Search Results For: 37


QUERY: A company, obliged to spend 2% of average net profits on Corporate Social Responsibility. Considering the fact that the mandates of the Companies Act on CSR specifies only expenditure specified in Schedule VII, which are not related to business. Further the CSR rules insist that the expenditure should not be in the course of business or undertaken for employees and families. Will this expenditure be allowed as business expenditure? Will it be treated on par with other statutory payments and be subject to 43B.
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Explanation 2 has been inserted in section 37(1) of the Act with effect from assessment year 2015-16 which reads as under:

“For the removal of doubts, it is hereby declared that for the purpose of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purpose of the business or profession”

QUERY: Explanation 2 to Section 37 provides that any expenditure incurred by an assessee on the activities relating to corporate social responsibility shall not be deemed to be an expenditure incurred by the assessee for the purpose of business. According to the Memorandum explaining the provisions of the Finance Bill 2014, such expense, being an application of income, is not incurred wholly and exclusively for the purpose of carrying on business and, hence, not allowable as deduction. It also says that CSR which is of the nature described in Section 30 to 36 of the Act shall be allowed under those sections subject to fulfilment of the conditions, if any, specified therein. Which types of expenses can be allowed under these sections?
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As it is evident from section 37 of the Act, that it is subject to the provisions of sections 30 to 36. Further, the Finance Minister has clarified that deductions specifically allowable under sections 30 to 36 of the Income-tax Act, 1961 could be availed. In effect, Section 30 of the Act can be used for availing deductions against the expenditure incurred on rent, repairs and insurance in respect of building. Section 31 in respect of repairs and insurance of machinery, plant and furniture used for CSR activities.

QUERY: Is there any restriction or limit on refreshment/ gift paid to members whoever attends an annual general meeting? Can it be questioned by the AO?
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In case of listed companies, SEBI prohibits giving gifts to the share holders in AGM. However SEBI permits light refreshment, tea, coffee etc. to share holders in AGM.

Generally, the AO allows the expenses incurred at AGM, if it is reasonable and for the purpose of business.

QUERY: A co-operative bank wants to take accident group insurance for its members. Whether premium paid on the insurance for members can be debited to Profit & Loss account of the bank? Will it be allowed by the Income Tax Department?
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The following conditions should be complied to claim deduction u/s. 37 of the Act.

i) The expenditure should not be of the nature described in sections 30 to 36.

ii) It should have been incurred in the accounting year.