M/s NMDC Limited, Hyderabad V. Dy.CIT, Circle-16(1), Hyderabad

ITA 287/HYD/2013

• Counselvise Citation: 28722514 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 05-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: LAKSHMI NIWAS SHARMA
• Keywords: Reopening of assessment; Capital asset; Depreciation; Income from undisclosed sources; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 145; 148; 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.287/HYD/2013 : ASSESSMENT YEAR 2008 - 09 ITA NO.288/HYD/2013 : ASSESSMENT YEAR 200 9 - 1 0 M/S. NATIONAL MINERAL DEVELOP - MENT CORPORATION LIMITED, HYDERABAD (PAN AAACN 7325 A ) V/S DY. COMMISSIONER OF INCOME - TAX, CIRCLE 16(1), HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI LAKSHMI NIWAS SHARMA RESPONDENT BY : SHRI D.SUDHAKAR RAO DR DATE OF HEARING 12.06.2014 DATE OF PRONOUNCEMENT 18.07.2014 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME - TAX(APPEALS) V, HYDERABAD, BOTH DATED 3.12.2012 FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10. SINCE CERTAIN COMMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OF WITH THIS COMMON CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.287/HYD/2013 : ASSESSMENT YEAR 2008 - 09 2. THOUGH ELABORATE GROUNDS OF APPEAL, NUMBERING 12 AND RUNNING INTO AS MANY AS 15 TYPED PAGES HAVE BEEN RAISED BY THE ASSESSEE IN THIS APPEAL, THERE ARE ONLY TWO EFFECTIVE GRIEVANCES OF THE ASSESSEE AGITATED IN THIS APPEAL, THE FIRST BEING WITH REGARD TO LEGALITY AND VALIDITY OF THE REOPENING OF ASSESSMENT UNDER S.147 OF THE INCOME ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 2 TAX ACT,1961; AND THE NEXT BEING THE ADDITION OF RS.2517.21 CRORES MADE BY T H E ASSESSING OFFICER AND SUSTAINED BY THE CIT(A), ON ACCOUNT OF SUPPRESSION OF EXPORT SALES BY UND ER - INVOICING, ALLEGEDLY DONE BY THE ASSESSEE. 3 . WE MAY TAKE UP FIRST THE ISSUE RELATING TO LEGALITY AND VALIDITY OF REOPENING OF ASSESSMENT BY THE ASSESSING OFFICER. 4 . FACTS IN BRIEF RELATING TO THIS ISSUE ARE THAT THE ASSESSEE, A PUBLIC SECTOR UNDERTAKING E NGAGED IN THE BU S IN E SS O F MINERAL EXPLORATION, HAS FIELD ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09 ON 27.9.20008, ADMITTING TOTAL INCOME OF RS.4908,58,41,140. THOUGH T HE SAID RETURN WAS INITIALLY PROCESSED UNDER S.143(1) OF THE ACT, REGULAR ASSE SSMENT WAS COMPLETED UNDER S.143(3) OF THE ACT ON 27.12.2010, AND BY VIRTUE OF AN ORDER PASSED UNDER S.154 OF THE ACT ON 21.3.2011, ASSESSEES INCOME WAS ULTIMATELY DETERMINED AT RS.5013,10,78,245. 5 . SUBSEQUENTLY, THE ASSESSING OFFICER BASING ON THE NEWSPAPER REPORT PUBLISHED AND THE REPORT OF THE HONBLE LOK AYUKTA OF KARNATAKA OBSERVED THAT THE ASSESSEE HAS BEEN RESORTING TO SUPPRESSION OF THE VALUE OF SALE TOWARDS EXPORT OF IRON ORE DURING THE PERIODS 2006 - 07 TO 2009 - 10. ACCORDINGLY, HE REOPENED TH E ASSESSMENT FOR THE ASSESSMENT YEAR 2008 - 09 BY ISSUING NOTICE UNDER SECTION 148. NOT FINDING MERIT IN THE OBJECTIONS OF THE ASSESSEE TO THE PROPOSED REOPENING OF THE ASSESSMENT, THE ASSESSING OFFICER, PROCEEDED TO COMPLETE THE RE - ASSESSMENT UNDER S.143(3) READ WITH S.147 OF THE ACT, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.7555,54,94,682 BY MAKING THE FOLLOWING ADDITIONS TO THE INCOME DETERMINED EARLIER, AS ABOVE, OF RS.5013,10,78,245 - A) SUPPRESSION OF SALE VALUE OF EXPORTS RS.25178,21,2 7,295 B) DISALLOWANCE UNDER S.40(A)(IA) ` RS. 25,22,89,142 ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 3 6 . ON APPEAL, THE CIT(A) HAS UPHELD THE LEGALITY AND VALIDITY OF THE REOPENING OF THE ASSESSMENT, VIDE PARA 5.3OF THE IMPUGNED ORDER, WHICH READS AS FOLLOWS - 5 .3. I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. THE FRESH SET OF FACTS IN THE FORM OF NEWSPAPER REPORTS AND REPORT OF HON'BLE MEMBER OF LOKAYUKTA, KARNATAKA VERY WELL FORM THE BASE FOR PRIMA FACIE EVIDENCE FOR REOPENING OF THE ASSESSMENT AND IT CANNOT BE SAID THAT THEY DO NOT HAVE ANY EVIDENTIARY VALUE. EVEN THE HON'BLE HIGH COURT OF ANDHRA PRADESH, IN A RECENT JUDGMENT ON A WRIT PETITION FILED BY THE HON'BLE MINISTER IN A DISPROPORTIONATE ASSETS CASE, HELD THAT THERE IS PRI MA FACIE EVIDENCE IN THE CONTENTS OF THE PETITION AND ORDERED FOR CBI ENQUIRY AGAINST A MEMBER OF PARLIAMENT. SIMILARLY, THE REOPENING OF THE ASSESSMENT IN THE PRESENT CASE BASING ON THE REPORTS OF THE NEWSPAPER AND REPORT OF HON'BLE LOKAYUKTA OF KARNATAKA IS NOT BAD IN LAW AND IS CORRECTLY JUSTIFIED. AS A MATTER OF FACT, THE SCRUTINY ASSESSMENT PROCEEDINGS IN THE APPELLANT'S CASE FOR ASSESSMENT YEAR 2009 - 10 HAVE ALSO CONCLUDED ON 30 - 12 - 2011 I.E., PRIOR TO