Asst.Commissioner of Income Tax, Circle-16(1), Hyderabad V. NMDC Limited, Hyderabad

ITA 1785/Hyd/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9029 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-07-2018
• Assessment Year: misc
• Appeal Filed On: 02-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Assessee Lawyers: LAKSHMI NIVAS SHARMA
• Keywords: Depreciation; Business expenditure; Capital expenditure
• Section: 143(3); 115JB; 37(1); 37

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1823 AND 1824 /HYD/ 2017 ASSESSMENT YEAR S : 2013 - 14 & 20 14 - 15 NMDC LIMITED, HYDERABAD. AAACN 7325 A VS. ACIT, CIRCLE - 6(1), HYDERABAD. (APPELLANT) (RESPONDENT) ITA NO. 1785 & 1786 /HYD/ 2017 ASSESSMENT YEAR S : 2013 - 14 & 20 14 - 15 ACIT, CIRCLE - 6(1), HYDERABAD. NMDC LIMITED, HYDERABAD. AAACN 7325 A ASSESSEE BY: SRI LAKSHMINIVAS SHARMA REVENUE BY: SRI J. SIRI KUMAR, DR DATE OF HEARING: 26.07.2018 DATE OF PRONOUNCEMENT: 17 .10 .2018 ORDER PER SMT. P. MADHAVI DEVI, J.M.: THE CAPTIONED APPEALS ARE THE CROSS APPEALS BY THE ASSESSEE AS WELL AS THE REVENUE FOR THE ASSESSMENT YEARS 2013 - 14 AND 2014 - 15 RESPECTIVELY. SINCE THE FACTS AND CIRCUMSTANCES IN BOTH THE YEARS ARE THE SAME AND THE GROUNDS RAISED BY THE ASSESSEE AS WELL A S THE REVENUE IN BOTH THE YEARS ARE THE SAME ( EXCEPT FOR THE QUANTUM ) , THESE APPEALS 2 WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY, A PUBLIC SECTOR UNDERTAKING, ENGAG ED IN THE BUSINESS OF MINING OF IRON ORE DIAMONDS ; AND GENERATION AND SALE OF WIND POWER, FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR S 2013 - 14 AND 2014 - 15 BOTH UNDER THE NORMAL PROVISIONS AS WELL AS U/S 115JB OF THE ACT FOR THE RELEVANT A YS . DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A.O. OBSERVED THAT THE ASSESSEE - COMPANY IS CARRYING OUT MINING ACTIVITY IN INDIA AND PARTICULARLY IN KARNATAKA AND THAT THE HONBLE SUPREME COURT OF INDI A TOOK NOTE OF THE LARGE SCALE ILLEGAL MINING ACTIVITY CARRIED ON BY VARIOUS COMPANIES IN KARNATAKA AT THE COST O R DETRIMENT OF ENVIRONMENT AND DELIVERED THEIR JUDGMENT ON 18.04.2013 LEVYING APPROPRIATE CHARGES ON THE LEASEHOLDERS. A.O. ALSO OBSERVED THAT THE HONBLE SUPREME COURT, BAS ED ON THE EXTENT OF ILLEGAL MINING, CLASSIFIED THE MINING LEASES INTO THREE CATEGORIES VIZ., CATEGORY A, B AND C' AND THAT THE ASSESSEE IS FALLING IN CATEGORY - B IN RESPECT OF DONIMALI COMPLEX AND THAT IN THEIR ORDER , THE APEX COURT OBSERVED THAT BEFOR E CONSIDERATION OF ANY RESUMPTION OF MINING OPERATIONS BY CATEGORY - B LEASEHOLDERS, EACH OF THE LEASE HOLDER MUST PAY COMPENSATION FOR THE AREAS UNDER ILLEGAL MINING PITS OUTSIDE THE SANCTIONED AREA AT THE RATE OF RS. 5 CRS PER HECTARE AND FOR ILLEGAL OVERB URDEN FOR AT THE RATE OF RS. 1 CR PER HECTARE. FURTHER, A.O. OBSERVED THAT THE SAID DIRECTION OF THE 3 APEX COURT WAS SUBJECT TO THE FINAL DETERMINATION OF THE NOTIONAL LOSS CAUSED BY THE ILLEGAL MINING AND ILLEGAL USE OF THE LAND ; AND THAT THE HONBLE SUP REME COURT HAD DIRECTED THAT EACH OF THE LEASEHOLDER SHOULD PAY A SUM EQUIVALENT TO 15% OF THE SALE PROCEEDS OF ITS IRON ORE SOLD THROUGH THE MONITORING COMMITTEE. IN ACCORDANCE WITH THE SAID DIRECTION, THE ASSESSEE MADE PAYMENT OF RS. 337.13 CRS TOWARDS CONTRIBUTION FOR THE SPECIAL PURPOSE VEHICLE AND THE SUM OF RS. 68.66 CRS TOWARDS PENALTY / COMPENSATION FOR ENCROACHMENT OF THE MINING AREA BEYOND THE SANCTIONED / LEASE D AREA. THE A.O. OBSERVED THAT THE TOTAL OF THE ABOVE PAYMENT OF RS. 405.79 CRS WAS PUNITIVE IN NATURE AND ACCORDINGLY SOUGHT TO DISALLOW THE SAME BY ISSU ANCE OF A SHOW - CAUSE NOTICE. 3. THE ASSESSEE , VIDE ITS REPLY DATED 07/03/2016 , STATED THAT THE ABOVE AMOUNTS HAD BEEN ACCOUNTED FOR UNDER SALES AND SUBSEQUENTLY 10% OF THE SALES BOOKED UNDER CONTRIBUTION TO SPV IN KARNATAKA IS AN ALLOWABLE BUSINESS EXPENDITURE. IT WAS ALSO SUBMITTED THAT THE TAX HAS BEEN PAID ON THE AMOUNT OF RS. 268.47 CRS WHICH WAS STILL RECEIVABLE AT THE END OF THE YEAR AND THAT BASED ON THE JUDGMENT OF THE HONBLE SUPREME COURT, BOTH THE EXPENSES I.E., CONTRIBUTION TO SPV AND COMPENSATION TO STATUTORY AGENCIES ARE PROVIDED IN I T S BOOKS WHICH HAS ALREADY BEEN WITHHELD BY MONITORING COMMITTEE APPOINTED BY THE APEX COURT AND THEREFORE, THE DISALLOWANCE AGAIN WOULD AMOU NT TO DOUBLE TAXATION. IT WAS ALSO ARGUED THAT THE PAYMENT MADE BY NMDC IS 4 COMPENSATORY IN NATURE AND IT CANNOT BE CONSTRUED AS PUNITIVE IN NATURE AND HENCE IT IS AN ALLOWABLE EXPENDITURE. 