The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that the expenditure allowed for corporate social responsibility (CSR) of the assessee shall be allowed as business expenditure under section 37(1) of the Income Tax Act, 1961.
The AO raised the issue of CSR expenditure of Rs.3,20,79,967 and disallowed the same by holding that it cannot be treated as business expenditure. The assessee, on the other hand, contended that this issue was already considered by the AO in the original assessment and the AO cannot reopen the assessment on the same issues on change of opinion.
Relying on a catena of decisions, a two-Member bench comprising Shri Chandra Poojari, Accountant Member and Smt. Beena Pillai, Judicial Member held that “The AO has no power to review, but he has power to reassess. But reassessment is to be made based on fulfilling certain pre-conditions and “if the concept of change of opinion” is removed in the garb of reopening of assessment, review would take place. We must treat the “concept of change of opinion” as an in-built test to check the abuse of power by the AO. Hence after 1st April, 1989, AO has power to reopen, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment.”
The bench further relied on the decision of High Court of Karnataka in the case of CIT v. Infosys Technologies Ltd., wherein it was held that, where assessee incurred expenditure on installation of traffic signals at various parts of city in order to secure free movement of its employees so that they reached office in time, amount so spent being a part of its corporate responsibility, was to be allowed as business expenditure as under section 37(1).
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