TaxTMI 
TaxTMI 
2002 (2) TMI 344
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....--------------------------------------------- 18/Nag./2001 1989-90 10-11-2000 143(3)/147 25-3-1997 19/Nag./2001 1990-91 10-11-2000 143(3)/147 25-3-1997 20/Nag./2001 1994-95 10-11-2000 143(3) 31-3-1997 21/Nag./2001 1995-96 10-11-2000 143(3) 27-3-1998 22/Nag./2001 1996-97 10-11-2000 143(3) 15/31-3-1999 ----------------------------....
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....; 18/Nag./2001 1989-90 1 19/Nag./2001 1990-91 1 20/Nag./2001 1994-95 1 21/Nag./2001 1995-96 1 22/Nag./2001 1996-97 -------------------------------------------------------------- 3.1 At the time of hearing before us, the learned counsel for the assessee has not pressed the above grounds. Accordingly, the same are dismissed as not pressed. 4. The next Is....
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....PRA did not survive and, therefore, the Assessing Officer had no jurisdiction to proceed with the reassessment and to make any other additions. 4.2 The learned Departmental Representative, on the other hand, submitted that the Assessing Officer had rightly reopened the assessment for assessment years 1989-90 and 1990-91 after recording the reasons for doing so and the said reasons were also communicated to the assessee vide his letter dated 19-11-1996. She further submitted that once the case is reopened under section 147, the full assessment was open before the Assessing Officer. Relying on the decision of Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd v. ITO [1999] 236 ITR 34, she contended that for determining whether initiation of reassessment proceedings was valid, it is only toether there was prima facie some material on the basis of which the Department could reopen the case. She further contended that itin therescaped items in the reassessment though such items did not form the basis of initiation. In support of this contention she cited the following decisions of various High Courts: CIT v. Ahmedabad Mfg. Calico Printing Co. Ltd. [1977] 106 ITR 159 (G....
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....9-90 and 1990-91. Before us, the learned counsel for the assessee has contended, relying on the decision of Hon'ble Punjab & Haryana High Court in the case of Atlas Cycles Industries Co. that when the main reason on the basis of which the assessments were reopened did not survive, the Assessing Officer had no jurisdiction to proceed with the reassessment and make any other additions. The learned Departmental Representative, on the other hand, has contended that there was a valid reason for reopening the assessments and once such assessments were reopened, the Assessing Officer had every right to bring to tax any other income that had escaped assessment. In support of this contention she has relied on various judicial pronouncements, which are enumerated above. 4.5 Before we proceed further to consider the contentions raised by the learned representatives of both the parties in the light of the facts and circumstances of the present case, it would be appropriate to summarise the legal position emanating from the various judicial pronouncements cited by both the parties Ahmedabad Mfg. & Calico Printing Co. Ltd.'s case Even if the grounds on which proceedings were reopened ....
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....en certain material has been used by the Assessing Officer for the purpose of assessment and he has acted upon that and passed the assessment order, then with the same material the assessment cannot be reopened on account of change of opinion. If some material has not been acted upon by the assessing authority and was not brought to the notice of assessing authority, it cannot be said that the Assessing Officer had assessed the income on that basis. Atlas Cycles Co. case In this case, assessment was reopened on two grounds. However, both the grounds did not survive. Hon'ble High Court accordingly held that: "..the Income-tax Officer did not have the jurisdiction to proceed with the reassessment, the moment he found the two grounds mentioned in the reassessment notice incorrect or non-existent." 4.6 It is pertinent to note here that all the aforesaid decisions cited by the learned representatives related to a period prior to 1-4-1989 when the conditions precedent for invoking jurisdiction under section 147 was that the belief which the ITO should entertain before issuing the notice ought to have been based on materials and such material constituted an important and essential ....
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....clear that all these decisions were rendered on the basis of existence or non-existence of the information in the possession of the Assessing Officer at the relevant time to entertain belief about escapement so as to acquire jurisdiction under section 147 read with section 148. 4.8 It is pertinent to note that section 147 was substituted by the Direct Tax Amendment Act, 1987 with effect from 1-4-1989 and as per the amended provisions of the said section the only condition precedent for invoking the jurisdiction under section 147 is that the Assessing Officer should have a reason to believe that income chargeable to tax has escaped assessment. It is thus clear that the requirements in the old provisions that the Assessing Officer should have 'information in possession' before taking action to assess or reassess the income escaping assessment have been dispensed with and the only requirement for reopening the assessment within a period of four years from the end of the relevant assessment year is that the Assessing Officer should have a reason to believe that the income chargeable to tax has escaped assessment. The Hon'ble Gujarat High Court in the case of Damodar H. Sha....
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....the various judicial authorities proceeded to conclude that the Assessing Officer did not have jurisdiction to assess or reassess the income of the assessee under section 147. However, where the factum of having such information was found to be in existence at the time of reopening the assessment but in the ultimate analysis the Assessing Officer did not find any escapement, the reopening was considered valid by the judicial forum giving jurisdiction to the Assessing Officer +Lo proceed under section 147. 4.10 After the amendments made to section 147 with effect from 1-4-1989, the condition precedent is only that the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment. In the present case, the reason to entertain belief about the escapement of income by way of allowing wrong deduction on account of contribution to CPRA was very much there and the same was also communicated to the assessee by the Assessing Officer. Although this belief turned out to be wrong during the reassessment proceedings, we are of the view that it cannot be said that the reason to form such belief did not exist at the time of initiation of reassessment proceed....
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....or that year. He submitted that the Assessing Officer assumed jurisdiction for reopening the assessment proceedings on the premise that the assessee had failed to disclose truly and fully all the material facts relating to the contribution to CPRA. In this regard, he contended that the appellant had made complete disclosure about its contribution to CPRA by clearly disclosing the same separately in the profit & loss account. He also drew our attention to the profit & loss account of the relevant period placed at page Nos. 3.4 and 3.5 of his paper book to show that the contribution to CPRA was separately claimed as expenditure by the assessee in its profit & loss account. Relying on the decision of Hon'ble Supreme Court in the case of Bankipur Club Ltd., he contended that the disclosure by way of expenditure in tile profit and loss account filed with the Assessing Officer along with the return of income was complete disclosure by the assessee and there was no failure or omission to disclose fully and truly all the material facts necessary for assessment insofar as they relate to the assessee's claim on account of contribution to CPRA. He also contended that no addition on ac....
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....g Officer was aware about the investment and fluctuations in the exchange rate from the fact that the depreciation claimed by the assessee on the enhanced cost was duly allowed by him and thus there was no failure on the part of the assessee to disclose material facts necessary for assessment to warrant the issue of notice for reassessment beyond a period of four years. In the present case the assessee had claimed the contribution to CPRA as an expenditure separately in its profit & loss account filed with the return of income and the nature of the said contribution was also explained in the following explanatory note No. 9 forming part of assessee's annual account filed before the Assessing Officer: "Contribution on account of retention price to Coal Price Regulation Account - The Government of India vide its Notification No. 28012/86-CA dated 16-3-1989 has fixed Rs. 182 per mtr. as retention price for the year 1988-89. In pursuance of this Notification Rs. 20,737.50 lakhs (previous year Rs. 8345.08 lakhs) in respect of sales for the year have become payable to the Coal Price Regulation Account. The amount has been arrived at on The basis of coal dispatches during the year fr....
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....lieve that any income chargeable to tax has escaped assessment for such assessment year by reason of the assessee's failure to make a return under section 139 or in response to a notice issued under section 142(1) or 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. In the present case, the stand of the Revenue is that there was a failure on the part of the assessee to disclose fully the material facts regarding its claim for deduction in respect of contribution to CPRA. In this regard, when the learned Departmental Representative was required by the Tribunal to point out any such specific failure of the assessee, she stated that the full scheme relating to the CPRA was not furnished by the assessee before the Assessing Officer, Referring to Explanation 1 to section 147, she has also contended that mere writing a small note regarding the contribution to CPRA was not a full and true disclosure on the part of the assessee. From the perusal of the said Explanation, it is however evident that it covers the eventuality / situation arising from the production of books or other evidence by the assessee before the Assessing Off....
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....e assessing authority has to draw inference as regards certain other facts and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences and ascertain on the correct interpretation of the taxing enactment, the proper tax leviable." After referring to the aforesaid observations, the Hon'ble Supreme Court proceeded to hold that the finality of proceeding is certainly a consideration but that avails one who has fully and truly disclosed all material facts necessary for his assessment for that year and not to others. 5.5 From the perusal of aforesaid observations of the Hon'ble Supreme Court, it is clear that the assessee is required to place before the Assessing Officer all the primary facts necessary for his assessment and once that is done the assessee can be said to have discharged his obligation in this regard. In the present case, as already mentioned, the assessee had claimed the contribution to CPRA as expenditure separately in the profit and loss account enclosed with his return and had also annexed a note explaining the nature of such contribution. As a matter of fact, on the basis of this discl....
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....p; 15 22/Nag./2001 1996-97 18 ---------------------------------------------------------- 6.1 The learned counsel for the assessee submitted that the learned CIT(Appeals) enhanced the assessment made by the Assessing Officer with regard to the matters which in fact were not considered in the original assessment by the Assessing Officer at all. He contended that the first appellate authority has no power of enhancement with regard to the matters, which are not dealt with or considered by the Assessing Officer in the assessment. Relying on the decisions of Hon'ble Supreme Court in the case of CIT v. Shapoorji Palionji Mistry [1962] 44 ITR 891, CIT v. Sardari Lal & Co. [2001] 251 ITR 864 (Delhi) (FB) and CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC), the learned counsel for the assessee contended that the learned CIT (Appeals) had no jurisdiction to assess a new source of income which had not been considered or processed by the Assessing Officer in the assessment or....
