Disallowance of Corporate Social Responsibility expenses

The Income Tax Appellate Tribunal has upheld the disallowance of a significant portion of Corporate Social Responsibility (CSR) expenses claimed by the National Building Construction Corporation Limited (NBCC) for the assessment year 2012-13. The tribunal found that the expenses, amounting to Rs. 1,65,84,000, were not eligible for deduction. However, the tribunal did allow an expenditure of Rs. 25,00,000 for an awareness campaign on Rashtriya Swasthya Bima Yojana as advertisement expenditure.

INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCH “E”: NEW DELHI ]
BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER
A N D
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A. No. 4287/Del/2017
(Assessment Year: 2012-13)
(THROUGH VIDEO CONFERENCING)

National Building Construction
Corporation Limited,
Lodhi Road,
New Delhi – 110 003.
PAN : AAACN3053B

Vs.

DCIT,
Circle : 18 (1)
New Delhi.

A N D
I.T.A. No. 4165/Del/2017
(Assessment Year: 2012-13)

Addl. CIT,
Special Range : 6,
New Delhi

(Appellants)

National Building
Construction Corpn. Ltd.,
C/o. M/s. S.B. Garg & Co.
Chartered Accountants,
20/17, Shakti Nagar,
Delhi – 110 007.
PAN : AAACN3053B

(Respondents)

Assessee by : Shri Sachin Kumar, C.A.;
Department by: Shri Gaurav Pundir, Sr. D. R;
Date of Hearing 26.07.2021
Date of pronouncement 26.07.2021
O R D E R

These are the cross appeals filed by the assessee as well as the ld. Assessing Officer against the order of the ld. Commissioner of Income Tax (Appeals)–39, New Delhi, dated 7.03.2017 for Assessment Year 2012-13.

2. Disallowance of Corporate Social Responsibility expenses
The Id.CIT (A) erred in upholding thedisallowanceof Corporate Social Responsibility expenses of Rs. 1,65,84,000 out of total expenses of Rs. 2,20,84,000; and without prejudice and alternatively, the Id. CIT (A) having held major expenditure to be capital expenditure, ought to have allowed depreciation thereon.

3. The brief facts of the case shows that assessee is a Government of India Undertaking working under the Ministry of Urban Development executing various types of civil and electrical projects all over India and abroad.

4. The assessee filed its return of income on 19.09.2012 at Rs.316,99,33,720/- which was revised to Rs.298,60,80,260/-. The assessment under Section 143(3) of the Income Tax Act, 1961 (the Act) was made on 31.03.2015.

5. Assessing Officer and assessee both are aggrieved by this order and are in appeal before us.

6. Appeal of the assessee are challenging selection of the case of the assessee in scrutiny. No specific arguments
were advanced and, therefore, same are dismissed.

7. Assessee has incurred an advertisement expenditure of Rs.25,00,000/- on awareness campaign in respect of Rashtriya Swasthya BimaYojna in NCT of Delhi by putting an advertisement. The ld. CIT (Appeals) has allowed this expenditure holding that these are the advertisement expenditure and assessee was the sponsor displaying its logo. We do not find any infirmity in holding that the above expenditure is an advertisement expenditure incurred by the assessee. With respect to the applicability of Explanation (2) to Section 37(1) of the Act, same applies with effect from 1.04.2015 i.e. assessment year 2015-16 and not to this year. In view of this, ground No. 5 of the appeal of the ld. Assessing
Officer is dismissed.

8. Accordingly, appeal of the ld. Assessing Officer is dismissed. Both these appeals are disposed of by this common order.

Order pronounced in the open court at the conclusion of hearing on 26.07.2021.

Please find attached the enclosed file for the full judgement