TaxTMI 
TaxTMI 
2016 (8) TMI 1032
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.... of India. It is engaged in the business of mining 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 di....
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.... Of Income Tax (Appeals) has on totally arbitrary, irrelevant and extraneous consideration, sustained the disallowance and has made a valiant attempt to support his own view taken for the A. Y. 2011-12, even when he accepted that the findings recorded by the 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 obs....
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....eals) in the appellate order on the judgment of the Apex Court in the case of Madras Industrial Investment Corporation vs. CIT reported in 225 ITR 802 is wholly misconceived as the aforesaid judgment has absolutely no application to the facts of the instant case as facts and issues involved in the aforesaid 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 whe....
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....ndings recorded by the learned Commissioner of Income Tax (Appeals) are perverse and have been recorded without considering the submissions/ evidences/ material produced on record and hence such findings are vitiated and deserves to be deleted It is therefore prayed that the adverse findings recorded by the learned Commissioner Of Income Tax (Appeals) in his appellate 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 t....
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....roduction of coal assessee is incurring expenditure on the removal of overburden which is an expenditure that has been incurred year after year since the inception of the assessee company. It is relevant to state here that in the books of account of assessee, there is no head of expenditure i.e. "expenditure on removal of overburden", and on the contrary, the expenditure on removal 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 an....
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....n fact not disputed that the expenditure incurred is revenue expenditure but has opined that the same should have been spread over number of years. It was submitted that aforesaid approach of the learned CIT (A) is legally misconceived and that it is settled law that under the. Income Tax Act there is no concept of deferred, Revenue expenditure. 13. It was also submitted that Coal India 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 ....
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....ach the second or third coal seam, and because the same coal seam may be at different levels below the surface as it need not be parallel to the surface level all along. These aspects could be appreciated with the help of following diagrams: (this space has been intentionally left blank) (This diagram, as shown by the appellant during the hearing, shows different coal seams and intervening layers of overburden which are required to be removed before reaching the next level 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 take....
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....the learned CIT(A) has noted, in the extracts reproduced earlier in this order, until the point of time when coal production in a mine reaches 25% of rated capacity in a given mine, it is generally treated as a 'development mine' and thereafter, the 'revenue mine', It is also noted that for converting a development mine to a revenue mine, earliest of the following conditions is applied:- (a) achieving 25% rated capacity of mine; (b) two years from the point of time of reaching the coal seam; 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....
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....her overburden is required to be removed for continuing with coal extraction. Such overburden removal can only be in the process of extraction of coal and further coal protection is not possible unless that overburden is removed. Given the nature of expenses, in the light of the foregoing discussions, such an inference is clearly incorrect and unsustainable in law. 27. We have also noted that a lot of emphasis has been placed by the authorities below on the scope of Section 35 E The Assessing Officer has observed 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 overb....