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.... assessment. In the present case, we find that learned CIT(Appeals) has not made any attempt to discover any such new source of income and the enhancement made by him on different counts appears to have been made on the issues which were either appearing in the return of income or were considered by the Assessing Officer expressly or by necessary implication in his assessment order. It is a settled position that the learned CIT(Appeals) has the power to make an order enhancing the assessment while deciding the appeal filed by the assessee if he is satisfied that the Assessing Officer has granted excessive relief or the assessment of income is in any way erroneous. In the case of CIT v. Nirbheram Daluram, the Hon'ble Supreme Court has held that the powers of enhancement of first appellate authority are not just confine to the items considered by the Assessing Officer. In the case of Kanpur Coal Syndicate, the Hon'ble Supreme Court has held that the powers of first appellate authority are co-terminus with that of the Assessing Officer and he can do what the Assessing Officer can do and can also direct him to do what he has failed to do. As such, considering all the facts of t....
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....p; 1254.16 313.54 940.62 ------------------------------------------------------------------------------ 7.1 The Heavy Earth Moving Machinery (HEMM) is used by the assessee company in its business of extracting coal either by the shaft method or by the cast method. During the years under consideration, substantial expenditure was incurred on the rehabilitation of the same, which was claimed as revenue expenditure by the assessee company while computing its total income. The Assessing Officer required the assessee to explain the nature of this expenditure and in the reply, it was stated by the assessee that HEMM which has covered 50% of its life in terms of working hours require major repair/overhauling to keep the same operational at its optimum capacity. It was also explained by the assessee that the expenditure incurred on such repairs/overhauling is termed as rehabilitation expenditure which is treated as deferred revenue expenditure in the books of account as per the policy guidelines issued by its holding company M/s. Coal India Limit....
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....ver, allowed depreciation on the same at the rates specified in the I.T. Rules. The matter was carried before the learned CIT(Appeals) and the submission made before the Assessing Officer on this issue was reiterated by the assessee before him. It was also brought to the notice of the learned CIT(Appeals) by the assessee that his predecessor has decided the similar issue in favour of the assessee in assessee's own case for assessment year 1991-92 allowing deduction to the assessee on account of expenditure incurred on rehabilitation of HEMM. Reliance was also placed by the assessee on the following decisions in support of its case Kedarnath Jute Mfg. Co. Ltd. v. CIT[1971] 82 ITR 363 (SC), CIT v. Gujarat Mineral Development Corpn. [1981] 132 ITR 377 (Guj.), Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC), CIT v. Chowgule & Co. (P.)Ltd. [1995] 214 ITR 523 (Bom.), CIT v. Jafarbhai Akbarali & Bros. [1995] 211 ITR 496 (Bom.), CIT v. Polyolefins Industries Ltd. [1988] 169 ITR 538 (Bom.), CIT v. Khalsa Mirbhai Transport Co. (P.) Ltd. [1971] 82 ITR 741 (Punj. & Har.), Hanuman Motor Service v. CIT [1967] 66 ITR 88 (Mys.), Nathmal Bankatlal Parikh & Co. v. CIT [1980] 122 ITR 168 (AP).....
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.... point out that the assessee has treated the said expenditure as deferred revenue expenditure in its books of account. He, therefore, contended that the main basis for disallowance given by the learned CIT(Appeals) does not survive as the assessee had not treated the said expenditure as capital expenditure in its books of account. As regards the nature of the said expenditure, the learned counsel for the assessee explained that by incurring such expenditure only the efficiency of the asset improved and no new life was added to the machinery. His contention, therefore, was that said expenditure was primarily of revenue nature and assessee had rightly claimed deduction on this count. He further contended that the replacement of worn out parts neither brought into existence any new machinery nor did it add new life of the asset. According to him, it merely facilitated working of the machinery at the efficient level and irrespective of the quantum of such expenditure it has to be allowed as revenue expenditure. He submitted that as a result of the rehabilitation work undertaken by the assessee, no new machine has emerged or came into existence and merely the whole machine was dismantle....
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....epartmental Representative submitted that the assessee has adopted the accounting policy as governed by the holding company i.e. Coal India Limited. She contended that it may be good for the purpose of accounting. However, the actual allowability of such expenditure has to be seen as per the provisions of the Income-tax Act under which only the current repairs are allowable as revenue expenditure. Relying on the judgment of Hon'ble Calcutta High Court in the case of Humayun Properties Ltd. v. CIT[1962] 44 ITR 73, she pointed out that the current repairs are those repairs, which are needed periodically and from that angle accumulation of repairs does not ordinarily satisfy the test of current repairs. She also contended that the renovation of machinery with the intention to increase its value and efficiency does not constitute current repairs. Reliance was also placed by her on the decision of Hon'ble Rajasthan High Court in the case of CIT v. S. Zoraster & Co. [1982] 133 ITR 559 wherein it has been held that expenditure on extensive repairs cannot be treated as current repairs. She further contended that the deferred revenue expenditure cannot be treated as current repairs.....
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....pairs to HEMM resulted into putting a new life in the said machinery. So far as the treatment given by the assessee-company in its books of account in respect of the said expenditure is concerned, it is pertinent to ascertain as to whether such expenditure has been treated by the assessee as capital expenditure in its books of account. In this regard, we find that the assessee has treated the said expenditure as "deferred revenue expenditure" considering the advantage of enduring nature accrued to it which was going to last for the remaining period of rated life of the relevant machinery not exceeding a period of four years. The authorities below, however, considered this treatment given by the assessee to resemble with the capital expenditure specifically considering that it indicated the accrual of advantage to the assessee of enduring nature. Before we consider the relevance of the test of enduring benefits for ascertaining the nature of expenditure, it would be appropriate to find out the meaning and nature of the term "deferred revenue expenditure". The Institute of Chartered Accountants of India in its guidance-note issued on the "terms used in financial statements", has defi....
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....ovisions of the Income-tax Act. 7.6 It is observed that the learned CIT(Appeals) placed reliance on the decision of Hon'ble Supreme Court in the case of State of Travancore and that of Hon'ble Calcutta High Court in the case of UCO Bank in coming to the conclusion that the particular method of accounting followed by the assessee in its books of account has to be followed for the purpose of income-tax also and he cannot adopt two different methods, one for its own purpose and the other for income-tax. In the present case, as already observed, the assessee-company having treated the impugned expenditure as deferred revenue expenditure and not as capital expenditure, the method adopted by the assessee in its books of account cannot be regarded as different in principle from the one adopted for income-tax purpose. 7.7 As regards the relevance of enduring benefits for ascertaining the nature of expenditure is concerned, we find that this issue has already been considered by the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd wherein their Lordships have observed as under: "There may be cases where expenditure, even if incurred for obtaining advantage of enduring ....
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.... allowability of the same under the Income-tax Act, it is pertinent to consider the facts involved in the present case in the light of relevant judicial pronouncements. It is observed that the HEMM is regularly used by the assessee-company for the purpose of its business of extracting coal from the coal mines. When a unit of HEMM covers more than 50% of its rated life, the same is undertaken for overhauling and repairs. During the process of such rehabilitation the whole engine assembly and transmission equipment are off-loaded and dismantled. The worn out parts are also replaced and necessary boring of the engines is done so that the required power of the engine is obtained once again to facilitate working at its optimum level for the balance life of the machinery. It is thus clear that the said expenditure does not result into increase in the life of the assets but it merely facilitates its optimum use for the balance period of its life. It is also clear that no new asset comes into existence by incurring such expenditure nor any new advantage accrues to the assessee in the capital field. It merely facilitates the assessee to continue with its operation at optimum level and such ....
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....e work of renewal, when it comes to be effected, necessarily a capital charge. Explaining further, their lordships observed that when such expenditure does not result in the creation of any new asset and it has been incurred to maintain the appellant's existing line in a state to earn revenue, the same has to be allowed as a revenue expenditure. In the case of CIT v. Cooperative Sugars Ltd. [1999] 235 ITR 343, the Hon'ble Kerala High Court allowed substantial expenditure incurred under the head, "machinery maintenance" observing that though the expenditure was incurred on substantial replacement, the fact remained that the concerned sugar plant was there and the same existed in the original form even after such replacement. The Hon'ble Bombay High Court also had an occasion to consider a similar issue in the case of Chowgule & Co. (P.) Ltd. wherein their lordships summarised the position that emerges for grant of deduction under section 31 as follows: (i) The amount should be paid on account of current repairs, (ii) "Current repairs" means repairs undertaken in the normal course of user for the purpose of preservation, maintenance or proper utilization or for restorin....
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....bilitation work and it is only for the purpose of preserving and maintaining the said machinery, the rehabilitation work was carried out by the assessee company. 7.12 It is thus clear that the expenditure on rehabilitation of HEMM was incurred by the assessee to preserve and maintain the already existing machinery operational at its optimum capacity during the balance period of its rated life and the said rehabilitation work neither resulted in bringing any new asset into existence nor any different or added advantage in the capital field accrued to the assessee. As such, considering all the facts of the case and the legal position emanating from the various judicial pronouncements discussed above, we are of the considered opinion that the expenditure incurred by the assessee on rehabilitation of HEMM was revenue expenditure in the nature of "current repairs" allowable under section 31 and the learned CIT(Appeals), therefore, was not justified in confirming the action of the Assessing Officer treating the same as capital expenditure. In that view of the matter, we reverse the impugned orders of the learned CIT(Appeals) on this issue and direct the Assessing Officer to allow the de....
