TaxTMI 
TaxTMI 
2018 (12) TMI 904
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....w the ld. CIT(A) was justified in allowing deduction of Rs. 3,01,47,000/- in respect of provision for Mines Closure Expenses. (iii) Whether on the facts in the circumstances of the case and in law the ld. CIT(A) was justified in holding that receipts of Rs. 2,92,48,044/- from sale of Carbon Emission Certifications are capital in nature." ITA. No. 47/JP/2018 "(1) The ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 1,22,76,496/- out of rural development expenses. (2) The ld. CIT(A) has erred on facts and in law in confirming the action of AO in disallowing the claim of amortization of mining land of Rs. 3,97,32,278/- and leasehold land of Rs. 8,18,248/- aggregating to Rs. 4,05,50,526/- by treating it as capital expenditure. (2.1) The ld. CIT(A) has erred on facts and in law in confirming the above disallowance on the basis of findings of Hon'ble ITAT in assessee's own case for AY 2007-08 but at the same time not allowing the benefit of treating such expenditure as capital expenditure as directed by Hon'ble ITAT. (3) The ld. CIT(A) has erred on facts and in law in upholding the action of AO in not all....
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....he case of the appellant, but it was decided by Hon'ble ITAT Bench 'A' Jaipur in ITA No. 783/JP/2009 & 740/JP/2009 in AY 2006-07 through order dated 31.03.2010 in favour of the appellant, where in para 15 Hon'ble Tribunal relied upon its decision dated 22.05.2009 in case of Rajasthan State Seeds Corporation Ltd, wherein relying upon Hon'ble Rajasthan High Court decisions in the case of CIT Vs. Rajasthan Spinning and Weaving Mills Ltd. 274 ITR 465 and CIT vs. Shri Rajasthan Syntex Ltd. 221 CTR 410 held that the contribution made by the assessee to a Public Welfare Fund which is connected or related with his business is an allowable deduction u/s 37 as it was provided for the benefit of the employees. Hon'ble Tribunal distinguished the decision of Hon'ble Rajasthan High Court in the case of CIT Vs. Jodhpur Co-operative Marketing Society 275 ITR 372 (Raj) stating that in that case the amount was set apart for the shareholders of the society whereas in the present case amount was provided for the benefit of the employees and the contribution made to State Renewal Fund was found allowable u/s 37(1). Respectfully following the decision of ITAT in appellant's own case, addition made by th....
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.... Mines Closure Expenses. 7. At the time of hearing, both the parties fairly submitted that the issue is covered by the decision of Co-ordinate Bench in assessee's own case for AY 2011-12 in ITA No. 256 and 298/JP/2015 dated 30.05.2017 wherein it was held as under:- "70. Ground no. 4 is confirming the action of the AO disallowed the claim of deduction of Rs. 4,69,61,000/- in respect of mine closure expenses made in course of assessment proceedings. The Ld. Counsel for the assessee reiterated the submission as made in the written submissions. The Ld. Counsel for the assessee submitted that as per this guidelines the assessee was fastened a liability of Rs. 4,69,61,000/- such liability which is an ascertained liability is allowable under the mercantile system of accounting followed by the assessee. For allowability of claim of expenditure, there is no requirement that it should be debited in the books of accounts for this proposition the Ld. Counsel for the assesssee relied upon the judgment of the Hon'ble Supreme Court rendered in the case of Satluj Cotton Mills vs CIT 116 ITR 1. He submitted that the Tribunal in assessee's own case pertaining to the AY 2010-11 h....
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....der u/s 143(3). Copy of Income Tax Return Acknowledgement, computation of total income and notes to the computation are enclosed for the ready reference." I have gone through the claim made by the assessee in respect of towards proportionate mines closure expenses for the financial year 2009-10 amounting to Rs. 2,49,04,000/-. As the assessee itself mentioned in his reply that the expenditure has not been debited in the books of accounts for the assessment year under consideration therefore no question of its allowability arises. Even otherwise, legally also the claim of the assessee is not valid in view of the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT 284 ITR 323, that claim of deduction not made in the return cannot be entertained by AO otherwise than by filing revised return." "6.1 Regarding issue no. 5, it is not reflected in the books of accounts without taking closure of a mining is a statutory liability and the same is for the subsequent year reflected, therefore, in view of the decision rendered by the Tribunal, we are of the opinion that the tribunal has not committed any error." 9. Undisputedly, there are no changes i....
