2017 (10) TMI 1538 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on expenses, remands hire charges issue, admits additional grounds

The Tribunal upheld the CIT(A)'s decision to delete additions for grants to sports and recreation, environment expenses, and uniform and stitching ... Addition on account of grant to sports and recreations - allowable business expenditure or not - AO disallowed the same by observing that these expenses are not incidental to business of the assessee and added to the total income of the assessee - CIT-A allowed claim - HELD THAT:- Assessee was bound to provide as part of the conditions of service to its employees, sports and recreational facilities. The grant in question is in pursuance of the aforesaid agreement. Therefore it cannot be said that the grants given by the Assessee are not for the purpose of business of the Assessee. As an employer provision of grants to provide better conditions of service will be part of the labour cost of the Assessee and it has to be allowed as deduction. Plea of the revenue that the evidence of area-wise expenses were not produced, the plea of the Assessee was that the coal area is scattered over a large area and that the Assessee being a Government of India undertaking, its accounts are subject to review by CAG and no adverse comments have been made by the CAG. This plea in our view, in the facts and circumstances of the present case was enough to disregard the findings of the AO Since the issue is identical with the issue raised in AYs. 2003-04 to 2005-06 which is squarely covered in favour of the assessee and the Ld. DR could not controvert the facts and since there is no change in facts or law, we respectfully following the aforesaid order we confirm the order of ld CIT(A) and dismiss the ground of appeal of revenue. Addition on account of Hire Charges of Bus & Ambulance - AO disallowed the same as the assessee was unable to produce any acceptable reason as to why the expenses should not be disallowed - CIT-A allowed claim - HELD THAT:- As in assessee’s own case for AYs 2003-04 to 2005-06 incurring of the expenses by the Assessee cannot be disputed and in fact has not been disputed by the revenue. There appears to be only a dispute with regard to the evidence of incurring of the expenses. The details to which our attention was drawn by the learned counsel for the Assessee, in our view, requires to be verified by the AO. We, therefore set aside the order of the CIT(A) on this issue and remand the question of incurring of these expenses to the AO for fresh consideration with liberty to the Assessee to let in evidence to substantiate its claim for deduction of the aforesaid expenditure. For statistical purposes the relevant grounds of appeal are treated as allowed. - Ground of appeal of revenue is allowed for statistical purposes. Disallowance of Uniform and Stitching Charges - AO disallowed the same by observing that these expenses are not incidental to business of the assessee and added to the total income of the assessee - CIT-A deleted the addition observing that the expenses incurred were wholly and exclusively for business purposes and eligible for deduction u/s. 37(1) - HELD THAT:- We find that no such disallowances were made in any of the earlier years and these expenses were duly allowed. Before us, the Ld. DR could not produce any material to controvert the factual finding recorded by the ld CIT(A) in respect of the expenses to be non-incidental to business of the assessee. In view of the above, we find no infirmity in the order of the Ld. CIT(A) in deleting the disallowance as made by the AO and the same is hereby upheld. This ground of appeal of the revenue is dismissed. Not admitting and adjudicating the additional ground raised before CIT-A albeit first - Disallowance u/s. 40A(3) of the Act read with Rule 6DD - HELD THAT:- If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected.” Further, we rely on the decision of the Hon’ble Supreme Court in CIT Vs. V. MR. P. Firm, Muar [1964 (10) TMI 13 - SUPREME COURT] and Circular No. 114XL 35 of 1955 issued by the CBDT on April 11, 1955 that an officer must not take advantage of ignorance of the assessee as to his rights. The judgment of Hon’ble Supreme Court in the case of Goetz (India) Ltd. [2006 (3) TMI 75 - SUPREME COURT] was limited to the power of the AO and did not impinge upon the power of the appellate authorities/Tribunal. We are inclined to admit this claim of the assessee and restore this issue back to the file of AO to verify the claim made by the assessee. The assessee is directed to bring all the facts before the AO and in case the issue is already covered by the decision of this Tribunal as claimed by the assessee, then the AO after