INPUT TAX CREDIT ALLOWED ON CSR EXPENSES

Relevant Text of the Judgement

11. To pin point the dispute, it is now to be looked into as to if CSR can be considered as input service and be included within the definition of “activities relating to business” and if in so doing, a company’s image before corporate world is enhanced so as to increase its credit rating as found from the handbook of CSR activities discussed above. The answer is in the affirmative since to win the confidence of the stake holders and shareholders including the people affected by the supply of raw material from their locality say natural resources like mines and minerals etc. the hazardous emission that may result in production activities.

11.1. It has been argued by the ld. AR that in the Rajya Sabha, the Minister of Corporate Affairs stated on 22.02.2013 that there is no provision for CSR before introduction of Companies Bill 2012 but as found from the handbook referred, there was existence of such provision (may not be in the form of statutory provision) regarding discharging of CSR activities by the companies as it says that new guidelines issued by the DPE in April 2013 would replace two existing separate guidelines on CSR and sustainable development issued in 2010 and 2011 respectively. Therefore sustainability is dependent on CSR without which companies cannot operate smoothly for a long period as they are dependent on various stake holders to conduct business in an economically, socially and environmentally sustainable manner i.e. transparent
and ethical. Hence in my considered view, CSR which was a mandatory requirement for the public sector undertakings, has been made obligatory also for the private sector and unless the same is to be treated as input service in respect of activities relating to business, production and sustainability of the company itself would be at stake. The relied upon case laws, which have equated CSR only with charity and not covered the other aspects of CSR namely triple bottom-line approach (discussed above), corporate citizenship, philanthropy, (charity just being a part only), strategic philanthropy, share value, corporate sustainability and business responsibility are of no application to the case on hand. Further, CSR
activity being held as input service that was maintained by the appellant through an agency (Trust), the other dispute relating to suppression etc. that would attract extended period is not required to be discussed in the appeal, nor the part acceptance of the duty liability by the appellant. Hence the order –

Order

The appeal is allowed and the order passed by the Commissioner (Appeals) demanding duty, interest and penalty against input service availed by the appellant company towards fulfilment of CSR activity is hereby set aside.

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