4. THE A.O. HOWEVER DID NOT ACCEPT THE ASSESSEES EXPLANATION AND HELD THAT THE ASSESSEE, BEING A CATEGORY - B LEASEHOLDER, HAS BEEN DIRECTED TO MAKE THE PAYMENT FOR INFRINGEMENT OF MMDR ACT AND OTHER ALLIED LAWS. THEREFORE, HE OBSERVED THAT THE PAYMENT OF RS. 405.79 CRS IS PUNITIVE IN NATURE AND BROUGHT IT TO TAX. 5 . FURTHER , A.O. ALSO EXAMINED THE ALLOWABILITY OF THE PAYMENT MADE BY THE ASSESSEE TOWARDS MINE CLOSURE AND HELD IT TO BE CONTINGENT IN NATURE AND NOT A DEDUCTIBLE EXPENDITURE U/S 37(1) OF THE ACT. H E OBSERVED THAT ASSESSEE - COMPANY HAS CLAIMED DEPRECIATION ON INTANGIBLE ASSETS. OBSERVING THAT THE INTANGIBLE ASSET, ON WHICH THE ASSESSEE HAS CLAIMED DEPRECIATION , IS LAND, HE HELD THAT SINCE THE LAND DOES NOT FORM AN INTANGIBLE ASSET, DEPRECIATION IS NOT ALLOWABLE. HE ALSO EXAMINED THE ALLOWABILI TY OF THE EXPENDITURE CLAIMED BY THE ASSESSEE TOWARDS CORPORATE SOCIAL RESPONSIBILITY (CSR) AND DISALLOWED THE SAME ON THE GROUND THAT THE SAID ACTIVITIES ARE NOT RELATED TO THE BUSINESS OF THE ASSESSEE. THE A.O. ALSO OBSERVED THAT THE ASSESSEE CLAIMED WEIGHTED DEDUCTION OF 200% U/S 35(2AB) OF THE ACT. OBSERVING THAT THE ASSESSEE - COMPANY HAS CLAIMED EXCESS DEDUCTION TO THE TUNE OF RS. 2,44,71,676/ - U/S 35(2AB), A.O. DISALLOWED THE CLAIM. 5 6 . AGGRIEVED, ASS ESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WH O PARTLY ALLOWED THE SAME. AGAINST THE CONFIRMATION OF THE DISALLOWANCE OF PAYMENTS MADE UNDER THE DIRECTIONS OF THE HONBLE SUPREME COURT TOWARDS PENALTY / COMPENSATION AND ALSO ON THE DISALLOWANCE OF EXPENDITURE MADE TOWARDS CORPORATE SOCIAL RESPONSIBIL ITY, THE ASSESSEE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW TO THE EXTENT IT IS THE PREJUDICIAL TO THE INTEREST OF THE ASSESSEE. 2. THE LD. CIT(A) ERRED IN CONFIRMI NG THE ADDITION MADE BY A.O. OF RS. 405,79,00,000/ - BY TREATING THE AMOUNTS PAID BY APPELLANT ON THE ORDER OF SUPREME COURT AS PENAL IN NATURE IGNORING THAT THE AMOUNT PAID IS COMPENSATORY IN NATURE AND PAID EXCESSIVELY FOR THE PURPOSE OF BUSINESS. 3. TH E LD. CIT(A) ERRED BY STATING THAT APPELLANT HAS NOT FURNISHED ANY FURTHER EVIDENCE OF PROOF TO COUNTER THE FINDINGS OF ASSESSING OFFICER IGNORING THAT THE APPELLANT HAS GIVEN DETAILED EXPLANATION ALONG WITH THE RELEVANT DOCUMENTS IN SUPPORT OF ITS CLAIM . 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF CSR TO THE EXTENT OF CAPITAL IN NATURE AS INTERPRETED, INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS AND CLAIMED AS DEDUCTION U/S 37(1) OF THE I.T. ACT. EXPENDITURE INCURRED IS NOT A CAPITAL EXPENDITURE FOR NMDC SINCE IT IS NOT CAPITALIZED IN THE BOOKS OF ACCOUNT . 7 . AGAINST THE RELIEF GIVEN BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL FOR THE A.Y. 2013 - 14: - 1. THE CIT(A) ERRED IN DIRECTING THE A.O. TO WORK OUT THE LIABILITY AND ALLOW THE MINE CLOSURE OBLIGATION EXPENSES OF RS. 8,21,00,000/ - , WITHOUT APPRECIATING THE FACT THAT THE SAID LIABILITY IS NOT AN ASCERTAINED LIABILITY. 2. THE CIT(A) ERRED IN IGNORING THE FACT THAT REVENUES APPEALS ON IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR THE AYS 2009 - 10 AND 2010 - 11 ARE PENDING ADJUDICATION BY THE HONBLE HIGH COURT. 6 3. THE CIT(A) ERRED IN ALLOWING THE DEPRECIATI9ON ON INTANGIBLE ASSETS OF RS. 13,85,98,142/ - . 4. THE CIT(A) ERRED IN IGNORING THE FACT THAT REVENUES APPEALS ON IDENTICAL ISSUE IS ASSESSEES OWN CASE FOR AYS 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 ARE PENDING ADJUDICATION BY THE HON BLE HIGH COURT. 5. THE CIT(A) ERRED IN DIRECTING THE A.O. TO RE - CALCULATE AND ALLOW CORPORATE SOCIAL RESPONSIBILITY EXPENSES OF RS. 72,38,00,000/ - . 6. THE CIT(A) ERRED IN IGNORING THE FACT THAT THE REVENUES APPEALS ON IDENTICAL ISSUE IN ASSESSEES OWN CA SE FOR AYS 2009 - 10, 2010 - 11 & 2011 - 12 ARE PENDING ADJUDICATION BY THE HONBLE HIGH COURT. 8 . AS REGARDS THE ASSESSEES APPEAL, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, WHILE THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES (A.O. AND THE CIT(A)). 