TaxTMI 
TaxTMI 
2025 (4) TMI 1995
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appeal, the revenue has raised following grounds of appeal: "(i) Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was correct in holding that the under-loading charges are not penal in nature even though as per provisions of Indian Railway Act, 1989, the underloading charges are punitive charges. (ii) In the facts and circumstances of the case, whether the Ld. CIT(A) was correct in holding that the demurrage charges paid to Railways is not penal in nature and does not fall within the purview of explanation to Section 37(1)." 2. The facts of the case, in brief, are that, the assessee i.e. M/s Bharat Coking Coal Limited (BCCL) is an undertaking of Government of India. It is a subsidiary of Coal India Ltd. The assessee company is engaged in coal mining. Its collieries are scattered mainly in Dhanbad district in Jharkhand and in some part of West Bengal. The assessee company filed return of income declaring total income of Rs. 356,77,36,970/- for the A.Y. 2017-18. The assessment was completed under Section 143(3) of the Income Tax Act, 1961 (in short, the Act) on 24/12/2019 determining total income of Rs. 550,97,91,015/- by making f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee that these expenses have never been disallowed by the Assessing Officer in the case of BCCL in the past. 5. The Assessing Officer, however, was not convinced with the explanation offered by the assessee and disallowed a sum of Rs. 121,08,01,000/- under the head "under loading charges" under Section 37 of the Act and added back to the total income of the assessee on the ground that there is no need of such type of FSA to load the goods in wagons because transportation including loading and unloading is a responsibility of buyers and not a responsibility of sellers. Further, the BCCL is not directly involved with the railways for transportation of coal. Parties/purchasers are booking the wagons and the BCCL is only filing up the wagons with coal. Indirectly, the BCCL is paid penalty to the railways for running of partly filled wagons by the coal buyers which are not incidental to the business of BCCL. The BCCL is allowing rebates in the bills of the party as penalty for irrelevant work. Besides above, the BCCL has not taken any concrete steps to fill up the wagons fully and complete it on time. BCCL has no mechanism to stop this type of unwanted penalty and unnecessary e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ilways like overloading charges, hence at the very outset, these are not covered within the ambit of Explanation 1 of section 37(1) of the ACTF. The fact of incurrence of these expenses for the purpose of business is also not in doubt. Accordingly, we hold that these are allowable expenses as incurred for the purpose of business. Thus, grounds no. 5 and 6 of the assessee's appeal are accepted." 6.1.8 Further, vide is judgment dated 13.01.2016 in a consolidated order the Hon'ble Bombay High Court in ITA No. 3 of 2010, ITA No. 4 of 2010. ITA No. 73 of 2010, ITA No. 85 of 2010 and ITA no. 14 of 2015 has dismissed the appeal filed by the Department against the aforesaid orders of the Hon'ble ITA T. While dismissing the appeal, in para 4 of its judgment the Hon'ble High Court has observed as under: "We have perused the said paragraph. In that paragraph the ITAT has relied upon its earlier judgment in paragraph nos. 25 and 26. It is not in dispute that those judgments are today impugned before us in connected matters. The overloading charges or under loading charges are payable in terms of contract between the parties and it is not an offence. It is pure....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsistentlyduringthree(3)continuousmonths,ondueintimationfromthePurchasertothiseffect, the Seller undertakes to take remedial measures. 10.2 For Grade A, Grade B, Steel Grade I, Steel Grade II, Washery Grade-I, Washery Grade-II, Semi-coking Grade I. Semi-coking Grade II and washed coal; and idle freight for underloading below the stenciled carrying capacity, as shown on the wagon or carrying capacity based on the actual tare weight, as the case may be, shall be borne by the Seller. For all other Grades of Coal, any idle freight for under-loading below the stenciled carrying capacity, as shown on the wagon or carrying capacity based on the actual tare weight, as the case may be, plus two (2) tonnes shall be borne by the Seller. 10.3 Idle freight resulting from under loading of wagon, as per Clause 10.2. shall be adjusted in the bills. Idle freight shall be reckoned as: (i) For Grade A. Grade B, Steel Grade-I. Steel Grade II, Washery Grade I, Washery Grade- II, Semi-coking Grade I, Semi-coking Grade II and washed Coal, the difference between the freight charges applicable for the stencilled carrying capacity, as Shown on the wagon or carrying capacity based ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llowable expenses as incurred for the purpose of business. Thus, ground Nos. 5 and 6 of assessee's appeal are accepted." 10. We have considered the facts of the case, rival submissions and the decisions of the Hon'ble ITAT, Nagpur Bench and also the decision of Hon'ble High Courts on this issue. It is found that the Hon'ble ITAT, Nagpur Bench has already decided this issue of "under-loading charges" in the case of assessee's sister concern i.e. M/s Western Coalfields Ltd. We have also examined Clause-10 of Coal Supply Agreement and it is found that this payment of under-loading charges is part of that agreement and the expenses is being borne by the assessee through book adjustments. We have also perused the order of Hon'ble ITAT Nagpur Bench in the case of sister concern of assessee i.e. Western Coalfields Ltd. and we find that the Hon'ble Nagpur Bench has already decided these issues in favour of the assessee and the additions made by the Assessing Officer were deleted. Thus, considering the specific clause-10 of the Coal Supply Agreement and the decisions of the Hon'ble ITAT, Nagpur Bench, Nagpur, there is no reason for this Bench to differ wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ltd. vs. Commissioner of Income-tax (1984) 19 Taxman 447 (Delhi). The Hon'ble High Court in para 9 of its judgment has observed as under: 9. Question No. 3 is common for the assessment years 1963-64 and 1964-65 and relates to the deductibility of the demurrage paid by the assessed-company to the Railways. For the assessment year 1963-64, the assessed had claimed a sum of Ps. 5.030 and for 196465 the assessed claimed Rs. 1,244 as demurrage paid to the Railways for not lifting the goods consigned to it in time. The Income-tax Officer disallowed the claim which was, however, allowed by the Appellate Assistant Commissioner in appeal. On appeal by the Department. the Tribunal held the claim of the assessed as correct and observed that the claim was allowed in earlier years as well. In doing so. the Tribunal applied its decision in relation to the allowability of the interest on the arrears of cess. On the other hand, it was contended by the Department before the Tribunal that this expenditure was of the same Mahalaxmi Sugar Mills Company vs Commissioner of Income-Tax on 29 May, 1984 Indian Kanoonhttp://indiankanoon.org/doc/155561/3 nature as interest paid by the assessed on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egligence of the appellant is also not sustainable in the eyes of law. 6.2.5 In view of the above discussion and also the judicial precedents cited by the appellant it is held that the demurrage charges paid by the appellant was on account of its contractual obligations with the railways for transportation and the expenditure incurred under the head was exclusively for the purpose of business. Therefore, the expenses claimed by the Appellant of Rs. 20,36,75,000/- is allowable expenditure u/s 37(1) of the Income Tax Act. Accordingly. the disallowance made by the AO of Rs. 20,36,75,000/- under the head demurrage charges is hereby deleted. 6.2.7 Thus the second ground of appeal is allowed." 14. Aggrieved by the order of ld. CIT(A), the revenue has filed this appeal before this Tribunal. 15. During the course of hearing before us, the revised grounds of appeal were filed by the revenue as under: "(i) Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was correct in holding that the under-loading charges are not penal in nature even though as per provisions of Indian Railway Act, 1989, the under-loading charges are punitive ....