORDINGLY THE ASSESSEE HAD CREATED THE IMPUGNED PROVISION OF RS.35,09,480/- ON ACCOUNT OF CORPORATE SOCIAL RESPONSIBILITY EXPENDITURE. IT WAS FURTHER SUBMITTED THAT THE AMOUNT WAS CALCULATED AS LAID DO WN BY THE INDIAN COMPANIES ACT, 1956 READ WITH THE GUIDELINES LAID DOWN BY THE DEPARTMENT OF PUBLIC ENTERPRISES AND, THAT THE ASSESSEE COULD NOT HAVE DEVIATED FROM THE CALCULATION SO PRESCRIBE D BY THE ACT. THE AR ALSO SUBMITTED THAT THE SCOPE OF ADDITIONS TO TH E NET PROFIT IS PRESCRIBED IN EXPLANATION-1 TO SECTION 115JB OF THE ACT AND THE 5 ITA NO.7388/DEL/2017 M/S. PAWAN HANS LTD . VS. DCIT SCOPE OF SUCH ADDITION CANNOT BE GO BEYOND THE SPEC IFIED ITEMS AND, THEREFORE, THE SCOPE OF ADDITION U/S 115JB IS VERY LIMITED. THE AR REITERATED THAT THERE WAS NO PROVISION IN THE LAW TO ADD BACK THE AMOUNT OF CSR EXPENDITURE WHICH HAD BEEN DULY DEBITE D IN THE PROFIT AND LOSS ACCOUNT AND, THEREFORE, IN ABSENCE OF ANY SUCH PROVISION TO DISALLOW THE CSR EXPENDITURE FOR COMPUT ING THE BOOK PROFIT U/S 115JB, ANY EXPENDITURE PROVIDED FOR ON C SR ACTIVITIES CANNOT BE ADDED BACK TO THE NET PROFIT. THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CA SE OF ROTORK CONTROLS INDIA (P.) LTD. VS. CIT REPORTED IN [2009] 223 CTR 425 (SC ) AND ARGUED THAT THE IMPUGNED PROVISION WAS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID JUDGMENT OF THE HONBLE APEX COURT IN AS MUCH AS CSR IS A PRESENT AND MANDA TORY OBLIGATION ON THE ASSESSEE ARISING FROM THE INDIAN COMPANIES ACT, 1956 AND THE GUIDELINES ISSUED BY THE DEPARTMENT OF PUBLIC ENTERPRISES. IT WAS FURTHER SUBMITTED THAT IT INVOL VES A MANDATORY OUT FLOW OF RESOURCES AND SINCE THE PROVISION IS CRE ATED ON THE BASIS OF FIXED PERCENTAGE PROVIDED BY THE GUIDELINES ISSU ED BY THE DEPARTMENT OF PUBLIC ENTERPRISES, IT CAN BE REASONA BLY ESTIMATED. 6 ITA NO.7388/DEL/2017 M/S. PAWAN HANS LTD . VS. DCIT RELIANCE WAS ALSO PLACED ON THE VARIOUS DECISIONS WHI CH ARE AS FOLLOWS: (I) APOLLO TYRES LTD. VS. CIT [2002] 122 TAXMAN 56 2 (SC) (II) BHARAT EARTH MOVERS VS. CIT, CIVIL APPEAL NO.9 271 OF 1995 (SC) (III) TATA COMMUNICATIONS LTD. VS. JCIT, ITA NO.343 8/MUM/2003 (IV) DCIT VS. CENTRAL COAL FIELDS LIMITED, ITA NO.2 35/RAN/2016 (V) HOUSING AND URBAN DEVELOPMENT CORPORATION LTD. VS. ADD. CIT, ITA 541/2019, (DELHI HC) (VI) PCIT VS. NHPC LTD., ITA 356, 2015, P&H HIGH COURT (V) DCIT VS. INOX LEISURE LTD., 351 ITR 314, GU JARAT HC (VI) BHARAT EARTH MOVERS VS. CIT, 245 ITR 428 (SC ), (VII) CIT V. ECHJAY FORGINGS (P) LTD., 251 ITR 15, BOMBAY HC (VIII) M/S. ROTORK CONTROLS INDIA (P.) LTD. V. CIT , 314 ITR 62 (SC) (IX) IRCON INTERNATIONAL LIMITED, V. ADD. CIT, I TA NOS. 1825/DEL/2005, ITAT DELHI (X) ASAHI INDIA GLASS LIMITED V. DCIT, ITA NO.1 637/DEL/2014, ITAT DELHI (XI) M/S. HIL LIFECARE LIMITED VS. ACIT IN ITA NO .ITA NO.123/COCH/2017, 11.06.2018. (XII) THE NATIONAL SMALL INDUSTRIES CORP LTD. VS. ADD. CIT., ITA NO.1367/DEL/2016, 25.02.2020. 