COMPLETION OF THE REASSESSMENT PROCEEDINGS, WHICH L ED TO THE CONCLUSION THAT THE ASSESSEE IS RESORTING TO SUPPRESSION OF VALUE OF SALES TOWARDS 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. HENCE, THE REOPENING OF ASSESSMENT FOR ASSESSMENT YEAR 200 8 - 0 9 IS NOT BAD IN LAW AND IS JUSTIFIED. SO FAR AS SEQUENCE OF EVENTS LEADING TO THE REASSESSMENT IS CONCERNED, THE APPELLANT'S MAIN CONTENTION I S THAT THE ASSESSING OFFICER HAS NOT FOLLOWED 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, ISS UED NOTICE U/S 148 AND THEREAFTER ON T HE REQUEST OF THE APPELLANT COMMUNICATED THE REASONS FOR REOPENING ON 29 - 12 - 2011. SIMULTANEOUSLY; HE ISSUED A NOTICE U/S 143(2) REQUESTING APPELLANT TO APPEAR BEFORE HIM ON 9 - 1 - 2012. THOUGH THE APPELLANT IS AWARE OF THE PROCEEDINGS BEFORE IT FOR ASSESSME NT YEAR 2009 - 10 AND THE REASONS FOR REOPENING OF THE ASSESSMENT YEAR 200 8 - 0 9 , DID NOT EVEN RAISED ANY OBJECTION ON 9.1.2012 TO THE PROPOSED REOPENING AND CHOSE TO BE SILENT. THE APPELLANT DID NOT EVEN RESPOND WITH ANY OBJECTIONS BEFORE THE REASONABLE 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 THE 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 WITHIN A REASONABLE TIME AND TO BE ADDRESSED BY THE ASSESSING OFFICER BEFORE PROCEEDING WITH THE ASSESSMENT. IN THE 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 THE REASONS AS ALSO THE ISSUE EMBROILED IN THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2009 - 10 I S COMMON FOR ASSESSMENT YEAR ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 4 200 8 - 09 8. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER IS WELL WITHIN LAW TO ASSUME THAT THE APPELLANT HAS NO OBJECTION FOR THE PROPOSED REOPENING. AS SUCH, THERE IS NO LAPSE ON THE PART OF ASSESSING OFFICER IN FOLLOWING THE P ROCEDURE LAID DOWN IN THE HON'BLE APEX COURT . THUS, THE ADDITIONAL GROUNDS RAISED BY THE APPELLANT STAND DISMISSED . 7 . AGGRIEVED BY THE ORDER OF THE CIT(A), ASSESSEE IS IN SECOND APPEAL BEFORE US ON THIS ISSUE. 8 . WE HAVE CONSIDERED THE RIVAL SUBM ISSIONS AND PERUSED THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE. WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE, AND OTHER MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS VERY ISSUE HAS COME UP FOR CON S I D ERATION BEFORE THIS TRIBUNAL IN ASSESSEES OWN CA S E FOR THE ASSESSMENT YEAR 2007 - 08, WHEREIN THIS TRIBUNAL, VIDE ITS ORDER DATED 9.5.2014 IN ITA NO.1794/HYD/2013, HAS, REJECTING THE CONTENTIONS OF THE ASSESSEE, UPHELD THE LEGALITY AND VAL IDITY OF THE REOPENING OF THE ASSESSMENT . THE TRIBUNAL IN THAT ORDER HAS DEAL T WITH THE ISSUE IN THE FOLLOWING MANNER - 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 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 SHA KTI 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. CIT(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 S TEPS TAKEN FOR OBTAINING THE INFORMATION FROM ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 5 LOKAYUKTA, VARIOUS ENQUIRIES CAUSED INCLUDING STATEMENTS RECORDED FROM THE OFFICERS INVOLVED IN EXPORT OF IRON ORE BEFORE REOPENING ASSESSMENT. AS ALREADY POINTED OUT BY THE LD. CIT(A), PROCEEDINGS FOR A.Y. 200 9 - 10 WERE ALSO PENDING AT THAT POINT OF TIME. THEREFORE, WE ARE OF THE OPINION THAT A.O. HAS PRIMA FACIE BELIEF TO REOPEN THE ASSESSMENT UNDER SECTION 147. AT THE STAGE OF REOPENING THE ASSESSMENT, IT IS NOT NECESSARY TO EXAMINE THE QUANTUM OF ESCAPEMENT. WHAT IS REQUIRED TO BE VERIFIED IS WHETHER THERE IS ANY BELIEF FOR COMING TO A DECISION WHETHER INCOME HAS ESCAPED ASSESSMENT. ON THE BASIS OF THE INFORMATION AVAILABLE IN THE FORM OF NEWSPAPER REPORTS AND ALSO REPORT OF LOKAYUKTA, WE ARE OF THE OPINION TH AT THERE IS PRIMA FACIE BELIEF FOR REOPENING THE ASSESSMENT. THEREFORE, GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE REJECTED. WE DO NOT INTEND TO EXAMINE THE VARIOUS CASE LAW RELIED UPON BY THE ASSESSEE WHICH ARE GIVEN IN PARTICULAR SET OF FACTS. SINC E THE ASSESSMENT ORDER ITSELF CONTAINS THE STEPS TAKEN CONSEQUENT TO THE INFORMATION OBTAINED IN THE FORM OF NEWSPAPER REPORTS AS PART OF THE ORDER ITSELF, WE ARE OF THE OPINION THAT IN THE GIVEN SET OF FACTS, WE CANNOT HOLD THAT AO HAS NO REASON TO BELIEV E AT THE TIME OF REOPENING THE PROCEEDINGS. ACCORDINGLY, THIS GROUND IS REJECTED. FACTS AND CIRCUMSTANCES OF THE CASE LEADING TO THE REOPENING OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2008 - 09 AS WELL AS THE CONTENTIONS OF THE PARTIES BEFORE US, BEING I DENTICAL , FOLLOWING THE ORDER OF THIS TRIBUNAL DATED 9.5.2014 FOR ASSESSMENT YEAR 2007 - 08, TO WHICH BOTH OF US ARE PARTIES , WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF THE CIT(A) ON THIS ISSUE. WE ACCORDINGLY, UPHOLD THE LEGALITY AND VALIDITY OF THE REOPENING OF ASSESSMENT UNDER S.147 OF THE ACT AND REJECT THE GROUNDS OF THE ASSESSEE ON THIS ISSUE. 