Itat/30/2024 Ia No: Ga/1/2024, Ga/2/2024 Principal Commissioner Of Income Tax 1 Kolkata v. M/S. Garden Reach Ship Builders And Engineers Ltd

IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITAT/30/2024IA NO: GA/1/2024, GA/2/2024PRINCIPAL COMMISSIONER OFINCOME TAX 1 KOLKATAVSM/S. GARDEN REACH SHIPBUILDERS AND ENGINEERS LTD BEFORE : THE HON’BLE THE CHIEF JUSTICE T.S. SIVAGNANAM ANDTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADATE : 10[th] APRIL, 2024. Appearance :Mr. Vipul Kundalia, Adv.Mr. Amit Sharma, Adv.Mr. Anurag Roy, Adv.…for appellantMs. Swapna Das, Adv.Mr. Siddhartha Das, Adv.…for respondent The Court :- This appeal filed by the revenue under Section 260A of theIncome Tax Act, 1961 (the Act) challenging the order dated 20.11.2020 passedby the Income Tax Appellate Tribunal “C” Bench, Kolkata (the Tribunal) inITAT No. 1099/Kol/2018 for the assessment year 2013-14. The revenue hasraised the following substantial questions of law for consideration :- i)Whether the Learned Tribunal has substantially erred in law insetting aside the order passed under Section 263 of the Income TaxAct, 1961 without appreciating the facts of the case andconsidering that the assessment order is erroneous in so far as it isprejudicial to the interest of the revenue as the assessment orderwas passed without making any enquiry in respect of CorporateSocial Responsibility expenditure to the tune of Rs.3,00,54,276/_during the assessment year under consideration ? 2 ii)Whether the Learned Tribunal has substantially erred in lawin setting aside the order under Section 263 of the Income Tax Act,1961 passed by the Principal Commissioner of Income Tax byignoring the fact that Corporate Social Responsibility expenditureto the tune of Rs.3,00,54,276/- for the assessment year underconsideration was not allowable expenditure as the same was notincurred for the purpose of the business of the respondentassessee? iii)Whether the Learned Tribunal has substantially erred in law insetting aside the order under Section 263 of the Income Tax Act,1961 passed by the Principal Commissioner of Income Tax byignoring the fact that Corporate Social Responsibility expenditureto the tune of Rs. 3,00,54,276/- for the assessment year underconsideration was not allowable under Section 37 of the IncomeTax Act, 1961? We have heard Mr. Vipul Kundalia and Mr. Amit Sharma learnedCounsel appearing for the appellant and Ms. Swapna Das and Mr. SiddharthaDas, learned Counsel appearing for the respondent. The present appeal is hopelessly barred by time as there is a delay of 976days in filing the appeal. We have perused the affidavit filed in support of thepetition and we find no acceptable reasons for condoning the inordinate delayin filing the appeal. However, since the learned standing Counsel for theappellant submitted that merits of the matter may kindly be looked into beforetaking a decision on the application for condonation of delay and he will makethe endeavor to convince the Court that there exists a substantial question of law for consideration and in such circumstances the Court will beinclined to condone the delay. We have heard the learned Counsel forrespondent/assessee on the above submission. The question which falls for consideration before learned Tribunal waswhether the expenses incurred by the assessee, which as it was claimed wasCSR expenses was admissible as the deduction under Section 37(1) of the Act.The Tribunal on going through the records has found that the assessing officerhas considered the issues called for explanation from the assessee andthereafter accepted the various stands taken by the assessee. PCIT issuedshow cause notice calling upon the assessee to explain as to why the powerunder Section 263 of the Act could not be invoked. The assessee submitted adetailed reply bill supported with facts and figures. Nevertheless, the PCITconcluded that no enquiry was conducted by the assessing officer and theassessing officer has to verify each of the expenses which have been incurredby the assessee and claimed as CSR expenses. Aggrieved by such order, the assessee filed the appeal before the learnedTribunal and the Tribunal on going though the facts of the case has allowedthe bill. Firstly, with regard to the allegation in the order passed under Section263 of the Act, that no enquiry was conducted by the assessing officer, we findthat the learned Tribunal upon going through the documents placed hasrecorded a factual finding that the assessing officer has called for and obtainedreasons for the CSR expenses incurred by the assessee and the saidexplanation given by the assessee before assessing officer was in fact reiteratedbefore the PCIT in response to the notice issued under Section 263 of the Act.Thus the Tribunal on fact concluded that it is not a case of no enquiry and nor it is a case of non-application of mind. This factual finding cannot bedislodged in an appeal filed under Section 260A of the Income Tax Act, wherewe are required to answer substantial questions of law for consideration. Withregard to the admissibility of the expenses under Section 37(1) of the Act, theTribunal has taken note of the decision in the case of Hindustan Copper LimitedVs. CIT, LTU-1 dated 29.01.2020, the facts of thesaid case is also on thesimilar line as in the said case the assessee was a public sector undertakingand certain directives issued by the Government of India was followed by theassessee. There are two notifications issued by the Government of India, thefirst of which is by Office Memorandum dated 21.06.2011, wherein theexpenses incurred by public sector undertakings in the form of fee charged forparticipation in CSR Training Programme/Workshops or for sponsorship ofWorkshops/programmes organized by Tata Institute of Social Sciences etc. willbe allowed to be included under the CSR Budgets of Central Public SectorEnterprises. The other notification is dated 1[st] November, 2011 whichstipulates the guidelines on Corporate Social Responsibility for Central PublicSector Enterprises. Admittedly, the respondent assessee has complied with thesaid directives issued by the Government of India. Furthermore, identical issuewas considered by this Court in the case of Principal Commissioner of IncomeTax Vs. Ramesh Prasad Sao; [2023] 155 taxmann.com, 256 (CAL), wherein theassessee company was engaged in iron ore mining and it incurred peripherydevelopment expenses for territorial welfare as well as welfare of local people inthe area in which mines were operating as per the direction of the localadministration and such CSR expenses incurred by the assessee prior to theassessment year 2015-16 were held to be liable as business expenditure as same was wholly and exclusively incurred for the purpose of business.In the case of Principal Commissioner of Income Tax Vs. Steel Authority of IndiaLimited; [2023] 148 taxmann.com 132(Del) the Court took into considerationmore or less same facts and circumstances concerning a public sectorundertakings and allowed the CSR expenses. Thus on facts we are convincedthat the expenses were allowable more so, when the respondent assessee is apublic sector undertaking and they had carried out a notification and they hadimplemented the notifications issued by the Government of India. The specificcase of the assessee was that they incurred the expenditure for facilitating thebusiness of construction and repair of ships mainly for Indian Navy and theywere required to take up certain activity for the benefit of people residing in thesaid locality. Thus, we are of the view that the matter is entirely factual and nosubstantial question of law arises for consideration and, therefore, theapplication for condonation of delay as well as the appeal stands dismissed. (T.S. SIVAGNANAM)CHIEF JUSTICE pkd/GH. (HIRANMAY BHATTACHARYYA,J.)