Income Tax Appellate Tribunal - Hyderabad
Acit, Circle-16(1), Hyderabad, ... vs National Mineral Development ... on 9 May, 2017
ITA No 148 of 2017 NMDC Ltd Hyderabad
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ' B ' Bench, Hyderabad
Before Smt. P. Madhavi Devi, Judicial Member
AND
Shri B. Ramakotaiah, Accountant Member
ITA No.148/Hyd/2017
(Assessment Year: 2012-13)
Asstt. Commissioner of M/s. National Mineral
Income Tax, Circle 16(1) Vs Development Corpn. Ltd
Hyderabad Hyderabad
PAN: AAACN 7325 A
For Revenue : Smt. G. Aparna Rao, DR
For Assessee : Shri Laxmi Niwas Sharma
Date of Hearing: 04.05.2017
Date of Pronouncement: 09.05.2017
ORDER
Per Smt. P. Madhavi Devi, J.M.
This is Revenue's appeal for the A.Y 2012-13. In this appeal, the Revenue is aggrieved by the order of the CIT (A)-4 dated 21.11.2016. The Revenue has raised the following grounds of appeal:
"1. The Ld. CIT(A), erred in deleting disallowance on account of mine closure obligation.
2. The Ld. CIT(A), erred in holding that mine closure obligation is an ascertained liability and allowable.
3. The Ld. CIT(A), erred in allowing the depreciation on lease hold land treating the same as intangible asset.Page 1 of 9
ITA No 148 of 2017 NMDC Ltd Hyderabad
4. The Ld. CIT(A), erred in allowing the claim of expenditure towards Corporate Social responsibility.
5. The appellant prays that the order of the CIT(A)-4, Hyderabad, on the above grounds be set aside and that of the Assessing Officer be restored.
6. The appellant craves leave to amend or alter any grounds or add a new ground, which may be necessary".
2. At the time of hearing, the learned Counsel for the assessee submitted that these issues had arisen in the assessee's own case in the earlier A.Ys and the issues had travelled up to the Income Tax Appellate Tribunal wherein relief has been granted to the assessee. He submitted that the CIT (A) has only followed the observations of the Income Tax Appellate Tribunal for giving relief to the assessee and therefore, the order of the CIT (A) should be sustained.
3. The learned DR supported the orders of the AO and submitted that the issues are now pending adjudication before the Hon'ble High Court of Telangana & Andhra Pradesh.
4. Having regard to the rival contentions and the material on record, we find that the assessee, a public sector undertaking, engaged in the mining of Iron ore, Diamonds, Wind Power Generation and sale, filed its return of income for the A.Y 2012-13 on 24.09.2012. During the assessment proceedings u/s 143(3) of the Act, the AO made the following disallowances:
Page 2 of 9ITA No 148 of 2017 NMDC Ltd Hyderabad i. Disallowance of mine closure Rs.9,12,00,000 obligation ii. Disallowance of depreciation on Rs.14,19,31,410 intangible assets iii. Demurrages on shipment charges Rs.65,25,000 iv. Disallowance of expenses on account Rs.63,32,00,000 of Corporate Social Responsibility v. Disallowance of additional Rs.17,40,11,599 depreciation wrongly claimed vi. Disallowance u/s 40(a)(ia) for non Rs. 7,64,20,400 deduction of tax on commission paid vii. Disallowance u/s 35(2AB) Rs. 1,89,32,004
5. Aggrieved by the disallowances made by the AO, the assessee filed an appeal before the CIT (A) who granted relief to the assessee by following the orders of the Tribunal in the assessee's own case for the earlier A.Ys.
6. As regards Ground No.1 & 2 is concerned, we find that the Tribunal for the A.Y 2009-10 in ITA No.287/Hyd/2013 dated 18.7.2014 has considered this issue at length and has held as under:
"19. The next effective ground of the assessee in this appeal relates to addition of Rs.15,38,26,817 made by the Assessing Officer and sustained by the CIT(A) on account of mine closure obligation.