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....issued a notice under section 251(2) proposing enhancement of income, inter alia, by way of disallowance of expenditure on account of contribution of CPRA. In the said notice, the learned CIT(Appeals) alleged that the assessee has not furnished the particulars of expenditure claimed on account of contribution to CPRA in order to establish that the same constitutes an ascertained liability. He, therefore, called upon the assessee company to explain as to why the same should not be disallowed and added back to the income of the assessee for the years under consideration. In reply, it was submitted on behalf of the assessee that this contribution has been made to Coal India Ltd. which is a nominated authority for managing the CPRA as per section 4B(2) of the Colliery Control Order (CCO) introduced with effect from 30-3-1982. It was also submitted on behalf of the assessee that since this contribution to CPRA is made as per the statutory provisions, the same should be allowed as a statutory liability. Reliance was placed by the assessee on the decision of Hon'ble Supreme Court in the case of Poona Electric Supply Co. Ltd. v. CIT [1965] 57 ITR 521 in support and the decision of ITAT....
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....hip between the assessee company and the Government and the assessee company is empowered in law only to retain from the selling price that portion which has been notified by the Government. According to him, the excess selling price over the retention price does not belong to the assessee but belongs to the Government. He submitted that during the years under consideration, the notified selling price of the coal in the assessee's case was higher than the notified retention price and, therefore, the assessee was obliged to hand over such excess amount to the Government. He also invited our attention to the copy of the Scheme drafted by the Government placed at page Nos. 6.32 to 6.36 placed in his paper book and explained the procedure for maintenance and operation of CPRA as well as the manner and method of making the contribution. Referring to para No. 8 of the said document, he pointed out that the Coal India Limited has the authority to appropriate the funds to disburse the same to those collieries, which are entitled to receive moneys from the CPRAU on account of their selling price being less than the retention price. He submitted that under the said scheme, the CIL was ob....
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....stances entitled the CIL or its subsidiaries to exercise lien over the contributions made to CPRA. He also submitted that the sums from CPRA accrued to the member companies on selling their products below retention price and only after such accrual that the money became due to them. He also submitted that the contributions to CPRA, on the other hand, became payable by the companies on their selling above the retention price and in such circumstances the contribution paid by the company went once for all. He, therefore, contended that what the member company received or was likely to receive subsequently had no linkage to the quantum of payment made in the earlier years and thus the same in no case could be considered as refund of contributions. Referring to a copy of letter dated 3-10-2000 placed at page Nos. 6.37 and 6.38 of his paper book, the learned counsel for the assessee submitted that the Ministry of Coal has subsequently lifted the price control in respect of the coal from 1-4-1996 and as a result of the same the assessee company has neither paid any contribution to CPRA from financial year 1996-97 onwards nor has received any amount from CPRA so far. 8.4 The learned coun....
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....eme for the maintenance and operation of CPRA makes it abundantly clear that the CIL being a nominated authority for maintenance and operation of CPRA, was entitled to draw any fund therefrom only on behalf of its subsidiary. She contended that the amount paid to CPRA was, therefore, to be received back by the assessee when the retention price becomes higher than the corresponding sale price. Relying on the decision of Hon'ble Supreme Court in the case of Indian Molasses Co. (P.) Ltd. v. CIT [1959] 37 ITR 66, she contended that the "expenditure" primarily denotes the idea of "spending" or "paying out" and, therefore, the same refers to something which is gone from assessee's hands irretrievably. As regards the assessee's emphasis on the CBDT's letter dated 27-12-1985, she submitted that the said letter nowhere states to allow contribution made to CPRA as revenue expenditure and in any case the same being not a Circular or instruction cannot be applied to all the collieries including the assessee company universally. She also submitted that the case of Poona Electric Supply Co. Ltd. relied upon by the learned counsel for the assessee is distinguishable on facts becau....
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....d the Coal Price Regulation Account. (2) Where the retention price of any class, grade or size of coal or coke fixed under clause 4-A for any colliery owner is lower than the corresponding sale price fixed under clause 4 for such class, grade or size of coal or coke such colliery owner shall, as soon as, may be, after each sale, and in any case not later than such period, as may be specified in this behalf by the Central Government, pay into the Coal Price Regulation Account, an amount equivalent to the difference between retention price and the sale price in respect of each tonne of coal or coke sold by him. (3) Where the retention price of any class, grade or size of coal or coke fixed under clause 4-A for any colliery owner is higher than the corresponding sale price fixed under clause 4 for such class, grade or size of coal or coke, such colliery owner shall be paid from the money standing to the credit of the Coal Price Regulation Account an amount equivalent to the difference between the retention price and the sale price in respect of each tonne of coal or coke sold by him. (4) The expenses for administration, if any, of the Coal Price Regulation Account shall be paid fro....
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.... On the other hand, the colliery owner in the circumstances specified in sub-clause (2) of clause 4B was required to pay the necessary contribution to the credit of the consolidated fund in CPRA which was never credited to its individual account and it had no right whatsoever to claim the refund/repayment of the said amount unless and until he comes across the situation mentioned in sub-clause (3). It is pertinent to note here that if the eventuality specified in sub-clause (3) does not arise at all in the case of a colliery, it was not entitled for the withdrawal of any amount from CPRA despite having made substantial contribution earlier. It is thus clear that the liability to pay into the CPRA was distinct and separate from the entitlement to receive money from the CPRA inasmuch as these two events/incidents were mutually exclusive and the mere fact that contribution had already been made to CPRA did not give rise to an entitlement to receive the said amount already contributed. Obvious as it is, the amount paid to the CPRA went irrevocably and irretrievably from the hands of the assessee and this being so, we find it difficult to concur with the view taken by the learned CIT (A....
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....thority to collect and deposit the proceeds received from the colleries in pursuance of clause 4B(2) of the Colliery Control Order, 1945 and it was also authorized to draw any fund due from the CPRA on behalf of the subsidiary who was entitled to receive money from CPRA in terms of clause 4B(3) of the said order. It is thus clear that the authority to receive and deposit the amount in CPRA on behalf of subsidiary as well as to withdraw any fund from the said account on behalf of the subsidiary was given to CIL by the Central Government of India in pursuance of the said scheme just to facilitate the operation of the said account in accordance with the provisions of the Colliery Control Order, 1945. It appears that the learned CIT(Appeals), however, could not fully appreciate the specific procedure prescribed in the scheme and proceeded to draw an adverse and incorrect inference reading clause Nos. 7 and 8 of the scheme in isolation ignoring entirely the fact that the said scheme was formulated by the Central Government in pursuance of the Colliery Control Order to achieve the objectives and purpose specified therein. It is worthwhile to note here that a similar issue came up for con....
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....such obligation to pay the said amount is not enough for the application of the Rule of diversion of income by an overriding title. The true test for applicability of the said Rule is whether such obligation is in the nature of a charge on the source i.e., the profit earning apparatus itself and only in such cases where the source of earning income is charged with an overriding title, the same can be considered as diversion of income by overriding title. The true test for the application of the rule of diversion of income by an overriding title has been explained by the Supreme Court in Shitaldas Tirathdas' case cited by the learned counsel for the assessee as follows : "In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation, which is the decisive fact. There is a difference between an amount, which a person is obliged to apply out of his income and an amount, which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the a....
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....------------------------ 18/Nag./2001 1989-90 10 19/Nag./2001 1990-91 10 22/Nag./2001 1996-97 23 ------------------------------------------------------------ 9.1 At the time of hearing before us, the learned counsel for the assessee submitted that this issue in fact was set aside by the learned CIT(Appeals) to the Assessing Officer for reconsideration and the same having been already decided in favour of the assessee by the Assessing Officer in the set aside proceedings, the assessee is not interested in pressing the above grounds. Accordingly, these grounds raised by the assessee are dismissed as not pressed. 10. The ....
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....he order of assessment dated 30-3-1994 which were as follows: "The nature of the same was enquired into and it was explained by the A.R. vide order sheet entry dated 30-3-1994 that the pension fund has been created by the company by way of the deduction from the gross emoluments of the employees @ 2 per cent in terms of the agreement with National Wage Board and CIL, the holding company of the assessee. The purpose of the same was given to be setting up of a scheme for that purpose. However, no copy of agreement or for that matter the minutes of the meeting giving out the modalities of the said scheme placed on record. But it has been informed that no scheme has yet been set up till date and this deduction in the name of the pension fund is continued to be collected as aforesaid. Under such circumstances the fate of such money, which is in the hands of the company and is used by it is quite uncertain. Since no scheme for pension has yet been formulated and otherwise also for the present it is not known whether in absence of the scheme the money would be refunded to the respective employees with or without interest. It is quite likely that out of the huge strength of employees, a s....
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....he fund by the due date. A chart was also filed to show that in various financial years from 1991-92 to 1994-95 refunds from the collections so made from the employees were given to employees who had left the organization. However, the fact remains that the provisions of section 2(24)(x) are applicable and in view of the express provisions of the said section mentioned above in detail the appellant would not be entitled to relief'. The addition of Rs. 4,50,00,000 is thus confirmed." 10.3 The learned counsel for the assessee submitted before us that the amount collected from employees towards pension funds from financial year 1989-90 was treated as income of the assessee-company under section 2(24)(x) since the same could not be deposited in the pension fund, which was pending finalisation, by the Government of India. In this regard, he contended that a significant and turning event was taken place in the financial year 1997-98 when the Coal Mines Pension Scheme, 1998 was formulated vide Notification No. GSR 123(E) dated 5-3-1998 in exercise of the powers conferred under section 3E of the Coal Mines Provident Fund and Miscellaneous Provision Act, 1948. He submitted that the sai....