9 . HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS A CENTRAL GOVERNMENT PUBLIC SECTOR UNDERTAKING AND IS UNDER THE ADMINISTRATIVE CONTROL OF THE MINISTRY OF STEEL, GOVERNMENT OF INDIA. IT IS SEEN THAT THE ASSES SEE HAS PAID RS. 405.79 CRS TOWARDS CONTRIBUTION FOR THE SPECIAL PURPOSE VEHICLE (SPV) AND COMPENSATION FOR ENCROACHMENT OF THE MINING AREA BEYOND THE SANCTIONED LEASE AREA AS PER THE DIRECTIONS OF THE HONBLE SUPREME COURT. THE ASSESSEE HAS FILED A COPY OF THE ORDER OF THE HONBLE SUPREME COURT, WHICH IS PLACED AT PAGES 8 TO 88 OF THE PAPER BOOK. WE FIND THAT THE ILLEGAL MINING ACTIVITY IN THE STATE OF KARNATAKA (IN BELLARY REGION) HAD COME UP BEFORE THE HONBLE SUPREME COURT OF INDIA AND THE APEX 7 COURT HAD FORMED A COMMITTEE VIZ., CENTRAL EMPOWERED COMMITTEE (CEC) TO EXAMINE AND SUGGEST THE REMEDIAL ACTION. THE CEC SUBMITTED ITS REPORT INDICATING LARGE SCALE ILLEGAL MINING AT TH E COST AND DETRIMENT OF THE ENVIRONMENT DUE TO WHICH BY ORDER DATED 29.07.2 011 A COMPLETE BAN ON MINING IN THE DISTRICT OF BELLARY WAS IMPOSED BY THE HONBLE SUPREME COURT. FURTHER, VIDE ORDER DATED 26.08.2011, THE BA N WAS EXTENDED TO TUMKUR AND CHITRADURGA DISTRICTS. THEREAFTER, A JOINT TEAM WAS CONSTITUTED BY THE APEX COURT VI DE ITS ORDER DATED 06.05.2011 TO DETERMINE THE BOUNDARIES OF INITIALLY 117 MINING LEASES WHICH HAS SUBSEQUENTLY EXTENDED TO 166 , BY INCLUSION OF TUMKUR AND CHITRADURGA DISTRICTS. THE JOINT TEAM REVEALED A SHOCKING STATE OF DEPREDATION OF NATURES BOUNTY B Y HUMAN GREED AND THEREFORE, THE HONBLE APEX COURT VIDE ITS ORDER DATED 23.09.2011 DIRECTED THE SPECIAL TEAM TO RE - EXAMIN E THE ISSUE . THEREAFTER, THE CEC SUBMITTED ITS REPORT TERMED AS FINAL REPORT DATED 03.02.2012 BY MAKING TWO SIGNIFICANT RECOMMENDAT IONS. THE FIRST WAS FOR CATEGORIZ ATION OF THE M INES INTO THREE CATEGORIES VIZ., A , B AND C ' ON THE BASIS OF THE EXTENT OF THE ENCROACHMENT IN RESPECT OF MINING PITS AND OVER BURDEN DUMPS DETERMINED IN TERMS OF PERCENTAGE QUA THE TOTAL LEASE AREA. TH E SECOND SET OF MODIFIED RECOMMENDATIONS ALONG WITH SET OF DETAILED GUIDELINES FOR PREPARATION AND IMPLEMENTATION OF RECLAMATION AND REHABILITATION PLANS (R & R) WERE ALSO SUBMITTED TO THE COURT BY THE CEC ON 13.03.2012. THE HONBLE SUPREME COURT THEREFOR E CONSIDERED THE RECOMMENDATIONS OF 8 THE CEC DATED 03.02.2012 AND 13.03.2012 AND IN ITS ORDER THE COURT HAS REPRODUCED THE SAME. RELEVANT PARAS FROM THE JUDGEMENT DATED 18.04.2013 ARE REPRODUCED HEREUNDER FOR READY REFERENCE: - 5. WE MAY NOW PROCEED TO NOT ICE THE RELEVANT PART OF THE TWO REPORTS OF THE CEC DATED 3.2.2012 AND 13.3.2012, AS REFERRED TO HEREINABOVE. IV. CLASSIFICATION OF LEASES IN DIFFERENT CATEGORIES ON THE BASIS OF THE LEVEL OF ILLEGALITIES FOUND. 27. THE CEC, BASED ON THE EXTENT OF ILLE GAL MINING FOUND BY THE JOINT TEAM AND AS APPROPRIATELY MODIFIED BY THE CEC IN ITS PROCEEDING DATED 25TH JANUARY, 2012 AND AFTER CONSIDERING THE OTHER RELEVANT INFORMATION HAS CLASSIFIED THE MINING LEASES INTO THREE CATEGORIES NAMELY CATEGORY - A, CATEGOR Y - B AND CATEGORY - C. 28. THE CATEGORY - A COMPRISES OF (A) WORKING LEASES WHEREIN NO ILLEGALITY/MARGINAL ILLEGALITY HAVE BEEN FOUND AND (B) NON WORKING LEASES WHEREIN NO MARGINAL/ILLEGALITIES HAVE BEEN FOUND. THE NUMBER OF SUCH LEASES COMES TO 21 & 24 RESPECTIVELY. 29. CATEGORY - B COMPRISES OF (A) MINING LEASES WHEREIN ILLEGAL MINING BY WAY OF (I) MINING PITS OUTSIDE THE SANCTIONED LEASE AREAS HAVE BEEN FOUND TO BE UP TO 10% OF THE LEASE AREAS AND/ OR (II) OVER BURDEN/WASTE DUMPS OUTSIDE THE SANCTION ED LEASE AREAS HAVE BEEN FOUND TO BE UP TO 15% OF THE LEASE AREAS AND (B) LEASES FALLING ON INTERSTATE BOUNDARY BETWEEN KARNATAKA AND ANDHRA PRADESH AND FOR WHICH SURVEY SKETCHES HAVE NOT BEEN FINALIZED. FOR SPECIFIC REASONS AS MENTIONED IN THE PAGE 9 9 ST ATEMENT OF CATEGORY - B LEASES, M/S. S.B. MINERALS (ML NO. 2515), M/S. SHANTALAXMI JAYRAM (ML NO. 2553), M/S. GAVISIDDESHWAR ENTERPRISES (ML NO. 80) AND M/S. VIBHUTIGUDDA MINES (PVT.) LTD. (ML NO. 2469) HAVE BEEN ASSIGNED IN CATEGORY - B. THE NUMBERS OF SU CH LEASES IN CATEGORY - B COMES TO 72. 30. THE CATEGORY - C COMPRISES OF LEASES WHEREIN (I ) THE ILLEGAL MINING BY WAY OF (A) MINING PITS OUTSIDE THE SANCTIONED LEASE AREA HAVE BEEN FOUND TO BE MORE THAN 10% OF THE LEASE AREA AND/OR (B) OVER BURDEN/WASTE DUMPS OUTSIDE THE SANCTIONED LEASE AREAS HAVE BEEN FOUND TO BE MORE THAN 15% OF THE LEASE AR EAS AND/OR (II) THE LEASES FOUND TO BE INVOLVED IN FLAGRANT VIOLATION OF THE FOREST (CONSERVATION) ACT AND/OR FOUND TO BE INVOLVED IN ILLEGAL MINING IN OTHER LEASE AREAS. THE NUMBER OF SUCH LEASES COMES TO 49. RECOMMENDATIONS (AS MODIFIED BY CEC BY ITS RE PORT DATED 13.3.2012. ITEMS 1 TO IV OF THE REPORT DATED 3.2.2012 STOOD REPLACED BY ITEMS A TO I OF THE REPORT DATED 13.3.2012 WHICH ARE REPRODUCED BELOW ALONG WITH ITEMS V TO XIV OF THE INITIAL REPORT DATED 3.2.2012). (A) THE FINDINGS OF THE JOINT TEAM A ND AS MODIFIED AFTER CAREFUL EXAMINATION BY THE CEC MAY BE ACCEPTED AND DIRECTED TO BE FOLLOWED BY THE CONCERNED AUTHORITIES AND THE RESPECTIVE LEASES, NOTWITHSTANDING ANYTHING TO THE