verification finds that the issue raised has already been settled by this Tribunal then the claim of the assessee should be allowed. Disallowance u/s. 40A(9) - As according to the assessee, since the payments were made to the labourers working in farflung collieries where no banking facilities were available falls under the exemption given under Rule 6DD(i) of the Rules, therefore, the assessee’s mistake of inadvertently disallowing the said amount needs to revisited and claim needs to be allowed we admit this issue also and restore the issue back to the file of the AO to decide as to whether the claim made by the assessee is allowable as per Rule 6DD(i) of the Rules. Appeal of the assessee is allowed for statistical purposes. Issues Involved:1. Deletion of addition on account of grant to sports and recreation.2. Deletion of addition on account of environment expenses.3. Deletion of addition on account of hire charges of bus and ambulance.4. Deletion of addition on account of uniform and stitching charges.5. Non-admission and adjudication of additional grounds raised by the assessee before the CIT(A).Issue-Wise Detailed Analysis:1. Deletion of Addition on Account of Grant to Sports and Recreation:The assessee debited Rs. 71,11,000 towards grants for sports and recreation, which the AO disallowed, arguing these expenses were not incidental to the business. The CIT(A) deleted the addition, referencing an earlier order for AY 2006-07. The Tribunal upheld the CIT(A)'s decision, citing the National Coal Wages Agreement (NCWA) which mandates such grants as part of employee welfare. The Tribunal also referenced its own prior decision for AYs 2003-04 to 2005-06, affirming that these grants are for business purposes and should be allowed as deductions.2. Deletion of Addition on Account of Environment Expenses:The assessee claimed Rs. 83,97,000 towards environment expenses, which the AO disallowed due to lack of verifiable details. The CIT(A) deleted the addition based on an earlier order for AY 2006-07. The Tribunal upheld this decision, noting that the expenses were statutory levies related to environmental compliance, such as afforestation and pollution control fees, which are necessary for the business. The Tribunal referenced its prior decision for AYs 2003-04 to 2005-06, confirming these expenses as deductible.3. Deletion of Addition on Account of Hire Charges of Bus and Ambulance:The assessee claimed Rs. 4,20,64,000 for hire charges of buses and ambulances, which the AO disallowed due to insufficient justification. The CIT(A) deleted the addition based on an earlier order for AY 2006-07. The Tribunal remanded the issue back to the AO for fresh consideration, instructing the AO to verify the evidence provided by the assessee. This decision was consistent with the Tribunal's approach in AYs 2003-04 to 2005-06.4. Deletion of Addition on Account of Uniform and Stitching Charges:The assessee claimed Rs. 63,74,000 for uniform and stitching charges, which the AO disallowed, arguing they were not incidental to the business. The CIT(A) deleted the addition, accepting the assessee's explanation that these expenses were for security and medical personnel as per hygiene and safety guidelines. The Tribunal upheld the CIT(A)'s decision, noting that such expenses were allowed in previous years and were necessary for business operations.5. Non-Admission and Adjudication of Additional Grounds Raised by the Assessee Before the CIT(A):The assessee raised additional grounds for deductions not claimed in the return, which the CIT(A) did not admit, citing the Supreme Court's decision in Goetze (India) Ltd. vs. CIT. The Tribunal admitted these additional grounds, emphasizing that appellate authorities have the power to consider such claims. The Tribunal remanded the issues back to the AO for verification. Specifically, the Tribunal directed the AO to verify the claim of Rs. 2.52 crores for contributions to schools and institutions, which the assessee argued should be allowed under section 37(1) of the Act. Additionally, the Tribunal instructed the AO to verify the claim of Rs. 2.33 crores disallowed under section 40A(9), which the assessee argued was exempt under Rule 6DD(i) due to payments made in areas without banking facilities.Conclusion:The Tribunal upheld the CIT(A)'s deletion of additions for grants to sports and recreation, environment expenses, and uniform and stitching charges. It remanded the issue of hire charges of buses and ambulances to the AO for fresh consideration. The Tribunal also admitted the additional grounds raised by the assessee and remanded these issues to the AO for verification. Both the appeals of the assessee and the revenue were partly allowed for statistical purposes.