NMDC Limited, Hyderabad V. Addl.CIT, Circle-16, Hyderabad

ITA 1795/HYD/2013

• Counselvise Citation: 179522514 RSA 2013
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: LAXMINIWAS SHAR MA
• Keywords: Reopening of assessment; Capital asset; Business income; Revision of order; Depreciation; Income from undisclosed sources; Principle of natural justice; Additional depreciation; Non-deduction of tax; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 80HHC; 147; 145; 148; 263; 28; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE S/SHRI B. RAMAKOTAIAH, A.M. & SAKTIJIT DEY, J.M. ITA.NO. A.Y. APPELLANT RESPONDENT 1792/HYD/2013 2007-08 THE DCIT, CIRCLE 16(1), HYDERABAD M/S. NMDC LTD., HYDERABAD. PAN AAACN7325A 1793/HYD/2013 2010-11 THE DCIT, CIRCLE 16(1), HYDERABAD M/S. NMDC LTD., HYDERABAD. PAN AAACN7325A 1794/HYD/2013 2007-08 M/S. NMDC LTD., HYDERABAD. PAN AAACN7325A THE DCIT, CIRCLE 16(1), HYDERABAD 1795/HYD/2013 2010-11 M/S. NMDC LTD., HYDERABAD. PAN AAACN7325A THE ADDL. CIT, RANGE-16, HYDERABAD FOR ASSESSEE : MR. LAXMINIWAS SHARMA FOR REVENUE : MR. D. SUDHAKAR RAO CIT-DR DATE OF HEARING : 23.04.2014 DATE OF PRONOUNCEMENT : 09.05.2014 ORDER PER B. RAMAKOTAIAH, A.M. THESE FOUR ARE CROSS-APPEALS BY ASSESSEE AND REVENUE FOR A.Y. 2007-2008 AND 2010-2011 AGAINST TH E ORDERS OF THE CIT(A)-V, HYDERABAD DATED 16.09.2013. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THESE ARE HEARD TOGETHER AND DECIDED BY THIS COMMON ORDER. ASSESSEE PLACED ON RECORD PAPER BOOKS RELEVANT FOR EACH A.Y. INCLUD ING CASE LAW AND ALSO BRIEF SUBMISSIONS ON THE GROUNDS RAISE D. 2 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 2. WE HAVE HEARD LD. COUNSEL MR. LAXMINIWAS SHARMA AND THE LD. CIT D.R. MR. D. SUDHAKAR RAO IN DETAIL. 3. ASSESSEE IS A PUBLIC SECTOR UNDERTAK ING ENGAGED IN THE BUSINESS OF MINERAL EXPLORATION AND EXTRACTI ON. ASSESSEE FILED ITS RETURNS FOR THE IMPUGNED ASSESSMENT YEARS AND THE ASSESSMENT WAS COMPLETED FOR A.Y. 2007-08 ORIGINALL Y UNDER SECTION 143(3) ON 29.12.2009 DETERMINING THE TOTAL INCOME AT RS.3502,79,16,045/-. SUBSEQUENTLY, ON THE BASIS OF INFORMATION OBTAINED THROUGH NEWS PAPERS FOLLOWED B Y THE REPORT OF LOKAYUKTA OF KARNATAKA RECEIVED/OBTAINED BY THE A.O. AND ALSO ENQUIRIES MADE IN THIS REGARD FROM TH E DIRECTORS OF THE COMPANY, ASSESSMENT WAS REOPENED UNDER SECTI ON 147 OF THE ACT BY ISSUING NOTICE UNDER SECTION 148 AND RE- ASSESSMENT WAS COMPLETED FOR A.Y. 2007-08 DETERMINI NG THE TOTAL INCOME AT RS.4042,93,38,564/- BY MAKING THE F OLLOWING ADDITIONS. A) SUPPRESSION OF SALE VALUE OF EXPORTS RS. 506,10,92,507 B) DISALLOWANCE U/S.40(A)(IA) RS. 20,56,93,044 C) DISALLOWANCE U/S.40(A) RS. 19,83,98,000 D) DISALLOWANCE OF ADDITIONAL DEPRECIATION WRONGLY CLAIMED RS. 7,46,73,168 E) DISALLOWANCE OF CLAIM OF EXPENSES OF EARLIER YEAR RS. 22,62,104 F) LOSS ON SALE OF ASSETS RS. 48,335 4. FOR A.Y. 2010-2011 ASSESSEE FILED RETURN OF INC OME ON 24.09.2010 ADMITTING TOTAL INCOME AT RS.5114,44, 66,450/- AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143( 3) DETERMINING TOTAL INCOME AT RS.5522,12,83,862/- INT ER ALIA, MAKING VARIOUS ADDITIONS. 5. ASSESSEE CONTESTED BEFORE THE LD. CIT(A) AMONGS T VARIOUS ADDITIONS MADE, THE ISSUE OF REOPENING OF A SSESSMENT UNDER SECTION 147 OF THE ACT IN AT 2007-08. WHILE U PHOLDING 3 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD THE REOPENING FOR A.Y. 2007-08, THE LD. CIT(A) CONF IRMED MOST OF THE ADDITIONS WHILE GIVING SOME RELIEF ON SOME O F THE ISSUES. ACCORDINGLY, BOTH REVENUE AND ASSESSEE ARE AGGRIEVE D ON THE ORDERS OF THE LD. CIT(A). THESE ARE DECIDED YEAR-WI SE AND APPEAL-WISE AS UNDER: ITA.NO.1794/HYD/2013 A.Y. 2007-08 : 6. THIS IS ASSESSEES APPEAL IN WHICH ASSESSEE HAS RAISED VARIOUS GROUNDS. GROUND NOS. 1 AND 6 ARE GEN ERAL IN NATURE AND THEREFORE, NEED NOT BE ADJUDICATED. 7. GROUND NO.2 PERTAIN TO THE ISSUE OF REOPENING. IT WAS CONTENDED THAT IT WAS BAD IN LAW AS IT WAS ONLY A CHANGE OF OPINION. IT WAS CONTENDED THAT A.O. HAS CONSIDER ED ALL THE ISSUES AT THE TIME OF ASSESSMENT AND THERE IS NO TA NGIBLE MATERIAL THAT HAS BEEN BROUGHT ON RECORD TO SUGGEST ESCAPEMENT OF INCOME. 8. AS BRIEFLY STATED, A.O. BASING ON THE NEWSPAPER REPORT PUBLISHED AND THE REPORT OF THE HONBLE LOKA YUKTA OF KARNATAKA OBSERVED THAT THE ASSESSEE HAS BEEN RESOR TING TO SUPPRESSION OF THE VALUE OF SALE TOWARDS EXPORT OF IRON ORE DURING THE PERIODS 2006-07 TO 2009-10. ACCORDINGLY, HE REOPENED THE ASSESSMENT FOR THE A.Y. 2007-08 BY ISS UE OF NOTICE UNDER SECTION 148. DURING APPEAL PROCEEDINGS BEFORE THE LD CIT(A) , ASSESSEE SUBMITTED THE FOLLOWING: 1. THE AO HAS CONSIDERED ALL THE FACTS AND INFORMAT ION WHILE COMPLETING THE ASSESSMENT U/S 143 (3). 2. NO CHANGE IN THE FACTS THAT EXISTED AT THE TIME OF ORIGINAL ASSESSMENT. THE FOLLOWING CASE-LAWS WERE RELIED UPON. 4 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD (A) IT VS SHIV SHAKTI BUILD HOME LTD 141 DJ 123 (JODHPUR) (TRIB) (B) ICLCI HOME FINANCE (WP 430/2012 DECIDED ON 25-7-2012 (BOMBAY HC) (C) KELVINATOR LIMITED 256 ITR 1 (DELHI HC) (D) CIT VS NIRMA CHEMICAL WORKS (309 ITR 67) (E) IDEA CELLULAR 301 ITR 407 (BOMBAY HC) (F) PARVEEN BHARUCHA VS. DCLT R 350 (BOMBAY HC) (G) CIT VS SFIL STOCK BROKING LTD41 DTR 98 (DEL) 9. THE LD. CIT(A) DID NOT AGREE WITH THE ASSESSEE S CONTENTIONS BY STATING AS UNDER : 4.3. I HAVE GONE THROUGH THE FACTS OF THE CASE AN D THE SUBMISSIONS OF THE APPELLANT. THE FRESH SET OF FACT S IN THE FORM OF NEWSPAPER REPORTS AND REPORT OF HON'BLE MEM BER OF LOKAYUKTA, KARNATAKA VERY WELL FORM THE BASE FOR PRIMA FACIE EVIDENCE FOR REOPENING OF THE ASSESSMEN T AND IT CANNOT BE SAID THAT THEY DO NOT HAVE ANY EVIDENT IARY VALUE. EVEN THE HON'BLE HIGH COURT OF ANDHRA PRADES H, IN A RECENT JUDGMENT ON A WRIT PETITION FILED BY THE H ON'BLE MINISTER IN A DISPROPORTIONATE ASSETS CASE, HELD TH AT THERE IS PRIMA FACIE EVIDENCE IN THE CONTENTS OF THE PETI TION AND ORDERED FOR CBI ENQUIRY AGAINST A MEMBER OF PARLIAM ENT. SIMILARLY, THE REOPENING OF THE ASSESSMENT IN THE P RESENT CASE BASING ON THE REPORTS OF THE NEWSPAPER AND REP ORT OF HON'BLE LOKAYUKTA OF KARNATAKA IS NOT BAD IN LAW AN D IS CORRECTLY JUSTIFIED. AS A MATTER OF FACT, THE SCRUT INY ASSESSMENT PROCEEDINGS IN THE APPELLANT'S CASE FOR ASSESSMENT YEAR 2009-10 HAVE ALSO CONCLUDED ON 30-1 2- 2011 I.E., PRIOR TO COMPLETION OF THE REASSESSMENT PROCEEDINGS, WHICH LED TO THE CONCLUSION THAT THE A SSESSEE IS RESORTING TO SUPPRESSION OF VALUE OF SALES TOWAR DS EXPORT OF IRON ORE. AS SUCH, THE FRESH SET OF FACT OF RESORTING TO SUPPRESSION OF VALUE OF SALES EMERGED DURING THE REGULAR ASSESSMENT FOR ASSESSMENT YEAR 2009-10, WHICH HAS BEEN IN THE KNOWLEDGE OF THE APPELLANT. H ENCE, THE REOPENING OF ASSESSMENT FOR ASSESSMENT YEAR 200 7- 08 IS NOT BAD IN LAW AND IS JUSTIFIED. 