PAGE 10 10 CONTRARY. THE 9 BOUNDARIES OF THE MINING LEASES SHOULD ACCORDIN GLY BE FIXED ON THE GROUND. (B) A CEILING OF 25 MILLION METRIC TONNES (MMT) FOR TOTAL PRODUCTION OF IRON ORE FROM ALL THE MINING LEASES IN DISTRICT BELLARY MAY BE PRESCRIBED. A CEILING OF 5 MMT FOR PRODUCTION OF IRON ORE FROM ALL THE MINING LEASES IN DIS TRICTS CHITRADURGA AND TUMKUR TOGETHER MAY BE PRESCRIBED; (C) THE PROPOSED GUIDELINES FOR THE PREPARATION OF THE R&R PLANS MAY BE APPROVED BY THIS HONBLE COURT AND THE PRESCRIPTIONS/PROVISIONS OF THE R&R PLANS, PREPARED AS PER THESE GUIDELINES, MAY BE DIRECTED TO BE FOLLOWED BY THE RESPECTIVE LESSEES AND THE CONCERNED AUTHORITIES; (D) THE IRON ORE WHICH BECOMES AVAILABLE SHOULD BE USED FOR MEETING THE IRON ORE REQUIREMENT OF THE STEEL PLANTS AND ASSOCIATED INDUSTRIES LOCATED IN KARNATAKA AND ALSO OF THOSE PLANTS LOCATED IN THE ADJOINING STATES WHICH HAVE BEEN USING THE IRON ORE FROM THE MINING LEASES LOCATED IN THESE DISTRICTS. EXPORTS, OUTSIDE THE COUNTRY, SHOULD BE PERMISSIBLE ONLY IN RESPECT OF THE MATERIAL WHICH THE STEEL PLANTS AND ASSOCIATED IND USTRIES ARE NOT WILLING TO PURCHASE ON OR ABOVE THE AVERAGE PRICE REALIZED BY THE MONITORING COMMITTEE FOR THE CORRESPONDING GRADES OF FINES/LUMPS DURING THE SALE OF ABOUT 25 MMT OF THE EXISTING STOCK OF IRON ORE. SIMILARLY, THE IRON ORE PRODUCED BY THE BE NEFICIATION PLANTS AFTER PAGE 11 11 PROCESSING SHOULD ALSO NOT BE PERMITTED TO BE EXPORTED OUTSIDE THE COUNTRY; (E) THE SALE OF THE IRON ORE SHOULD CONTINUE TO BE THROUGH E - AUCTION AND THE SAME SHOULD BE CONDUCTED BY THE MONITORING COMMITTEE CONSTITUTED BY THIS HONBLE COURT. HOWEVER, THE QUANTITY TO BE PUT UP FOR E - AUCTION, ITS GRADE, LOT SIZE, ITS BASE/FLOOR PRICE AND THE PERIOD OF DELIVERY WILL BE DECIDED/PROVIDED BY THE RESPECTIVE LEASE HOLDERS. THE MONITORING COMMITTEE MAY PERMIT THE LEASE HOLDERS TO PUT UP FOR E - AUCTION THE QUANTITIES OF THE IRON ORE PLANNED TO BE PRODUCED IN SUBSEQUENT MONTHS. THE SYSTEM OF SALE THROUGH THE MONITORING COMMITTEE MAY BE REVIEWED AFTER SAY TWO YEAR; (F) 90% OF THE SALE PRICE (EXCLUDING THE ROYALTY AND THE APPLICABLE T AXES) RECEIVED DURING THE E - AUCTION MAY BE PAID BY THE BUYER DIRECTLY TO THE RESPECTIVE LEASE HOLDERS AND THE BALANCE 10% MAY BE DEPOSITED WITH THE MONITORING COMMITTEE ALONGWITH THE ROYALTY, FDT AND OTHER APPLICABLE TAXES/CHARGES; (G) THE RESPONSIBILITY OF THE MONITORING COMMITTEE WILL BE (A) TO MONITOR THE IMPLEMENTATION OF THE VARIOUS PROVISIONS/PRESCRIPTIONS OF THE R&R PLANS, (B) TO ENSURE STRICT COMPLIANCE OF THE CONDITIONS ON WHICH THE ENVIRONMENT CLEARANCE, THE APPROVAL UNDER THE FOREST (CONSERVATI ON) ACT, 1980 AND THE OTHER STATUTORY APPROVALS/CLEARANCES HAVE BEEN ACCORDED, (C) TO ENSURE THAT THE MINING IS UNDERTAKEN AS PER THE APPROVED MINING PLAN, (D) TO ENSURE PAGE 12 12 THAT THE CEILING ON ANNUAL PRODUCTION FIXED FOR THE LEASE DOES NOT EXCEED, (E) TO ENSURE THAT THE SAFETY ZONE IS MAINTAINED AROUND THE LEASE AREA AND IN RESPECT OF THE CLUSTERS OF MINING LEASES AROUND THE OUTER BOUNDARY OF SUCH CLUSTER OF MINING 10 LEASES AND (F) TO ENSURE COMPLIANCE OF THE OTHER APPLICABLE CONDITION/PROVISIONS. ANY LEASE FOUND TO BE OPERATING IN VIOLATION OF THE STIPULATED CONDITIONS/PROVISIONS SHOULD BE LIABLE FOR CLOSURE AND/OR TERMINATION OF THE LEASE; (H) THE PRESENT MEMBERS OF THE MONITORING COMMITTEE SHOULD CONTINUE FOR A PERIOD OF NEXT TWO YEARS; AND (I) IN THE LARGER PUBLIC INTEREST THE MINING OPERATIONS IN THE TWO LEASES OF M/S. NMDC MAY BE PERMITTED TO BE CONTINUED. HOWEVER, IT WILL BE LIABLE TO DEPOSIT PENALTY/COMPENSATION AS PAYABLE FOR THE MINING LEASES FALLING IN CATEGORY - B (V) IN RESPECT OF THE MINING LEASES FALLING IN CATEGORY - B (DETAILS GIVEN AT ANNEXURE - R10 TO THIS REPORT) IT IS RECOMMENDED THAT: I) THE R&R PLAN, UNDER PREPARATION BY THE ICFRE, AFTER INCORPORATING THE APPROPRIATE CHANGES AS PER THE DIRECTIONS OF THIS HONBLE COURT, SHOULD BE IMPLEMENTED IN A TIME BOUND MANNER BY THE RESPECTIVE LESSEES AT HIS COST. IN THE EVENT OF HIS FAILURE TO DO SO OR PAGE 13 13 IF THE QUALITY AND/OR THE PROGRESS OF THE IMPLEMENTATION OF THE R&R PLAN IS FOUND TO BE UNSATISFACTORY BY THE MONITORING COMMIT TEE OR BY THE DESIGNATED OFFICER(S) OF THE STATE OF KARNATAKA, THE SAME SHOULD BE IMPLEMENTED BY THE STATE OF KARNATAKA THROUGH APPROPRIATE AGENCY(IES) AND AT THE COST OF THE LESSEE; II) FOR CARRYING OUT THE ILLEGAL MINING OUTSIDE THE LEASE AREA, EXEMPLAR Y COMPENSATION/ PENALTY MAY BE IMPOSED ON THE LESSEE. IT IS RECOMMENDED THAT: A) FOR ILLEGAL