CSR spending will be counted as a business expense: ITAT

Income Tax Appellate Tribunal (ITAT Bangalore) in the matter of Mysore Minerals Ltd. Vs. The Deputy Commissioner of Income Tax ruled out that CSR spending will be counted as a business expense.

The issue was that assessment for this year was completed u/s. 143(3) of the Act on 29.2.2016. Later assessment was reopened by issuing notice u/s. 148 dated 22.3.2017 and consequently assessment order u/s. 143(3) r.w.s. 147 of the Act was framed by the AO making addition on account of disallowance of CSR expenditure of RS.3,20,79,967.

The Coram found out that, “In the present case the AO raised the issue of CSR expenditure of Rs.3,20,79,967. The contention of the ld. AR is 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.”

The Tribunal Ruled out that, ” It was also held that there is a difference between power to review and power to reassess. 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 Appellate Tribunal Further count 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)”.

The Judgment was made by Shri Chandra Poojari and Smt. Beena Pillai.

The Petitioner was represented by Shri Narendra Sharma and Respondent represented by Dr. Manjunath Karkihalli.

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