9 . THE ONLY OTHER ISSUE RAISED IN THIS APPEAL RELATES TO ADDITION OF RS.2517,21,27,295 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) O N ACCOUNT OF SUPPRESSION OF SALE VALUE OF EXPORTS. 10 . FACTS IN BRIEF RELATING TO THIS ISSUE ARE THAT THE ASSESSING OFFICER RELYING ON THE INVESTIGATION REPORT OF DR.U.V.SINGH , CHIEF CONSERVATOR OF FORESTS, WHO HAS BEEN APPOINTED AS INVESTIGATING OFFICER BY HON'BLE LOKAYUKTA OF KARNATAKA, WHERE IN IT WAS REPORTED THAT ASSESSEE WAS UNDER - INVOICING SALES, CALLED FOR INFORMATION AND AFTER ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 6 ANALYZING THE VARIOUS DETAILS, HELD THAT T HE EXPORT SALE PRICES DISCLOSED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT ARE NOT RELIABLE AND ACCORDINGLY WORKED OUT THE UNACCOUNTED INCOME OF THE ASSESSEE. IN COURSE OF THE PROCEEDINGS, THE ASSESSING OFFICER EXAMINED THE FOLLOWING OFFICERS OF NMDC, AND O FFICERS OF M/S. MINERALS & METALS TRADING CORPORATION, NEW DELHI WHO ARE INVOLVED IN EXPORT OF IRON ORE, BY ISSUING OF SUMMONS AND RECORDED THEIR STATEMENTS. SL.NO. NAME & DESIGNATION NAME OF THE COMPANY DATE OF RECORDING STATEMENT 1. SRI RANA SOM, CHAI RMAN 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 KHURANA, DIRECTOR (MARKETING) MMTC 20.12.11 1 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 AGREEMENTS. THE LONG TERM AGREEMENT WHICH NORMALLY COVERS A PERIOD OF FIVE YEARS ESSENTIALLY CONTAINS T HE PRODUCE - WISE QUANTITIES TO BE EXPORTED EVERY YEAR DURING THE PENDENCY OF THE LONG TERM CONTRACT. AS FAR AS THE PRICE IS CONCERNED, THERE IS A SPECIFIC PROVISION IN THE LONG TERM AGREEMENT THAT PRICES SHALL BE NEGOTIATED MUTUALLY EACH YEAR FOR SUPPLY DUR ING THE YEAR. WITH REGARD TO FIXATION OF PRICE, SHORT TERM AGREEMENTS, YEARLY AND QUARTERLY ARE MADE. THE BASIS ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 7 FOR FIXATION OF THE PRICE IS STATED TO BE THE 'BENCH MARK PRICE'. THE 'BENCH MARK PRICE' IS STATED TO BE BASED ON THE NEGOTIATIONS HELD BETWEEN THE MAIN IMPORTING AND EXPORTING COUNTRIES AND THIS IS IN THE 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. F URTHER INVESTIGATIONS REVEALED THAT THERE IS DIFFERENCE BETWEEN EXPORT SALES STATED BY MMTC AND SALES DECLARED BY NMDC. THERE IS HUGE DIFFERENCE BETWEEN THE SALE RATE OF NMDC AND THE SALE RATE OF OTHER EXPORTERS DURING THE FINANCIAL YEAR 2006 - 07 TO FINANCIAL YEAR 2009 - 10. THUS, HE OPINED THAT NMDC WAS DECLARING EXPORT SALES AT A VERY LOW RATE WHEN THE MARKET RATES/ THE RATES AT WHICH THE OTHER EXPORTERS EXPORTED IRON ORE DURING THE SAME PERIOD ARE VERY HIGH. MORE OVER, HE ALSO CAME TO A CONCLUSION THAT THE PERSONS WHO HAVE SIGNED THE AGREEMENTS ON BEHALF OF NMDC COULD NOT GIVE ANY SATISFACTORY EXPLANATION IN THEIR STATEMENT ON THE DISCREPANCIES. ON THAT BASIS ASSESSING OFFICER CAME TO A CONCLUSION THAT THE ASSESSE E HAS BEEN RESORTING TO SUPPRESSION OF THE VALUE OF SALES TOWARDS EXPORT OF IRON ORE DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR. 1 2 . ON APPEAL BEFORE CIT(A), ASSESSEE SUBMITTED THAT THE EXPORT OF IRON ORE TO JAPANESE STEEL MILLS (JSM) AND KOREAN S TEEL MILLS IS GOVERNED BY LONG TERM EXPORT CONTRACTS AND THE PRICES ARE SETTLED EVERY YEAR ON THE BASIS OF INTERNATIONAL BENCHMARK PRICES ARRIVED AT BETWEEN JSM, BRAZILIAN AND AUSTRALIAN IRON ORE SUPPLIERS. IT WAS FURTHER SUBMITTED THAT SUBSEQUENT TO APPRO VAL FROM THE UNION CABINET, A HIGH POWERED DELEGATION COMPRISING OF OFFICIALS FROM MINISTRY OF COMMERCE, MINISTRY OF STEEL AND SENIOR OFFICIALS OF ASSESSEE COMPANY AND MMTC LIMITED VISIT JAPAN AND KOREA AND HAVE EXTENSIVE NEGOTIATIONS WITH THE RESPECTIVE S TEEL MILLS AS REGARDS PRICE AND THE QUANTITY APPLICABLE FOR THAT YEAR. FURTHER, IT WAS ALSO ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 8 SUBMITTED 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 I S INSTRUMENTAL IN FIXING THE PRICES APPLICABLE FOR THE LONG TERM CONTRACTUAL QUANTITY FOR EACH YEAR. THE ASSESSEE ALSO SUBMITTED THAT SINCE THE INTERNATIONAL TRADE AGREEMENTS AT THAT POINT OF TIME DID NOT PROVIDE FOR ANY MIDTERM PRICE REVISIONS IN LINE WIT H SPOT MARKET VARIATIONS, SO AS TO INSULATE THE STEEL COMPANIES 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 ASSESSEE FURTHER SUBMITTED THE PROCEDURE BEING FOLLOWED BETWEEN THE ASSESSEE COMPANY AND MMTC. FINALLY, IT WAS ARGUED THAT THE ENTIRE SALES REVENUE GENERATED FROM EXPORTS HAS BEEN ACCOUNTED BY BOTH THE ASSESSEE AND MMTC AND SUBMITTED THAT THE COMMERCIAL PRUDENCE OF THE ASSESSING OFF ICER BASED ON SPOT PRICES, CAN ONLY INDICT THE COMMERCIAL JUDGMENT OF THE ESTEEMED TEAM OF GOVERNMENT OFFICIALS RESPONSIBLE FOR FIXATION OF PRICES BUT CANNOT CHALLENGE THE CORRECTNESS OF THE AMOUNTS NOR THE FLOW OF TRANSACTIONS WHICH ARE ENTIRELY TRANSPARE NT AND HAVE BEEN UPHELD TO BE TRUE AND FAIR BY THE GOVERNMENT AND STATUTORY AUDITORS. ACCORDINGLY, THE ASSESSEE REQUESTED TO REJECT THE CONTENTIONS OF THE ASSESSING OFFICER THAT THERE IS UNDER INVOICING OF EXPORTS. 