MINING BY WAY OF MINING PITS OUTSIDE THE LEASES AREA, AS FOUND BY THE JOINT TEAM, THE COMPENSATION/ PENALTY MAY BE IMPOSED AT THE RATE OF RS. 5.00 CRORE (RS. FIV E CRORE ONLY) FOR PER HA. OF THE AREA FOUND BY THE JOINT TEAM TO BE UNDER ILLEGAL MINING PIT; AND B) FOR ILLEGAL MINING BY WAY OF OVER BURDEN DUMP(S) ROAD, OFFICE, ETC. OUTSIDE THE SANCTIONED LEASE AREA, THE COMPENSATION/ PENALTY MAY BE IMPOSED @ RS. 1.0 0 CRORES (RS. ONE CRORES ONLY) FOR PER HA. OF THE AREA FOUND TO BE UNDER ILLEGAL OVER BURDEN DUMP ETC. III) MINING OPERATION MAY BE ALLOWED TO BE UNDERTAKEN AFTER (A) THE IMPLEMENTATION OF THE R& R PLAN IS PHYSICALLY UNDERTAKEN AND IS FOUND TO BE SATISFA CTORY BASED ON THE PREDETERMINED PARAMETERS (B) PENALTY/ COMPENSATION AS DECIDED BY THIS HONBLE PAGE 14 14 COURT IS DEPOSITED AND (C) THE CONDITIONS AS APPLICABLE IN RESPECT OF CATEGORY - A LEASES ARE FULFILLED/FOLLOWED; IV) IN RESPECT OF THE SEVEN MINI NG LEASES LOCATED ON/NEARBY THE INTERSTATE BOUNDARY, THE MINING OPERATION SHOULD PRESENTLY REMAIN SUSPENDED. THE SURVEY SKETCHES OF THESE LEASES SHOULD BE FINALIZED AFTER THE INTERSTATE BOUNDARY IS 11 DECIDED AND THEREAFTER THE INDIVIDUAL LEASES SHOULD BE DEA LT WITH DEPENDING UPON THE LEVEL OF THE ILLEGALITY FOUND; AND V) OUT OF THE SALE PROCEEDS OF THE EXISTING STOCK OF THE MINING LEASES, AFTER DEDUCTING : A) THE PENALTY/COMPENSATION PAYABLE; B) ESTIMATED COST OF THE IMPLEMENTATION OF THE R& R PLAN; AND C) 10% OF THE SALE PROCEEDS TO BE RETAINED BY THE MONITORING COMMITTE E FOR BEING TRANSFERRED TO THE SPV D) THE BALANCE AMOUNT, IF ANY, MAY BE ALLOWED TO BE DISBURSED TO THE RESPECTIVE LESSEES. .. .. ( II) CONDITIONS WHICH HAVE BEEN SUGGESTED FOR OPENING OF CATEGORY A MINES AND ADDITIONALLY THE R& R PLANS FOR CAT EGORY B MINES 43. THE CONDITIONS SUBJECT TO WHICH CATEGORY A AND B MINES ARE TO BE REOPENED AND THE R&R PLANS THAT HAVE BEEN RECOMMENDED AS A PRECONDITION FOR REOPENING OF CATEGORY B MINES ARE ESSENTIALLY STEPS TO ENSURE SCIENTIFIC AND PLANNED EX PLOITATION OF THE SCARCE MINERAL RESOURCES OF THE COUNTRY. THE DETAILS OF THE PRECONDITIONS AND THE R&R PLANS HAVE ALREADY BEEN NOTICED AND WOULD NOT REQUIRE A REPETITION. SUFFICE IT WOULD BE TO SAY THAT SUCH RECOMMENDATIONS ARE WHOLESOME AND IN THE INTERE ST NOT ONLY OF THE ENVIRONMENT AND ECOLOGY BUT THE MINING INDUSTRY AS A WHOLE SO AS TO ENABLE THE INDUSTRY TO RUN IN A MORE ORGANIZED, PLANNED AND DISCIPLINED MANNER. FIMI WAS ACTIVELY ASSOCIATED IN THE FRAMING OF THE GUIDELINES AND THE PREPARATION OF THE R&R PLANS. THERE IS NOTHING IN THE PRECONDITIONS OR IN THE DETAILS OF THE R&R PLANS SUGGESTED WHICH ARE CONTRARY TO OR IN CONFLICT OR INCONSISTENT WITH ANY OF THE STATUTORY PROVISIONS OF THE MMDR ACT, EP ACT AND FC ACT. IN SUCH A SITUATION, WHILE ACCEPTING THE PRECONDITIONS SUBJECT TO WHICH THE CATEGORY A AND B MINES ARE TO BE REOPENED AND THE R&R PLANS THAT MUST BE PUT IN PLACE FOR CATEGORY B MINES, WE ARE OF THE VIEW THAT THE SUGGESTIONS MADE BY THE CEC FOR PAGE 80 80 REOPENING OF CATEGORY A AND B MINES AS WELL AS THE DETAILS OF THE R&R PLANS SHOULD BE ACCEPTED BY US, WHICH WE ACCORDINGLY DO. THIS WILL BRING US TO THE MOST VITAL ISSUE OF THE CASE, I.E., THE FUTURE OF THE CATEGORY C MINES. THE ANNEXURE R - 9 WHICH IS AN EXTRACT FROM THE CEC REPORT DATED 03.02.2012 CLASSIFYING THE CATEGORY A MINING LEASES IS AS UNDER: - S NO NAME OF THE LEASE DIST CAT JOINT TEAM PROCEEDINGS DATED M.L. NO. LEASE AREA ENCROACHMENT FOUND BY THE JOINT TEAM ENCROACHMENT AS PER THE TOTAL STATION SURVEY MINING PIT DUMP ROAD OTHER TOTAL AREA OF MINING PIT % OF LEASE AREA AREA OF MINING PIT % OF LEASE AREA IN HA. IN HA IN HA 1 V.N.K. MENON BALLARY A 13.06.2011 2543 10.00 0.05 0.50 0.00 0.32 0.37 2 VEERABHADRAPHA SANGAPPA AND COMPANY BALLARY A 13.06.2011 2296 51.00 0.00 0.29 0.57 2.12 2.41 3 B. KUMARA GOWDA BALLARY A 13.06.2011 2516 54.25 0.03 0.06 0.22 0.41 1.33 6.70 8.28 4 SRI ALLUM PRASHANTH BALLARY A 02.07.2011 2352 69.64 0.00 0.21 0.30 12.17 12.38 5. NADEEM MINERALS BALLARY A 02.07.2011 2526 53.20 0.06 0.11 0.16 0.30 3.09 3.09 6 TIFFINS BARYTES ASBESTOS AND PAINTS LTD BALLARY A 02.07.2011 2293 191.13 0.00 0.25 0.13 7.43 7.68 7 MYSORE MINERALS (HARISHANKAR) BALLARY A 28.07.2011 1754 6.07 0.00 0.00 0.07 0.07 8 LAKSHMI MINERALS BALLARY A 28.07.2011 2551 22.26 0.00 0.10 0.45 1.80 1.90 9 NATIONAL MINERAL DEVELOPMENT CORPORATION BALLARY A 08.09.2011 1111 647.50 0.29 0.04 0.00 10.12 10.41 10 P. BALASUBBASETTY & SONS BALLARY A 08.09.2011 2502 44.11 0.18 0.41 0.29 0.66 0.69 1.16 12 10 . THUS, FROM