Income Tax, Issue Update

Corporate Social Responsibility expenditure: Allowability under section 37

Case: Vedanta Ltd vs Addl. CIT, Delhi ITAT

Outcome: Remand

Facts

  • During the course of scrutiny assessment proceedings, the Assessing Officer had noticed that the Assessee has claimed an expenditure of Rs. 50.36 lakhs on account of Corporate Social Responsibility. The Assessing Officer was of the opinion that expenditure so incurred did not qualify as expenditure incurred for the purpose of business in terms of section 37 of the Act.

Key points

  • Though the amendment to Section 37 of the act may be prospective, but at the same time, Assessee had to justify the claim of expenditure being spent on Corporate Social Responsibility. The details provided by the Assessee did not justify the claim of expenditure on account of commercial expediency. Considering the claim from all possible angles, there was no merit in such claim of expenditure.
  • Hence, the expenditure of Rs. 50.36 lakhs claimed on account of Corporate Social Responsibility was to be disallowed.

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