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....y created. He contended that the assessee, therefore, resorted to collect the amounts from each employee in order to spread over their burden and kept such collections to the credit of each employee. He also contended that the employees who retired during the intervening period i.e., from the date of collection up to the date of formal setting up of the fund, were paid the amount collected from them towards pension fund together with interest thereon. He contended that a fiction has been created under section 2(24)(x) to treat certain amounts as income and such legal fiction according to accepted principles of Jurisprudence has to be carried to its logical conclusion. In this regard, his contention was that the collection from the workers cannot be treated as a sum received by the assessee from his employees as contribution to a fund for welfare of such employees in the absence of any formal pension fund and, therefore, the same cannot be classified as income under section 2(24)(x). He submitted that till the time the pension fund scheme came into force and implemented, the assessee company collected the contributions from its employees and the same was retained in the capacity of ....
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....ing the claim of assessee for deduction on this count. She also contended that the assessee's alternative plea that no disallowance is warranted even under section 43B as the amount collected from employees was finally deposited with the pension fund within the prescribed period is also not relevant in the context of years under consideration because the pension fund was not in existence at the relevant time and the question of its payment within due date does not arise at all. 10.7 We have considered the rival submissions and also perused the relevant material on record. It is observed that the assessee company collected by way of deduction from the salary of the employees a contribution at the rate of 296 of the gross emoluments towards pension fund in terms of the agreement with National Wage Board and CIL, the holding company of the assessee. The purpose of the same was stated to be for setting up a scheme of pension fund. The assessee company continued to collect such contribution from financial years 1989-90 to 1997-98 but the fund was finally and formally set up only on 31-3-1998. In the absence of the formal fund, the assessee retained the amount of contribution collec....
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....loyees from the first day of April, 1989 or the date of joining whichever is later, up to the 31st day of March, 1996 and 2% of the notional salary of the employees from first day of April, 1996 or the date of joining whichever is later, which was to be transferred by the employer from the salary of the respective employees. As regards the payment of the said amount mentioned in section 3(c), it was provided in section 7(3) of the said scheme that the said amount which had already been deducted in part or in full but not remitted to the authorized officer on or before the appointed day, shall be remitted to the authorized officer within a period of 120 days from the appointed day and an interest of 12% per annum accrued on such amount as on the appointed day shall have also to be remitted by the employer to the authorized officer. As per the clause 1(2) of the said scheme, the said scheme was to come into force from such date as the Central Government may by Notification in the official gazette appoint and vide Notification No. S.O. 233(E), dated 20-3-1998, the Central Government appointed the March 31, 1998 as the date on which the said scheme came into force. It is thus clear tha....
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....ange in the relevant facts of the case. 10.11 The learned counsel for the assessee has contended before us that the decision of the learned CIT(Appeals) for assessment year 1991-92 on which reliance was placed by the learned CIT(Appeals) while deciding this issue for the years under consideration had become abrogated and lost its binding nature. In this regard, we may observe that the principle of abrogated decision is applicable only, where a decision ceases to be binding by the process of law itself with contrary enactment brought into the relevant statute having the effect of nullifying the said decision. In the present case, there was merely a significant change in the material and relevant facts concerning the issue rendering the earlier decision given by the learned CIT(Appeals) in assessment year 1991-92 inapplicable to the years under consideration. 10.12 It is true that the said significant change came into existence only after a lapse of a period of about 9 years and in the absence of the same, the Revenue authorities had no option but to continue to treat the amount collected by the assessee company towards contribution to pension fund as income under section 2(24)(x).....
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....aw will in general excuse him and though impossibility of performance is in general no excuse for not performing an obligation which a party has expressly undertaken by contract, yet when the obligation is one employed by law, impossibility of performance is a good excuse. The same principle has been explained in Craies on statute law as follows : "Under certain circumstances compliance with the provisions of statute which prescribes how something is to be done will be excused. Thus in accordance with the maxim of laws the lex non cogit ad impossivilia, if it appears that the performance of the formalities prescribed by a statute has been rendered impossible by circumstances over which the persons interested had no control, like the act of the God or the King's enemies, these circumstances will be taken as valid excuse." 10.14 Keeping in view the above legal position as well as taking a circumspect view of the matter on hand, we are of the opinion that the provisions of section 2(24)(x) read with section 36(1)(va) should be interpreted liberally keeping in view the principle of equity as well as the legislative intention behind enacting such prohibitory provisions. In that vi....
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....; 350.75 21/Nag./2001 1995-96 4 234.83 22/Nag./2001 1996-97 4 226.82 -------------------------------------------------------------- 11.1 During the relevant previous years, the assessee company spent substantial amount on account of payment to the State Government and for rehabilitation of villages in the course of obtaining use of land for its business purposes. This amount was capitalized by the assessee in its books of account under the head "leasehold land", but for the purpose of computing income under the Income-tax Act, the same was claimed as revenue expenditure. When the assessee-company was called upon by the Assessing Officer to explain the position, it was submitted on behalf of the assessee company that the said expenditure has been incur....
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.... purposes from the one followed in his books of account. The learned CIT(Appeals), therefore, held that the assessee company having capitalized the said expenditure in its books of account, cannot treat and claim the same as revenue expenditure for income-tax purposes. He also relied on the decision of Hon'ble Supreme Court in R.B. Seth Moolchand Suganchand's case referred to by the Assessing officer in his order and confirmed the disallowance made by the Assessing Officer on this count. 11.2 The learned counsel for the assessee submitted before us that the expenditure was incurred by the assessee company for obtaining use of land for a limited period and it did not become the owner of the land by spending the said amount. He submitted that the land was acquired on lease for a period not exceeding 30 years and the assessee enjoyed only the extraction rights in respect of the said land as set out in the model form of lease deed furnished at page Nos. 14.8 to 14.16 of his paper book. He further submitted that with a view to enable the assessee company to build office complex, health centres for employees etc., payment was made to the State Government for obtaining the surfac....
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....s placed by the authorities below, the learned counsel for the assessee contended that the said decision has been distinguished by the Hon'ble Apex Court in the case of Bikaner Gypsums Ltd. v. CIT[1991] 187 ITR 39 wherein it was held that the expenditure incurred to relocate a railway line under the terms of the lease is a revenue expenditure. He also placed strong reliance on the decision of Hon'ble Madhya Pradesh High Court in the case of R.J. Trivedi (HUF) v. CIT[1987] 166 ITR 856 wherein it was held by the Hon'ble jurisdictional High Court that the expenditure incurred for removing obstruction in the course of mining operation is a revenue expenditure. He contended that the expenditure incurred for rehabilitating the people in the present case is akin to removal of obstruction in the course of mining operation and, therefore, the decision of Hon'ble Madhya Pradesh High Court in the case of R.J. Trivedi is directly applicable. Relying on the decision of Hon'ble Supreme Court in the cases of Kedarnath Jute Mfg. Co. Ltd. and Tuticorin Alkali Chemicals & Fertilizers Ltd., the learned counsel for the assessee contended that the entries in the books of account mad....
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....expenditure in that case was incurred to relocate a railway line whereas in the present case the assessee company has acquired surface rights as well as right to possession in respect of the same from the occupants for the purpose of construction of utility buildings. She contended that similarly in the case of R.J. Trivedi relied upon by the assessee, expenditure was incurred for removing the obstruction in the course of mining operation, which is not the fact in the present case. She further contended that the case of Gotan Lime Syndicate v. CIT [1966] 59 ITR 718 (SC) is also out of context as the expenditure incurred by the assessee in that case was related to the raw material whereas in the present case the expenditure has been incurred to acquire the surface rights. She submitted that the assessee in the present case has acquired the surface rights and right to possession under a lease in respect of a land and, therefore, the decision of Hon'ble Supreme Court in the case of Madras Auto Services (P.) Ltd. involving the advantage of lower or concessional rate cannot be extended to the instant case. She contended that in the case Empire Jute Co. Ltd. the advantage was acquire....
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....9;ble Apex Court observed that a question whether a particular expenditure incurred by the assessee is of a capital or revenue nature is a vexed question and it is very difficult to lay down exhaustive test for distinguishing the capital expenditure from revenue expenditure and each decision in this regard has to be founded on its own facts and circumstances. It is thus pertinent to cull out the facts relevant to the issue under consideration in the present case. In this regard, it is observed that the assessee company acquired certain land on lease from the State Government for a period not exceeding 30 years under the Mines and Minerals (Regulation and Development) Act, 1957 on the terms and conditions as set out in the model form of mining lease. As per the said model form of mining lease (copy placed in assessee's paper book at pages 14.8 to 14.16), the assessee acquired certain liberties, powers and privileges to be exercised and enjoyed in respect of the lease-hold land for a period not exceeding 30 years as specified in Part II of the said model form. As per clause 2 of Part III of the said lease agreement, the assessee was under an obligation to obtain a permission from....