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....bility of the assessee. The assessee wants to claim these expenses on the basis of social cause or general public good. The expenditure incurred is not with the motive to bring profit or monetary advantage to the company. Accordingly, he disallowed the claim of rural development expenses of Rs. 1,22,76,496/-. The Ld. CIT(A) after relying on the decision of Tribunal in assessee's own case for AY 2007-08 in ITA No.253/JP/15 has confirmed the said disallowance. 15. During the course of hearing, the ld. AR submitted that the AO has accepted the nature of expenses incurred under this head and the fact that the same has actually been incurred. However, he is of the view that the motive of incurring these expenses is not solely for promoting the business but also the social cause. It is submitted that expenditure on rural development relates to various expenses like expenses on tubewell, payment made to govt. upper primary school for various educational facilities, payment to District Collector for dessert festival, construction of road, construction of public rest shelter at bus stand, contribution to Gram Panchayat, payment made for maintenance of park, supply of drinking water, etc.....
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....t was further submitted that the AO has observed the cases relied above are not applicable in the present case as in these cases expenses related to the direct business expediency of the assessee. However, he has failed to point out that how the various expenditure incurred by the assessee in the area where it is operating its mines is not related to the business expediency of the assessee. As against this, the cases relied by him are those where there was no business expediency involved and therefore they were disallowed. The nature of expenses incurred by the assessee is not of the nature referred in the cases relied by the AO. In these facts the expenditure incurred under the head rural development expenses is allowable u/s 37(1). 19. It was further submitted that in AY 2007-08, the Ld. CIT(A) held that these expenditure are on corporate social responsibility which are not incurred wholly & exclusively for the purpose of business. The Tribunal in ITA No.253/JP/15 for AY 2007-08 dt. 03.05.2017 at Para 8.3 of the order confirmed the findings of Ld. CIT(A) by holding that assesse has not rebutted the finding given by Ld. CIT(A) that the amount was not expended wholly & exclusive....
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....ities where children of its employees/workers are also stated to be studying. Further, expenditure has been incurred on construction of public rest shelter at bus stand at vicinity of the mining area and which is also been used by the workers of the assessee. Similarly, payment have been made to Gram Panchayat for tubewell and supply of drinking water in nearby villages and its workers are staying in these places and they are also benefitted. It has been contended by the ld. AR that unlike the previous year, where the necessary details could not be produced by the assessee in support of its claim, for the year under consideration, the necessary details are available on record and our reference was drawn to copy of the ledger account of Rural Development Expenses of various units available at assessee's paper book 4 to 11. It was submitted that all the expenses have been incurred at close vicinity of its different mining area where the assessee business activities are being undertaken and its employees/workers are equally benefited by the incurrence by such expenditure besides the local people/villagers residing in those areas. It was further submitted that these expenses such as....
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....ce of such expenditure, the assessee has established the necessary nexus of such expenditure for the purpose of smooth running of its business operation and such expenditure should be held as allowable deduction. In the result, we delete the addition made by the Assessing Officer under the head of Rural Development Expenses and ground so taken by the assessee is allowed. 22. In Ground No. 2, the assessee has challenged the action of the ld. CIT(A) in confirming the disallowance of amortization of mining land of Rs. 3,97,32,278/- and leasehold land of Rs. 8,18,248/- by treating it as capital expenditure. Further, the assessee has also raised a ground that the above disallowance has been made on the basis of the findings of the Co-ordinate Bench in assessee's own case for AY 2007-08 but at the same time not allowing the benefit of treating such expenditure as capital expenditure as directed by the Tribunal. 23. Briefly stated, the facts of the case are that during the course of assessment proceedings, the AO observed that claim of amortization of mining land is not eligible u/s 35D(2). Further, the assessee could not justify its allocation in the year under consideration to cla....