5 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 4.4 SO FAR AS SEQUENCE OF EVENTS LEADING TO THE REASSESSMENT IS CONCERNED, THE APPELLANT'S MAIN CONTENTION IS THAT THE ASSESSING OFFICER HAS NOT FO LLOWED THE DUE PROCEDURE LAID DOWN BY SUPREME COURT IN THE CASE CITED SUPRA. IN THIS CONTEXT, IT IS SEEN THAT THE ASSESSING OFFICER, AFTER RECORDING HIS REASONS FOR REOPENING, ISSUED NOTICE U/S 148 ON 16-12-2011 AND THEREAFTER ON THE REQUEST OF THE APPELLANT, VIDE IT S LETTER DATED 16-12-2011, COMMUNICATED THE REASONS FOR REOPENING ON 29-12-2011. SIMULTANEOUSLY; HE ISSUED A NOTICE U/S 143(2) DATED 29-12-2011 WAS ISSUED TAKIN G UP THE CASE FOR SCRUTINY. THOUGH THE APPELLANT IS AWAR E OF THE PROCEEDINGS BEFORE IT FOR ASSESSMENT YEAR 2009-10 A ND THE REASONS FOR REOPENING OF THE ASSESSMENT YEAR 20 07- 08, DID NOT EVEN RAISED ANY OBJECTION TO THE PROPOS ED REOPENING AND CHOSE TO BE SILENT. THE APPELLANT DID NOT EVEN RESPOND WITH ANY OBJECTIONS BEFORE THE REASONA BLE TIME OF 15 DAYS. ONLY AFTER COMMENCEMENT OF THE PROCEEDINGS, THE APPELLANT RAISED ITS OBJECTIONS ON 23-1- 2012 I.E.. NEARLY A MONTH AFTER COMMUNICATION OF TH E REASONS FOR REOPENING. THE SUM AND SUBSTANCE OF THE HON'BLE SUPREME COURT DECISION THAT DUE PROCEDURE T O BE FOLLOWED BEFORE ASSESSMENT PROCEEDINGS, IS THAT OBJECTIONS, IF ANY, TO BE FILED BY THE APPELLANT WI THIN A REASONABLE TIME AND TO BE ADDRESSED BY THE ASSESSIN G OFFICER BEFORE PROCEEDING WITH THE ASSESSMENT. IN T HE PRESENT CASE, THE APPELLANT RESPONDED TO THE COMMUNICATION OF REASONS FOR REOPENING ONLY AFTER CONSUMING 25 DAYS, WHICH IN COMMON PARLANCE IS NOT CALLED FOR WHEN THE APPELLANT ITSELF IS AWARE OF TH E REASONS AS ALSO THE ISSUE EMBROILED IN THE ASSESSME NT PROCEEDINGS FOR ASSESSMENT YEAR 2009-10 IS COMMON F OR ASSESSMENT YEAR 2007-08. IN THESE CIRCUMSTANCES, TH E ASSESSING OFFICER IS WELL WITHIN LAW TO ASSUME THAT THE APPELLANT HAS NO OBJECTION FOR THE PROPOSED REOPENI NG. AS SUCH, THERE IS NO LAPSE ON THE PART OF ASSESSING OF FICER IN FOLLOWING THE PROCEDURE LAID DOWN IN THE HON'BLE AP EX COURT. 10. WE HAVE CONSIDERED THE ARGUMENTS ON THE ISSUE AND VARIOUS CASE LAW RELIED UPON WHICH ARE AS UNDER : I) KELVINATOR 256 ITR 1 II) CIT VS. NIRMA CHEMICAL WORKS 309 ITR 67 (GUJ.) (HC) III) IDEA CELLULAR 301 ITR 407 6 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD IV) ICICI HOME FINANCE CO. LTD. VS. ACIT, MUMBAI WP.NO.430 OF 2012 DATED 20.07.2012 V) PARVEEN P. BHARUCHA VS. DCIT WP.NO.10437/2011 DT . 27.06.2012 VI) ITO VS. SHIV SHAKTI BUILD HOME (P) LTD. (2011) 141 TTJ 123 (ITAT JODHPUR) VII) CIT VS. S.F.I.L. STOCK BROKING LTD. (2010) 41 DTR 98 (DEL.) VIII) VXL TECHNOLOGIES LTD. VS. ACIT ITA.NO.2728/DEL/2013 11. AFTER CONSIDERING THE VARIOUS CASE LAW, ON THE FACTS OF THE CASE WE AGREE WITH THE FINDINGS OF THE LD. C IT(A). BEFORE REOPENING THE ASSESSMENT, A.O. HAS IN FACT GOT THE REPORTS FROM THE NEWS PAPERS AND THEN A.O. ALSO MENTIONED IN THE ASSESSMENT ORDER THE STEPS TAKEN FOR OBTAINING THE INFORMATION FROM LOKAYUKTA, VARIOUS ENQUIRIES CAUSED INCLUDING STATEMENTS RECORDED FROM THE OFFICERS INVOLVED IN E XPORT OF IRON ORE BEFORE REOPENING ASSESSMENT. AS ALREADY POINTED OUT BY THE LD. CIT(A), PROCEEDINGS FOR A.Y. 2009-10 WERE ALSO PENDING AT THAT POINT OF TIME. THEREFORE, WE ARE OF THE OPINIO N THAT A.O. HAS PRIMA FACIE BELIEF TO REOPEN THE ASSESSMENT UND ER SECTION 147. AT THE STAGE OF REOPENING THE ASSESSMENT, IT I S NOT NECESSARY TO EXAMINE THE QUANTUM OF ESCAPEMENT. WHA T IS REQUIRED TO BE VERIFIED IS WHETHER THERE IS ANY BEL IEF FOR COMING TO A DECISION WHETHER INCOME HAS ESCAPED ASSESSMENT . ON THE BASIS OF THE INFORMATION AVAILABLE IN THE FORM OF N EWSPAPER REPORTS AND ALSO REPORT OF LOKAYUKTA, WE ARE OF THE OPINION THAT THERE IS PRIMA FACIE BELIEF FOR REOPENING THE ASSESSMENT. THEREFORE, GROUNDS RAISED BY THE ASSESSEE ON THIS I SSUE ARE REJECTED. WE DO NOT INTEND TO EXAMINE THE VARIOUS C ASE LAW RELIED UPON BY THE ASSESSEE WHICH ARE GIVEN IN PART ICULAR SET OF FACTS. SINCE THE ASSESSMENT ORDER ITSELF CONTAINS T HE STEPS TAKEN CONSEQUENT TO THE INFORMATION OBTAINED IN THE FORM OF NEWSPAPER REPORTS AS PART OF THE ORDER ITSELF, WE A RE OF THE 7 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD OPINION THAT IN THE GIVEN SET OF FACTS, WE CANNOT H OLD THAT AO HAS NO REASON TO BELIEVE AT THE TIME OF REOPENING T HE PROCEEDINGS. ACCORDINGLY, THIS GROUND IS REJECTED. 12. GROUND NO.3 PERTAINS TO THE ISSUE OF ADDITION OF RS.506,10,92,507/- AS SUPPRESSION OF SALE BASED ON THE REPORT OF LOKAYUKTA. THE FACTS RELATING TO THE ADDITION AR E THAT ASSESSING OFFICER RELYING ON THE INVESTIGATION REPO RT OF DR.U.V.SINGH, CHIEF CONSERVATOR OF FORESTS, WHO HAS BEEN ASSIGNED AS INVESTIGATING OFFICER BY HON'BLE LOKAYU KTA OF KARNATAKA, WHERE IN IT WAS REPORTED THAT ASSESSEE W AS UNDER- INVOICING SALES, CALLED FOR INFORMATION AND AFTER A NALYZING THE VARIOUS DETAILS, HELD THAT THE EXPORT SALE PRICES D ISCLOSED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT ARE NOT RELIAB LE AND ACCORDINGLY WORKED OUT THE UNACCOUNTED INCOME OF TH E ASSESSEE. IN COURSE OF THE PROCEEDINGS, THE ASSESSI NG OFFICER EXAMINED THE FOLLOWING OFFICERS OF NMDC, AND OFFICE RS OF M/S. MINERALS & METALS TRADING CORPORATION, NEW DELHI WH O ARE INVOLVED IN EXPORT OF IRON ORE, BY ISSUING OF SUMMO NS AND RECORDED THEIR STATEMENTS. SL.NO. NAME & DESIGNATION NAME OF THE COMPANY DATE OF RECORDING STATEMENT 1. SRI RANA SOM, CHAIRMAN CUM- MANAGING DIRECTOR NMDC 2.12.11 2. SRI B. RAMESH KUMAR, CHAIRMAN CUM- MANAGING DIRECTOR (RETD.) NMDC 14.12.11 3. SRI MUNRALI MANOHAR, DIRECTOR COMMERCIAL (RETD.) NMDC 30.11.11 4. SRI S.K. DAS, DIRECTOR (COMMERCIAL) NMDC 01.12.11 5. SRI ADARSH R. GOEL, DIRECTOR MARKETING (RETD.) MMTC 19.12.11 6. SRI SUNIL KKHURANA, DIRECTOR (MARKETING) MMTC 20.12.11 8 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 12.1. ON EXAMINATION OF THE ABOVE OFFICERS, THE ASSESSING OFFICER NOTICED THAT THE EXPORTS BY NMDC ARE STATED TO HAVE BEEN COVERED BY LONG TERM AND SHORT TERM AG REEMENTS. THE LONG TERM AGREEMENT WHICH NORMALLY COVERS A PER IOD OF FIVE YEARS ESSENTIALLY CONTAINS THE PRODUCE-WISE QUANTIT IES TO BE EXPORTED EVERY YEAR DURING THE PENDENCY OF THE LONG TERM CONTRACT. AS FAR AS THE PRICE IS CONCERNED, THERE I S A SPECIFIC PROVISION IN THE LONG TERM AGREEMENT THAT PRICES SH ALL BE NEGOTIATED MUTUALLY EACH YEAR FOR SUPPLY DURING THE YEAR. WITH REGARD TO FIXATION OF PRICE, SHORT TERM AGREEMENTS, YEARLY AND QUARTERLY ARE MADE. THE BASIS FOR FIXATION OF THE P RICE IS STATED TO BE THE 'BENCH MARK PRICE'. THE 'BENCH MARK PRICE ' IS STATED TO BE BASED ON THE NEGOTIATIONS HELD BETWEEN THE MA IN IMPORTING AND EXPORTING COUNTRIES AND THIS IS IN TH E FORM OF PERCENTAGE INCREASE/DECREASE OVER THE PREVIOUS YEAR 'S PRICE. FURTHER, IT IS LEARNT FROM THE STATEMENTS GIVEN BY THE ABOVE OFFICERS THAT NMDC HAS NOT ADHERED TO OR TAKEN INTO ACCOUNT THE MARKET PRICE FOR FIXATION OF EXPORT PRICE. ON F URTHER INVESTIGATIONS REVEALED THAT THERE IS DIFFERENCE BE TWEEN EXPORT SALES STATED BY MMTC AND SALES DECLARED BY NMDC. TH ERE IS HUGE DIFFERENCE BETWEEN THE SALE RATE OF NMDC AND T HE SALE RATE OF OTHER EXPORTERS DURING THE FINANCIAL YEAR 2 006-07 TO FINANCIAL YEAR 2009-10. THUS, HE OPINED THAT NMDC W AS DECLARING EXPORT SALES AT A VERY LOW RATE WHEN THE MARKET RATES/ THE RATES AT WHICH THE OTHER EXPORTERS EXPOR TED IRON ORE DURING THE SAME PERIOD ARE VERY HIGH. MOREOVER, HE ALSO CAME TO A CONCLUSION THAT THE PERSONS WHO HAVE SIGNED TH E AGREEMENTS ON BEHALF OF NMDC COULD NOT GIVE ANY SAT ISFACTORY EXPLANATION IN THEIR STATEMENT ON THE DISCREPANCIES . ON THAT BASIS ASSESSING OFFICER CAME TO A CONCLUSION THAT T HE ASSESSEE HAS BEEN RESORTING TO SUPPRESSION OF THE VALUE OF S ALES TOWARDS 9 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD EXPORT OF IRON ORE DURING THE PERIOD RELEVANT TO TH E ASSESSMENT YEAR. 12.2. DURING APPEAL PROCEEDINGS BEFORE CIT(A), ASSESSEE SUBMITTED THAT