THE TABLE REPRODUCED ABOVE, IT IS SEEN THAT THE ASSESSEE HAS BEEN CLASSIFIED AS CATEGORY - A WHEREAS THE ASSESSING OFFICER HAS CONSIDERED THE ASSESSEE AS CATEGORY - B COMPANY . THE HONBLE SUPREME COURT HAS CLEARLY INDICATED THAT CATEGORY - A COMPRISES OF (I) WORKING LEASES WHEREIN NO ILLEGALITY / MARGINAL ILLEGALITY HAVE BEEN FOUND AND (II) NON - WORKING LEASES WHEREIN NO MARGINA L / ILLEGALITIES HAVE BEEN FOUND , W HEREAS CATEGORY - B COMPRISES OF (I) MINING LEASES WHEREIN ILLEGAL MINING IS 10% TO 15% OF THE SANCTIONED LEASE AREAS. HOWEVER, CEC HAD RECOMMENDED THAT BOTH A AND B CATEGORIES MAY BE ALLOWED TO RESUME THE MINING ACTIVITY SUBJECT TO THE PAYMENT OF PENALTY / COMPENSATION DECIDED BY THE COURT. THUS, ACCORDING TO THE ASSESSEE , THE SAID EXPENDITURE IS NOTHING BUT A PAYMENT WHICH WAS REQUIRED TO BE MADE WITHOUT WHICH THE ASSESSEE COULD NOT HAVE CARRIED ON T HE MINING ACTIVITIES AND THEREFORE, IT IS A BUSINESS EXPENDITURE. SINCE THE CEC HAD CATEGORISED THE ASSESSEE AS A CATEGORY - A COMPANY AND THE HONBLE SUPREME COURT HAS ACCEPTED THE SAID CATEGORIZATION, THERE WOULD HAVE 11 MYSORE MINERALS LTD (TIMMAPPANAGUDI) BALLARY A 08.09.2011 2805 136.97 0.00 1.82 1.33 1.78 3.60 12 M. SRINIVASULU BALLARY A 08.09.2011 2552 134.00 0.00 0.00 0.99 0.99 13 ZEENATH TRANSPORT CO BALLARY A 08.09.2011 2547 50.00 0.22 0.44 0.51 1.02 1.59 2.32 14 VARALAKSHMI MINING CO BALLARY A 08.09.2011 2611 10.66 0.00 0.16 1.50 0.71 0.87 15 HP MANJUNATH BALLARY A 08.09.2011 699 3.03 0.07 2.31 0.00 0.00 0.14 0.21 16 NATIONAL MINIERAL DEVELOPMENT CORPORATION BALLARY A 08.09.2011 2396 608.00 1.19 0.20 1.65 0.27 49.49 52.33 17 SANDUR MAGENESE & IRON ORES LTD BALLARY A 10.11.2011 2580 1,863.02 3.97 0.21 0.78 0.04 35.89 40.64 18 G J KUMAR CHITRA DURGA A 13.10.2011 2499 1.34 0.00 0.00 0.16 0.16 19 E. RAMAMURTHY ( R PRAVEEN CHANDRA) CHITRA DURGA A 13.10.2011 2294 42.60 0.00 0.32 0.75 2.53 2.85 20 MINERAL ENTERPRISES LTD CHITRA DURGA A 24.01.2012 2348 103.81 3.13 3.13 21 KARNATAKA LIMPO TUMK UR A 10.11.2011 2028 16.19 0.17 1.05 0.12 0.74 1.02 1.31 TOTAL (2 MINING LEASES) 4,118.78 6.23 0.15 6.88 0.17 141.94 155.0 5 13 BEEN MARGINAL ILLEGALITIES COMMITTE D BY THE ASSESSEE AND THE COMPENSATION / PENALTY AS DIRECTED BY THE HONBLE SUPREME COURT IS ONLY TO COMPENSATE THE GOVERNMENT FOR THE LOSS OF REVENUE FROM SUCH MINING OR MARGINAL ILLEGALITIES AND NOT AS A PENALTY . T HOUGH THE NOMENCLATURE GIVEN IS PENAL TY IT IS NOT FOR INFRACTION OR VIOLATION OF ANY LAW TO HOLD IT TO BE PUNITIVE IN NATURE, AS PRESUMED BY THE ASSESSING OFFICER. LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON VARIOUS CASE LAW, PARTICULARLY THE DECISION OF THE COORDINATE BENCH OF THE ITAT, KOLKATA IN THE CASE OF ESSEL MINING & INDUSTRIES LTD VS. ADDL. CIT (ITA NO. 352/KOL/2011 AND OTHERS, DATED 20.05.2016); ACIT VS. FREEGADE & CO. LTD (ITA NO.934/KOL/2009, DATED 05.08.2011) AND ALSO THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN TH E CASE OF SHYAM SEL LTD VS. DCIT (72 TAXMANN.COM 105) (CAL.). ON GOING THROUGH THE SAID DECISIONS, WE FIND THAT THE HONBLE CALCUTTA HIGH COURT HAS CONSIDERED THE CASE OF AN ASSESSEE WHO FAILED TO INSTALL POLLUTION CONTROL DEVICE WITHIN FACTORY PREMISE WI THIN PRESCRIBED TIME AND THAT THE ASSESSEE HA D TO PAY RS. 12.50 LAKH FOR COMPENSATING DAMAGE TO ENVIRONMENT AND THE SAME WAS RECOVERED BY STATE POLLUTION CONTROL BOARD ON THE PRINCIPLE OF POLLUTER PAYS AND THE A.O. HAD TREATED IT AS PENALTY AND DID NOT A LLOW THE SAME AS BUSINESS EXPENDITURE. THE HONBLE HIGH COURT HAD TAKEN NOT E OF THE FACT THAT THE ASSESSEE S BUSINESS WAS NOT ILLEGAL AND THAT COMPENSATION WAS PAID BECAUSE OF ITS FAILURE TO INSTALL POLLUTION CONTROL DEVICE WITHIN PRESCRIBED TIME AND THER EFORE, SUCH PAYMENT WAS UNDOUBTEDLY FOR THE 14 PURPOSE OF BUSINESS AND IN CONSEQUENCE OF BUSINESS CARRIED ON BY THE ASSESSEE AND WAS THUS COVERED BY SECTION 37 OF THE ACT. FOR COMING TO THIS CONCLUSION, HONBLE HIGH COURT HAS ALSO CONSIDERED THE JUDGMENT OF THE HONBLE NATIONAL GREEN TRIBUNAL IN THE CASE OF STATE POLLUTION CONTROL BOARD VS. SWASTIK ISPAT (P.) LTD WHEREIN AT PARA 38 OF THE JUDGMENT THE TRIBUNAL HELD AS UNDER: - BEING PUNITIVE IS THE ESSENCE OF PENALTY. IT IS IN CLEAR CONTRADISTINCTION TO REMEDIAL AND / OR COMPENSATORY. PENALTY ESSENTIALLY HAS TO BE FOR RESULT OF A DEFAULT AND IMPOSED BY WAY OF PUNISHMENT. ON THE CONTRARY, COMPENSATORY MAY BE RESULTI NG FROM A DEFAULT FOR THE ADVANTAGE ALREADY TAKEN BY THAT PERSON AND IS INTENDED TO REMEDY OR COMPENSATE THE CONSEQUENCES OF THE WRONG DONE. FOR INSTANCE, IF A UNIT HAS BEEN GRANTED CONDITIONAL CONSENT AND IS IN DEFAULT OF COMPLIANCE, CAUSES POLLUTION BY POLLUTING A RIVER OR DISCHARGING SLUDGE, TRADE AFFLUENT OR TRADE WASTE INTO THE RIVER OR ON OPEN LAND CAUSING POLLUTION, WHICH A BOARD HAS TO REMOVE ESSENTIALLY TO CONTROL AND PREVENT THE POLLUTION, THEN THE AMOUNT SPENT BY THE BOARD, IS THUS, SPENT BY ENC ASHING THE BANK GUARANTEE OR IS ADJUSTED THREAD AND THIS EXERCISE WOULD FALL IN THE REALM OF COMPENSATORY RESTORATION AND NOT A PENAL CONSEQUENCE. IN GATHERING THE MEANING OF THE WORD PENALTY IN REFERENCE TO A LAW, THE CONTEXT IN WHICH IT IS USED IS SIG NIFICANT. 