TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 1032
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....ining and production of coal. The assessee has 10 coal mines as tabulated below: S. No Location of Mines Sanction date of Mine Year of Commencement of Production i JHINGUDRA 03/1965 1966-97 ii BINA 08/1974 1976-77 iii JAYANT 09/1974 1977-78 iv KAKRI 10//1980 1982-83 v AMLORI 04/1982 1990-91 vi DUDHICHUA 02/1984 1989-90 vii KHADIA 09/1985 1993-94 viii NIGAHI 11/1987 1990-91 ix BLOCK-B 07/2006 2007-08 x KRISHANSHILA 05/2006 2007-08 3. For the year under consideration, the company filed its return of total income on 26909.2012 returning an income of Rs. 4553,39,88,290/-. The aggregate value of sales out of the coal extracted/ produced from aforesaid ten mines aggregated to Rs. 7916.52 crores and the gross value of sale of coal aggregated to Rs. 10,176.94 crores. The coal extracted aggregated to 632.08 lac Tons Tons. Assessing Officer framed the assessment vide an order dated 9.3.2015 at total income of Rs. 6568.78 crores alia by making following disallowances out of the expenses incurred (The aggregate disallowances made were of Rs. 2495.07 lac) S.No. Particulars of addition/disallowante Amount (in crores) Returned Income Rs. ....
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....Hon 'ble Income Tax Appellate THbunal in the assessee's own case for the A. Y. 2010-11 were applicable to the findings recoded for the A. Y. 2011-12 4. That the learned Commissioner of Income Tax (Appeals) has, in his attempt to sustain the disallowance made by the Deputy Commissioner of Income Tax, held that the facts and circumstances of the instant case for the instant assessment year are different than to the facts and circumstances of preceding assessment years which is f incorrect and perverse. 5. That the learned Commissioner of Income Tax (Appeals) has further erred in holding that "there has been investigation of accounts when no such investigation of accounts took place in the preceding year." as aforesaid finding is not only factually incorrect but is highly arbitrary since there are no distinguishing features, facts or circumstances warranting such a finding. 6. That the findings and observations recorded in the order at page 78 that, "the A.O. has discovered a completely new fact in respect of the month wise OBR debited and coal production", is not only factually incorrect but is also based on misconceived facts, that the learned Commissioner Of Income Tax....
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....case is entirely different than the instant case. 11.1 That similarly the judgments relied upon by the learned Commissioner of Income Tax (Appeals) on his order in support of his conclusion is not only unjustified, arbitrary, misconceived but have absolutely no application whatsoever with the instant assessee. 11.2 That the learned Commissioner of Income Tax (Appeals) has also overlooked the principle laid down in the leading case of Quinn vs. Leathern [19011 AC 495 (HL)_which has subsequently been followed by the Supreme Court in numerous judgments, (see 188 ITR 402, Goodyear India Ltd. vs. State of Haryana). 12. That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate the concept of matching principle, the concept of revenue vs. * capital expenditure, the provisions contained in section 35E (2) of the Act and went wrong when he quotes selectively the said judgment in support of his conclusion and to burden the order to create the judicial phobia. 13. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, right from the initial assessment year till date, there has been no change in the method of accounting and the pr....
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....ppellate order which are highly misconceived and are based on extraneous consideration being not valid and sustainable in law, be held as unsustainable and the addition sustained be directed to be deleted and the appeal be allowed by directing that the amount sustained of Rs. 2466.35 crores be deleted." 6. The Ld. AR submitted that the consistent finding of the Tribunal has been that the expenditure incurred on removal of overburden in respect of mines which are revenue mines and are not development mines is revenue expenditure and cannot be held to be a capital expenditure. The expenditure has not been incurred once for all but is a recurring expenditure and has regularly been incurred in the course of the production of the coal and is not an expenditure incurred for the development of the mine. It was submitted that the issue of treating the OBR expenditure u/ s 35E of the Act was considered by the Tribunal in its order dated 11,05.2007 in the case of assessee itself in ITA No. 96 & 97 for the AY 1988-89 wherein it has been held by the Tribunal that mine development expenditure in respect of the mines where commercial production has not yet commenced is allowable u/ s 35E of the....
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....moval of overburden incurred. The assessee, however, for the purpose of reporting to the ministry of coal, groups various such expenses that had been incurred for the removal of the overburden. It was submitted that as per books of account, total expenditure incurred on removal of overburden is of Rs. 2963.29 crore, however since the depreciation claimed was as per the Companies Act, while computing the taxable income, the assessee has added back Rs. 378.09 crore in respect of Depreciation and Rs. 162.08 crore in respect of Provision and therefore, under the Act, after reducing the claim of depreciation, total amount claimed as OBR was of Rs. 2740.37 crores. 10. The Ld. AR further submitted that the assessee had been similarly incurring such expenditure year after year in respect of removal of overburden and it is submitted that such an expenditure is necessary for extracting coal and thereby earning the revenue from the production of coal and that but for the aforesaid expenditure, assessee would not have been able to earn revenue from the production of the coal. It was emphasized that till the mines became revenue mines, the assessee had not claimed such expenditure and the same....
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....ndia Limited, the holding company has six wholly owned coal producing subsidiary companies other than assessee and in all the other companies, the expenditure incurred on OBR has duly been allowed by the AO himself and in one subsidiary, wherein disallowance was made, has been allowed by the learned CIT(A). The Jud, AR submitted the details of such subsidiaries and treatment by the revenue in respect of claim of expenditure in respect of OBR through a chart which is reproduced as under- S.No. Name of Subsidiary Treatment of Actual OBR expenditure by AO Bharat Cooking Coal Ltd. Allowed ii. South Eastern Coalfields Limited Allowed Western Coalfields Limited Allowed iv. Eastern Coalfields Limited Allowed Central Coalfields Limited Allowed vi. Mahanadi Coalfields Limited Disallowed and allowed under section 35 E. However CIT(A) deleted the addition on the basis of Judgment of ITAT, Jabalpur 14. The Ld. CIT DR Shri Ravi Jain supported the orders of- the Assessing Officer and the Ld. CIT (A). 15. We have heard the rival submissions and perused the records. We concur with the submissions of the Ld. Senior Advocate Shri C.S. Aggarwal that the is....
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....evel of coal seam. In between Purewa top seam and Purewa bottom seam, shown on the left, there are layers of overburden which is required to be removed before the coal extraction can be done from the next coal seam .level) 19. Let us, at this stage, go back to the line of reasoning adopted by the Assessing Officer. She has justified the disallowance, inter alia, on the ground that, '_"'it is undeniable that removal of overburden is a prior necessary condition before removal of that "in any given unit, the condition of removing overburden first, before extraction of coal, shall always remain unaltered, and, unless the coal is exposed, profit earning process cannot be said to have taken place t'. Learned Commissioner has upheld this action by observing that "The appellant is having 1 1 projects of coal mining, which are contiguous to one another" and that 'Therefore, the OBR in project, being contiguous to others, cannot be treated as revenue merely because the process of coal mining has started in one of the projects". Quite clearly these observations show that, in the understanding of the authorities below, once overburden is removed so as to reach the coal seam t....
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.... and (c) the area becoming profit earning i.e. sale minus - entire expenditure on OBR and other expenses. This is a standard practice adopted all along and has been accepted as such. There is no good reason to disturb the well settled factual aspect which permeates from year to year and which has reached finality. It is indeed true that the principles of res judicata do not apply to the income tax assessments but, as is the settled position of law, once a factual aspect of the matter, which permeates different assessment years, has reached finality one way or the other, there is no good reason to disturb the same. We may, in this regard, refer to the following observations of Hon'ble Supreme Court, in the case of Radhasoami Satsang V. CIT (1992) 193 ITR 321/60 Taxman 248. XXXXX 26. We have also noted that while the Assessing Officer and the CIT(A) have impliedly held that a mine cannot be treated as revenue mine even after reaching 25% of rated capacity, even after two years from the point of time of touching the coal seam or even after revenues generated by the coal extraction exceed the expenses on overburden removal, whichever is earlier, they have not identified any criterio....
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....that, "with due deference to Hon'ble ITA T judgments, it is stated that the relevance of the OBR expenses can be examined in connection with section 35E which has neither been pleaded nor considered by Hon'ble bench" and the CIT(A) has stated that "Section 35E of the Act was introduced to deal with amortisation of expenditure on prospecting and developing of certain minerals and the very purpose of this section was to address the treatment to be siven for expenses relatable to development of a mine. In the instant, the A.O. has invoked the provisions of this sec, considerins the prevailins facts of the case". While the Assessing Officer thus requires the overburden removal expenses to be examined in connection with Section 35 E, the CIT(A) seems to proceed on the basis that Section 35E governs treatment of any expenses which are "relatable to development of a mine. XXXX 32. Coming back to the scope of Section 35 E, the concept of 'commercial production' is crucial to this section inasmuch as in the cases in which there cannot be commercial production, such as in the cases of prospecting simplictor, this section cannot have any application as was held by Hon'ble ....