THE EXPORT OF IRON ORE TO J APANESE STEEL MILLS (JSM) AND KOREAN STEEL MILLS IS GOVERNE D BY LONG TERM EXPORT CONTRACTS AND THE PRICES ARE SETTLED EV ERY YEAR ON THE BASIS OF INTERNATIONAL BENCHMARK PRICES ARRI VED AT BETWEEN JSM, BRAZILIAN AND AUSTRALIAN IRON ORE SUPP LIERS. IT WAS FURTHER SUBMITTED THAT SUBSEQUENT TO APPROVA L FROM THE UNION CABINET, A HIGH POWERED DELEGATION COMPRI SING OF OFFICIALS FROM MINISTRY OF COMMERCE, MINISTRY OF ST EEL AND SENIOR OFFICIALS OF ASSESSEE COMPANY AND MMTC LIMIT ED VISIT JAPAN AND KOREA AND HAVE EXTENSIVE NEGOTIATIO NS WITH THE RESPECTIVE STEEL MILLS AS REGARDS PRICE AND THE QUANTITY APPLICABLE FOR THAT YEAR. FURTHER, IT WAS ALSO SUBM ITTED THAT IT IS THE COLLECTIVE PRUDENCE AND COMMERCIAL SENSE OF THE ENTIRE TEAM OF OFFICIALS REPRESENTING GOVERNMENT OF INDIA AS WELL AS THE TWO CPSE'S WHICH IS INSTRUMENTAL IN FIX ING THE PRICES APPLICABLE FOR THE LONG TERM CONTRACTUAL QUA NTITY FOR EACH YEAR. THE ASSESSEE ALSO SUBMITTED THAT SINCE T HE INTERNATIONAL TRADE AGREEMENTS AT THAT POINT OF TIM E DID NOT PROVIDE FOR ANY MIDTERM PRICE REVISIONS IN LINE WIT H SPOT MARKET VARIATIONS, SO AS TO INSULATE THE STEEL COMP ANIES AGAINST VOLATILE SWINGS IN PRICES OF RAW MATERIALS, EVEN THE LONG TERM AGREEMENTS OF ASSESSEE COULD NOT CONTRIVE ANY DEPARTURE FROM THE EXISTING TRADE PRACTICE. THE ASS ESSEE FURTHER SUBMITTED THE PROCEDURE BEING FOLLOWED BETW EEN THE ASSESSEE COMPANY AND MMTC. FINALLY, IT WAS ARGUED T HAT THE ENTIRE SALES REVENUE GENERATED FROM EXPORTS HAS BEEN ACCOUNTED BY BOTH THE ASSESSEE AND MMTC AND SUBMITT ED 10 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD THAT THE COMMERCIAL PRUDENCE OF THE ASSESSING OFFIC ER BASED ON SPOT PRICES, CAN ONLY INDICT THE COMMERCIA L JUDGMENT OF THE ESTEEMED TEAM OF GOVERNMENT OFFICIA LS RESPONSIBLE FOR FIXATION OF PRICES BUT CANNOT CHALL ENGE THE CORRECTNESS OF THE AMOUNTS NOR THE FLOW OF TRANSACT IONS WHICH ARE ENTIRELY TRANSPARENT AND HAVE BEEN UPHELD TO BE TRUE AND FAIR BY THE GOVERNMENT AND STATUTORY AUDIT ORS. ACCORDINGLY, THE ASSESSEE REQUESTED TO REJECT THE CONTENTIONS OF THE ASSESSING OFFICER THAT THERE IS UNDER INVOICING OF EXPORTS. 13. ASSESSEE INTER ALIA MADE VARIOUS SUBMISSIONS WHICH CAN BE SUMMARIZED AS UNDER : 'FIRSTLY, THE APPELLANT HAS NOT DIRECTLY EXPORTED T HE IRON ORE. IT HAS SOLD THE IRON ORE TO MMTC (ANOTHER GOVT. OF INDIA PSU) AND MMTC HAS EXPORTED THE IRON ORE TO JAPAN, KOREA, CHINA ETC. 1. IT IS SQUARELY COVERED BY CASE-LAW : THE ABOVE ISSUE REGARDING UNDER INVOICING OF SALES ARE SQUARELY COVERED IN THE CASE OF MYSORE MINERALS LTD FOR FOUR A.YS 2004-05 TO 2007-08, VIDE ITA NO.350,351/BANG/2011 AND ITA NO.679 & 680 AND 733/BANG/2010 FOR A. Y.2004-05, 2005-06, 2006- 07 AND ITA NO.971/BANG/2011 FOR AY 2007-08. 2. REAL INCOME IS TAXABLE BUT NOT HYPOTHETICAL INCOME > LOKAYUKTA STATED THAT, 'THE LIST OF EXPORTERS AND THEIR PREFERRED CONSIGNEE' IN THE LIST OF EXPORTERS, WHO HAVE UNDER-INVOICED EXPORTS, THERE I S NO NAME OF NMDC > ALSO, DR. UV SINGH ONLY STATES THAT 'IN SOME EXPORTS, THE NMDC SALE RATES ARE VERY LOW AS COMPARED TO SALE RATES OF OTHER EXPORTERS AND PREVAILING MARKET RATES'. 11 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD * FURTHER, DR. U. V.SINGH STATED THAT 'PSU'S IRON ORE EXPORT REALIZATION IS FAR LESS THAN THE POTENTI AL EARNINGS'. * ALSO, HE OBSERVED THAT 'NMDC HAS EXPORTED IRON ORE AT A RATE MUCH BELOW THE PREVAILING RATES DUE TO THIS PUBLIC SECTOR UNDERTAKING HAS INCURRED A HUGE LOSS' * UNDER THE ITA ACT, 1961, IN ORDER THAT INCOME SHOULD ACCRUE IT SHOULD NOT MERELY FALL DUE OR BECOME LEGALLY RECOVERABLE, BUT SHOULD ALSO BE FACTUAL AND PRACTICALLY REALIZABLE. THE THEORY OF O NLY REAL INCOME IS TO BE TAXED IS SETTLED LAW AND IT HA S BEEN HELD BY VARIOUS COURTS THAT NOTWITHSTANDING THAN AN ASSESSEE MAY BE FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE ASSESSEE COULD ONLY BE TAXED ON REAL INCOME AND NOT ON ANY HYPOTHETICAL/ILLUSORY INCOME. THE ASSESSE RELIED ON THE FOLLOWING CASE-LAWS: 1. CLT GUJARAT VS A. RAMAN & CO AIR 1968 SC 49 2.CLT VS SHORJI VA/LABHDAS & CO. 461TR 144 SC 3.STATE BAN OF TRAVANCORE VS CLT 158 ITR 102 SC 3. CLT VS VASISTH CHAY VYAPAR LTD 330 ITR 440 (DEL) 4.UCO BANK VS CLT 2371TR 889 SC 5.GODHRA ELECTRICITY CO. LTD VS. CLT 225 ITR 746 (GUJ) 3. THE ASSESSEE IS BOUND BY THE MOU WITH THE PURCHASER (CONTRACTUAL OBLIGATIONS). IN SUPPORT, RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS : * RB JODHA MAL KUTHIALA VS CLT 82 ITR 570 SC 4. THE ASSESSEE WAS NOT PROVIDED WITH NATURAL JUSTICE TO CROSS EXAMINE THE THIRD PARTY: IN SUPPOR T, RELIANCE IS PLACED ON PRAKASH CHAND NAHTA VS CLT 301 ITR (MP) AND CLT VS SMC SHARE BROKERS LTD 288 ITR 345 (DEL) AND KISHENCHAND CHELLARAM VS CLT 1251TR 713 (SC).' 12 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 14. LD. CIT(A) HOWEVER, DID NOT AGREE WITH THE ASSESSEES CONTENTION AND UPHELD THE ADDITION MADE BY THE A.O. BY FINALLY CONCLUDING IN PARA 5.5.6 AS UNDER : 5.5.6 IN THE LIGHT OF THE OBSERVATIONS IN THE PRECEDING PARAS, IT CAN BE CONCLUDED THAT THERE ARE INCONSISTENCIES IN THE PRICING POLICY OF THE APPELL ANT WITH JAPAN AND SOUTH KOREA AND THE APPELLANT COULD NOT GIVE CONCRETE EXPLANATION RATHER SUBSTANTIATE W ITH PROPER EVIDENCE TO THE FIGURES REPORTED IN THE REPO RT OF DR U.V.SINGH. AS SUCH, THE APPELLANT FAILED TO BRIN G OUT A CASE THAT THE FIGURES IN THE REPORT OF DR U.V.SIN GH ARE INCORRECT EXCEPT STATING THAT THE REPORT IS WRONG. HENCE, THE ADDITION MADE BY THE ASSESSING OFFICER O N THIS COUNT IS UPHELD AND THE GROUNDS RAISED BY THE APPELLANT ARE DISMISSED. 15. LD. COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES. HIS MAIN CONTENTIONS ARE TH AT (1) THERE ARE FACTUAL ERRORS IN THE REPORT AS ASSESSEE IS NOT A DIRECT EXPORTER BUT ROUTED THE EXPORTS ONLY THROUGH MMTC ( 2) THAT ASSESSEE WAS ALWAYS EXPORTING BY WAY OF LONG TERM C ONTRACTS NEGOTIATED THROUGH MMTC, REPRESENTATIVES OF THE FOR EIGN COMPANIES AND AS APPROVED BY THE MINISTRY OF STEEL AND ALSO CABINET NOTES. (3) THAT LOKAYUKTA DID NOT QUANTIFY ANY CONCEALMENT OF INCOME BUT ONLY EXPRESSED OPINION BA SED ON THE SPOT PRICE FOR CHINA THAT MMTC UNDER INVOICED E XPORTS (4) THAT IN THE LIST OF EXPORTERS ENCLOSED AS LIST BY L OKAYUKTA, NMDC WAS NOT MENTIONED AND (5) AN IMPORTANT ASPEC T WHICH REQUIRE CONSIDERATION WAS THAT LOKAYUKTA/A.O. COMPA RED IRON ORE SPOT PRICES OF CHINA WITH THE LONG TERM PRICES NEGOTIATED WITH JAPAN AND KOREA. IT WAS FURTHER CONTENDED THAT BEING 13 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD PUBLIC SECTOR UNDERTAKING THERE IS NO SCOPE FOR ANY CONCEALMENT OF INCOME AND THE SO-CALLED SALE PROCEE DS AS ARRIVED AT BY THE A.O. WAS NEVER RECEIVED BY THE AS SESSEE OR BY MMTC OR BY ANY OTHER PERSON. SO, HYPOTHETICAL INCOM E CANNOT BE BROUGHT TO TAX. 16. LEARNED D.R. HOWEVER, RELIED ON THE ORDERS OF THE A.O. AND LD. CIT(A) AND RELIED ON THE FACTS. 