Case summary, Income Tax

Corporate Social Responsibility expenditure: Allowability under section 37

Case: Garden Reach Shipbuilders & Engineers Ltd vs Pr. CIT, Kolkata ITAT

Outcome: Assessee


  • The assessee was a public limited company, in the public sector, under the Ministry of Defence, Government of India.
  • The assessment was completed u/s 143(3) of the Act. Thereafter, the Ld. Pr. CIT issued separate show cause notice for each of these assessment years proposing to revise the assessment orders u/s 263 of the Income Tax Act.
  • The matter of concern was whether the CSR expenses were deductible as business expenses under Section 37 of the Income Tax Act, 1961.

Key Points

  • The Tribunal relied on the order of Kolkata ‘A’ Bench of the Tribunal in the case of Hindustan Copper Ltd. vs CIT, LTU-1, where it was held that even if it was held that the Assessing Officer had erred in not carrying out the necessary enquiry / factual verification on the assessee’s claim of its “CSR”, the same could not have caused any prejudice interest of the revenue in case of a public sector undertaking bound by the Government of India’s directions issued on the subject. More particularly before the insertion of Explanation-2 in sec. 37 of the Act in assessment year 2013-14 since the amended legal position carried prospective effect only.
  • Thus, relying on the same the Tribunal conluded that the amendment brought about by way of Explanation 2 to section 37 by Finance Act, 2014, was only with effect from 01.04.2015.
  • Issue Outcome: Assessee

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