1 3 . THE CIT(A) HOWEVER, DID NOT AGREE WITH THE ASSESSEES CONTENTION AND AFTER ELABORATE DISCUSSION OF THE MATTER IN PARAS 6.4 TO 6.4.5 ON PAGES 23 TO 26 OF THE IMPUGNED ORDER, ULTIMATELY UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER BY CONCLUDING IN PARA 6 .5 AS UNDER : 6 .5. IN THE LIGHT OF THE OBSERVATIONS IN THE PRECEDING PARAS, IT CAN BE CONCLUDED THAT THERE ARE INCONSISTENCIES IN THE PRICING POLICY OF THE APPELLANT WITH JAPAN AND SOUTH KOREA AND THE APPELLANT COULD NOT GIVE CONCRETE EXPLANATION RATHER SUBSTANTIATE WITH PRO PER EVIDENCE TO THE FIGURES REPORTED IN THE REPORT OF DR U.V.SINGH. AS SUCH, THE APPELLANT FAILED TO BRING OUT A CASE THAT THE FIGURES IN THE ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 9 REPORT OF DR U. V .SINGH ARE INCORRECT EXCEPT STATING THAT THE REPORT IS WRONG. HENCE, THE ADDITION MADE BY THE ASS ESSING OFFICER ON THIS COUNT IS UPHELD AND THE GROUNDS RAISED BY THE APPELLANT ARE DISMISSED . 1 4 . AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), ASSESSEE IS IN SECOND APPEAL BEFORE US. 1 5 . WE HEARD BOTH THE PARTIES AND PERUSED THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. WE FIND THAT SIMILAR ADDITION S MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) IN ASSESSMENT YEAR 2007 - 08 AND 2010 - 11 WAS SUBJECT MATTER OF APPEAL BEFORE THIS TRIBUNAL, AND THIS TRIBUN AL, VIDE ITS CONSOLIDATED ORDER INTER ALIA IN ITA NO.1794 AND 1795 /HYD/2013, DATED 9.5.2014, HAS DELETED THE CORRESPONDING ADDITION MADE BY THE ASSESSING OFFICER FOR TH OSE YEAR S . RELEVANT PORTION OF THE SAID ORDER OF THE TRIBUNAL, BEING PARAS 19 TO 21 RE AD AS FOLLOWS - 19. BE THAT AS IT MAY, THE ISSUE IN THIS APPEAL IS WHETHER A.O. IS CORRECT IN MAKING THE ADDITION ON THE 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 C HINA IN WHICH ASSESSEE HARDLY INDULGES IN ANY TRANSACTION WITH THAT OF LONG TERM CONTRACTS WITH COMPANIES IN JAPAN AND KOREA ON FIVE YEAR AGREEMENT, WHICH WAS DULY APPROVED BY THE GOVERNMENT OF INDIA IS NOT APPROPRIATE. MOREOVER, ASSESSEE IS NOT INVOLVED D IRECTLY 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 COMPANY, THERE WERE NEGOTIATIONS WITH THE FOREIGN BUYERS AND GENERALLY FOR FIVE YEAR CONTRACT PE RIOD WITH QUANTUM AND PRICES ARE BENCH MARKED ON INTERNATIONAL PRICES AND DECIDED ACCORDINGLY. ASSESSEE HAS RECEIVED THE AMOUNTS AS PER THE INVOICES 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 MARKET IS HIGHER THAN PRICE FOR LONG TERM CONTRACTS. SOMETIMES IT MAY VARY DEPENDING ON THE MARKET REQUIREMENTS. ASSESSEE ALWAYS ENTERED INTO LONG TER M CONTRACTS THROUGH MMTC 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 ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 10 AGREE MENTS ENTERED BY THE PARTIES. THESE CANNOT BE BRUSHED ASIDE. 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. THERE IN, THE HONBLE ITAT VIDE ITS ORDER 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 FIND 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 INCOME ON ACCOUNT OF SALES TO M/S. KALYANI STEELS LTD BELOW MARKET PRICE, WE AGREE WITH THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE PRICE CHARGED F OR C - ORE IS BELOW THE MARKET PRICE. WE ALSO OBSERVE THAT THE ASSESSING OFFICER HAS 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 T HE ASSESSEE, A GOVT OF KARNATAKA UNDERTAKING, IT CAN 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 SYSTEM OF ACCOUNTING FOLLOWED BY THE ASS ESSEE IS THE MERCANTILE SYSTEM AS PER THE PROVISION OF SECTION 145 OF THE ACT AND WE FIND THAT NO FAULT HAS BEEN FOUND THEREIN NOR HAS IT BEEN REJECTED. NOWHERE IN THE ORDER OF ASSESSMENT OR THE MATERIAL ON RECORD DO WE FIND ANYTHING TO ESTABLISH THAT THER E 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 OF THE ACT AS PER THE ACCOUNTING POLICIES MANDATED BY SECTION 145 OF THE ACT WH ICH IN THE ASSESSEE'S CASE IS THE MERCANTILE SYSTEM. THE SCOPE OF TOTAL INCOME IS ALSO DEFINED UNDER SECTION 5 OF THE ACT. THE I.T. ACT, 1961 IS VERY CLEAR THAT WHAT IS TO BE TAXED IS THE REAL INCOME OF AN ASSESSEE AND NOT NOTIONAL OR HYPOTHETICAL INCOME A ND IT DOES NOT PERMIT AN ASSESSING OFFICER TO COMPUTE INCOME WITHOUT ANY EVIDENCE. THERE IS NO FINDING BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS SOLD ITS C - ORE AT A PRICE LESS THAN THAT AGREED TO IN THE CONTRACT ENTERED INTO WITH M/S. KALYANI STEELS L TD OR THAT IT HAS REALIZED FROM M/S. KALYANI STEELS LTD ADDITIONAL AMOUNTS ON SUCH SALES WHICH IT HAD NOT RECORDED IN ITS BOOKS. THE ASSESSEE IS LEGALLY BOUND TO ABIDE 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 CANNOT BE BRUSHED ASIDE. AFTER TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE CASE ON THIS ISSUE, WE FIND THAT NO EVIDENCE WHATSOEVER HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO ESTABLISH THAT THE ASSESSEE HAS REALIZED FROM THE SALE OF C - ORE TO M/S. KALYANI STEELS LTD MORE 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. KAL YANI STEELS LTD BELOW MARKET RATE, ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 11 IN OUR CONSIDERED OPINION IS NOT FOUNDED ON SOUND AND ACCEPTED ACCOUNTING AND LEGAL PRINCIPLES AND IS THEREFORE LIABLE TO BE DELETED. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE DECISION OF THE LEARNED CIT(APPEALS ) IN DELETING THE ADDITION OF RS.15,51,45,117. THE GROUNDS AT S.NOS.2 AND 3 RAISED BY REVENUE ARE ACCORDINGLY DISMISSED. 21. WE AGREE WITH THE ABOVE FINDINGS OF THE COORDINATE BENCH GIVEN IN SIMILAR CIRCUMSTANCES. IN FACT, ASSESSEES CASE IS MUCH BETTE R THAN THE ABOVE CASE AS THE FACTS IN THAT CASE ARE THAT ASSESSEE ENTERED INTO AGREEMENT WITH A PRIVATE COMPANY WHEREAS THIS ASSESSEE HAS ENTERED INTO LONG TERM CONTRACT WITH FOREIGN BUYERS WHICH WERE DULY NEGOTIATED AND FINALLY APPROVED BY GOVERNMENT OF INDIA. WE, THEREFORE, FIND NO REASON TO CONFIRM THE ADDITION OF THE ABOVE AMOUNT, AS THE ASSESSEE COMPANY HAD FURNISHED ALL THE DETAILS REQUIRED BY THE A.O. AND ASSESSEE HAS ACCOUNTED FOR ALL THE AMOUNTS IT RECEIVED. THERE IS NO IOTA OF INFORMATION THAT AS SESSEE OR ANY AGENT RECEIVED ANY AMOUNT OVER AND ABOVE THE AMOUNTS 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. ADDITI ONS CANNOT BE MADE ON PRESUMPTIONS AND HYPOTHESIS. IN VIEW OF THIS, WE HAVE NO HESITATION IN DELETING THE ADDITION OF THE ABOVE AMOUNT. GROUND NO.3 RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 1 6 . CONSISTENT WITH THE VIEW TAKEN BY THE COORDINATE BEN CH OF THE TRIBUNAL IN ITS ORDER DATED 9.5.2014 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR S 2007 - 08 AND 2010 - 11 , FOR THE YEAR UNDER APPEAL, VIZ. ASSESSMENT YEAR 2008 - 09 AS WELL, WE DELETE THE IMPUGNED ADDITION OF RS.2517,21,27,295, ALLOWING THE GROUNDS OF THE ASSESSEE ON THIS ISSUE. 16.1. BEFORE PARTING, WE WOULD LIKE TO OBSERVE THAT, AS WAS THE CASE IN ASSESSMENT YEAR 2007 - 08, IN THE PRESENT ASSESSMENT YEAR ALSO, THERE IS DIFFERENCE BETWEEN EXPORT SALES DECLARED BY THE ASSESSEE AND EXPORT SALES CONSIDERED BY THE ASSESSING OFFICER. THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED BEFORE US THAT AC TUAL EXPORT SALES OF NMDC THROUGH MMTC WAS RS.8,752,800,000 WHEREAS THE ASSESSING OFFICER HAS CONSIDERED THE FIGURE OF RS.9,010,326,570, WHICH IS THE SALE PRICE OF MMTC, TO WORK OUT THE SUPPRESSION OF SALES OF RS.2517,21,27,295. IN THIS CONTEXT, THE LEARN ED AUTHORISED REPRESENTATIVE REFERRED TO SCHEDULE - ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 12 23 OF THE AUDIT REPORT AND ALSO FURNISHED DETAILS OF EXPORT SALES MADE BY MMTC AFTER PURCHASE FROM NMDC. AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES AND EXAMINING THE DETAILS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE, PRIMA FACIE, IT APPEARS THAT THE ASSESSING OFFICER HAS MIXED UP THE FIGURES RELATING TO EXPORT SALES, THEREBY COMMITTED A FACTUAL ERROR WHILE QUANTIFYING SUPPRESSION OF SALE. HOWEVER, SINCE WE HAVE HELD THAT THERE IS NO SUPPRESS ION OF SALE BY THE ASSESSEE, THIS ISSUE IS OF ACADEMIC INTEREST ONLY. 1 7 . IN THE RESULT, ASSESSEES APPEAL FOR ASSESSMENT YEAR 200 8 - 0 9 , BEING ITA NO.287/HYD/2013 , IS PARTLY ALLOWED. ITA N O .28 8 /HYD/2013 : ASSESSMENT YEAR 200 9 - 1 0 1 8 . FIRST EFFECTIVE GROUND OF THE ASSESSEE IN THIS APPEAL RELATES TO ADDITION OF RS.278,02,66,495 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) TOWARDS SUPPRESSION OF SALES. FACTS AND CIRCUMSTANCES OF THE CASE LEADING TO THE SAID ADDITION OF RS.278,02,6 6,495 AND THE CONTENTIONS OF THE PARTIES IN THIS REGARD , ARE SIMILAR TO THOSE RAISED IN THE CONTEXT OF CORRESPONDING ADDITION OF RS.2517,21,27,295 MADE FOR THE PRECEDING ASSESSMENT YEAR, VIZ. 200 8 - 0 9 . IN THIS VIEW OF THE MATTER, FOR THE DETAILED REASONS DISCUSSED IN PARA S 1 5 AND 1 6 HEREINABOVE, WE SET ASIDE THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND DELET E THE ADDITION OF RS.278,02,66,495 . G ROUNDS OF THE ASSESSEE ON THIS ISSUE ARE ALLOWED . 