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....ed by the assessee to relocate and rehabilitate the villages in order to acquire a right to possession in the leasehold land to facilitate the enjoyment of surface rights in respect of the leasehold land. We are, therefore, of the opinion that the present case is distinguishable on facts from the case of R.J. Trivedi and, therefore the said decision cannot help the assessee's case. Reliance was also placed by the learned counsel for the assessee on the decision of Hon'ble Supreme Court in the case of Gotan Lime Syndicate wherein the payment of royalty was made by the assessee in relation to the raw material i.e. lime stone to be obtained from mines taken on lease and the same was not referable to the acquisition of the mining lease. Considering these facts, the Hon'ble Apex Court found the said expenditure incurred in relation to the raw material, which was going to be excavated or extracted by the assessee, and accordingly treated the same as revenue expenditure. The facts in the present case, however, are different inasmuch as the impugned expenditure has been incurred by the assessee company to acquire the surface rights as well as the right to possession in respect ....
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....application in the assessee's case. Similarly the case of Plantation Corpn. of Kerala Ltd. is also distinguishable on the similar line. 11.8 The learned counsel for the assessee has also contended before us that the assessee company did not acquire any right or interest in respect of relocated villages which were built up and handed over to the villagers and ultimately became the property of the said villagers. In this regard, we may observe that the said expenditure on rehabilitation and relocation of the villages was incurred by the assessee company to acquire the right to possession in the leasehold land in respect of surface rights obtained by it and the very purpose of incurring the said expenditure was to acquire such rights in the said immovable property. This being so, it cannot be said that the said expenditure did not result in the acquisition of enduring benefits in the capital asset, the rights or interest in the relocated villages notwithstanding. 11.9 In the case of Assam Bengal Cement Co. Ltd. relied upon by the revenue, the Hon'ble Apex Court observed that the aim and object of the expenditure would determine the character of expenditure whether it is a ca....
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....e case of mining leases is to acquire rights over a land for winning the mineral is of a capital nature. Before us the learned counsel for the assessee has contended that the said decision in the case of R.B. Seth Moolchand Suganchand has been distinguished by the Hon'ble Apex Court in its subsequent decision in the case of Bikaner Gypsums Ltd. A perusal of the subsequent judgment of the Hon'ble Apex Court, however, reveals that the facts involved in the case of R.B. Seth Moolchand Suganchand were found to be totally different from the facts involved in the case of Bikaner Gypsums Ltd inasmuch as in the latter case the expenditure was incurred by the assessee for the removal of a restriction which was obstructing his business operation of mining within a particular area. We have already observed that the existence of village was not obstructing the mining operations of the assessee-company and the expenditure in question was incurred to acquire the right to possession in respect of the leasehold land to facilitate the enjoyment of surface rights. Moreover, as the said acquisition resulted into accrual of enduring benefits to the assessee-company for the balance period of le....
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....duction on this count was found to be erroneous and prejudicial to the interests of the revenue and the CIT, Jabalpur assuming jurisdiction under section 263 set aside the said order on this issue to be made afresh and when the order passed by the CIT, Jabalpur under section 263 was assailed in the appeal preferred before this bench, the Tribunal set aside the said order of the CIT and upheld the action of the Assessing Officer by observing as under: "The coalfields are located in various backward areas and large staff has to be posted. They have to be provided with various educational facilities. Under section 40A(9) it is not necessary that the assessee as an employer should be allowed deduction in respect of any sum paid by it towards set up or formation of fund, trust, company association of persons etc. for the purposes as described under section 36(1)(iv) or (v). In such areas there are institutions already in existence and the assessee as an employer pays contributions to such institutions for the purposes of running the same as the employees of the assessee gets preference over the others in matters of admission. The assessee-company is a Government company and as discusse....
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....the following observations of the Hyderabad Bench of ITAT recorded in the case of Raasi Cement Ltd. v. ITO [1993] 45 ITD 33 :- "The object and intention of the Legislature introducing section 40A(9) was only to discourage contribution to any trust which do not benefit the employees in any manner. In the instant case, reading of the Trust Deed would clearly reveal that the beneficiaries of the trust are the assessee's employees. Hence, having regard to the Legislature intention in introducing the said section and the fact that the contribution constituted employees welfare measures as well as with such contribution made pursuant to an agreement with the employees is a requirement under the Industrial Dispute Act violation of which would result in penalty to the defaulter, an assessee is entitled for the allowance of the relief asked for." As a matter of fact, the impugned expenditure on account of contribution to various schools was not incurred by the assessee-company voluntarily but the same was incurred to discharge its obligation terms of a National Coal Wage Agreement entered with the employees and as the said agreement was enforceable in law under the Indian Contract Act....
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....sed accordingly. 15. The next issue relating to the disallowance of depreciation on Power Support Long Equipment (PSLE for short) is raised by the assessee in the following appeals: --------------------------------------------------------------- ITA No. Asst. Year Grd. No. Amount (Rs. in lacs) --------------------------------------------------------------- 20/Nag./2001 1994-95 9 258.59 21/Nag./2001 1995-96 2 &nbs....
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....is merged into the block of assets, it loses its identity and the question of its actual use in the later year does not survive so as to disallow the claim of depreciation on the same. Referring to the working of depreciation illustrated on page No. 18.2 of his paper book, he explained that even when a particular machinery is sold at less than its written down value, its balance WDV continues to be depreciated till the relevant block of assets exists. Relying on the decision of Hon'ble Bombay High Court in the case of CIT v. G.N. Agrawal[1996] 217 ITR 250 and that of Jabalpur Bench of ITAT in the case of Packwell Printers v. ACIT[1996] 59 ITD 340, he contended that the individual assets loses its identity as per the concept of block of assets introduced in the Act with effect from 1-4-1988 and for the purpose of allowing depreciation, the test of "user" has to be applied upon the block as a whole and not upon an individual asset. He, therefore, urged that the claim of the assessee for depreciation on PSLE deserves to be allowed. 15.3 The learned Departmental Representative, on the other hand, relied on the orders of the authorities below on this issue and further submitted tha....
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....cular asset has not been done away with and for the purpose of depreciation allowance, the use of such asset during the relevant previous year has to be established. It is, therefore, pertinent to refer to the provisions of section 43(6)(c) as well as the Rule 5(1) which are reproduced below: Section 43(6) : "Written down value" means (a).......................... (b).......................... (c) in the case of block of assets (i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted- (A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year; (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; (ii) in respect of any previous year relevant to the assess....
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....ue to be used for business purpose. Therefore, the new scheme as introduced does not require use of individual assets for the grant of depreciation. The Legislature also has fully taken into account the possibility of some assets enjoying depreciation without really being put into use. In such a case, when such asset is sold, then the moneys payable in respect of the assets sold exceeding the actual cost would not be taxable as short-term gains and not as long-term gains as under the old law. Therefore, there is no likelihood of the assessee using the new scheme as means to avoidance of tax. The new scheme is self-contained and there can be no loss to the Revenue in the ultimate analysis." 15.6 The Ahmedabad Bench of ITAT also had an occasion to consider this change of system for the purpose of allowing depreciation and after critically examining the relevant amendments made in the Act in the light of the purpose and intention of making such amendment as clarified in the CBDT Circular No. 469 dated 23-9-1986, the Tribunal observed that the Legislature has prescribed mode of allowing depreciation in respect of block asset and henceforth a calculation of depreciation will be in a l....
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.... the extent of Rs. 62.49 lacs. During the course of appellate proceedings, the learned CIT (Appeals) found from the perusal of the records that the amount so provided are mere provisions for which no liability in fact had accrued during the previous year relevant to the assessment year 1994-95. According to him, nothing was brought on record before him to establish that the said liability had accrued on or before 31-3-1994 and as the assessee was following mercantile system of accounting, he found no basis for claiming the expenditure in respect of the said liability in assessment year 1994-95 which had not accrued during the relevant previous year. He, therefore, enhanced the income of the assessee by disallowing the claim made on this count relying on the decision of Hon'ble Supreme Court in the case of CIT v. Swadeshi Cotton & Flour Mills (P.) Ltd. [1964] 53 ITR 134 wherein it was held that even underthe mercantile system, a mere claim by the assessee is not sufficient to establish the accrual of income as the profit must become actually due and likewise a liability must definitely arise. 16.2 The learned counsel for the assessee submitted that M/s. Coal India Ltd., the hol....
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.... interim relief and, therefore, the same was an allowable expenditure during the previous year relevant to assessment year 1994-95. He also submitted that the said liability, which arose under the MOU, was a definite and ascertained liability constituting expenditure to earn income for the year and the same being a charge against the said income, the assessee was entitled for deduction in respect of the same. 16.3 He submitted that a similar issue arose in the assessee's own case for assessment year 1988-89 wherein an amount of Rs. 364.28 lacs was provided by the assessee company for fringe benefits payable to the employees on interim relief as per the direction of the holding company as well as on the advise of the Comptroller and Auditor General of India and the disallowance made by the Assessing Officer and confirmed by the learned CIT (Appeals) on that count was deleted by the Tribunal holding that the said amount represents liability accruing during the year under consideration. He also pointed out that the reference application filed by the Department against the said order of the Tribunal stands rejected. Reliance was also placed by him on the decision of Hon'ble Bo....
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....earned CIT (Appeals) was not warranted and urged that the same may be deleted following the decision of this Bench in assessee's own case for assessment year 1988-89. 16.5 The learned Departmental Representative submitted that the decision of the learned CIT (Appeals) in disallowing the claim of the assessee for deduction on account of provision made for interim relief payable to the employees is based on the Hon'ble Supreme Court in the case of Swadeshi Cotton Mills wherein it has been held by Their Lordships that it is only when the claim to profit bonus, if made, is settled amicably or by industrial adjudication that a liability can be said to have incurred by the employer who follows the mercantile system. She submitted that the ratio of the said judgement squarely applies to the present case as the impugned liability had not definitely arisen before the end of the relevant previous year. She contended that the accounting standard referred to by the learned counsel for the assessee cannot be applied in the income-tax proceedings and the issue has to be decided on the basis of the settled position keeping in view the relevant judicial pronouncements. She submitted that ....
