Income Tax, Issue Update

Corporate Social Responsibility expenditure: Allowability under section 37

Case: Addl. CIT vs Eastern Coalfields Ltd, Kolkata ITAT

Outcome: Remand

Facts

  • The Assessee had claimed deduction of Rs. 4.55 crores on account of Corporate Social Responsibility (CSR) expenditure incurred.
  • During assessment proceedings, the Assessing Officer disallowed the expenditure incurred towards CSR.

Key points

  • Reliance was placed on the decision of Nagpur Tribunal in the case of Southern Coal Field, wherein it was concluded that considering all the facts of the case and the legal position emanating from the judicial pronouncements, the community development expenditure incurred by the assessee company mainly for the welfare of its employees was an expenditure incurred wholly and exclusively for the purpose of its business by considerations of commercial expediency.
  • Hence, applying the above to present facts of the case, it was inferred that the Corporate Social Responsibility expenditure was to be allowed as deduction under section 37 of the Income Tax Act.

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