September 2023
Business expenditure — Capital or revenue expenditure — Corporate social responsibility expenditure — Amendment providing for disallowance of — Not retrospective — Expenditure in discharge of assessee’s obligation as mandated by law — Utilisation of funds by recipient irrelevant — Corporate social responsibility expenditure incurred by assessee for earlier years allowable.
37. Principal CIT vs. Steel Authority of India Ltd
[2023] 455 ITR 139 (Del)
Date of order: 6th January, 2023
Section 37(1) of ITA 1961
Business expenditure — Capital or revenue expenditure — Corporate social responsibility expenditure — Amendment providing for disallowance of — Not retrospective — Expenditure in discharge of assessee’s obligation as mandated by law — Utilisation of funds by recipient irrelevant — Corporate social responsibility expenditure incurred by assessee for earlier years allowable.
The assessee was a public sector undertaking. The AO disallowed the assessee’s claim of the corporate social responsibility expenditure on the ground that the expenditure was made of enduring long-term benefits for the communities in which the assessee operated, and included establishments of medical facilities, sanitation, schools and houses and vocational training centres, and that it was to be treated as capital expenditure.
The CIT(A) held that the assessee did not establish any direct nexus between the incurring of the corporate social responsibility expenditure and the running of its business and upheld the order of the AO. The Tribunal held that prior to the insertion of Explanation 2 to Section 37(1) of the Income-tax Act, 1961 with effect from 1st April, 2015, the settled legal position was that corporate social responsibility expenditure was allowable under section 37(1) until a specific