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....us by the learned representatives of both the sides. 16.7 In the case of United Motors India Ltd the Hon'ble Bombay High Court has observed that a provision made in respect of the impending liability that arose on account of the revision in the service conditions of its workman in the manner of a prudent businessman who knew that the service conditions would have to be better, the liability was rightly recognized as having accrued. In the case of Mahindra Ugine & Steel Co. Ltd. it was held by the Hon'ble Bombay High Court that the Tribunal having found on facts that conciliation proceedings were held after protracted negotiations in respect of fresh charter of demands of workers and that the assessee had agreed to pay a lump sum amount at a particular rate to the workers, it rightly allowed deduction of the provision for anticipated expenditure which was made on a reasonable basis. In the case of Bharat Earth Movers the Hon'ble Supreme Court has held that if a business liability has definitely arisen in the accounting year, deduction is allowable although the liability may have to be quantified and discharged at a future date. In the case of Swadeshi Cotton & Flour Mil....
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....deduction. (3) The liability which has fasten on to the assessee during the relevant previous year can be considered as the liability in presenti and as such deductible for income-tax purposes. (4) The liability which can be deducted for the income-tax purpose should have been ascertained during the relevant previous year which means that the same has become certain with no possibility of extinction or substantial variation. (5) The liability can be recognized as having accrued in the manner of a prudent businessman on the basis of specific knowledge which can lead to the estimation of such liability with a reasonable certainty. It should be possible for the assessee to anticipate the liability on a reasonable basis. (6) If a business liability has definitely arisen and become ascertainable in the accounting year, a deduction is allowable even though the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability and capability of estimating the same with a reasonable certainty though the actual quantification may not be possible'. 16.10 In the light of the above underlying principles emerging from the vario....
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....n'ble Bombay High Court in the cases of United Motors India Ltd. and Mahindra Ugine & Steel Co. Ltd. that the company was aware of this liability and as a prudent businessman a provision was rightly made in respect of the same during the previous year relevant to assessment year 1994-95. In this regard, we may observe that the amount of interim relief was agreed upon between the concerned parties only after the end of the relevant accounting year and the liability in respect of the same was also provided by the assessee on the basis of a letter which was received from CIL only after the end of the relevant accounting year. Although the assessee company provided for this liability on the basis of event occurring after the balance sheet date but before the finalisation of accounts in accordance with Accounting Standard (AS) 4 issued by the Institute of Chartered Accountants of India, it is a settled position of law that such accounting treatment given by the assessee company is not decisive or conclusive to determine a question of admissibility of a particular deduction for the purpose of Income tax and the same has to be decided In accordance with the relevant provisions of the ....
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....------------------- 20/Nag./2001 1994-95 17 10992.83 21/Nag./2001 1995-96 21 9021.00 --------------------------------------------------------------- 17.1 After considering the rival submissions and perusing the relevant material on record, it is observed that the learned CIT (Appeals) in the course of the appellate proceedings before him, found that the assessee company has claimed expenditure on account on interest payable to Coal India Ltd. to the tune of Rs. 13,283.45 lacs and Rs. 10.964.47 lacs for assessment years 1994-95 and 1995-96 respectively on the amount standing to the credit of CIL at the end of the corresponding accounting at Rs. 15,278.81 and Rs. 10,964.47 lacs only. He, therefore, called upon the assessee to explain this huge amount of interest debited in profit and loss account which was disproportionate to the principle amount o....
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....o A.23. From the perusal of the same, it however appears that neither the factum or quantum of amount advanced by CIL to the assessee company therein nor the utilization of the same for the business purpose was in dispute in that case and the interest was disallowed mainly because the exact nature of amount advanced by the CIL could not be proved by the assessee company before the authorities below. The Tribunal, however, found that the treatment given by the assessee company to half of the advanced amount being loan for the purpose of charging interest to be justifiable considering that the debt equity ratio of 1:1 has been finally approved. The Tribunal therefore, proceeded to allow the claim of the assessee company for deduction of the said interest. In the present case, the basis of disallowance, as mentioned above, appears to be altogether different and, therefore, we are of the view that the reliance placed by the learned counsel for the assessee on the aforesaid decision of the Tribunal is misplaced. 17.3 The learned counsel for the assessee has contended before us that the amount charged by CIL, being a business expenditure incurred wholly and exclusively for the purpose o....
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....ing documents in order to establish that the aforesaid conditions precedent for claiming deduction under section 36(1)(iii) have been complied by the assessee company. (1) Statement received from CIL showing total investment made in its subsidiary companies including the assessee company for allocation of interest. (2) Statement received from CIL showing allocation of interest between the subsidiary companies. (3) Statement received from CIL showing calculation of total interest. (4) Statement received from CIL showing total interest paid and recovered from subsidiary companies. (5) Annual accounts of M/s. Coal India Ltd. showing receipt of such interest income. The Learned Departmental Representative has contented before us that the above documents have been filed by the assessee for the first time before the Tribunal and the same were not furnished before the learned CIT (Appeals). In this regard, we find that this evidence goes to the root of the matter and the assessee appears to have not filed the same before the learned CIT (Appeals) in view of its heavy reliance on the legal submission. Moreover, we find that the learned CIT (Appeals) has taken the outstanding balance ....
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....o discharged its social obligation to the community in and around its area of operation. Considering that the said expenditure has been incurred by the assessee company mainly to fulfil its social obligation, the Assessing Officer was of the opinion that the same could not be treated as wholly and exclusively incurred for the purpose of its business. He, therefore, disallowed the same. The matter was carried before the learned CIT (Appeals) and it was contended on behalf of the assessee before him that the said expenditure has been incurred with a view to provide facility to its own workers in the form of better roads, better street lighting, better drinking water supply scheme etc. and the same, therefore, is an allowable expenditure under section 37. Reliance was also placed by the assessee on the decision of Hon'ble Supreme Court in the case of Empire Jute Mills Ltd. The learned CIT (Appeals), however, was of the opinion that there being no direct and immediate nexus between the said expenditure by the assessee company and its business, the disallowance made by the AO on this count deserves to be upheld keeping in view the decision of Hon'ble Supreme Court in the case of....
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....s expenditure, was an allowable expenditure. In support of his contention, he cited CIT v. Premier Cotton Spg. Mills Ltd. [1997] 223 ITR 440 (Ker.), Empire Jute Co. Ltd.'s case, Sarabhai M. Chemicals (P.) Ltd. v. CIT [1981] 127 ITR 74 (Guj.), CIT v. Rupsa Rice Mill [1976] 104 ITR 249 (Ori.), CIT v. T V Sundaram 186 ITR 276, CIT v. Panbari Tea Co. Ltd. [1985] 151 ITR 726 (Punj. & Har.) and Madras Auto Services (P.) Ltd.'s case. 18.3 The learned Departmental Representative, on the other hand, submitted that the impugned expenditure was incurred by the assessee company for the benefits of public at large and not for the benefit of its employees alone. According to her, such an expenditure may be regarded as philanthropic or humanitarian, but not the business expenditure for the purpose of income tax as there is no nexus between the business of the assessee and the concerned expenditure. Referring to the various decisions cited by the learned counsel for the assessee, she pointed out that in most of these cases, the expenditure was incurred by the assessee exclusively for the welfare of its employees whereas in the present case the expenditure has been incurred by the assessee....
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....lf is an important input for any type of business, more particularly for the business of the assessee company of mining operation and therefore, the expenditure incurred mainly for the welfare of the labour force has to be treated as incurred wholly and exclusively for the purpose of its business. 18.5 It is observed that the learned CIT (Appeals) has confirmed the disallowance made by the Assessing Officer on this count for lack of nexus between the said expenditure and the business of the assessee, relying heavily on the decision of Hon'ble Supreme Court in the case of Amalgamations (P.) Ltd. A perusal of the said judgment, however, reveals that the expenditure in that case was incurred by the assessee company on payment of managerial remuneration to the Directors of the subsidiary companies and considering that the assessee company was entitled only to the dividend from the subsidiary company as and when declared even without incurring such expenditure, the Hon'ble Apex Court held that such expenditure cannot be said to have a direct and immediate connection with the business of the assessee company and proceeded to disallow the same. in the present case, the assessee c....
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....was allowed as business expenditure. in the case of ITAT v. B. Hill & Co. (P.) Ltd. [1983] 142 ITR 185 (All.), the expenditure incurred on donations made to the schools with a view to provide educational facilities to the labourers and their children was considered to be for the purpose of facilitating the smooth running of assessee's business and, therefore, was held to be an admissible business expenditure by considerations of commercial expediency. As such considering all the facts of the case and the legal position emanating from the aforesaid judicial pronouncements, we are of the considered opinion that the community development expenditure incurred by the assessee company mainly for the welfare of its employees was an expenditure incurred wholly and exclusively for the purpose of its business by considerations of commercial expediency and the learned CIT (Appeals) was not justified in confirming the disallowance of the same made by the Assessing Officer. We, therefore, reverse his impugned order on this issue and direct the Assessing Officer to allow this expenditure. 19. The next issue relating to the disallowance of loss claimed by the assessee on account of irrecover....
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....explained by the CBDT in its Circular No. 551 dated 23-1-1990 and we find it relevant to reproduce para Nos. 6.6 and 6.7 of the said circular hereunder: "6.6 Amendments to sections 36(1)(vii) and 36(2) to rationalize provisions regarding allowability of bad debts. - The old provisions of clause (vii) of sub-section (1) read with sub-section (2) of the section laid down conditions necessary for allowability of bad debt. It was provided that the debt must be established to have become bad in the previous year. This led to enormous litigation on the question of allowability of bad debt in a particular year, because the bad debt was not necessarily allowed by the Assessing officer in the year in which the same had been written off on the ground that the debt was not established to have become bad in that year. In order to eliminate the disputes in the matter of determining the year in which a bad debt can be allowed and also to rationalize the provisions, the Amending Act, 1987 has amended clause (vii) of section (1) and clause (i) of sub section (2) of the section to provide that the claim for the bad debt will be allowed in the year in which such a bad debt has been written off as i....
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....he rival submissions and perusing the relevant material on record, it is observed that the disallowance has been made by the Revenue on this count for the reason that the relevant liability according to them arose during the year relevant to assessment year 1996-97 and not in assessment year 1995-96 as claimed by the assessee. This issue relating to the period of accrual of liability and corresponding deduction in respect of the same has already been discussed by us in detail in Para Nos. 16.7 and 16.8 of this order and the principles emerging from analysing the various judicial pronouncements have also been enumerated by us in Para No. 16.9. As regards the liability arising due to enhancement in tariff of power and fuel involved in the instant issue is concerned, it is observed that this liability was provided by the assessee on the basis of a bill received from the Madhya Pradesh Electricity Board dated 27-6-1995. It is thus clear that the said bill, on the basis of which the liability in fact had been ascertained and fastened on the assessee, was received by the assessee in the accounting year relevant to assessment year 1996-97. Obvious as it is, there was no material or basis ....
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....the impugned order of the learned CIT (Appeals) confirming the disallowance made by the Assessing Officer on this count. 21. The next issue relating to the disallowance of Rs. 23.84 lacs under section43B is raised by the assessee in para no. 8 of ITA No. 21/Nag./2001 for assessment year 1995-96. 21.1 After considering the rival submissions and perusing the relevant material on record, it is observed that against the liability on account of Provident Fund for the month of March 1995 amounting to Rs. 8,88,83,757, the assessee company was found to have paid Rs. 8,65,00,000 on 26-4-1995. The Assessing Officer, therefore, simply added back the balance amount of Rs. 23,83,757 under section 43B. Before the learned CIT (Appeals), it was submitted on behalf of the assessee company that excess payment of P.F. contribution for the month of February 1995 was made by it and after adjustment of the said excess amount, the balance amount in lump sum was paid on account of liability for the month of March 1995. The learned CIT (Appeals), however, confirmed the disallowance made by the Assessing Officer without making any discussion on the submission made by the assessee. 21.2 Before us, the lea....
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....nt that an excess amount of Rs. 44,54,248 was paid by the assessee on 28-3-1995 itself and as this surplus amount was available to the credit of the assessee, the same was duly adjusted against the liability for the month of March 1995 while making the payment of P.F. contribution for that month on 26-4-1995. It is thus amply clear that the entire amount of contribution to P.F. for the month of March 1995 was paid before the due date of 30-4-1995 and this being the position, we are of the opinion that the disallowance made by the Assessing Officer on this count under section 43B and confirmed by the learned CIT (Appeals) was not warranted. We, therefore, direct and Assessing Officer to delete the same. 22. The next issue relating to the disallowance of Rs. 110.86 lacs under section 43B is raised by the assessee in ground No. 9 of ITA No. 21 /Nag./ 2001 for assessment year 1995-96. 22.1 After considering the rival submissions and perusing the relevant material on record, it is observed that the disallowance of Rs. 110.86 lacs was made by the Assessing Officer as he found that the assessee company has actually paid a sum of Rs. 160.35 lacs only against the overall statutory dues of....
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....e Assessing Officer : "The wage structure and other conditions of service including the fringe benefits of the employees in the coal industry are covered under the recommendations of the Central Wage Capital for the coal mining industries and are accepted by the Government of India in the form of National Coal Wage Agreement. Such National Coal Wage Agreement remains in tenure up to the date specified in such agreement. Upon expiry of the period of National Coal Wage Agreement IV on 30th June, 1991 Joint Bipartite Committee for the Coal Industry (JBCCI-V) was to be constituted. However, the same could not be constituted particularly in view of the fact that the Hon'ble High Court of Judicature, Calcutta had granted an interim stay order vide GR No. 16108(W) of 1992 restraining the constituting of such committee. The interim stay order was later on vacated by the Hon'ble High Court of Judicature, Calcutta on 10th November, 1994 and on 11th November, 1994. JBCCI-V was duly constituted consisting of the representatives of the management and Unions / Workers. The character of demand submitted by the different Unions were integrated and after prolonged negotiations the repres....
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.... company became aware of a liability after the year and but before the accounts were finalized such liability was entitled for deduction for having rightly recognized such liability. Based on the above submission, we request your goodself to allow us the deduction of Rs. 6213 lacs provided in the accounts as Impact of MOU on NCWA V." 23.2 The Assessing Officer, however, found that the decision of learned CIT (Appeals), Raipur in assessee's own case for assessment year 1989-90 has been challenged by the Department by filing an appeal before the Tribunal. He also found that there are other aspects which militate against the assessee's claim for deduction on this count. According to him, the liability is allowable only in the year of accrual provided it is an ascertained liability and since the relevant MOU itself was arrived at on 28th and 29th April, 1995 in the assessee's case i.e., after the close of the relevant accounting year, there was no definite and ascertained liability fastened on the assessee during the accounting period relevant to assessment year 1995-96. He, therefore, came to the conclusion that the relevant liability had not definitely arisen in the rel....
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....nder consideration in the month of September 1995. He pointed out that a detailed submission on a similar issue has already been made by him while raising arguments on ground Nos. 15 and 16 raised in the appeal for assessment year 1994-95 in the light of Accounting Standard 4 as well as various judicial precedents and urged that the same may be taken into consideration while deciding this issue. He also contended that the case laws relied upon by the revenue authorities on this issue are distinguishable and as the impugned liability in the present case had crystallized before the finalisation of accounts for the relevant previous year, the assessee was entitled for deduction in respect of the same. He further contended that this issue is squarely covered in favour of the assessee by the order of this Bench in assessee's own case for assessment year 1988-89 wherein a similar provision made for fringe benefits @ 2096 of interim relief payable to non-executives of the company much after the close of the previous year has been allowed by the Tribunal. He also brought it to our notice that the reference application filed by the Department against the said order of the Tribunal has b....
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....April, 1995 became available to the assessee only after the end of the relevant previous year. 23.7 Before us, the learned counsel for the assessee has strongly relied on the decision of Hon'ble Bombay High Court in the case of United Motors (India) Ltd. In that case, the Board of Directors of the assessee company had taken a review of the revised wage terms which were under negotiations with the employees' union in the relevant accounting year and on the basis of the status of such negotiations, a provision for the corresponding liability was decided to be made in that accounting year itself. Considering these facts, the Hon'ble Bombay High Court observed that the event giving rise to the said liability was occurred in the relevant previous year itself and it was therefore held by their Lordships that the said liability having arisen during the relevant previous year, is deductible during the relevant year. The facts of the present case, however, appear to be different from that case inasmuch as the impugned liability has been provided by the assessee company on the basis of the Memorandum of Understanding reached only after the end of the relevant previous year. We, ....
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....the present case. As regards the accounting policy/treatment followed by the assessee, we have already observed in the preceding paras of this order that although the impugned liability was rightly provided for by the assessee in its financial accounts on the basis of event occurring after the end of the relevant accounting period but before the finalisation of the concerned accounts as per Accounting Standard (AS)-4 issued by the Institute of Chartered Accountants of India, such treatment is not conclusive for deciding the issue relating to a deduction under the Income-tax Act which has to be allowed as per the relevant provisions contained in the Act itself as well as the position propounded by the various judicial forum. As regards the period of accrual of liability, we have already observed, after taking into consideration all the facts and circumstances of the case, that the impugned liability had arisen and became an ascertained liability during the previous year relevant to assessment year 1996-97 when the MOU was finally signed by the concerned parties and this being the position, we find no infirmity in the impugned order of the learned CIT (Appeals) in upholding the actio....
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....ing heard to the assessee. 25. The next issue relating to the imposition of interest under section 234B amounting to Rs. 4525.30 lacs is raised by the assessee in ground No. 14 of ITA No. 21/Nag./2001 for assessment year 1995-96. 25.1 After considering the rival submissions and perusing the relevant material on record, it is observed that the learned CIT(Appeals) has upheld the action of the Assessing Officer in imposing interest under section 234B considering that a direction was given in the assessment order itself by the Assessing Officer for charging interest as per Law and amount of such interest was also specified in the demand notice issued under section 156 which formed part of the assessment order. In this regard, the learned counsel for the assessee has relied on the decision of Hon'ble Patna High Court in the case of Uday Mistanna Bhandar & Complex v. CIT [1996] 222 ITR 44 and has particularly referred to the following observations of their Lordships contained in the said order: "From the bare reading of section 156 it is clear that notice of demand claiming interest can be issued only when there is an order in the assessment levying interest. To use the expressio....