7 ITA NO.7388/DEL/2017 M/S. PAWAN HANS LTD . VS. DCIT 3.1 THE LD. AR SUBMITTED THAT, THEREFORE, THE DISALLOWANCE U/S 115JB OF THE ACT WAS VIOLATIVE OF TH E PROVISIONS OF THE ACT. 4.0 PER CONTRA, THE LD. SR. DEPARTMENTAL REPRES ENTATIVE (DR) SUBMITTED THAT THE ASSESSEE HAD ADDED BACK THE IMPUGNED PROVISION IN THE REGULAR COMPUTATION OF INCOME BUT HAD NOT ADDED THE SAME TO THE BOOK PROFIT FOR THE PURPOSES OF SEC TION 115JB OF THE ACT. IT WAS SUBMITTED THAT IN TERMS OF CLAUSE-(C) OF EXPLANATION-1 TO 115JB, THE NET PROFIT IS TO BE ADJUSTED BY ANY AMOU NT OR AMOUNTS SET ASIDE TO PROVISION MADE FOR MEETING LIABILITIES , OTHER THAN ASCERTAINED LIABILITIES FOR ARRIVING AT THE BOOK PR OFIT IN TERMS OF SECTION 115JB OF THE ACT. THE LD. SR. DR ALSO SUBMI TTED THAT THE FACT OF THE MATTER REMAINED THAT IN THE PRESENT CAS E THE PROVISION FOR CSR WAS NOT AN ASCERTAINED LIABILITY IN AS MUCH AS IT WAS NOT KNOWN AS TO WHAT WAS THE NATURE OF THE PROVISION FOR C SR. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE MATERIAL ON RECORD. THE ESSENTIAL QUEST ION BEFORE US IS AS TO WHETHER THE PROVISION FOR CSR AS MADE BY THE A SSESSEE 8 ITA NO.7388/DEL/2017 M/S. PAWAN HANS LTD . VS. DCIT AMOUNTING TO RS.35,09,480/- CAN BE CONSIDERED AS AN ASCERTAINED LIABILITY OR NOT. IN TERMS OF CLAUSE-(C) OF EXPLANA TION-1 TO 115JB, THE NET PROFIT IS TO BE ADJUSTED BY ANY AMOUNT OR A MOUNTS SET ASIDE TO PROVISION MADE FOR MEETING LIABILITIES, OTHER TH AN ASCERTAINED LIABILITIES FOR ARRIVING AT THE BOOK PROFIT IN TERM S OF SECTION 115JB OF THE ACT. IT IS SEEN THAT, ADMITTEDLY, THE ASSESSEE HAS MADE THE IMPUGNED PROVISION IN TERMS OF THE CALCULATION PROV IDED BY THE GUIDELINES ISSUED BY THE DEPARTMENT OF PUBLIC ENTER PRISES. HOWEVER, ALTHOUGH, THE AMOUNT TO BE PROVIDED TOWARDS MEETING THE LIABILITY OF THE CSR EXPENDITURE HAS BEEN QUANTIFIE D IN ACCORDANCE WITH THE GUIDELINES PROVIDED BY THE DEPARTMENT OF EN TERPRISES, HOW THE AMOUNT IS TO BE SPENT HAS NEITHER BEEN DETERMIN ED NOR HAS BEEN SPECIFIED BY THE ASSESSEE. THUS, ALTHOUGH THE ASSESSEE HAS SET-ASIDE AN AMOUNT EAR-MARKED FOR SPENDING TOWARDS THE CSR OBLIGATION, HOW THE EAR-MARKED AMOUNT WILL BE FINALLY SPENT HAS NOT BEEN DETERMINED. AS PER THE CAMBRIDGE ADVANCED LEAR NERS DICTIONARY, THE MEANING OF THE WORD ASCERTAINED IS TO MAKE CERTAIN . IN DICTIONARY.COM, THE WORD ASCERTAIN HAS BEEN DESCRIBED AS TO MAKE CERTAIN, CLEAR OR DEFINITELY KNOWN IN THE PRESENT CASE, 9 ITA NO.7388/DEL/2017 M/S. PAWAN HANS LTD . VS. DCIT HOW THE AMOUNT EAR-MARKED FOR SPENDING TOWARDS THE C SR OBLIGATION WILL BE SPENT IS NOT CERTAIN, CLEAR O R DEFINITELY KNOWN. AT BEST, IT IS JUST AN AMOUNT WHICH HAS BEEN SET ASIDE FOR BEING SPENT TOWARDS CORPORATE SOCIAL RESPONSIBILITY BUT WITHOUT ANY FURTHER CERTAINTY OF ITS END-USE. THUS, IN OUR CONSIDERED OPINION, IT CANNOT BE SAID THAT THE LIABILITY IS AN ASCERTAINED LIABILITY. ALTHOUGH, THE LD. AR HAS PLACED RELIANCE ON NUMEROUS JUDICIAL PRECEDENTS, THE SAME ARE DISTINGUISHABLE O N FACTS AS IN THOSE CASES THE NATURE/MODE OF EXPENDITURE EAR-MARK ED FOR CORPORATE SOCIAL RESPONSIBILITY SPENDING WAS VERY MU CH DETERMINED AND SPECIFIED I.E. THE NATURE/MODE OF EX PENDITURE WAS ASCERTAINED. THEREFORE, ON THE PECULIAR FACTS OF THIS CASE WE ARE UNABLE TO AGREE TO THE CONTENTION OF THE LD. AR THA T THE IMPUGNED DISALLOWANCE U/S 115JB WAS AN ASCERTAINED LIABILITY. WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE. 10 ITA NO.7388/DEL/2017 M/S. PAWAN HANS LTD . VS. DCIT 6. IN THE FINAL RESULT, THE APPEAL OF THE ASSESS EE STANDS DISMISSED. ORDER PRONOUNCED ON 18.03.2021. SD/- SD/- (G.S.PANNU) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEMBER DATED:18/03/2021 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI