TaxTMI 
TaxTMI 
2017 (4) TMI 1282
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....izure operation carried out by the revenue u/s 132 of the Income Tax Act, 1961 (Act) on 06.02.2012 in the residential and business premises of various persons belonging to the Rungta group of cases. The assessee being part of Rungta group was also subjected to a search u/s 132 of the Act at its office premises on 06.02.2012. Consequent to the search, a notice u/s 153A of the Act dated 04.02.2013 was issued to the Assessee by the Assessing Officer (AO) calling upon the assessee to furnish return of income for A.Y.2006-07 to 2011-12. As far as A.Y.2010-11 is concerned the assessee had already filed return of income u/s 139(1) of the Act on 31.10.2010 declaring total income of rs.173,89,34,527/-. The assessee filed a return in response to notice u/s 153A of the Act declaring the same income as was declared in the original return filed u/s 139(1) of the Act 4. In the course of assessment proceedings the AO noticed from a bunch of loose sheets seized in the course of search and marked as RH-31 which were receipts relating to payment of "Railway Punitive Charges". These charges totalled a sum of Rs. 33,02,103/- and formed part of the freight and transporting expenses debited in the pr....
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.... not in the nature of punishment for violation or infraction of law but by way of compensation for permitting to overload the goods beyond the permissible limit; moreover, there is no provision for criminal action or prosecution or confiscation of goods for overloading. It was argued that in fact overloading was very common which was permitted by the railways on additional freight termed as punitive charges. The Assessee also submitted that overloading of wagons was not a deliberate act on the part of the assessee but was basically due to the lack of infrastructural facility at the loading station. In case the Weighting Bridge was available at the loading station, then overloading of wagons could have been easily avoided. The Assessee also relied on Notification dated the 23rd December 2005 (to be published in Gazette of India, Part-II, Section 3(i) of the Gazette of India) issued by the Ministry of Railways wherein punitive charges for overloading has been defined in para 3 as : "Where the commodities are over-loaded in a 8-wheeled wagon, the railway administration shall recover punitive charges as provided in parts I, II and III of the situation 'A' & 'B'....
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....s that the issue raised by the revenue in this appeal is squarely covered in favour of the assessee by the decision of ITAT Mumbai bench in the case of Taurian Iron & Steel Co.(P)Ltd (supra). In the aforesaid decision the Hon'ble ITAT after considering the decision of the Hon'ble Supreme Court in the case of Prakash Cotton Mills P.Ltd. 201 ITR 684 (SC) and also the nature of railway punitive charges held that the payments made to the railways for overloading of the wagons is compensatory in nature and cannot be disallowed under Explanation to Section 37(1) of the Act. The other decisions relied upon by the assessee supports the plea of the assessee and where the decisions rendered in the context of overloading charges paid to railways. In view of the above we do not find any merits in ground no.1 raised by the revenue. Consequently the same is dismissed. 9. Ground No.2 raised by the revenue reads as follows :- "(2) In the facts and circumstances and law point of the case Ld. CIT(A) is erred in deleting the addition u/s 14A without going into the provision of IT Act and IT Rule." 10. As far as ground no. 2 raised by the revenue is concerned the facts are that th....
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....r as disallowance of other expenditure u/r 8D(2)(iii) of the Rules is concerned, the CIT(A) held that if there is no dividend income and no disallowance can be made under Rule 8D(2)(iii) of the Rules as laid down in the case of REI Agro Ltd. (supra). The CIT(A) directed the AO to verify the contention of the assessee and restrict the disallowance by considering only those investments which yielded tax free dividend during the previous year. The following are the observations of CIT(A) in this regard :- "The Ld AR has contended that the disallowance of Rs. 2,80,411/- and Rs. 2,25,000/- made under rule 8D(2)(ii) & (iii) are not justified on the facts of the case. I have perused the impugned order and also considered the submissions of the assessee and relevant judicial decisions. It was argued before me that the investments were made by the assessee out of its own fund and that the borrowed fund was utilized for the purposes of the business. I find from the balance sheet for the relevant year that the assessee had initial share capital & reserves of Rs. 304.63 crores and closing share capital & reserves of Rs. 418.06 crores whereas tax free investment was Rs. 4.5 crore....
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....nvestments which are likely to yield tax free income. As far as disallowance under Rule 8D(2)(iii) is concerned it is only the investment which yield dividend income that should be considered for the purpose of applying the formula as held by this tribunal in the case of REI Agro Ltd. (supra) which has since been affirmed by the Jurisdictional Calcutta High Court. In view of the above we find no merits in the ground raised by the revenue. Accordingly we dismiss ground no.2 raised by the revenue. 16. In the result IT(SS)A.No.36/Kol/2015 is dismissed. IT(SS)A.No.37/Kol/2015 (A.Y.2011-12) 17. Ground No.1 and 2 raised by the revenue read as follows :- "(1) In the facts and circumstances. of the case, Ld CIT(A) is erred in deleting the disallowance as the overloading charges is nothing but a penalty as per Provision of section 73 of the Indian Railway Act, 1989. " "(2) In the facts and circumstances and law point of the case Ld. CIT(A) is erred in deleting the addition u/s 14A without going into the provision of IT Act and IT Rule." 18. These grounds are identical to ground nos. 1 and 2 raised by the revenue in IT(SS)A.No.36/Kol/2015 for A.Y.2011-12. For th....
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....llowing the decision of ITAT in assessee's own case and also the decision rendered in the following other cases :- 1.Mysore Minerals vs ACIT ITA No. 679/Bang/2010, 350,351/Bang/2011, 680/Bang/2010 & 733/Bang/2010 2 ACIT vs Freegrade & Co. Ltd, ITA No. 934/K/2009 3 ACIT vsRungta sons (P) Ltd, ITA No. 933/K/2009 22. Aggrieved by the order of CIT(A) the revenue has preferred ground no.3 before the Tribunal. 23. At the time of hearing it was agreed by both the parties that the issue raised in ground no.3 has been decided in assessee's own case for A.Y.2006-07 and this tribunal had held as follows :- "12. The question before us is as to whether the payment being NPV made by the assessee for obtaining forest clearance for mining on the forest areal land under the Forest Conservation) Act, 1980 is allowable as revenue expenditure or not. It is relevant to state that Hon'ble Apex Court in the case of T.N. Godavaram Thirnmalpad (supra) has observed that forests are vital components to sustain life support system on the earth. Therefore, there is an absolute need to take all precautionary measures when forest lands are sought to be directed for nonfo....
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....e on revenue account, provided the expenditure does not acquire any capital asset. Payments made for removal of restriction, obstruction or disability may result in acquiring benefits to the business but that by itself would not acquire any capital asset". 13 We observe that by making this payment of NPV, no tangible asset come into existence. Further the said payment is a pre-condition to enable the assessee to carry on its mining activities and as such it is not a voluntary one. That payment was made on the basis of direction given by the Divisional Forest Officer working in the Ministry of Environment and Forests, Government of India. Since the said payment of NPV being a statutory requirement and has to be paid by the assessee to continue to carry on its mining activities, we are of the considered view that the said payment is wholly and exclusively for the purpose of carrying on its business. Hence, incurring of such expenses should be considered as having direct nexus with the business activities of the assessee. By making this payment of NPV, the assessee has not got any fresh right to mining, but the said payment has been made to overcome any restriction or obstruc....
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....e expenditure has been considered wholly and exclusively for the purpose of business and has got a direct connection with the business activity of the Company. It was held that since the assessee- company was following mercantile system of accounting and the provisions had been made on the basis of Office order, the same was rightly accounted for in the concerned year of accruing of the liability and it was held that the same was allowable as business expenditure under section 37(1) of the Act. Special Bench, ITAT, Kolkata in Peerless Securities Limited -vs.- Joint Commissioner of Income Tax [93 TTJ 325(SB)] held that if the advantage consists of merely in facilitating the assessee's trading operations or enabling the management and conduct of assessee's business to be carried on more efficiently or more profitability while leaving the fixed capital untouched, expenditure would be on revenue account, even though the advantage may endure for an indefinite future. Ahmedabad Bench, ITAT in Joint Commissioner of Income Tax -vs.- Dewerson Industries Limited [2005 TIOL 236 (AHD.)] held that payments of similar nature to Ministry of Forest and Environment, Government of Gujarat we....