17. WE HAVE CONSIDERED THE ISSUE AND EXAMINED FACT S ON RECORD. AT THE OUTSET, WE NOTICED THAT THE A.O. HAS TAKEN EXPORTS BY NMDC DURING THE YEAR AT RS.726,39,88,999 /- WHEREAS IN TABLE AT PAGE 38 WHILE MAKING THE ADDITI ON, THE SALE VALUE OF EXPORT DECLARED BY NMDC WAS TAKEN AT RS.469,55,65,037/-. AS THERE IS HUGE VARIATION BETW EEN THE SALE VALUE DECLARED BY NMDC ITSELF AND AMOUNT TAKEN BY AO, THE ADDITION MADE BY THE A.O. AT RS.506.10 CRORES I TSELF IS TO BE RECONCILED. ASSESSEE WAS ASKED TO SUBMIT THE REC ONCILIATION OF THE VARIOUS AMOUNTS CONSIDERED BY THE A.O. VIS- -VIS ACTUAL EXPORTS UNDERTAKEN BY THE ASSESSEE-COMPANY. ASSESSE E PLACED ON RECORD THE FOLLOWING RE-CONCILIATION : DATA AS PER AO ORDER. PORT TOTAL SALES VALUE OF EXPORTS AS PER INTERNATIONAL MARKET SALES VALUE OF EXPORT AS DECLARED BY NMDC SUPPRESSION OF SALES VALUE BY NMDC CHENNAI 2,413,920,813 1,824,509,457 589,411,356 VIZAG (IRON ORE SIZED LUMP) 4,781,928,856 893,727,604 3,888,201,252 VIZAG (IRON ORE SIZED LUMP) 2,560,807,875 1,977,327,976 583,479,899 TOTAL *9,756,657,544 4,695,565,037 5,061,092,507 14 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD FROM THE ABOVE TABLE, FOLLOWING OBSERVATIONS ARE M ADE. A) FOR CHENNAI PORT, NO ENTRY HAS BEEN MADE OF S.NO.2 IN ANNEXURE-A IN THE TABLE REFERRED IN ASSESSMENT ORDE R AT 89 OF APPEAL PAPER (PAGE 35 OF ASSESSMENT ORDER) B) IN COLUMN-3 OF THE ABOVE TABLE, IT IS STATED THAT T HE SALES VALUE DECLARED BY NMDC IS 4,695,565,037, WHICH IS NOT CORRECT. IT IS AMOUNT OF SALES DECLARE D BY MMTC. C) FOR VIZAG (IRON ORE LUMPS), AT ANNEXURE-B, TRANSACT ION FROM S.NO.1-13 AMOUNTING TO RS.1,934,739,002 & S.NO. 16 & 17 AMOUNTING TO RS.37,253,4936 THAT HAS NOT BEEN TAKEN INTO CONSIDERATION WHILE COMPUTING SALES VALUE OF EXPORT AS DECLARED BY NMDC IN COLUMN 3 AS PER PAGE 90 OF APPEAL PAPER. (PAGE 36 OF ASSESSMENT ORDER) D) TOTAL SALES VALUE OF EXPORT AS PER INTERNATIONAL MA RKET IS RS.9,756,657,544 WHEREAS IN THE ASSESSMENT ORDER (AT PAGE 81 OF APPEAL PAPER & 27 OF ASSESSMENT ORDE R) IT IS VALUED AT RS.12,201,629,446. THE A.O. CAN ONL Y GIVE THE EXPLANATION HOW HE ARRIVED AT THIS FIGURE. E) TOTAL SALES VALUE OF EXPORT AS DECLARED BY NMDC IS VALUED AT RS.4,695,565,037 BY THE A.O. WHEREAS THE ACTUAL EXPORT SALES VALUE OF NMDC IS RS.7,264,000,000. 6. TAKING INTO CONSIDERATION, THE ABOVE FACTS, THE EXPORT SALES MADE BY MMTC WORKS OUT TO RS.734,61,80,143 WE WOULD LIKE TO BRING TO YOUR NOTICE THAT IN TABLE F.Y. 2006-07 (A.Y. 07-08) IRON ORE SIZED LUMP AT PAGE 90 OF APPEAL PAPER (PAGE 36 OF ASSESSMENT ORDER), IN S.NO .1, QUANTITY OF EXPORT HAS BEEN TAKEN AT 1398150 INSTEA D OF 13981.50 (AS REFLECTED IN ANNEXURE-B IN S.NO.15) IN FLATING THE SUPPRESSION OF SALES VALUE BY 3,648,359,911. 18. AS CAN BE SEEN FROM THE ABOVE AS AGAINST THE EXPORT SALES RECORDED BY THE ASSESSEE AT RS.726,39, 89,000/- A.O. WRONGLY TOOK THE VALUE AT RS.469,55,65,037/-. THIS ITSELF HAS LEAD TO LOT OF DISCREPANCY. NOT ONLY THAT IN AN NEXURE-A OF 15 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD THE TABLE, THERE IS NO SERIAL NO.2 AS THE TABLE CON TAINS SL.NO.1 AND SL.NO.3, THAT MEANS SOME INFORMATION PERTAIN TO SL.NO.2 WAS MISSING AND AS POINTED OUT THE SALES DECLARED I N COLUMN NO.3 WAS NOT ACTUALLY SALE VALUES OF ASSESSEE-COMPA NY BUT THAT OF MMTC. MOREOVER, ANOTHER MISTAKE COMMITTED W AS THE QUANTITY OF EXPORT AT SL.NO.1 TAKEN AT RS.13,98,150 /- INSTEAD OF RS.13981.50. THEREFORE, INSTEAD OF RS. 3.64 CROR ES, THE MULTIPLICATION HAS TO COME I.E., RS.364 CRORES, AS SUPPRESSION OF SALES VALUE BY NMDC. IF THESE FACTUAL ERRORS ARE CORRECTED, WE ARE OF THE OPINION THAT ADDITION WOULD NOT HAVE COME TO THE AMOUNT AS WAS DETERMINED BY THE A.O. 19. BE THAT AS IT MAY, THE ISSUE IN THIS APPEAL IS WHETHER A.O. IS CORRECT IN MAKING THE ADDITION ON T HE SO CALLED SUPPRESSION OF SALES. WE ARE NOT CONVINCED WITH THE ACTION OF THE A.O. FIRST OF ALL, THE COMPARISON BETWEEN SPOT PRICE OF CHINA IN WHICH ASSESSEE HARDLY INDULGES IN ANY TRAN SACTION WITH THAT OF LONG TERM CONTRACTS WITH COMPANIES IN JAPAN AND KOREA ON FIVE YEAR AGREEMENT, WHICH WAS DULY APPROV ED BY THE GOVERNMENT OF INDIA IS NOT APPROPRIATE. MOREOVER, A SSESSEE IS NOT INVOLVED DIRECTLY IN EXPORTS OF GOODS. POWER TO EXPORT WAS GIVEN TO MMTC, THROUGH WHICH ASSESSEE CHANNELS ITS EXPORTS. AS ADMITTED BY THE DIRECTORS AND AS STATED BY THE C OMPANY, THERE WERE NEGOTIATIONS WITH THE FOREIGN BUYERS AND GENERALLY FOR FIVE YEAR CONTRACT PERIOD WITH QUANTUM AND PRIC ES ARE BENCH MARKED ON INTERNATIONAL PRICES AND DECIDED AC CORDINGLY. ASSESSEE HAS RECEIVED THE AMOUNTS AS PER THE INVOIC ES RAISED AND EVEN THE REPORT OF THE LOKAYUKTA AS PREPARED BY DR. U.V. SINGH ONLY MENTIONS THAT THERE IS UNDER INVOICING BY THE NMDC, VIS A VIS THE SPOT PRICES OF MARKET. IT IS GENERALLY UNDERSTOOD IN COMMERCIAL PARLANCE THAT THE PRICE IN THE SPOT 16 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD MARKET IS HIGHER THAN PRICE FOR LONG TERM CONTRACTS . SOMETIMES IT MAY VARY DEPENDING ON THE MARKET REQUIREMENTS. A SSESSEE ALWAYS ENTERED INTO LONG TERM CONTRACTS THROUGH MMT C AND HONOURED THOSE CONTRACTS AT THE PRICE NEGOTIATED. A .O. ALSO ACKNOWLEDGES THE RECEIPT OF THE COMMUNICATION FROM THE UNDER SECRETARY, GOVERNMENT OF INDIA OF THE VARIOUS CABINET NOTES AND THE APPROVAL OF PRICES INCLUDING THE AGRE EMENTS ENTERED BY THE PARTIES. THESE CANNOT BE BRUSHED ASI DE. 20. MORE OVER, SIMILAR ISSUE WAS CONSIDERED BY THE COORDINATE BENCH IN THE CASE OF MYSORE MINERALS LTD . VS. ACIT ITA.NO.351/BANG./2011 FOR A.Y. 2005-06. ON SIMILAR ADDITIONS MADE BY A.O. THEREIN, THE HONBLE ITAT VIDE ITS ORD ER DATED 2 ND NOVEMBER, 2012 HELD AS UNDER : 18.4 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSED AND CONSIDERED THE MATERIAL ON RECORD. WE F IND FROM THE RECORD THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS REQUIRED BY THE ASSESSING OFFICER. FROM THE DETAILS ON RECORD IN RESPECT OF THE ADDITIONS MADE TO THE RETURNED IN COME ON ACCOUNT OF SALES TO M/S. KALYANI STEELS LTD BELOW M ARKET PRICE, WE AGREE WITH THE OBSERVATIONS OF THE ASSESS ING OFFICER THAT THE PRICE CHARGED FOR C-ORE IS BELOW T HE MARKET PRICE. WE ALSO OBSERVE THAT THE ASSESSING OFFICER H AS RECORDED THAT KARNATAKA LOK AYUKTA IN ITS REPORT ON THE MINING SCAM ALLEGED MALPRACTICES ON THE PART OF THE OFFICIALS OF THE ASSESSEE COMPANY. FROM THE SUBMISSIONS MADE BY THE ASSESSEE, A GOVT OF KARNATAKA UNDERTAKING, IT C AN BE INFERRED THAT THE SALES OF C-ORE TO KALYANI STEELS LTD ARE SUPPORTED BY INVOICES RAISED, ENTRIES IN THE BOOKS OF ACCOUNTS AUDITED BY CHARTERED ACCOUNTANTS. THE SYST EM OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS THE MERCANTI LE SYSTEM AS PER THE PROVISION OF SECTION 145 OF THE A CT AND WE FIND THAT NO FAULT HAS BEEN FOUND THEREIN NOR HAS I T BEEN REJECTED. NOWHERE IN THE ORDER OF ASSESSMENT OR THE MATERIAL ON RECORD DO WE FIND ANYTHING TO ESTABLISH THAT THE RE WERE ANY REALIZATION ON ACCOUNT OF SALES BEYOND WHAT IS RECORDED IN THE BOOKS OF ACCOUNTS. AS PER THE I.T. ACT, 1961 PROFITS FROM BUSINESS ARE TO BE COMPUTED UNDER SECTION 28 O F THE ACT AS PER THE ACCOUNTING POLICIES MANDATED BY SECT ION 145 17 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD OF THE ACT WHICH IN THE ASSESSEE'S CASE IS THE MERC ANTILE SYSTEM. THE SCOPE OF TOTAL INCOME IS ALSO DEFINED U NDER SECTION 5 OF THE ACT. THE I.T. ACT, 1961 IS VERY CL EAR THAT WHAT IS TO BE TAXED IS THE REAL INCOME OF AN ASSESS EE AND NOT NOTIONAL OR HYPOTHETICAL INCOME AND IT DOES NOT PERMIT AN ASSESSING OFFICER TO COMPUTE INCOME WITHOUT ANY EVI DENCE. THERE IS NO FINDING BY THE ASSESSING OFFICER THAT T HE ASSESSEE HAS SOLD ITS C-ORE AT A PRICE LESS THAN TH AT AGREED TO IN THE CONTRACT ENTERED INTO WITH M/S. KALYANI S TEELS LTD OR THAT IT HAS REALIZED FROM M/S. KALYANI STEELS LT D ADDITIONAL AMOUNTS ON SUCH SALES WHICH IT HAD NOT R ECORDED IN ITS BOOKS. THE ASSESSEE IS LEGALLY BOUND TO ABID E WITH THE TERMS OF THE CONTRACTUAL OBLIGATIONS ARISING OUT OF ITS AGREEMENT TO SELL C-ORE TO M/S. KALYANI STEELS LTD AND THE CONTRACT ENTERED INTO BEING LEGAL AND VALID, IT CAN NOT BE BRUSHED ASIDE. AFTER TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE CASE ON THIS ISSUE, WE FIND TH AT NO EVIDENCE WHATSOEVER HAS BEEN BROUGHT ON RECORD BY T HE ASSESSING OFFICER TO ESTABLISH THAT THE ASSESSEE HA S REALIZED FROM THE SALE OF C-ORE TO M/S. KALYANI STEELS LTD M ORE THAN WHAT IS RECORDED IN THE ASSESSEE'S BOOKS OF ACCOUNT . IN THIS VIEW OF THE MATTER, THE ADDITION MADE ON ACCOUNT OF SALES TO M/S. KALYANI STEELS LTD BELOW MARKET RATE, IN OUR CONSIDERED OPINION IS NOT FOUNDED ON SOUND AND ACCE PTED ACCOUNTING AND LEGAL PRINCIPLES AND IS THEREFORE LI ABLE TO BE DELETED. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE DECISION OF THE LEARNED CIT(APPEALS) IN DELETING TH E ADDITION OF RS.15,51,45,117. THE GROUNDS AT S.NOS.2 AND 3 RA ISED BY REVENUE ARE ACCORDINGLY DISMISSED. 21. WE AGREE WITH THE ABOVE FINDINGS OF THE COORDI NATE BENCH GIVEN IN SIMILAR CIRCUMSTANCES. IN FACT, ASSE SSEES CASE IS MUCH BETTER THAN THE ABOVE CASE AS THE FACTS IN THAT CASE ARE THAT ASSESSEE ENTERED INTO AGREEMENT WITH A PRI VATE COMPANY WHEREAS THIS ASSESSEE HAS ENTERED INTO LON G TERM CONTRACT WITH FOREIGN BUYERS WHICH WERE DULY NEGOTI ATED AND FINALLY APPROVED BY GOVERNMENT OF INDIA. WE, THEREF ORE, FIND NO REASON TO CONFIRM THE ADDITION OF THE ABOVE AMOUNT, AS THE ASSESSEE COMPANY HAD FURNISHED ALL THE DETAILS REQU IRED BY THE A.O. AND ASSESSEE HAS ACCOUNTED FOR ALL THE AMOUNTS IT RECEIVED. THERE IS NO IOTA OF INFORMATION THAT ASSE SSEE OR ANY 18 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD AGENT RECEIVED ANY AMOUNT OVER AND ABOVE THE AMOUNT S ACCOUNTED IN THE BOOKS OF ACCOUNTS. MOREOVER, I.T. ACT DOES NOT PERMIT MAKING ADDITIONS ON HYPOTHETICAL INCOME PARTICULARLY, AS SUPPRESSION OF SALES WHEN THERE IS NO EVIDENCE AT ALL. ADDITIONS CANNOT BE MADE ON PRESUMPTIONS AN D HYPOTHESIS. IN VIEW OF THIS, WE HAVE NO HESITATION IN DELETING THE ADDITION OF THE ABOVE AMOUNT. GROUND NO.3 RAISE D BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 22. GROUND NO.4 PERTAINS TO DISALLOWANCE OF ADDITI ONAL DEPRECIATION CLAIMED BY THE ASSESSEE ON MACHINERY. A.O. DISALLOWED THE ADDITIONAL DEPRECIATION IN THE RE-AS SESSMENT PROCEEDINGS WHICH WAS ORIGINALLY ALLOWED IN THE SCR UTINY PROCEEDINGS, HOLDING THAT ASSESSEE COMPANY IS NOT I NVOLVED IN ANY ACTIVITY OF PRODUCTION OF ANY ARTICLE OR THING, IGNORING THE FACT THAT ASSESSEE HAS ALWAYS PRODUCING/EXTRACTING IRON ORE, DIAMONDS, WIND POWER ETC., AND THE COMPANY IS NOT F ALLING UNDER THE NEGATIVE LIST OF ASSETS. ASSESSEE WAS ALL OWED ADDITIONAL DEPRECIATION IN ALL THE ASSESSMENT YEARS UP TO AND INCLUDING ASSESSMENT YEARS 2006-07, 2008-09 AND 200 9-10. EARLIER ALSO, ASSESSEE WAS ALLOWED BENEFIT UNDER SE CTION 80HHC WHEN THE PROVISIONS ARE ON STATUTE, ON THE RE ASON THAT ASSESSEE IS IN THE BUSINESS OF MANUFACTURE AND PROD UCTION OF ARTICLE OR THING. IN OUR OPINION LD. CIT(A) WRONGLY CONFIRMED THE ADDITION MADE BY THE A.O. HOLDING THAT EXPLORAT ION AND SALE OF IRON ORE DOES NOT INVOLVE ACTIVITY OF PRODU CTION OF ANY ARTICLE OR THING, IGNORING THE FACT THAT ASSESSEE D O EXTRACT THE IRON ORE AND SELL THE IRON ORE AFTER VARIOUS PROCES SES. THE HONBLE SUPREME COURT IN THE CASE OF SESA GOA LTD. 271 ITR 331 HELD THAT EXTRACTION AND PROCESSING OF IRON ORE AMOUNTS TO PRODUCTION. LIKEWISE, THE HONBLE JURISDICTIONAL HI GH COURT IN 19 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD THE CASE OF SINGARENI COLLERIES LTD. 221 ITR 48 HEL D THAT ACTIVITY OF WINNING OR EXTRACTING THE COAL FROM THE MINES CAN BE APTLY DESCRIBED AS PRODUCTION ACTIVITY. HONBLE KAR NATAKA HIGH COURT IN THE CASE OF CIT VS. GOGTE MINERALS 225 ITR 16 ALSO HELD THAT MINING OPERATIONS CARRIED OUT FOR EXTRACT ION OF IRON ORE INVOLVE MANUFACTURING ACTIVITY. IN VIEW OF THE ABOVE, ON BOTH PRINCIPLES OF LAW AND ALSO ON FACT THAT ASSESS EE WAS ALLOWED THE ADDITIONAL DEPRECIATION IN ALL OTHER YE ARS, WE DO NOT SEE ANY REASON TO CONFIRM THE ORDER OF THE CIT( A). AO IS DIRECTED TO ALLOW ADDL. DEPRECIATION AS CLAIMED AND ALLOWED EARLIER. GROUND NO.4 IS ACCORDINGLY ALLOWED. 23. GROUND NO.5 PERTAINS TO ADDITION DUE TO ROUNDI NG OF FIGURES BETWEEN ANNUAL REPORT AND COMPUTATION OF INCOME. A.O. MADE ADDITION OF RS.48,335/- AS DIFFERENCE BET WEEN CONSOLIDATED FIGURES SHOWN IN THE ANNUAL RETURN IGN ORING THE FACT THAT SCHEDULES CONTAIN THE ACTUAL AMOUNT. ASS ESSEE HAS SHOWN THE CORRECT AMOUNT OF RS.1,51,665/- IN THE SC HEDULE WHEREAS IN THE CONSOLIDATED P & L ACCOUNT THE FIGUR ES ARE SHOWN AS ROUNDED UP TO RS.2 LAKHS. THE ADDITION CAN NOT BE SUSTAINED AS THERE IS NO MISTAKE IN AMOUNTS ACTUALL Y INCURRED BY THE ASSESSEE. THEREFORE, GROUND NO.5 IS ALSO ALL OWED. 24. IN THE RESULT, ITA.NO.1794/HYD/2013 OF THE ASSESSEE IS PARTLY ALLOWED. ITA.NO.1792/HYD/2013 A.Y. 2007-08 (REVENUE APPEAL ) : 25. THIS IS REVENUE APPEAL FOR THE SAME A.Y. 2007- 08. THE REVENUE HAS RAISED THE FOLLOWING THREE GROUNDS WHICH ARE MATERIAL FOR DECIDING APPEAL : 20 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT THE DISALLOWANCE U/S.40(A)(IA) FOR NON-DEDUCTION OF TAX ON COMMISSION PAID TO M/S. MMTC @ 2.8% IS AS PER LAW. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT TH AT THE DISALLOWANCE U/S.40(A) WHICH ARE MENTIONED IN COL.NO.17(1) OF FORM NO. 3CD ARE AS PER LAW. 4. THE CIT(A) ERRED IN ACCEPTING THE ASSESSEES CLA IM OF PRIOR PERIOD EXPENSES WHICH IS NOT ACCEPTABLE ONE A S PER LAW. 26. GROUND NO.2 PERTAINS TO THE ISSUE OF DISALLOWA NCE UNDER SECTION 40(A)(IA) FOR NON-DEDUCTION OF TAX AN D COMMISSION PAID TO MMTC AT RS.2.8%. THE A.O. MADE T HE ADDITION ON THE REASON THAT MMTC IS ACTING AS CANAL IZING AGENT TO NMDC IN EXPORT OF IRON ORE AND NMDC IS MAKING PA YMENT OF COMMISSION OF 2.8% OF FOB PRICE. ON THE REASON THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE ON THE ABOV E PAYMENT, A.O. DISALLOWED THE AMOUNT UNDER SECTION 40(A)(IA). IT WAS THE SUBMISSION OF THE ASSESSEE THAT ASSESSEE IS NOT PAY ING THE FIXED MARGIN OF COMMISSION BUT MMTC IS PURCHASING T HE ORE FROM ASSESSEE AND INTURN, IS SUPPLYING TO FOREIGN C OMPANIES AND THEREFORE, QUESTION OF DEDUCTING TAX AT SOURCE DOES NOT ARISE. 27. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT T HIS ISSUE WAS COVERED BY THE DECISION OF THE HONBLE IT AT, VISAKHAPATNAM BENCH IN ASSESSEES OWN CASE IN ITA.N O.145, 146 & 147/VIZAG/2006 FOR A.YS. 2003-04, 2005-06 DAT ED 20.07.2009. IT HAS BEEN FURTHER FOLLOWED BY THE HYD ERABAD BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA .NO.292 & 293/HYD/2013 FOR A.Y. 2008-09 & 2009-10 DATED 31.05 .2013. THE RELEVANT OBSERVATIONS OF THE ORDER OF THE VISAK HAPATNAM TRIBUNAL DATED 20.07.2009 ARE AS UNDER : 21 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD '4.4 IT IS VERY PERTINENT TO NOTE THAT THE LEARNED -CIT(A) HAS NOTED THE FACT THAT THE ASSESSEE HAS ROUTED THE TRA NSACTION OF EXPORT THROUGH MMTC ONLY BECAUSE THE ASSESSEE WA S NOT ALLOWED TO EFFECT THE EXPORT ON ACCOUNT OF GOVERNME NT REGULATIONS. IT IS THE MOST STRIKING FEATURE IN THE IMPUGNED TRANSACTIONS WHICH WAS NOT AT ALL CONSIDERED BY THE TAX AUTHORITIES. IT IS WELL SETTLED LAW THAT IN ANY AGE NCY AGREEMENT, AN AGENT CAN ACT ON BEHALF OF THE PRINCI PAL ONLY IN RESPECT OF THOSE TRANSACTIONS WHICH THE PRINCIPA L IS ENTITLED TO CARRY ON DIRECTLY WITHOUT THE ASSISTANC E/HELP OF THE AGENT, I.E. EVEN IN THE ABSENCE OF AN AGENT, TH E PRINCIPAL SHOULD BE ENTITLED TO CARRY ON THE SAID TRANSACTION . IN THE INSTANT CASE THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT HE ASSESSEE HEREIN IS NOT ENTITLED TO EXPORT THE IR ON ORE WITH FE CONTENT OF 64% AND ABOVE. SINCE THE ASSESSEE IS DISENTITLED TO EXPORT THESE GOODS, IT CANNOT BE POS SIBLE TO SAY THAT THE GOODS WERE EXPORTED BY MMTC ON BEHALF OF T HE ASSESSEE ON A PRINCIPAL TO AGENT BASIS. AS CONTENDE D BY THE ASSESSEE, IT CAN ONLY BE HELD THAT THE MMTC HAS EXP ORTED THE GOODS ON ITS OWN AND NOT ON BEHALF OF THE ASSES SEE HEREIN. BY VIRTUE OF THE GOVERNMENT REGULATIONS, BO TH THE COMPANIES HAD TO REACH AN AGREEMENT WITH REGARD TO THE MODALITIES OF THE INCURRING EXPENSES AND PAYMENT AN D IN OUR OPINION, THE SAID MODALITIES OF PAYMENT ARE NOT THE DECIDING FACTOR TO DETERMINE THE NATURE OF TRANSACTION. IN V IEW OF THE FOREGOING, WE SET ASIDE THE ORDERS OF THE LD. CIT(A ) AS WELL AS THAT OF THE ASSESSING OFFICER . SINCE WE HAVE DE CIDE D THE FIRST ISSUE IN FAVOUR OF THE ASSESSEE, THE SECOND I SSUE URGED BY THE ASSESSEE BECOMES INFRUCTUOUS.' 22 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 28. IT WAS FURTHER SUBMITTED THAT MISCELLANEOUS APPLICATION FILED BY THE DEPARTMENT AGAINST THE ABO VE ORDERS WERE ALSO DISMISSED BY THE ITAT. FOLLOWING THE DECI SION OF THE ITAT, THE LD. CIT(A) DELETED THE ADDITION. HENCE, R EVENUE IS AGGRIEVED. 29. ON CONSIDERING THE RIVAL CONTENTIONS, WE DO N OT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE C IT(A). RESPECTFULLY FOLLOWING THE AFORE CITED DECISIONS IN ASSESSEES OWN CASE, WE HOLD THAT SINCE THE ASSESSEE IS NOT EN TITLED TO EXPORT DIRECTLY AND EXPORT BY THE MMTC WAS ON PRINC IPAL- PRINCIPAL BASIS, THERE CAN BE NO COMMISSION PAYMENT TO MMTC, AS SUCH THE QUESTION OF SUSTAINING THE ORDER OF THE ASSESSING OFFICER IN ESTIMATING THE COMMISSION AND DISALLOWING THE SAME UNDER S.40(A)(IA) DOES NOT ARISE. IN FACT THERE IS NO CLAIM OF COMMISSION BY ASSESSEE. SO QUESTION OF DED UCTION OF TAX DOES NOT ARISE AND CONSEQUENTLY DISALLOWANCE U/ S 40(A)(IA). ACCORDINGLY, THE ORDER OF THE CIT(A) IS UPHELD. ACC ORDINGLY, GROUND NO.2 OF THE REVENUE IS DISMISSED. 30. GROUND NO.3 PERTAINS TO THE DISALLOWANCE UNDER SECTION 40(A) STATED TO BE FOLLOWING COLUMN 17(F) O F FORM 3CD OF RS.19.84 CRORES. A.O. MADE THE ADDITION ON THE R EASON THAT FORM 3CD HAS STATED THE AMOUNTS AS INADMISSIBLE IN COLUMN- 17(F). ASSESSEE SUBMITTED THAT ANNUAL RETURN WAS SU BMITTED BY THE COMPANY AFTER CONSIDERING THE PROFIT BEFORE TAX . ITEMS MENTIONED UNDER COLUMN 17(F) ARE BELOW THE LINE ITE MS WHICH WERE NOT CHARGED AGAINST THE PROFIT RETURNED. AS PE R DISCLOSURE REQUIREMENT, PROVISIONS LIKE INCOME TAX, FBT, WEALT H TAX AND DIFFERED TAX ARE SHOWN IN FORM 3CD. SINCE THE ABOVE AMOUNTS ARE NOT CHARGED TO P & L ACCOUNT WHICH WAS TAKEN FO R THE PURPOSE OF COMPUTATION, QUESTION OF DISALLOWANCE DO ES NOT 23 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD ARISE. THE A.O. DID NOT AGREE AND MADE THE ADDITION OF THE ABOVE AMOUNT. LD. CIT(A) ON VERIFICATION FOUND THAT ASSESSEES CONTENTIONS ARE CORRECT BUT DIRECTED THE A.O. TO EX AMINE AND ALLOW THE CLAIM. REVENUE HAS COME IN APPEAL ON THIS ISSUE BEFORE THE TRIBUNAL. 31. WE FIND THAT THERE IS NO MERIT IN THE REVENUE CONTENTIONS AS THE AMOUNTS WHICH ARE NOT CHARGED TO P & L ACCOUNT CANNOT BE DISALLOWED AND ONLY AN AMOUNT CLA IMED CAN BE DISALLOWED. IN CASE, ASSESSEE HAS NOT CHARGED TH IS AMOUNT FROM THE PROFIT BEFORE TAX AND OFFERS THE INCOME ON THE BASIS OF PROFIT BEFORE TAX ALONE, THEN QUESTION OF DISALLOWA NCE DOES NOT ARISE. SINCE THIS ISSUE WAS ALSO DIRECTED TO BE EXA MINED BY THE A.O. WE DO NOT SEE ANY REASON TO CONSIDER THE REVEN UE GROUND WHICH IS BASICALLY ON FACTS. GROUND NO.3 OF THE REV ENUE IS ACCORDINGLY DISMISSED. 32. GROUND NO.4 PERTAINS TO THE CLAIM OF PRIOR PER IOD EXPENSES DISALLOWED BY THE A.O. A.O. DISALLOWED AN AMOUNT OF RS.22.62 LAKHS ON THE REASON THAT THIS AMOUNT PERTA INS TO PRIOR PERIOD. ASSESSEE VIDE THE LETTER DATED 23.01. 2012 EXPLAINED THAT THERE WERE PRIOR PERIOD EXPENSES AND ALSO INCOME WHICH HAVE CRYSTALLIZED DURING THE YEAR AS N ET INCOME CREDITED TO P & L ACCOUNT WAS RS.7,58,696/-. ON THE REASON THAT ASSESSEE FAILED TO FURNISH THE ABOVE ACCOUNT, THE A.O.DISALLOWED THE ENTIRE AMOUNT OF RS.22.62 LAKHS. ON THIS ISSUE ALSO FOLLOWING THE COORDINATE BENCH DECISION IN ITA.NO.1381/H/2012 DATED 18.01.2013 FOR A.Y. 2000-0 1, LD. CIT(A) DIRECTED THE A.O. TO VERIFY THE CLAIM OF EXP ENDITURE AND DETERMINE THE YEAR OF CRYSTALISATION/ACCRUAL AND TH EN ACCORDINGLY ALLOW THE EXPENDITURE EITHER IN THIS YE AR OR ANY OTHER YEAR BY MODIFYING THE RELEVANT ORDERS, IF REQ UIRED. 24 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD THEREFORE, WE DO NOT SEE ANY GRIEVANCE OF THE REVEN UE SINCE THE MATTER IS DIRECTED TO BE EXAMINED AND ALLOW ACC ORDING TO THE FACTS OF THE CASE. THEREFORE, GROUND NO.4 OF TH E REVENUE IS REJECTED. 33. IN THE RESULT, ITA.NO.1792/HYD/2013 OF THE REVENUE IS DISMISSED. ITA.NO.1795/HYD/2013 A.Y. 2010-2011 (ASSESSEE APP EAL) 34. THIS IS ASSESSEES APPEAL FOR THE A.Y. 2010-20 11. THE ASSESSEE HAS RAISED 7 GROUNDS IN THIS APPEAL, G ROUND NO.1 AND 7 ARE GENERAL IN NATURE AND THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION. 35. GROUND NO.2 PERTAINS TO THE ISSUE OF SUPPRESSI ON OF SALES ADDED BY THE A.O. AND CONFIRMED BY THE CIT (A) AT RS.255.03 CRORES. AS STATED IN A.Y. 2007-08, BASED ON THE NEWS PAPER REPORTS OF THE LOKAYUKTA, A.O. MADE ENQU IRIES AND THEN MADE THE ADDITION OF SO-CALLED SUPPRESSION OF SALES. THE ARGUMENTS OF THE ASSESSEE ARE SIMILAR IN THIS A.Y. ALSO. AS NOTICED BY US IN A.Y. 2007-08, THIS YEAR ALSO THERE ARE VARIATIONS IN THE AMOUNTS ADOPTED BY THE A.O. AS PE R THE REPORT OF DR. U.V. SINGH WHICH WAS THE BASIS FOR MA KING THE SUPPRESSION OF SALES, THE EXPORT SALES ADMITTED BY NMDC ARE AT RS.1116.00 CRORES AND TOTAL EXPORT SALES AS PER THE INTERNATIONAL MARKET WAS ARRIVED AT RS.1289.14 CROR ES THEREBY, SUPPRESSION OF SALES DETERMINED AT RS.173.13 CRORES . THIS STATEMENT WAS ACKNOWLEDGED AT PAGE 14 OF THE ASSESS MENT ORDER. HOWEVER, A.O. WHILE COMPUTING THE SUPPRESSIO N OF SALES ARRIVED AT THE SALE VALUE DECLARED BY THE ASSESSEE AT RS.730.15 CRORES. THE SALE VALUE AS PER THE INTERNATIONAL MAR KET WAS ARRIVED AT RS.985.18 CRORES AND SUPPRESSION OF SALE S VALUE AT 25 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD RS.255.03 CRORES. THERE IS NO RECONCILIATION, AS SE EN FROM THE ABOVE AMOUNTS FROM THE ANNUAL REPORT ASSESSEE VIS- -VIS SO- CALLED AMOUNTS DETERMINED IN THE LOKAYUKTA REPORT. WE ARE NOT IN A POSITION TO RECONCILE THE AMOUNTS NOR THE ASSESSEE SUBMITTED ANY RECONCILIATION LIKE IN A.Y. 2007-08. HOWEVER, THE FACT IS THAT THE ADDITIONS ARE NOT BASED ON THE AMO UNTS, WHICH REQUIRE RECONCILIATION. BE THAT AS IT MAY, WE HAVE ALREADY EXAMINED THE ISSUE LEGALLY ALSO AND ARRIVED AT A CO NCLUSION THAT HYPOTHETICAL INCOME CANNOT BE BROUGHT TO TAX. FOR THE REASONS MENTIONED THEREIN IN A.Y. 2007-08 FROM PARA 17 TO 21 THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. AC CORDINGLY, GROUND NO.2 OF THE ASSESSEE IS ALLOWED. A.O. IS DIR ECTED TO DELETE THE AMOUNT. 