20. We heard both sides and perused the orders of the Revenue authorities on this issue and other material available on record. It has been brought to our notice by the learned counsel for the assessee, which has not been controverted by the learned Departmental Representative, that this issue is covered by the decisions of the Tribunal in assessee's own cases dated 28.2.2014 for assessment year 2008-09 in ITA No.714/Hyd/2012 and dated 9.5.2014 for assessment year 2010-11 in ITA No.1795/Hyd/2013. We find that the coordinate benches of this Tribunal, vide Paras 9 and 9.1 of its order dated 28.2.2014 for assessment year 2008-09, cited supra, decided the issue in the following manner:
Page 3 of 9ITA No 148 of 2017 NMDC Ltd Hyderabad "9. We have heard the arguments of both the parties, perused the record and have gone through the orders of the authorities below as well as the decisions cited. In AY 2006-07, the coordinate bench in assessee's own case (supra), held as follows:
"11. We have heard both the parties, perused the record and gone through the orders of the authorities below. It is observed that the basis of calculation for the relevant AY 2006-07 for Rs. 71.18 crores was submitted during the original assessment and accepted by the AO. The detailed calculation of Rs. 21.31 crores charged to P&L A/c (on the basis of Rs. 71.18 crores) was also enclosed and produced before the CIT. Hence, the CIT is wrong in his observation that the estimate of Rs. 21.31 crore is excessively on a higher side and absolutely no realistic or rational basis for such calculation.
12. The CIT is not correct in invoking the provisions of section 263 as we find that the issue is debatable and when two views are possible the AO has taken one view. The Apex Court in the case of Malabar Industrial Co. Ltd. Vs. CIT reported in 243 ITR 83 as well as CIT Vs. Max India Ltd. reported in 295 ITR 282 has held that when there are two views possible and the AO has taken one view, the order of the AO cannot be considered as erroneous and hence the CIT cannot exercise revisional power u/s 263. As pointed out above, the provisions for an accrued existing liability, even though, the actual expenditure may take place at a later date, is an allowable deduction and the CIT erred in treating it as an unascertained liability. Therefore, we set aside the order of the CIT passed u/s 263 and the order of the AO is restored."
9.1 The above decision relied upon by the AR of the assessee, though, it was delivered in assessee's own case for AY 2006-07 cannot be applied to the facts of the case as that order was delivered by the Tribunal in connection with the order passed u/s 263. The order passed u/s 263 read with section 143(3) and the order passed u/s 143(3) read with section 251 are standing on different footing. The scope of section 263 is not par with the provisions of section 251 of the Act. Being so, we cannot borrow support from the order of the Tribunal passed in ITA No. 991/Hyd/2011 for AY 2006-07, on which reliance placed by the assessee's counsel. In the present case, there is a categorical finding given by the CIT(A) that there are certain mines not yet commenced. On that mine closure obligation works out to Rs. 4,98,058/- cannot be allowed. Further, mines at Kumaraswamy and Lalpur where there is no production, being so, no obligation is allowable. Further, assessee has not given year-wise break- up. Being so, the CIT(A) directed the AO to ascertain the account of year-wise mining, which has been done from the remaining mines and allow mine closure obligation to the extent mining done corresponding to the current year. He further gave a direction to the AO if the assessee fails to provide such data, then, pro rata h as to be applied. Thus, the CIT(A) has given a categorical finding in Paras 4.3 & 4.4 of his order. Therefore, we do not find any infirmity on that p art of Page 4 of 9 ITA No 148 of 2017 NMDC Ltd Hyderabad the order and accordingly, we confirm the same. This ground raised by the assessee is dismissed".
Following the above decision of the Tribunal dated 28.2.2014, coordinate bench of this Tribunal, vide Paras 47 and 48 of its order dated 9.5.2014 for the assessment year 2010-11 in ITA No.1795/Hyd/2013, though held that mine closure obligation is not a contingent liability, but an ascertained liability, restored the matter to the file of the Assessing Officer, for recomputing the disallowance, in the following manner-
"48. Respectfully following the above decision, we hold that mine closure obligation is not a contingent liability but ascertain liability. However, it has to be verified that whether assessee has made the claim on the mines which are in working condition which are being operated or not. If the assessee has made the claim on mines which have not started operations, the same cannot be allowed. As rightly held by the CIT(A) in A.Y. 2008-09, ascertainability of liability is to be ascertained year-wise. Therefore, to that extent, following the Coordinate Bench decision, we direct the assessee to furnish the relevant data to the A.O. towards the mines closure obligation and A.O. is directed to verify and allow the amount accordingly. Subject to the above observations, the ground No.2 is considered as allowed for statistical purposes."
21. In this view of the matter, following the consistent view taken by the Tribunal in assessee's own cases for other years noted above, we hold that the mine closure obligation is not a contingent liability but an ascertained liability. Since the quantum of such ascertained liability has to be determined year-wise, as observed in the order for assessment year 2010-11, extracted above, we direct the assessee to furnish the relevant data to the Assessing Officer towards mines closure obligation. The Assessing Officer shall verify such data and recompute the disallowance, if any, warranted, in accordance with law and after giving reasonable opportunity of hearing to the assessee. Assessee's grounds on this issue are treated as allowed for statistical purposes".