11. APPLY ING THIS RATIO TO THE FACTS OF THE CASE BEFORE US, WE FIND FROM PARA 43 OF THE HONBLE SUPREME COURTS ORDER REPRODUCED ABOVE THAT THE CONDITION OF PAYMENT FOR RESUMING THE MINING ACTIVITY BY CATEGORIES A & B COMPANIES IS TO NOT TO PUNISH THE COMPANIES FOR ANY VIOLATION OF LAW BUT IS TO ENSURE SCIENTIFIC AND PLANNED E XPLOITATION OF MINERAL RESOURCES IN INDIA. FURTHER THE HONBLE SUPREME COURT HAD DIRECTED AS UNDER: - (X) OUT OF THE 20% OF SALE PROCEEDS RETAINED BY THE MONI TORING COMMITTEE IN RESPECT OF THE CLEARED MINING LEASES FALLING IN CATEGORY - A, 10% OF THE SALE PROCEEDS MAY BE TRANSFERRED TO THE SPV WHILE THE BALANCE 10% OF THE SALE PROCEEDS MAY BE REIMBURSED TO THE RESPECTIVE LESSEES. IN RESPECT OF THE MINING LEASE S FALLING IN CATEGORY - B, AFTER DEDUCTING THE PENALTY / COMPENSATION, THE ESTIMATED COST OF THE IMPLEMENTATION OF THE R & R PLAN, AND 10% OF THE SALE PROCEEDS TO BE 15 RETAINED FOR BEING TRANSFERRED TO THE SPV, THE BALANCE AMOUNT, IF ANY MAY BE REIMBURSED TO THE RESPECTIVE LESSEES; THE FACT T H AT THE COMPENSATION IS PROPORTIONATE TO AREA OF ILLEGAL MINING OUTSIDE THE LEASE D AREA AND THAT THE ASSESSEE HAS PAID THE PROPORTIONATE COMPENSATION FOR MINING IN THE AREAS OUTSIDE THE SANCTIONED AREA ALLOTTE D TO IT AND TH AT 10% OF SUM IS TO BE TRANSFERRED TO SPV AND THE BALANCE 10% IS TO BE REIMBURSED TO THE RESPECTIVE LESSEES, ACCORDING TO US, PROVES THAT IT IS A PAYMENT MADE AS COMPENSATION FOR EXTRA MINING , WITHOUT WHICH THE ASSESSEE COULD NOT HAVE RESUMED ITS ACTIVITIES . THEREFORE, WE ARE INCLINED TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT IT IS COMPENSATORY IN NATURE AND IS A BUSINESS EXPENDITURE AND IS ALLOWABLE U/S 37(1) OF THE ACT. THUS, GROUNDS NO.2 AND 3 RAI SED BY THE ASSESSEE ARE ALLOWED. 1 2 . AS REGARDS THE GROUND NO.4, AGAINST THE DISALLOWANCE OF EXPENDITURE INCURRED TOWARDS CORPORATE SOCIAL RESPONSIBILITY (CSR), WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWED THE SAME OBSERVING THAT THE EXPENDITURE CLAIM ED BY THE ASSESSEE IS IN THE NATURE OF DONATIONS AND THEREFORE HELD THAT IT IS NOT A BUSINESS EXPENDITURE AND IS NOT ALLOWABLE AS A DEDUCTION U/S 37 (1) OF THE ACT. THE CIT(A) CONSIDERED THE DIRECTION OF THE ITAT FOR THE A.Y. 2009 - 10 AND A.O. WAS DIRE CTED TO EXAMINE THE NATURE OF EXPENDITURE AND RECALCULATE THE ALLOWABILITY OF EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS CSR AND TO DISALLOW THE 16 EXPENDITURE WHICH ARE IN THE NATURE OF CAPITAL EXPENDITURE WHICH WAS DEBITED TO THE CSR. THEREFORE, THE ASSE SSEE IS IN APPEAL BEFORE US. 1 3 . LEARNED COUNSEL FOR THE ASSESSEE SOUGHT SIMILAR DIRECTIONS AS GIVEN BY THE ITAT IN THE EARLIER YEARS 2005 - 06 TO 2011012. 1 4 . LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 1 5 . HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE DIRECTION OF THE ITAT IN THE EARLIER ASSESSMENT YEARS HOLDS GOOD FOR THE RELEVANT ASSESSMENT YEARS UNDER CONSIDERATION. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH ON SIMILAR SET OF FACTS, WE DIRECT THE A.O. TO RECALCULATE THE EXPENSES ALLOWABLE UNDER CSR AFTER DISALLOWING THE SUM OF CAPITAL EXPENSES. ACCORDINGLY, GROUND NO.4 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 1 6 . GROUND NO.5 IS GENERAL IN NATURE AND THEREFORE NEEDS NO ADJUDICATION. 1 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 1 8 . AS FAR AS THE REVENUES APPEAL (ITA NO.1785/H/2017, A.Y. 2013 - 14) IS CONCERNED, WE FIND THAT ALL THE ISSUES RAISED BY THE REVENUE BEFORE US ARE COVERED BY THE DECISION OF ITAT IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS AND THE REVENUE IS IN APPEAL BEFORE THE HIGH 17 COURT ON THE SAID ORDERS OF THE TRIBUNAL. WE FIND THAT THE CIT(A) HAS FOLLOWED THE DECISION OF THE TRIBUNAL FOR GRANTING RELIEF TO THE ASSESSEE AND IT HAS NOT BEEN BROUGHT TO OUR NOTICE THAT THE ORDERS OF THE ITAT ARE SUSPENDED OR SET - ASIDE BY THE HONBLE HIGH COURT. IN VIEW OF THE SAME, WE SEE NO REASON TO INTERFERE WITH THE ORDERS OF THE CIT(A) ON THE ISSUES, WHO HAS FOLLOWED THE ORDERS OF THE ITAT ON THE SAME ISSUES. ACCORDINGLY, THE REVENUES APPEAL FOR THE A.Y. 2013 - 14 IS DISMISSED. ITA NO.1823/H/2017 (A.Y.: 2014 - 15) (BY ASSESSEE) 1 9 . IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW TO THE EXTENT IT IS THE PREJUDICIAL TO THE INTEREST OF THE ASSESSEE. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY A.O. OF RS. 285,46,00,000 / - BY TREATING THE AMOUNTS PAID BY APPELLANT ON THE ORDER OF SUPREME COURT AS PENAL IN NATURE IGNORING THAT THE AMOUNT PAID IS COMPENSATORY IN NATURE AND PAID EXCESSIVELY FOR THE PURPOSE OF BUSINESS. 3. THE LD. CIT(A) ERRED BY STATING THAT APPELLANT HAS NOT FURNISHED ANY FURTHER EVIDENCE OF PROOF TO COUNTER THE FINDINGS OF ASSESSING OFFICER IGNORING THAT THE APPELLANT HAS GIVEN DETAILED EXPLANATION ALONG WITH THE RELEVANT D OCUMENTS IN SUPPORT OF ITS CLAIM. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF CSR TO THE EXTENT OF CAPITAL IN NATURE AS INTERPRETED, INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS AND CLAIMED AS DEDUCTION U/S 37(1) OF THE I.T. AC T. EXPENDITURE INCURRED IS NOT A CAPITAL EXPENDITURE FOR NMDC SINCE IT IS NOT CAPITALIZED IN THE BOOKS OF ACCOUNT. 5. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,85,00,000/ - TOWARDS INTEREST ON INCOME TAX ON THE BASIS THAT THE SAME HAS NOT BE EN CRYSTALLISED DURING THIS ASSESSMENT YEAR. 20 . FROM THE ABOVE GROUNDS OF APPEAL, WE FIND THAT GROUNDS NO.2 AND 3 ARE SIMILAR TO THAT OF THE GROUNDS NO. 2 AND 3 RAISED BY THE ASSESSEE 18 FOR THE A.Y. 2013 - 14, WHICH ARE ADJUDICATED IN THE ABOVE PARAS OF THIS ORDER. FOR THE DETAILED REASONS GIVEN ABOVE, THE GROUNDS NO.2 AND 3 RAISED BY THE ASSESSEE FOR THE A.Y. 2014 - 15 ARE ALLOWED. 2 1 . FURTHER , WE FIND THAT GROUND NO.4 RAISED BY THE ASSESSEE IN THE A.Y. 2014 - 15 IS SIMILAR TO THAT OF THE GROUND NO.4 RAISED IN THE A.Y. 2013 - 14 AND FOR THE DETAILED REASONS GIVEN THEREIN, THE GROUND NO.4 RAISED BY THE ASSESSEE FOR THE A.Y. 2014 - 15 IS ALLOWED FOR STATISTICAL PURPOSES. 2 2 . AT THE TIME OF HEARING LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES N OT WISH TO PRESS THE GROUND NO.5 AND ACCORDINGLY, THE SAME IS REJECTED AS NOT PRESSED. 2 3 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1786 /H/2017 (A.Y.: 2014 - 15) (BY REVENUE ) 2 4 . IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE CIT(A) ERRED IN DIRECTING THE A.O. TO WORK OUT THE LIABILITY AND ALLOW THE MINE CLOSURE OBLIGATION EXPENSES OF RS. 8,35,00,000 / - , WITHOUT APPRECIATING THE FACT THAT THE SAID LIABILIT Y IS NOT AN ASCERTAINED LIABILITY. 2. THE CIT(A) ERRED IN IGNORING THE FACT THAT REVENUES APPEALS ON IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR THE AYS 2009 - 10 AND 2010 - 11 ARE PENDING ADJUDICATION BY THE HONBLE HIGH COURT. 3. THE CIT(A) ERRED IN ALLOWING THE DEPRECIATI9ON ON INTANGIBLE ASSETS OF RS. 11,33,00,000 / - . 19 4. THE CIT(A) ERRED IN IGNORING THE FACT THAT REVENUES APPEALS ON IDENTICAL ISSUE IS ASSESSEES OWN CASE FOR AYS 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 ARE PENDING ADJUDICATION BY THE HONBLE HIG H COURT. 5. THE CIT(A) ERRED IN DIRECTING THE A.O. TO RE - CALCULATE AND ALLOW CORPORATE SOCIAL RESPONSIBILITY EXPENSES OF RS. 152,85,00,000 / - . 6. THE CIT(A) ERRED IN IGNORING THE FACT THAT THE REVENUES APPEALS ON IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR AYS 2009 - 10, 2010 - 11 & 2011 - 12 ARE PENDING ADJUDICATION BY THE HONBLE HIGH COURT. 2 5 . FROM THE ABOVE GROUNDS, WE FIND THAT EXCEPT FOR THE QUANTUM, THE GROUNDS RAISED IN THE A.Y. 2014 - 15 ARE SIMILAR TO THAT OF THE GROUNDS RAISED IN THE A.Y. 2013 - 14. THEREFORE, FOR THE REASONS GIVEN THEREIN IN THE A.Y. 2013 - 14, THE GROUNDS OF APPEAL RAISED BY THE REVENUE FOR THE A.Y. 2014 - 15 ARE ALSO REJECTED AND THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 2 6 . IN THE RESULT, ASSESSEES APPEALS FOR THE AYS 2013 - 14 AND 2014 - 15 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE REVENUES APPEALS FOR THE AYS 2013 - 14 AND 2014 - 15 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER , 2018. SD/ - SD/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 17 TH OCTOBER , 2018 OKK COPY TO: - 20 1) CMD, NMDC LIMITED, KHANIJI BHAVAN, 10 - 3 - 311/A, CASTLE HILLS, MASAB TANK, HYDERABAD. 2) DCIT, CIRCLE - 16(1), HYDERABAD. 3) THE CIT(A) - 4 , HYDERABAD 4) THE PR. CIT - 4 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE