Voluntarily Disallowance of CSR Expenditure u/s 37(1) by Assessee: ITAT deletes Income Tax Addition [Read Order]

The Income Tax Appellate Tribunal (ITAT), deleted addition on the ground that there was voluntary disallowance of CSR under Section 37(1) of the Income Tax Act, 1961 by the assessee, Agappe Diagnostics Limited.

The assessee company is engaged the business of development, manufacturing, sale and distribution of in-vitro diagnostic reagents and equipment and rendering of maintenance services. The assessee has filed the return of income for the A. Y. 2018- 19 disclosing a total income of Rs 14,26,34,740. The assessee has filed the revised return of income dated on 28.03.2019 with a total income of Rs 14,12,33,870. Subsequently, the return of income was selected for complete scrutiny under E- Assessment scheme 2019.

The A.O was not satisfied with the submissions and is of the view that the assessee has not incurred the expenditure wholly and exclusively for the purpose of carrying on the business or profession and disallowed Rs 2,90,214 as incurred in relation to CSR disallowance under section 37(1) of the Act. The CIT(A) confirmed the disallowance made by AO. Hence the appeal has been preferred.

The Counsel for the assessee submitted that the CIT(A) has erred in confirming in addition of claim of expenditure overlooking the fact that the expenditure was incurred over and above the CSR expenditure and doesn’t qualify for claim under CSR and form part of business expenditure incurred wholly and exclusively for the business. The Ld. AR explained that an amount of Rs 2,09,214 was claimed as deduction in the return of income filed. T

A Bench consisting of Pavan Kumar Gadale, Judicial Member and Gagan Goyal, Accountant Member observed that “We considering the facts, submissions, provisions of the Act and the judicial decisions relied by the Counsel for the assessee, find the action of the assessee incurring the expenditure voluntarily to maintain harmony at the vicinity of the factory area and is not a personal expenditure, further the assessing officer has not doubted genuineness of the expenditure but only on the nature of the expenditure was not incurred for the purpose of business.”

“The assessee has filed the details of CSR expenditure which cannot be overlooked and the AO has accepted such claim and the assessee has made a voluntarily disallowance of CSR expenditure under section 37(1) of the Act in restricting expenses under the statutory obligations of CSR policy. Accordingly, we set-aside the order of the CIT(A) on this disputed issue and direct the Assessing officer to delete the addition.”

To Read the full text of the Order CLICK HERE

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