7. Respectfully following the same, we reject the grounds of appeal No. 1 & 2.
8. As regards Ground of appeal No.3, we find that the Tribunal in the assessee's own case for the A.Y 2009-10 has considered this issue at length and held as under:
Page 5 of 9ITA No 148 of 2017 NMDC Ltd Hyderabad "22. The next effective ground of the assessee in this appeal relates to addition of Rs.10,66,56,599 made by the Assessing Officer and sustained by the CIT(A), by disallowance of assessee's claim for depreciation on lease hold land.
23. We heard both sides and perused the orders of the Revenue authorities on this issue and other material available on record. It has been brought to our notice by the learned counsel for the assessee, which has not been controverted by the learned Departmental Representative, that this issue is covered by the decisions of the Tribunal in assessee's own cases dated 28.2.2014 for assessment year 2008-09 in ITA No.714/Hyd/2012 and dated 9.5.2014 for assessment year 2010-11 in ITA No.1795/Hyd/2013. We find that the coordinate bench of this Tribunal, vide para 22 and 22.1 of its order of this Tribunal dated 28.2.2014 for assessment year 2008-09, cited supra, decided the issue in favour of the assessee in the following manner;
"22. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the M/s. National Mineral Development Corporation Limited, Hyderabad authorities below. Similar came up for consideration before the coordinate bench of ITAT, Cuttack in case East India Minerals Ltd. Vs. JCIT in ITA No. 224/CTK/2012, vide its order dated 25/06/2012, on which reliance placed by the assessee, wherein it has been held as follows:
"7. We have heard the rival contentions of the parties and perused the material available on record. Considering the facts and circumstances of the case, we uphold the contention of the learned Counsel for the assessee for the simple reason that the denial of claim of depreciation has been made on misinterpretation of law and the applicability thereof. Explanation to Section 32(1)(ii) leans in favour of the assessee to the extent that it is the actual action of put to use which entitles the assessee to claim depreciation. A straight line method of claiming the writing off of lease hold rights for the period of lease cannot be denied to the assessee for the simple reason it being intangible asset has been written off which pertains to land being a intangible asset. It is nobody's case that the land either belonged to the lessee or to the Government. This simply indicates that a depletion of the land against the payment of premium it was leased has to be claimed after capitalization thereof by the assessee which is for the purpose of its main business. All expenses are incurred for the purpose of business and are incidental to the holding of rights were claimed u/s.32(1)(ii) being the license to carry out the mining therefore could not be denied insofar as the Government and the lessee are in control of the asset. The definition of depreciation therefore has been misconstrued for the purpose of allowing deduction by the Assessing Officer and the learned CIT(A) in holding a view on the promulgation of Section 32(1)(ii) with effect from the year 1998-99 which has been further amended i.e. Assessment Year 2003-04. In this view of the mater, we are inclined to hold that the assessee is entitled to depreciation as charged to the P & L account in accordance with its business Page 6 of 9 ITA No 148 of 2017 NMDC Ltd Hyderabad exigencies. We direct accordingly. On the claim of deduction/s.80G, the A.O., is directed to verify the receipts and allow the deduction in accordance with the provisions of Income-tax Act,1961."
22.1 Since the issue under consideration is materially identical to that of the case decide by the Tribunal in the case of East India Minerals Ltd., respectfully following the same, we set aside the order of the CIT(A) and direct the AO to delete the addition made in this regard".
Following the above decision of the Tribunal dated 28.2.2014, coordinate bench of this Tribunal, vide Paras 36 and 37 of its order dated 9.5.2014 M/s. National Mineral Development Corporation Limited, Hyderabad for the assessment year 2010-11 in ITA No.1795/Hyd/2013, decided this issue in favour of the assessee. In this view of the matter, following the consistent view taken by the Tribunal in assessee's own cases for other years noted above, we delete the addition of Rs.10,66,56,599 made by the Assessing Officer and sustained by the CIT(A), by disallowing the assessee's claim for depreciation on lease hold land. Assessee's grounds on this issue are accordingly allowed".
9. Thus, ground of appeal No.3 is rejected.
10. As regards Ground No.4, we find that this issue has also been considered in the assessee's own case for the A.Y 2009- 10 wherein and it was held as under:
"26. The next effective grievance of the assessee in this appeal relates to addition of Rs.33,30,05,797 made by the Assessing Officer and sustained by the CIT(A), by disallowance of assessee's claim for expenditure stated to have been incurred in discharge of corporate social responsibility.
27. We heard both sides and perused the orders of the Revenue authorities on this issue and other material available on record. It has been brought to our notice by the learned counsel for the assessee, which has not been not controverted by the learned Departmental Representative, that this issue is covered by the decisions of the Tribunal in assessee's own cases dated 28.2.2014 for assessment year 2008-09 in ITA No.714/Hyd/2012 and dated 9.5.2014 for assessment year 2010-11 in ITA No.1795/Hyd/2013. We find that the coordinate bench of this Tribunal, vide para 35, 36 and 36.1 of its order dated 28.2.2014 for assessment year 2008-09, cited supra, decided the issue in favour of the assessee in the following manner:Page 7 of 9
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35. We have considered rival submissions and perused the record. We find that the issue in dispute is squarely M/s. National Mineral Development Corporation Limited, Hyderabad covered by the decision of coordinate bench in assessee's own case for AY 2005-06 in ITA No. 1791/Hyd/2008 dated 30/09/2009 wherein it has been held as follows:
"14. We have considered the rival submissions on either side and also perused the material available on record. No doubt the assessee incurred an expenditure of Rs. 5,00,00,000/- as contribution for establishing a medical college.
The fact that the assessee is having a mining unit and a steel plant in Chhattisgarh is not dispute. T he objection of the Department appears to be that the medical college was located a t a distance of 16 km s. And the asses see, instead of providing relief to the affected people, directly incurred the expenditure for establishing the medical college. The fact remains that one of the conditions for contributing the money was to give free medical treatment to the Adivasis who were affected by the asses see's project in the locality. Moreover, the employees of the assessee and their dependents were to be treated free of cost. Five seas were reserved in the medical college for the children of the employees of the assessee. In fact admission was also given to the children of the employees of the assessee as per the condition stipulated while contributing the money. The assessee also had a representation in the Board. In view of the above, in our opinion, the contribution of Rs. 5 crores is only a welfare mea sure for the upliftment of the Adivasis in the locality where the mining unit was situated and also for the welfare of the employees of the asses see. This contribution would definitely go a long way in conducting the asses see's mining business in a profitable manner. When the assessee is having a mining unit in a remote corner of the country, the cooperation of the villagers is very much required for conducting the business. More particularly, the cooperation of the people who are affected by the mining operation of the asses see is required. Merely because the hospital and medical college are situated 16 kms away from the unit, that will not deter the medical institution in giving treatment to the affected people. Moreover, admission was given to the children of the assessee's employees in the medical college. Therefore, indirectly the contribution made by the assessee takes care of the education of the employees' children. This would certainly be a welfare measure on the part of the asses see for carrying out the business in an effective and efficient manner. M/s. National Mineral Development Corporation Limited, Hyderabad Therefore, in our opinion, the contribution of Rs. 5,00,00,000 has to be treated as revenue expenditure for the purpose of the business. Therefore, we do not find any justification in disallowing the sum. Accordingly, we set aside the orders of the lower authorities and delete the entire addition."
36. Since the issue under consideration is identical to that of AY 2005-06, we delete the additions m a de under the heads from (i) to vii). 36.1 However, we make it clear that the expenditure incurred at Rs. 3,48,04,548/- shown as miscellaneous expenses cannot be allowed as the assessee has not furnished the details of expenditure, therefore, in the absence of Page 8 of 9 ITA No 148 of 2017 NMDC Ltd Hyderabad requisite information the said expenditure cannot be allowed. Accordingly, this ground is partly allowed. "
Following the above decision of the Tribunal dated 28.2.2014, coordinate bench of this Tribunal, vide Paras 41 and 42 of its order dated 9.5.2014 for the assessment year 2010-11 in ITA No.1795/Hyd/2013, decided this issue in favour of the assessee, subject to the observation that the Assessing Officer shall examine the expenditure in that year also and allow the same accordingly. In this view of the matter, following the consistent view taken by the Tribunal in assessee's own cases for other years noted above, we direct the Assessing Officer to examine the nature of the expenditure claimed in this year also and accordingly redetermine the allowability of such expenditure in accordance with law and in consonance with the observations of the Tribunal for earlier years noted above. Assessee's grounds on this issue are accordingly treated as allowed.
11. Respectfully following the same, this ground of appeal is rejected.
12. Ground Nos. 5 & 6 are general in nature and need no adjudication.
13. In the result, Revenue's appeal is dismissed.
Order pronounced in the Open Court on 9th May, 2017.
Sd/- Sd/-
(B. Ramakotaiah) (P. Madhavi Devi)
Accountant Member Judicial Member
Hyderabad, dated 9th May, 2017.
Vinodan/sps
Copy to:
1 Asstt. Commissioner of Income Tax, Circle 16(1) 1st Floor, Block B IT Tower, Masab Tank, Hyderabad 2 M/s. National Mineral Development Corpn. Ltd, Khanij Bhavan, 10-3-311/A Castle Hills, Masab Tank, Hyderabad 3 CIT (A)-4 Hyderabad 4 Pr. CIT - 4 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order Page 9 of 9