Western Coalfields Limited, Nagpur V. The Assistant CIT Range-2, Nagpur

ITA 171/NAG/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3128 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Principle of natural justice; Revenue expenditure; Capital expenditure
• Section: 143(3); 147

Judgement Text

1 ITA NO. 171/NAG/2012. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 171/NAG/2012 ASSESSMENT YEAR : 200 7 - 08 . WESTERN COALFIELDS LIMITED, ASSTT. COMMISSIONER OF INCOME - TAX, NAGPUR. VS. RANGE - 2, NAGPUR. PAN AAACW 1578L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.P. DEWANI. RESPONDENT : SHRI NARENDRA K ANE . DATE OF HEARING : 14 - 01 - 2016 DATE OF PRONOUNCEMENT : 5 TH FEBRUARY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 29 - 02 - 2012. GROUNDS RAISED ARE HEREBY DECIDED AS UNDER : 2. GROUND NO. 1: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER HAS LEGALLY ERRED IN DISALLOWING EXPENSES INCURRED IN RESPECT OF STUDY OF OVERBURDEN DUMPS OF RS.359.65 LACS . IN RESPECT OF THE ABOVE GROUND THE OBSERVATION S OF THE AO AS PER THE ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 147 DATED 28 - 12 - 2010 WERE THAT THE ASSESSEE HAD REMITTED AN AMOUNT OF RS.359.65 LAKHS ON THE STUDY CONDUCTED BY IIT, KHARAGPUR REGARDING OLD AND ACTIVE DUMPS OF OC MINES. AS PER THE AO THE ASSESSEE HAD WRONGLY CLAIMED THE SAID EXPENDITURE AS REVENUE 2 ITA NO. 171/NAG/2012. EXPENDITURE. IT IS WORTH TO MENTION THAT THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING AND IN THE BUSINESS OF EXTRACTION AND SALE OF COAL. THE ASSESSEES CONTENTION WAS THAT THE STUDY WAS CARRIED OUT A S PER THE REQUIREMENT OF MINISTRY OF ENVIRON MENT AND FOREST, HENCE IT WAS REVENUE EXPENDITURE. THE CASE LAW OF ALEMBIC CHEMICAL WORKS LIMITED 177 ITR 377 (SC) WAS CITED. HOWEVER, THE AO HAS HELD THAT THE ASSESSEE WANTED TO START A NEW MINE. THEREFORE, THE STUDY WAS CONNECTED WITH THE ACQUISITION OF NEW CAPITAL ASSET. THE CLAIM WAS, THEREFORE, DISALLOWED AS CAPITAL EXPENDITURE. 2.1 WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE ACTION OF THE AO WAS AFFIRMED IN THE FOLLOWING MANNER : THUS THE BENEFIT OF THE STUDY IS CLEARLY AV AILABLE OVER A SPAN OF YEARS. IN MY CONSIDERED OPINION THE EXPENDITURE CANNOT BE TERMED AS REVENUE EXPENDITURE AND IT IS A ONE TIME EXPENDITURE INCURRED TO FACILITATE THE PROCESS OF PUTTING INTO PLACE SYSTEM TO HANDLE OVERBURDEN AND OBTAINING ENVIRONMENTAL CLEARANCE. IT WOULD BE NECESSARY TO APPRECIATE THAT WITHOUT OBTAINING ENVIRONMENTAL CLEARANCE THE EXPANSION PROJECT OF GONDEGAON AND UMRER WOULD NOT BE ALLOWED TO COMMENCE. THE3 BENEFIT OF OBTAINING SUCH CLEARANCE IS ALSO NOT EXHAUSTED IMMEDIATELY. THE ASSESSEE, THEREFORE HAS OBTAINED AN ENDURING BENEFIT. THE CONTENTION OF THE APPELLANT IS THEREFORE NOT ACCEPTABLE AND IS THEREFORE REJECTED AND THE EXPENDITURE IS HELD TO BE CAPITAL IN NATURE. THIS GROUND IS THEREFORE DISMISSED. 3. WE HAVE HEARD BOTH TH E SIDES. AT THE OUTSET LEARNED A.R. MR. K.P. DEWANI HAS RAISED A VERY BASIC ISSUE THAT THE REVENUE AUTHORITIES WENT WRONG IN MAKING THE ABOVE ADDITION IN THE TAXABLE INCOME BECAUSE THE SAID EXPENDITURE WAS NOT AT ALL CLAIMED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. LEARNED A.R. HAD MADE A STATEMENT THAT THE SAID AMOUNT WAS NOT CLAIMED AS AN EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. HE HAS PLACED BEFORE US DIRECTORS REPORT TO DEMONSTRATE THAT IT WAS A TECHNICAL STUDY WHICH WAS CONDUCTED BY IIT, KHARAGPUR. IT WAS NOT SPENT BY THE ASSESSEE, AS PER LEARNED A.R. 3 ITA NO. 171/NAG/2012. 