36. GROUND NO.3 PERTAINS TO DEPRECIATION ON INTANG IBLE ASSETS. ASSESSEE CLAIMED AN AMOUNT OF RS.16,77,48,2 19/- TOWARDS DEPRECIATION ON INTANGIBLE ASSETS. IN THE C OURSE OF SCRUTINY PROCEEDINGS, ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF THE ASSETS ACQUIRED AND THE LIABILITY OF SUCH DE PRECIATION. IT WAS EXPLAINED THAT INTANGIBLE ASSETS ARE MAINLY LEA SE HOLD LANDS ACQUIRED FROM VARIOUS STATE GOVERNMENTS WHICH CAN BE USED FOR CERTAIN PERIOD. A.O. NOTED THAT FROM THE A BOVE EXPLANATION THAT THE LANDS ARE NOT OWNED BY THE ASS ESSEE COMPANY BUT ARE OBTAINED ON LEASE FROM STATE GOVERN MENT AND THE PERIOD OF LEASE ALSO WAS NOT EXPLAINED. A.O . WAS OF THE OPINION THAT LAND WAS TAKEN ON LEASE FOR THE PURPOS E OF EXPLOITATION OF MINING AND IT CANNOT BE TREATED AS PLANT AND MACHINERY FOR WHICH DEPRECIATION WAS ALLOWABLE UNDE R THE INCOME TAX PROVISIONS. HE WAS OF THE OPINION THAT T HE LEASE HOLD RIGHTS DOES NOT COME WITHIN THE PURVIEW OF INT ANGIBLE ASSETS SO AS TO ALLOW DEPRECIATION. THEREFORE, THE CLAIM OF ASSESSEE WAS DISALLOWED AND AMOUNT WAS ADDED BACK. 26 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 36.1. ON APPEAL, LD. CIT(A) FOLLOWING HIS PREDECES SOR ORDER FOR A.Y. 2008-09 CONFIRMED THE DISALLOWANCE. AT THE OUTSET IT WAS SUBMITTED THAT THE ISSUE IN A.Y. 2008 -09 WAS DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY ORDER OF THE ITAT B BENCH IN ITA.NO.714 & 885/HYD /2012 DATED 28.02.2014 WHEREIN THE CLAIM WAS ALLOWED BY H OLDING AS UNDER : 22. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. SIMILA R 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 NOBODYS CASE THAT THE LAND EITHER BELONGED TO THE LESSEE OR TO THE GOVERNMENT. THIS SIMPLY INDICATES THAT A DEPLETION OF THE LAND AGAINST THE PAYME NT OF PREMIUM IT WAS LEASED HAS TO BE CLAIMED AFTER CAPITALIZATION THEREOF BY THE ASSESSEE WHICH IS F OR THE PURPOSE OF ITS MAIN BUSINESS. ALL EXPENSES 27 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 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 W.E.F. 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 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. 37. RESPECTFULLY FOLLOWING, WE ALLOW THE ASSESSEE S CLAIM. GROUND NO.3 OF THE ASSESSEE IS ALLOWED. 38. GROUND NO.4 PERTAINS TO ISSUE OF ADDITION MADE BY A.O. AMOUNTING TO RS.1,30,34,280/- BY CONTENDING TH AT STAMP DUTY AND REGISTRATION CHARGES ARE CAPITAL IN NATURE . THIS ISSUE WAS ALSO COVERED BY THE ABOVE DECISION WHEREIN THE HONBLE ITAT HELD AS UNDER : 28. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES, PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS TH E 28 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD DECISIONS CITED. THIS ISSUE IS SQUARELY COVERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CINCEITA (P) LTD. (SUPRA), WHEREIN THE HONBLE COURT HELD AS FOLLOWS: ALTHOUGH THE PERIOD OF THE LEASE WAS FOR 20 YEARS AND THERE WAS OPTION FOR RENEWAL THE EXPENDITURE WAS THE ONLY EXPENDITURE REQUIRED FOR DRAWING UP OF EFFECTIVE DEED OF LEASE NAMELY, THE EXPENDITURE IN RESPECT OF STAMP DUTY, REGISTRATION CHARGES AND PROFESSIONAL FEES PAID TO THE SOLICITORS, WHO PREPARED AND GOT REGISTERED THE DEED OF LEASE. FURTHER THERE WAS NO ELEMENT OF PREMIUM IN THE AMOUNT CLAIMED AS EXPENDITURE AND THE EXPENDITURE WOULD HAVE BEEN THE SAME EVEN IF THE LEASE HAD BEEN OF A SHORTER DURATION PROVIDED THE PERIOD OF LEASE WAS MORE THAN ONE YEAR. HENCE, THE PERIOD OF THE LEASE COULD NOT BE REGARDED AS DECISIVE OF THE CIRCUMSTANCES AS TO WHETHER THE ASSET OR ADVANTAGE SECURED IS OF AN ENDURING NATURE. HENCE THE EXPENDITURE ON REGISTRATION FEE, SOLICITORS FEE AND STAMP DUTY INCURRED FOR REGISTERING LEASE DEED WAS A REVENUE EXPENDITURE ALLOWABLE UNDER S. 37(1). 28.1 THE HONBLE COURT CONCLUDED THAT EXPENDITURE ON REGISTRATION FEE, SOLICITOR'S FEE AND STAMP DUTY INCURRED IN CONNECTION WITH REGISTRATION OF LEASE DEED IS REVENUE EXPENDITURE IRRESPECTIVE OF PERIOD OF LEASE. 28.2 THE COORDINATE BENCH OF ITAT, CUTTACK IN CASE OF SHRI JITENDRA NATH PATNAIK VS. DCIT IN ITA NO. 185/CTK/2010 FOR AY 2007-08 VIDE ITS ORDER DATED 17/06/2011, ON SIMILAR ISSUE, HELD AS FOLLOWS: 7. ON CAREFUL ANALYSIS OF THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE ORDER PASSED BY THE CIT(A), BHUBANESWAR DT. 21/07/2010 IN THE CASE OF ORISSA MINING CORPORATION LTD., COPY OF WHICH IS MADE AVAILABLE BY THE ASSESSEE BEFORE US, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS NOT ACQUIRING ANY ASSET NOR ENDURING BENEFIT BUT IS 29 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD HAVING ONLY A RIGHT TO WORK OF MINING IN THE LAND GIVEN TO HIM FOR A SPECIFIC PERIOD ON LEASE. THEREFORE, THIS AMOUNT IS PRACTICALLY A REVENUE EXPENDITURE INCURRED BY THE ASSESSEE WHILE DOING HIS TRADE OF MINING OPERATION. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE CLAIM OF THE ASSESSEE TO ALLOW THE SAME AS REVENUE EXPENDITURE IS VERY MUCH WITHIN THE PROVISIONS OF THE INCOME-TAX ACT, 1961 APPLICABLE THERETO. HENCE, HAVING FIND MERITS IN THE APPEAL OF THE ASSESSEE, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. 28.3 FURTHER, THE SAME VIEW HAS BEEN FOLLOWED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. PANYAM CEMENTS AND MINERALS INDUSTRIES LTD. , 228 ITR 212 (AP) WHEREIN IT HAS BEEN HELD THAT STAMP DUTY PAID FOR RENEWAL OF MINING LEASE IS A REVENUE EXPENDITURE. HOWEVER, WE MAKE IT CLEAR THAT IF THE EXPENDITURE INCURRED BY THE ASSESSEE F OR FIRST TIME WITH RESPECT TO THE ASSETS CLAIMED AS CAPITAL ASSET, IN EARLIER PARAS OF THIS ORDER ON WHICH WE HAVE GRANTED DEPRECIATION, THEN, THIS EXPENDITURE TO BE CONSIDERED AS CAPITAL EXPENDITURE. THUS, THIS GROUND IS PARTLY ALLOWED. 39. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE A.O. IS CORRECT IN TREATING THE ABOVE AMOUNTS AS CA PITAL IN NATURE. LIKE IN THE OTHER YEAR, WE MAKE IT CLEAR TH AT EXPENDITURE INCURRED BY THE ASSESSEE FOR THE FIRST TIME WITH RESPECT TO THE ASSETS CLAIMED AS CAPITAL ASSET, DEP RECIATION HAS TO BE GRANTED AND THEN THIS EXPENDITURE IS ALSO TO BE CONSIDERED AS CAPITAL ELIGIBLE FOR DEPRECIATION. GR OUND NO.4 OF THE ASSESSEE IS PARTLY ALLOWED. 40. GROUND NO.5 PERTAIN TO CLAIM OF RS.71,20,08,35 4/- ON CORPORATE SOCIAL RESPONSIBILITY STATED TO HAVE B EEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ASSESSEE 30 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD HAS INCURRED THE ABOVE AMOUNT ONLY TO OPERATE MINES IN REMOTE PLACES. IT WAS SUBMITTED THAT THE EXPENDITUR E WAS NECESSARY FOR THE SMOOTH CONDUCT OF THE BUSINESS SU CH AS INSTALLING TRAFFIC SIGNALS AT CIRCLE NEAR THE VICIN ITY OF THE OFFICE, FLOOD RELIEF ETC., AND FOLLOWING THE UNION GOVERNME NTS CSR POLICY, NMDC HAS TO CREATE BUDGET MANDATORILY AT RS .104 CRORES (2% OF PBT) WHEREAS, COMPANY HAS SPENT ONLY RS.71.20 CRORES. THE A.O. HOWEVER, HELD THAT THE AMOUNT IS N OT RELATED TO THE BUSINESS OF THE ASSESSEE AND THEY ARE IN THE NATURE OF DONATIONS WHICH CANNOT BE ALLOWED UNDER SECTION 37( 1). LD. CIT(A) CONFIRMED THE SAME. 41. AT THE OUTSET, IT WAS SUBMITTED THAT SIMILAR I SSUE WAS ALLOWED BY THE ITAT IN EARLIER YEARS AND THE LA TEST BEING ITA.NO.714 & 885/HYD/2012 DATED 28.02.2014 WHEREIN THIS ISSUE WAS EXAMINED AND ALLOWED VIDE PARA 35 AS UNDE R : 35. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF COORDINATE BENCH IN ASSESSEES 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 CHATTISGAARH IS NOT DISPUTE. THE OBJECTION OF THE DEPARTMENT APPEARS TO BE THAT THE MEDICAL COLLEGE WAS LOCATED AT A DISTANCE OF 16 KMS. AND THE ASSESSEE, 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 31 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD THE ASSESSEES 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 MEASURE 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 ASSESSEE. THIS CONTRIBUTION WOULD DEFINITELY GO A LONG WAY IN CONDUCTING THE ASSESSEES 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 ASSESSEE 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 ASSESSEES 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 ASSESSEE FOR CARRYING OUT THE BUSINESS IN AN EFFECTIVE AND EFFICIENT MANNER. 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 MADE UNDER THE HEADS FROM (I) TO VII). 32 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 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 REQUISITE INFORMATION THE SAID EXPENDITURE CANNOT BE ALLOWED. ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. 42. AO IS DIRECTED TO EXAMINE THE EXPENDITURE IN T HIS YEAR ALSO AND ALLOW ACCORDINGLY. GROUND NO.5 IS C ONSIDERED ALLOWED. 43. GROUND NO.6 PERTAINS TO ALLOWANCE OF ADDITIONA L DEPRECIATION CLAIMED BY THE ASSESSEE ON MACHINERY U SED FOR PRODUCTION OF IRON ORE / DIAMONDS TO AN EXTENT OF RS.7,74,23,161/-. THIS CLAIM IS SIMILAR TO GROUND N O.3 DECIDED IN ITA.NO.1794/HYD/2013 VIDE PARA NO. 22. IN THE LI GHT OF DISCUSSION THEREIN, ASSESSEE IS ELIGIBLE FOR ADDITI ONAL DEPRECIATION. ACCORDINGLY, GROUND NO.6 IS ALLOWED. 44. IN THE RESULT, ITA.NO.1795/HYD/2013 OF THE ASSESSEE IS PARTLY ALLOWED. ITA.NO.1793/HYD/2013 A.Y. 2010-11 (REVENUE APPEAL ) : 45. IN THIS APPEAL, REVENUE HAS RAISED 7 GROUNDS. GROUND NOS. 1 AND 7 ARE GENERAL IN NATURE AND THERE FORE, IT DOES NOT REQUIRE ADJUDICATION. 46. GROUND NO.2 PERTAINS TO THE ISSUE OF MINE CLOS URE OBLIGATION OF RS.12.13 CRORES. THE FACTS ARE THAT A SSESSEE IS A PUBLIC SECTOR UNDERTAKING AND DEBITED THE ABOVE AMO UNT TOWARDS MINE CLOSURE OBLIGATION. THIS WAS A PROVISI ON MADE TOWARDS EXPECTED FUTURE LIABILITY TO CLOSE MINES WH ICH ARE EXPLOITED BY THE ORGANIZATION. ASSESSEE EXPLAINED T HAT THAT THIS IS A STATUTORY LIABILITY FOR WHICH A SEPARATE FUND HAS BEEN 33 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD CREATED WITH LIC. THE A.O. DID NOT AGREE AND DISALL OWED THE OBLIGATION ON THE REASON THAT IT IS A CONTINGENT UP ON CERTAIN FUTURE EVENTS. THEREFORE, IT WAS NOT ALLOWABLE AS R EVENUE EXPENDITURE. CONSIDERING THE DETAILED SUBMISSIONS A ND ALSO THE ORDERS OF HIS PREDECESSOR IN THE EARLIER YEAR I .E., A.Y. 2008- 09, THE LD. CIT(A) ALLOWED THE EXPENDITURE. 47. AT THE OUTSET, IT WAS SUBMITTED THAT THIS ISSU E WAS CRYSTALISED IN FAVOUR OF THE ASSESSEE AGAINST THE R EVENUE BY ITAT IN EARLIER YEARS AND IN THE LATER YEAR IN A.Y. 2008-09 IN ITA.NO.714 & 885/HYD/2012 DATED 28.02.2014 DECISIO N IS AS UNDER : 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 ASSESSEES 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 ENCLOSE D 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 34 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 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 ASSESSEES 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 ASSESSEES 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 PROV IDE SUCH DATA, THEN, PRORATA HAS 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 PART OF THE ORDER AND 35 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD ACCORDINGLY, WE CONFIRM THE SAME. THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 48. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE HOLD THAT MINE CLOSURE OBLIGATION IS NOT A CONTINGENT LI ABILITY 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 LIABILI TY IS TO BE ASCERTAINED YEAR-WISE. THEREFORE, TO THAT EXTENT, F OLLOWING THE COORDINATE BENCH DECISION, WE DIRECT THE ASSESSEE T O FURNISH THE RELEVANT DATA TO THE A.O. TOWARDS THE MINES CLO SURE 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 PURPO SES. 49. GROUND NO.4 PERTAINS TO ISSUE OF DISALLOWANCE UNDER SECTION 40(A)(IA) FOR NON-DEDUCTION OF TAX AN D COMMISSION PAID TO MMTC AT 2.8%. THIS ISSUE IS COVE RED AND ALREADY DISCUSSED IN REVENUE APPEAL FOR A.Y. 2007-0 8 VIDE PARA NO. 26 TO 29. FOR THE REASONS STATED THEREIN, WE AFFIRM THE ORDER OF THE CIT(A) AND REJECT THE GROUND NO.4 OF T HE REVENUE. 50. GROUND NO.5 IS WITH RESPECT TO LEVY OF INTERES T UNDER SECTION 115P ON THE REASON OF REMITTING DIVID END DISTRIBUTION TAX WITH A DELAY OF 4 MONTHS. IT WAS T HE A.OS CONTENTION THAT ASSESSEE HAS DECLARED DIVIDEND ON A DHOC BASIS IN THE YEAR AND TAX WAS PAID WITH A DELAY OF 4 MONT HS AND THEREFORE, INTEREST UNDER SECTION 115P AMOUNTING TO RS.2.69 CRORES WAS LEVIED. IT WAS CONTENDED THAT THE BOARD OF DIRECTORS HAS POWER TO RECOMMEND THE AMOUNT OF DIVIDENDS TO B E 36 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD DECLARED OR DISTRIBUTED IN THE ANNUAL GENERAL BODY MEETING AND THE AMOUNTS ARE PROVIDED ON THE BASIS OF THE PROPOS ED DIVIDENDS WHEREAS, SHAREHOLDERS/MEMBERS OF THE COMP ANY ARE EMPOWERED TO DECLARE SUCH DIVIDEND FULLY THROUGH AG M ONLY VIDE SECTION 166 AND 205 OF THE COMPANIES ACT. THER EFORE, UNLESS THE AMOUNT WAS APPROVED BY THE AGM, QUESTION OF PAYMENT OF TAX ON THAT DISTRIBUTED DIVIDEND DOES NO T ARISE. IF CALCULATED FROM THE DATE OF DECLARATION, THERE IS N O DELAY AND PROVISIONS OF SECTION 115P ARE NOT APPLICABLE. 51. LD. CIT(A) HELD THAT THE IDENTICAL ISSUE HAS B EEN DECIDED BY HIS PREDECESSOR IN A.Y. 2007-08 AND OTHE R YEARS HELD THAT ISSUE IS IDENTICAL IN THE PRESENT YEAR AL SO. HE ALSO NOTED THAT ITAT IN A.Y. 2003-04 HAS AFFIRMED THE AB OVE OPINION AND KEEPING THE PRINCIPLES, THE DATE OF DEC LARATION OF DIVIDEND IS TO BE TAKEN AS DATE WHICH WAS ACTUALLY DECLARED/APPROVED BY AGM AND NOT WHEN IT WAS RECOMM ENDED BY THE BOARD. ACCORDINGLY, HE DELETED THE INTEREST. 52. AT THE OUTSET, THIS ISSUE IS ALSO COVERED BY T HE ORDERS OF THE ITAT IN EARLIER YEARS. ACCORDINGLY, G ROUND NO.5 OF THE REVENUE IS REJECTED. 53. GROUND NO.6 PERTAINS TO THE CLAIM OF PRIOR PER IOD EXPENSES. THIS ISSUE HAS BEEN CONSIDERED IN ITA.NO.1792/HYD/2013 FOR A.Y. 2007-08 AT PARA NO.33 - HEREINABOVE. IN FACT, THE LD. CIT(A) DIRECTED THE A .O. TO VERIFY THE CLAIM OF EXPENDITURE PERTAINING TO EARLIER YEAR S DETERMINING THE YEAR OF CRYSTALLIZATION AND THEN ALLOW THE EXPE NDITURE EITHER IN THIS YEAR OR ANY OTHER YEAR BY MODIFYING THE RELEVANT ORDERS, IF REQUIRED. THIS DIRECTION OF THE CIT(A) I S UPHELD AND REVENUE GROUND NO.6 ON THIS ISSUE IS ACCORDINGLY DI SMISSED. 37 ITA.NO.1792 TO 1795/HYD/2013 M/S. NMDC LTD. HYDERABAD 54. ITA.NO.1793/HYD/2013 OF THE REVENUE IS DISMISSED. 55. TO SUM-UP, ITA.NO.1794/HYD/2013 OF THE ASSESSEE IS PARTLY ALLOWED, ITA.NO.1792/HYD/2013 OF THE REVENUE IS DISMISSED, ITA.NO.1795/HYD/2013 OF THE A SSESSEE IS PARTLY ALLOWED AND ITA.NO.1793/HYD/2013 OF THE R EVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.05.2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATE 09 TH MAY, 2014 VBP/- COPY TO : 1. NATIONAL MINERAL DEVELOPMENT CORPORATION LTD., K HANIJ BHAVAN, 10-3-311/A, CASTEL HILL, MASAB TANK, HYDERABAD 500 028. 2. THE DCIT, CIRCLE 16(1), HYDERABAD. 3. CIT(A)-V, HYDERABAD 4. CIT-IV, HYDERABAD 5. D.R. ITAT, B BENCH, HYDERABAD.