Assessing Officer Has Not Doubted Any Of The Vouchers And Memos Which Weresubmitted By The Assessee To Substantiate The Nature Of Expenses Incurred Bythem. Furt v. Shri Ramesh Prasad Sao

OD-6 IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITAT 199 OF 2023IA NO: GA/1/2023, GA/2/2023PRINCIPAL COMMISSIONER OF INCOME TAX 1-Versus-SHRI RAMESH PRASAD SAO BEFORE: The Hon’ble T.S. SIVAGNANAM, CHIEF JUSTICE -And- The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA Date : 4[th] October, 2023 Appearance :Ms. Smita Das De, Adv...for the appellant The Court : This appeal has been filed by the revenue challengingthe order passed by the Income Tax Appellate Tribunal “C” Bench, Kolkata inITA 572/Kol/2019 for the assessment year 2014-15. There is a delay of 965 days in filing the appeal. Notice has beenserved on the respondent assessee but none appears for respondent assessee.Though we are not fully convinced with the explanation offered, yet taking noteof the fact that this appeal had been preferred by the Income Tax departmentunder 260A of the Income Tax Act, 1961 (the Act) and we are required toconsider as to whether any substantial questions of law arise for consideration, we exercise discretion in the matter and condone the delay infiling the appeal. The assessee is a company engaged in the business of mining iron oreand manganese. It filed its return of income for the assessment year underconsideration i.e. A.Y. 2014-15 and the assessment was completed underSection 143(3) of the Act by order dated 29[th] December, 2006. During thecourse of assessment proceedings the Assessing Officer raised a query withregard to the proposal to disallow the periphery development expenses. Theonly ground on which such a proposal was made is by referring to a letterdated 16[th] August, 2008, issued by the Collector and Chairman, PeripheryDevelopment Society, Keonjhar, in which it was stated that all mining houseshave to pay 5% of their net profit as contribution towards peripherydevelopment of the concerned District. The Assessing Officer questioned thedebit made by the assessee in the profit and loss account amounting toRs.4,22,38,097/- and this was in excess of the amount which was required tobe paid in terms of the letter of the Periphery Development Society. Admittedly,the assessee did not furnish any explanation to the query raised by theAssessing Officer. However, the assessee furnished the ledger copy of itsexpenses. The Assessing Officer proceeded to confirm his proposal andaccordingly disallowed a sum of Rs.4,22,38,097/-. The assessee carried thematter on appeal before the Commissioner of Income Tax (Appeals) 1, [CIT(A)]contending that the periphery development expenses which were incurred are exclusively for the purpose of business and the same are fully supported byvouchers and receipts and they are necessary for the smooth conduct of thebusiness and to maintain cordial relationship with the local villagers wheremining activity is being done. Further, it was contended that such expensesare incurred for the territorial welfare as well as the welfare of the local peopleeither for development of roads, construction of well, distribution of clothes,flood relief etc. to the local people as per the direction of the localadministration and taking into consideration the welfare of the locality. Beforethe CIT(A) it was contended by the assessee that the periphery developmentexpense was nothing but a corporate social responsibility (CSR) of the assesseecompany which was carrying out the mining operations in Joda, Orissa State.Further, it was mandatory for the mining industries to look after thedevelopment of the area in which mines were operating on account of creatingemployment opportunities, providing educational facilities to the children etc.Further, it was contended that the expenses incurred by the assessee were onwelfare schemes only namely, malaria eradication, distribution of mosquitonets, construction of mandaps etc. which were wholly and exclusively forbusiness purposes. The CIT(A) after considering the facts held that the activitydone by the assessee is undoubtedly a CSR activity and their businessexpenditure. Further, the CIT(A) observed that the expenditure is also part ofledger account of the assessee and the expenditure is incurred in consultationwith the State Government Authorities. Furthermore, the CIT(A) noted that the Assessing Officer has not doubted any of the vouchers and memos which weresubmitted by the assessee to substantiate the nature of expenses incurred bythem. Further, after taking note of the decision of the Hon’ble Supreme Courtin Thakur Prasad Sao Vs. Member, Board of Revenue, in Civil Appeal No.819-823, 824-827, 1105 of 1975, dated 18[th] December, 1975, the appeal filed bythe assessee was allowed. The revenue carried the matter on appeal before theLearned Tribunal. The Learned Tribunal after reconsidering and re-appreciating the facts of the case also noted that it is mandatory for theassessee, which is a mining industry, to look after the development of the areain which the mines were operating to create employment opportunities, provideeducational facility to children etc. Furthermore, the expenses incurred for thewelfare schemes were also taken into consideration and found to be justified.The Learned Tribunal also noted that the expenditure having been claimed bythe assessee as of deduction for the assessment year 2014-15 and the miningwhich was made by adding explanation to Section 37(1) of the Act would notbe applicable as it was with effect from the assessment year 2015-16. Thus, on a factual re-appraisal the Learned Tribunal was satisfied thatthe CSR expenditure incurred prior to the assessment year 2015-16 areallowable as business expenditure as the same are wholly and exclusivelyincurred for the purpose of business. Thus, on being satisfied with the factualmatrix the Learned Tribunal dismissed the appeal filed by the revenue. Thus, we find that in this appeal no question of law, much lesssubstantial question of law, arises for consideration. Accordingly, the appeal fails and is dismissed. The connected applications also stand dismissed. (T.S. SIVAGNANAM) CHIEF JUSTICE (HIRANMAY BHATTACHARYYA, J.) SN/GH.AR(CR)