4. ON THE OTHER HAND, LEARNED D.R. MR. NARENDRA KANE HAS PLEADED THAT NOW THE ASSESSEES COUNSEL IS TAKING A U TURN AND THE ALLEGED FACT COULD HAVE BEEN BROUGHT TO THE NOTICE OF THE AO AT THE TIME OF A SSESSMENT. 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED OPINION THAT THERE SHOULD NOT BE ANY DISPUTE AMONG THE PARTIES ABOUT THE FACTS IN EXISTENCE. THE FACT THAT WHETHER THIS AMOUNT WAS CLAIMED AS AN EXPENDITURE CAN BE ASCE RTAINED FROM THE PROFIT AND LOSS ACCOUNT AND OTHER RELATED ACCOUNTS OF THE ASSESSEE. IN OUR OPINION, THERE SHOULD NOT BE ANY TWO OPINION OR DISPUTE ABOUT THE IMPUGNED FACT THAT WHETHER IT WAS CLAIMED AS AN EXPENDITURE OR NOT? TO ASCERTAIN THIS FACT WE DEE M IT NECESSARY AS WELL AS NATURAL JUSTICE DEMANDS TO REFER THIS MATTER BACK TO THE STAGE OF THE AO SO THAT THE CORRECT FACTUAL POSITION CAN BE ASCERTAINED. SINCE WE ARE RESTORING THIS ISSUE TO THE FILE OF THE AO, HENCE THIS GROUND OF THE ASSESSEE MAY BE T REATED AS ALLOWED ONLY FOR STATISTICAL PURPOSES. 6. GROUND NO. 2: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED AO HAS LEGALLY ERRED IN DISALLOWING THE EXPENDITURE OF RS.1024.94 LACS UNDER SECTION 40(A)(IA) OF THE INCOME - TAX ACT, 1961 FOR NON DEDUCTION OF TAX AT SOURCE UNDER SECTION 194J OF THE ACT ON THE SAME. THE OBSERVATION OF THE AO WAS THAT NO TDS WAS DEDUCTED U/S 194J IN RESPECT OF THE AMOUNT PAID TO THE DOCTORS AS MEDICAL CHARGES. THE AO HAD INVOKED THE PROVISIONS OF SECTION 4 0(A)(IA) OF THE I.T. ACT. 6.1 WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(APPEALS) HAS CONFIRMED THE ACTION OF THE AO IN THE FOLLOWING MANNER: THE PROVISIONS OF SECTION 40(A)(IA) INTRODUCED TO ENSURE THAT EXPENDITURE CLA IMED AS A DEDUCTION IS MADE WITH THE PURPOSE OF ENSURING COMPLIANCE TO TDS PROVISIONS. AS PER THE PROVISIONS OF THIS SECTION DISALLOWANCE IS CONTEMPLATED ON THE FAILURE OF THE ASSESSEE TO DEDUCT AND PAY TX DURING THE PREVIOUS YEAR OR IN THE SUBSEQUENT YEA R BEFORE THE EXPIRY OF TIME PRESCRIBED U/S 200(1). IN A RECENT DECISION REPORTED IN 335 4 ITA NO. 171/NAG/2012. ITR 381 IN THE CASE OF RAJA & CO. VS. CIT THE KERALA HIGH COURT HAS STATED THAT WHEN NO TAX HAS BEEN DEDUCTED AT SOURCE AS IS STATUTORILY REQUIRED DISALLOWANCE US 40(A )(IA) IS ATTRACTED. THE CONTENTION OF THE APPELLANT THAT SUBSEQUENTLY THE TAX DUE HAS BEEN PAID BY THE DEDUCTEE IS NOT RELEVANT. THIS GROUND IS THEREFORE DISMISSED. 7. AT THE OUTSET WE HAVE BEEN INFORMED THAT NOW THIS ISSUE STOOD COVERED IN ASSESSEES OWN CASE BY ITAT, NAGPUR BENCH IN THE FOLLOWING ORDERS : 1. ITA NOS. 35/NAG/2010 AND OTHERS, ORDER DATED 24 TH SEPT., 2015. 2. ITA NO.215/NAG/2013 ORDER DATED 4 TH DEC., 2015. IN BOTH THE ABOVE ORDERS, THE RESPECTED COORDINATE BENCHES HAVE HELD THAT THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT THE TDS ON THE PAYMENTS MADE TO THE DOCTORS IN THE LIGHT OF THE CBDT CIRCULAR DATED 24 - 11 - 2009, H ENCE THE PROVISIONS OF SECTION 40(A)(IA) HAVE BEEN WRONGLY INVOKED. RESPECTFULLY FOLLOWING THE ABOVE D ECISIONS, WE HEREBY ALLOW THE GROUND OF THE ASSESSEE. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED AS PER THE DIRECTIONS GIVEN ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF FEBRUARY, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 5 TH FEBRUARY, 2016. 5 ITA NO. 171/NAG/2012. COPY FORWARDED TO : 1. WESTERN COALFIELDS LIMITED, COAL ESTATE, CIVIL LINES, NAGPUR. 2. A .C.I.T., RANGE - 2 , NAGPUR. 3. COMMISSIONER OF INCOME - TAX - ,NAGPUR. 4. CIT(APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER WAKODE. ASSISTANT REGISTRAR, ITAT, NAGPUR