Expenditure made towards CSR is expenditure made in furtherance of business; eligible for ITC: AAR

Case Details: Authority for Advance Rulings, Telangana Bambino Pasta Food Industries (P.) Ltd., In re - [2022] 144 taxmann.com 207 (AAR-TELANGANA)

Judiciary and Counsel Details

• • S.V. Kasi Visweswara Rao, Additional Commissioner (State Tax) & Sahil Inamdar, Additional Commissioner (Central Tax)

Facts of the Case

The applicant was a manufacturer of vermicelli and pasta products. It purchased an oxygen plant and donated oxygen plant to AIIMS hospital as part of corporate responsibility under section 135 of companies Act, 2013. It filed an application for advance ruling to determine whether ITC would be allowed on expenditure made towards corporate social responsibility.

AAR Held

The Authority for Advance Ruling observed that companies with specified net worth or net profit are obliged to incur a minimum 2 percent of their net profit towards corporate social responsibility and failure to do so would attract penalty. Thus, the running of the business of companies will be substantially impaired if they do not incur the said expenditure. Therefore, expenditure made by applicant towards corporate social responsibility would be an expenditure made in furtherance of business. Hence, the tax paid on purchases made to meet obligations under corporate social responsibility shall be eligible for input tax credit.