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....cs instead of an actual expenditure of Rs. 37,162.26 lacs debited by the assessee-company to the profit and loss account is raised by the assessee in ground No. 22 of ITA No. 21/Nag./2001 for assessment year 1995-96. 26.1 After considering the rival submissions and perusing the relevant material on record, it is observed that the claim of the assessee for deduction on account of contribution to CPRA has already been allowed by us in full vide para No. 8.10 of this order. Resultantly, this alternative ground raised by the assessee has become infructuous. Accordingly, the same is dismissed. 27. The next issue relating to the alternative claim of depreciation on the rehabilitation expenses of HEMM treated as capital expenditure is raised by the assessee in ground No. 3 of ITA No. 22/Nag./2001 for assessment year 1996-97. In this regard, we have already allowed deduction in respect of the said expenditure holding the same to be of revenue nature in para No. 7.12 of this order and consequently this ground relating to the alternative claim of the assessee for depreciation on such expenditure has become infructuous. Accordingly the same is dismissed. 28. The next issue relating to the ....
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.... in respect of any building used as a guest house. She also cited the following decisions in support of the Revenue's case : Raja Bahadur Motilal Poona Mills Ltd. v. CIT [1995] 212 ITR 175 (Bom.) "As per section 37(4)(i) of the Act no allowance shall be made in respect of any expenditure incurred by an assessee on maintenance of any residential accommodation in the nature of a guest house after 28th Feb., 1970. As regards the expenditure incurred for maintenance of the residential accommodation in the nature of a guest house for assessment years 1971-72 and 1972-73 the controversy is squarely covered by our judgment in CIT v. Ocean Carriers Pvt. Ltd. and in view thereof, the question is answered in the affirmative and in favour of the revenue for the assessment years 1971-72 and 1972-73." United Catalysts (India) Ltd. v. CIT[1998] 229 ITR 233 (Ker.) "A reading of sub-section (4) of section 37, as more clarified by sub-section (5), would clearly show that any accomodation by whatever name called, maintained, hired, reserved or arranged by the assessee for providing boarding or lodging to any person on tour or visit to the place at which such accommodation is situated, will b....
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.... opinion between the two Members on a similar issue, the matter was referred to Third Member who, after taking into consideration the provisions of sections 37(1), 37(3), 37(4) as well as sections 30 to 36, observed that the provisions of sections 37(3) and 37(4) override the provisions of section 37(1) and opined that such overriding has to be restricted to such item of expenditure that are exclusively dealt with by that section and not the other items of expenditure which are exclusively covered by sections 30 to 36. It was also observed by the learned Third Member in that case that the interpretation of the relevant provisions shows that the issue is quite ambiguous and is not capable of clear interpretation. The Tribunal in the said case also deliberated upon the two different views expressed by the Division Benches of Hon'ble Bombay High Court which was the jurisdictional High Court and even though the rule of precedent warranted following of the latter judgment which was in favour of the Revenue, found itself with no alternative but to choose the view that was favourable to the assessee resorting to the Supreme Court decision in the case of CIT v. Vegetable Products Ltd. ....
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....ujarat High Court in the case of CIT v. Gaekwar Mills Lid [1992] 193 ITR 734 and Hon'ble Madras High Court in the case of T. V. Sundaram Iyengar & Sons Ltd. v. CIT[2000] 244 ITR 133 have taken a different view while deciding this issue against the assessee, judicial propriety requires us to follow the view taken by the Hon'ble Bombay High Court in the case of Century Spg. & Mfg. Co. Ltd which is in favour of the assessee and respectfully following the same, we hold that the depreciation on the assets used in the guest house was allowable to the assessee company under section 32 and its claim for the same could not be denied under section 37(4). The impugned order of the learned CIT(Appeals) on this issue is, therefore, reversed and the Assessing Officer is directed to allow the claim of the assessee on this count. 29. The next issue relating to the disallowance of provision made for deterioration of coal stock is raised by the assessee in ground Nos. 9 and 10 of ITA No. 22/Nag./2001 for assessment year 1996-97. 29.1 The stock of coal is valued by the assessee-company after providing for deterioration in its value due to fire, abnormal stacking etc. Upto assessment year 19....
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....bmitted that the coal like all other chemicals, loses its quality and weight when exposed to nature for prolong period and because of its chemical characteristics, its quality as well as weight gets spoiled due to spontaneous heating. He submitted that a similar provision made for deterioration of stock value of coal has been allowed by this Bench in the case of M/s Western Coal fields Ltd. for assessment years 1978-79 to 1984-85 in ITA Nos. 163 to 167/Nag./86 and 576-577/Nag./88 vide its consolidated order dated 26-5-1992. He also submitted that the assessee-company has followed the changed method of providing for deterioration of stock in the subsequent years also and the same has also been accepted by the Assessing Officer. He, therefore, contended that the change in the method for valuing the stock being bona fide and the same having been followed by the assessee-company consistently in the subsequent years, there was no reason for the authorities below for not accepting the said change and in making disallowance on this count. In support of this contention, he cited the cases of Snow White Food Products Co. Ltd. v. CIT[1983] 141 ITR 861 (Cal.), Jaipur Taj Enterprises Ltd. v. I....
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....r deterioration in the value of closing stock was placed before the Board of Directors of holding company i.e., M/s. Coal India Ltd. in its meeting held on 29-5-1996 and its formal approval as extracted from the minutes of the said meeting (copy placed on page c.2 of assessee's paper book filed on 30-1-2002) is given below : "The board considered the proposal and on detailed deliberation accorded its approval to amend the existing Accounting Policy regarding provision for deterioration in Stock of Coal due to fire and longer period stocking be made to 10% of the value of the Closing Stock instead of 1.5% of the value of production followed at present. This modification/change in the Accounting Policy will be effective from the accounting year 1995-96." 29.6 From the perusal of the aforesaid approval, it is evident that the modification/change in the accounting policy relating to the making of a provision for deterioration in stock value was duly considered and deliberated upon by the Board of Directors of Coal India Ltd. and the said change was not only made applicable to the assessee-company but also to the other subsidiaries of Coal India Ltd. In these circumstances, the As....
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....se decisions stating that the assessee in the present case has not followed the new method in the subsequent year and the same has been changed immediately in assessment year 1996-97. When the learned counsel for the assessee pointed out that this submission made by the learned Departmental Representative is factually incorrect, the learned Departmental Representative was directed by the Bench to ascertain the correct factual position from the record available with the Department. In reply, she has admitted vide letter dated 14-2-2002 that the method adopted by the assessee-company in the year under consideration has been followed consistently in the succeeding years also and the change in the method, as submitted by her at the time of hearing, was reported by the Assessing Officer due to some misunderstanding of factual position. It is thus clear that the change in the method has been consistently followed by the assessee-company in the subsequent years also and as the same has also been held to be bona fide by us, we find no justification in the impugned order of the learned CIT (Appeals) upholding the action of the Assessing Officer in rejecting the same and consequently in maki....
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....ince the arrears of wages and salary were payable only in the month of January 1997. Before us, the learned counsel for the assessee has submitted that the liability on account of contribution to provident fund on arrears of wages was actually accrued on 31-3-1996 although the same was payable in the month of February 1997. He contended that what accrued on 31-3-1996 was a quantum liability assuming nomenclature of companies contribution to P.F., but the same was incorrectly classified as contribution to provident fund. After considering the facts of the case including the fact that nothing has been brought on record to establish that the liability towards P.F. contribution accrued during the previous year relevant to assessment year 1996-97, we find it difficult to agree with the contention of the learned counsel for the assessee. As a matter of fact, the finding given by the Assessing Officer that the said liability accrued only in the month of January 1997 when the arrears of wages and salary were actually paid has neither been disputed nor controverted by the learned counsel for the assessee before us and this being so, we find no reason to disturb the orders of the authorities....
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....6-97, the assessee challenged the levy of interest under section 234C stating that the tax payable as per the revised computation of income filed with the Assessing Officer was Nil and the assessee having paid the advance tax of Rs. 1 crore, no interest under section 234C was leviable. The learned CIT (Appeals), however, did not find the contention raised on behalf of the assessee before him in this regard to be acceptable observing that the levy of interest under section 234C is mandatory. 32.2 The learned counsel for the assessee submitted that the expenses claimed in the revised computation sheet filed before the Assessing Officer could not be claimed as deduction by filing a revised return because the due date for revising the return had already expired. He contended that the returned income of the assessee, however, filed a revised computation of income on 19-1-1999 before the Assessing Officer showing a Nil income and since the assessee company had paid an amount of Rs. I crore as advance tax for the year under consideration, interest under section 234C which is levied on the short fall of tax payable on the returned income and the amount of advance tax paid, was not leviabl....
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....argeable under section 234C. Before us the learned counsel for the assessee has contended that the assessment for immediately preceding year i.e., assessment year 1995-96 was completed by Assessing Officer disallowing certain deductions claimed by the assessee in that year as the same, according to him, were related to assessment year 1996-97. He has contended that by the time the said order was served on the assessee, the due date for filing the revised return had already expired and, therefore, the assessee could not file the revised return claiming deductions which had not been allowed by the Assessing Officer for the reason that the same related to assessment year 1996-97. The assessee, therefore, filed a revised computation of income before the Assessing Officer showing Nil income and the plea of the assessee is that the same be construed as the "returned income" for the purpose of levying of interest under section 234C. After considering the facts of the case and keeping in view very clear, unambiguous and specific provisions contained in section 234C, we find it difficult to accept this plea of the assessee. It is trite law that a taxing statute has to be strictly construed.....