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....ow the claim of depreciation u/s 32(1)(ii) of the Act. 25. The Hon'ble Rajasthan High Court in its order in DB ITA No.146/2016 dt. 13.12.2017 while admitting the appeal has framed the substantial question of law as under: "(ii) Whether on the facts and circumstances of the case, the licence to use the land for mining is covered by the definition of intangible assets u/s 2(11) of the Act entitling depreciation allowance u/s 32(1)(ii) of the Act." And thereafter, at Para 13 to 13.2 of its judgement, the Hon'ble High Court has held as under: "13. However, on the second issue, on a close scrutiny of Sub section 32(ii) of the Income Tax Act which reads as under:- Section 32, (1) In respect of depreciation of- (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1988. 13.1 In our consideration opinion the rights which are given to the assessee are of commerce rights which are akin to license for mining. 13.2 In that view of the matter, the contention of the assessee regarding dep....
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.... in this case at Para 4 has held as under:- "4. The decision in question is that the power of the Tribunal under s. 254 of the IT Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the AO to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Tribunal under s. 254 of the IT Act, 1961. There shall be no order as to costs." Thus, the Hon'ble Supreme Court held that AO cannot entertain a claim of deduction otherwise than by way of filing revised return of income but at the same time held that this does not impugned on the power of Tribunal u/s 254. In that case, the Ld. CIT(A) has allowed the claim of assessee but the Tribunal upheld the order of AO. In these facts, it was held that Tribunal has power to allow a claim even if not raised before the AO provided the facts are available on reco....
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....e return originally filed by the assessee on 28.11.2014 was within such extended period, interest u/s 234A was not chargeable. 35. In this regard, we refer to the order issued by the CBDT u/s 119 dated 26th September, 2014 which reads as under:- "Section 44AB of the Income-tax Act, 1961 ('the Act') read with rule 6G of the Income-tax Rules, 1962 ('the Rules') requires certain person to file tax audit report in Form No.3CA/Form No.3CB along with prescribed particulars in Form No.3CD. Vide Notification No. 33/2014 dated 25th July, 2014, the forms for filing tax audit, report have been revised. As per section 44AB of the Act, the tax audit report has to be obtained and furnished electronically by 30th November of the Assessment year in case of an assessee who is required to furnish report under section 92E of the Act and 30th September of the Assessment year in case of other assessees. 2. In view of the representations received by the Central Board of Direct Taxes (`the Board'), the due date for obtaining and furnishing of tax audit report under section 44A13 of the Act for assessment year 2014-15 in respect of assessees who are not required to furnish report ....
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....rd to modify the order under section 119 of the Act dated 20.08.2014 by extending the due date for furnishing the return of income to 30th November, 2014. It has also been further stated in the said order that it would be open for the Board to qualify such relaxation by extending the due date for all purposes, except for the purpose of Explanation 1 to section 234A of the Act. 6. In compliance to the judgment of High Court of Gujarat and after considering the representations made for extension of due date for furnishing of return of income in compliance with the directions of the other High Courts, the Board, in exercise of power conferred by section 119 of the Act, hereby extends, subject to para 7 below, the 'due-date' for furnishing return of income from 30th September, 2014 to 30th November, 2014 for the assessment year 2014-15 for all purposes of the Act, in case of an assessee, who, (i) is required to file his return of income by 30th September, 2014 as per clause (a) of Explanation 2 to sub-section (1) of section 139 of the Income-tax Act, 1961, and (ii) is also required to get his accounts audited under section 44AB of the Act or is a working partner of a f....
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....by way of compensation to compensate the revenue in order to avoid it from being deprived of the payment of tax on the due date. The High Court also held that interest would be payable in a case where tax has not been deposited prior to the due date of filing of the income-tax return. 4. The revenue has challenged the aforesaid decision by filing a special leave petition before this court wherein leave was granted on 20-1-2003. 5. Having heard counsel on both sides, we entirely agree with the finding recorded by the High Court as also the interpretation of section 234A of the Act as it stood at the relevant time. 6. Since the tax due had already been paid which was not less than the tax payable on the returned income which was accepted, the question of levy of interest does not arise. Thus, we find no merit in this appeal and the same is dismissed." 37. Following the Supreme Court decision, the CBDT has come out with a Circular No. 2/2015 [F.NO.385/03/2015-IT(B)] dated 10-2-2015 which reads as under: "Interest under section 234A of the Income-tax Act, 1961 (hereinafter the Act) is charged in case of default in furnishing return of income by an....