1 9 . THE NEXT EFFECTIVE GROUND OF THE ASSESSEE IN THIS APPEAL RELATES TO ADDITION OF RS. 15,38,26,817 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) ON ACCOUNT O F MINE CLOSURE OBLIGATION. ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 13 20 . WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND O THER MATERIAL AVAILABLE ON RECORD. IT HAS BEEN BROUGHT TO OUR NOTICE BY THE LEARNED COUNSEL FOR THE ASSESSEE, WHICH HAS NOT BEEN CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THAT THIS ISSUE IS COVERED BY THE DECISIONS OF THE TRIBUNAL IN ASSESS EES OWN CASES DATED 28.2.2014 FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO.714/HYD/2012 AND DATED 9.5.2014 FOR ASSESSMENT YEAR 2010 - 11 IN ITA NO.1795/HYD/2013. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL, VIDE PARAS 9 AND 9. 1 OF ITS ORDER DATED 28.2.2014 FOR ASSESSMENT YEAR 2008 - 09, CITED SUPRA, DECIDED THE ISSUE IN THE FOLLOWING MANNER - 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 2 006 - 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 B Y THE AO. THE DETAILED CALCULATION OF RS. 21.31 CRORES CHARGED TO P&L A/C (ON THE BASIS OF RS. 71.18 CRORES) WAS ALSO ENCLOSED AND PRODUCED BEFORE THE CIT. HENCE, THE CIT IS WRONG IN HIS OBSERVATION THAT THE ESTIMATE OF RS. 21.31 CRORE IS EXCESSIVELY ON A HIGHER SIDE AND ABSOLUTELY NO REALISTIC OR RATIONAL BASIS FOR SUCH CALCULATION. 12. THE CIT IS NOT CORRECT IN INVOKING THE PROVISIONS OF SECTION 263 AS WE FIND THAT THE ISSUE IS DEBATABLE AND WHEN TWO VIEWS ARE POSSIBLE THE AO HAS TAKEN ONE VIEW. THE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT REPORTED IN 243 ITR 83 AS W ELL 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 POINTE D 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 O F THE CIT PASSED U/S 263 AND THE ORDER OF THE AO IS RESTORED. ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 14 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 DELIVE RED 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 PROVISI ONS 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 CUR RENT YEAR. HE FURTHER GAVE A DIRECTION TO THE AO IF THE ASSESSEE FAILS TO PROVIDE SUCH DATA, THEN, PRO RATA 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 ACCORDINGLY, WE CONFIRM THE SAME. THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL DATED 28.2.2014, COORDINATE BENCH OF THIS TRIBUNAL, VIDE PARAS 47 AND 48 OF ITS ORDER DATED 9.5.2014 FOR THE ASSESSMENT YEAR 2010 - 11 IN ITA NO.1795/HYD/2013, THOUGH HELD T HAT MINE CLOSURE OBLIGATION IS NOT A CONTINGENT LIABILITY, BUT AN ASCERTAINED LIABILITY, RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER, FOR RECOMPUTING THE DISALLOWANCE, IN TH E FOLLOWING MANNER - 48. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE HOLD THAT MINE CLOSURE OBLIGATION IS NOT A CONTINGENT LIABILITY BUT ASCERTAIN LIABILITY. HOWEVER, IT HAS TO BE VERIFIED THAT WHETHER ASSESSEE HAS MADE THE CLAIM ON THE MINES WHICH ARE IN WORKING CONDITION WHICH ARE BEING OPERATED OR NOT. IF THE ASSESSEE HAS MADE THE CLAIM ON MINES WHICH HAVE NOT STARTED OPERATIONS, THE SAME CANNOT BE ALLOWED. AS RIGHTLY HELD BY THE CIT(A) IN A.Y. 2008 - 09, ASCERTAINABILITY OF LIABILITY IS TO BE ASCERTAINED YEAR - WISE. THEREFORE, T O THAT EXTENT, FOLLOWING THE COORDINATE BENCH DECISION, WE DIRECT THE ASSESSEE TO FURNISH THE RELEVANT DATA TO THE A.O. TOWARDS THE MINES CLOSURE OBLIGATION AND A.O. IS DIRECTED TO VERIFY AND ALLOW THE AMOUNT ACCORDINGLY. SUBJECT TO THE ABOVE OBSERVATIONS, THE GROUND NO.2 IS CONSIDERED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 15 2 1 . IN THIS VIEW OF THE MATTER, FOLLOWING THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CASES FOR OTHER YEARS NOTED ABOVE, WE HOLD THAT THE MINE CLOSURE OBLIGATION IS NOT A CONTINGENT LIABILITY BUT AN ASCERTAINED LIABILITY. SINCE THE QUANTUM OF SUCH ASCERTAINED LIABILITY HAS TO BE DETERMINED YEAR - WISE, AS OBSERVED IN THE ORDER FOR ASSESSMENT YEAR 2010 - 11, EXTRACTED ABOVE, WE DIRECT THE ASSESSEE TO FURNISH THE RELEVANT DAT A TO THE ASSESSING OFFICER TOWARDS MINES CLOSURE OBLIGATION. THE ASSESSING OFFICER SHALL VERIFY SUCH DATA AND RECOMPUTE THE DISALLOWANCE, IF ANY, WARRANTED, IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ASSESSE ES GROUNDS ON THIS ISSUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 2 2 . THE NEXT EFFECTIVE GROUND OF THE ASSESSEE IN THIS APPEAL RELATES TO ADDITION OF RS. 10,66,56,599 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A), BY DISALLOWANCE OF ASSESSEES CLAIM FOR DEPRECIATION ON LEASE HOLD LAND. 2 3 . WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND OTHER MATERIAL AVAILABLE ON RECORD. IT HAS BEEN BROUGHT TO OUR NOTICE BY THE LEARNED COUNSEL FOR THE AS SESSEE, WHICH HAS NOT BEEN CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THAT THIS ISSUE IS COVERED BY THE DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASES DATED 28.2.2014 FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO.714/HYD/2012 AND DATED 9.5.2014 FO R ASSESSMENT YEAR 2010 - 11 IN ITA NO.1795/HYD/2013. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL, VIDE PARA 22 AND 22.1 OF ITS ORDER OF THIS TRIBUNAL DATED 28.2.2014 FOR ASSESSMENT YEAR 2008 - 09, CITED SUPRA, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E IN THE FOLLOWING MANNER - 22. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 16 AUTHORITIES BELOW. SIMILAR CAME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF ITAT, CUTTACK IN CASE EAST INDIA MINERALS LTD. VS. JCIT IN ITA NO. 224/CTK/2012, VIDE ITS ORDER DATED 25/06/2012, ON WHICH RELIANCE PLACED BY THE ASSESSEE, WHEREIN IT HAS BEEN HELD AS FOLLOWS: 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE UPHOLD THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR THE SIMPLE REASON THAT THE DENIAL OF CL AIM 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 DEP RECIATION. 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 PAYMENT OF PREMIUM IT WAS LEASED HAS TO BE CLAIMED AFTER CAPITALIZATION THEREOF BY THE ASSESS EE WHICH IS FOR THE PURPOSE OF ITS MAIN BUSINESS. ALL EXPENSES ARE INCURRED FOR THE PURPOSE OF BUSINESS AND ARE INCIDENTAL TO THE HOLDING OF RIGHTS WERE CLAIMED U/S.32(1)(II) BEING THE LICENSE TO CARRY OUT THE MINING THEREFORE COULD NOT BE DENIED INS OFAR 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 ACCORDA NCE 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 CONSIDER ATION 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. FOLLOWIN G THE ABOVE DECISION OF THE TRIBUNAL DATED 28.2.2014, COORDINATE BENCH OF THIS TRIBUNAL, VIDE PARAS 36 AND 37 OF ITS ORDER DATED 9.5.2014 ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 17 FOR THE ASSESSMENT YEAR 2010 - 11 IN ITA NO.1795/HYD/2013, DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. IN THIS VIEW O F THE MATTER, FOLLOWING THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CASES FOR OTHER YEARS NOTED ABOVE, WE DELETE THE ADDITION OF RS.10,66,56,599 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) , BY DISALLOWING THE ASSESSEES CLAI M FOR DEPRECIATION ON LEASE HOLD LAND. ASSESSEES GROUNDS ON THIS ISSUE ARE ACCORDINGLY ALLOWED. 2 4 . THE NEXT EFFECTIVE GROUND OF THE ASSESSEE IN THIS APPEAL RELATES TO ADDITION OF RS. 42,80,491 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A), BY DISALLOWANCE OF ASSESSEES CLAIM FOR STAMP DUTY AND REGISTRATION CHARGES , TREATING THE SAME AS EXPENDITURE OF CAPITAL NATURE . 2 5 . WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND OTHER MATERIAL AVAILABLE ON RE CORD. IT HAS BEEN BROUGHT TO OUR NOTICE BY THE LEARNED COUNSEL FOR THE ASSESSEE, WHICH HAS NOT BEEN NOT CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THAT THIS ISSUE IS COVERED BY THE DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASES DATED 28.2 .2014 FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO.714/HYD/2012 AND DATED 9.5.2014 FOR ASSESSMENT YEAR 2010 - 11 IN ITA NO.1795/HYD/2013. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL, VIDE PARA 2 8 AND 2 8 .1 TO 28.3 OF THE ORDER DATED 28.2.2014 FOR ASSESSMENT YEAR 2008 - 09, CITED SUPRA, DECIDED THE ISSUE IN THE FOLLOWING MANNER - 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 THE DECISIONS CITED. THIS ISSUE IS SQUARE LY 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 ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 18 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 ELEM ENT 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 D ECISIVE 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, CU TTACK 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 HAVING O NLY 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 C IT(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 OF 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 FOR 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. ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 19 FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL DATED 28.2.2014, COORDINATE BENC H OF THIS TRIBUNAL, VIDE PARAS 38 AND 39 OF ITS ORDER DATED 9.5.2014 FOR THE ASSESSMENT YEAR 2010 - 11 IN ITA NO.1795/HYD/2013, DECIDED THIS ISSUE IN IDENTICAL MANNER, AND PARTLY ALLOWED THE GROUNDS OF THE ASSESSEE ON THIS ASPECT. IN THIS VIEW OF THE MATTER, FOLLOWING THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CASES FOR OTHER YEARS NOTED ABOVE, THOUGH WE UPHOLD THE DISALLOWANCE MADE BY THE REVENUE AUTHORITIES IN THIS REGARD, WE DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION FOR THE YEAR U NDER APPEAL AS WELL, IN TUNE WITH THE DIRECTIONS OF THE TRIBUNAL FOR THE OTHER YEARS NOTED ABOVE. A SSESSEES GROUNDS ON THIS ISSUE ARE ACCORDINGLY TREATED AS PARTLY ALLOWED. 2 6 . THE NEXT EFFECTIVE GR IEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO ADDITION OF RS. 33,30,05,797 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A), BY DISALLOWANCE OF ASSESSEES CLAIM FOR EXPENDITURE STATED TO HAVE BEEN INCURRED IN DISCHARGE OF CORPORATE SOCIAL RESPONSIBI LITY. 2 7 . WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND OTHER MATERIAL AVAILABLE ON RECORD. IT HAS BEEN BROUGHT TO OUR NOTICE BY THE LEARNED COUNSEL FOR THE ASSESSEE, WHICH HAS NOT BEEN NOT CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THAT THIS ISSUE IS COVERED BY THE DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASES DATED 28.2.2014 FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO.714/HYD/2012 AND DATED 9.5.2014 FOR ASSESSMENT YEAR 2010 - 11 IN ITA NO.1795/HYD/2 013. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL, VIDE PARA 35, 36 AND 36.1 OF ITS ORDER DATED 28.2.2014 FOR ASSESSMENT YEAR 2008 - 09, CITED SUPRA, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING MANNER - 35. WE HAVE CONSIDERED RIVAL SU BMISSIONS AND PERUSED THE RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 20 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 CO NSIDERED 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 M INING 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 THE ASSESSEES PROJECT IN THE LOCALITY. MOREOVER, THE EMPL OYEES 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 LO CALITY 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 BECAUS E 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 COLL EGE. 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 MANNE R. ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 21 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 LOWE R 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). 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 ALL OWED. FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL DATED 28.2.2014, COORDINATE BENCH OF THIS TRIBUNAL, VIDE PARAS 41 AND 42 OF ITS ORDER DATED 9.5.2014 FOR THE ASSESSMENT YEAR 2010 - 11 IN ITA NO.1795/HYD/2013, DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE , SUBJECT TO THE OBSERVATION THAT THE ASSESSING OFFICER SHALL EXAMINE THE EXPENDITURE IN THAT YEAR ALSO AND ALLOW THE SAME ACCORDINGLY . IN THIS VIEW OF THE MATTER, FOLLOWING THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CASES FOR OTHER YEARS NO TED ABOVE, WE DIRECT THE ASSESSING OFFICER TO EXAMINE THE NATURE OF THE EXPENDITURE CLAIMED IN THIS YEAR ALSO AND ACCORDINGLY REDETERMINE THE ALLOWABILITY OF SUCH EXPENDITURE IN ACCORDANCE WITH LAW AND IN CONSONANCE WITH THE OBSERVATIONS OF THE TRIBUNAL FO R EARLIER YEARS NOTED ABOVE. ASSESSEES GROUNDS ON THIS ISSUE ARE ACCORDINGLY TREATED AS ALLOWED. 2 8 . THE NEXT GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO DISALLOWANCE OF PREOPERATIVE EXPENSES AMOUNTING TO RS.4,69,41,696. 2 9 . WE HEARD BOTH S IDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND OTHER MATERIAL AVAILABLE ON RECORD. WE FIND ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 22 THAT ON THIS ISSUE, THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE DATED 28.2.2014 FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO.714/HYD/2012 , IS AGAINST THE ASSESSEE. THE TRIBUNAL VIDE PARA 44 OF THE SAID ORDER DATED 28.2.2014, HAS REJECTED THE CORRESPONDING GROUND OF THE ASSESSEE FOR THAT YEAR IN THE FOLLOWING MANNER - 44.WE HAVE H E ARD THE ARGUMENTS OF BOTH THE PARTIES AND PE R USED THE RECORD. WHIL E CONFIRMING THE ADDITION, THE CIT(A) GAVE A CATEGORICAL FIN D IN G THAT THESE EXPENSE ARE DEFINITELY CAPITAL AND HAVE BEEN RIGHTLY CATEGORISED SO BY THE APPELLANT AND ALSO CERTIFIED AS CAPITAL EXPENDITURE BY THE AUDITORS. IT IS ONLY AT THE TIM E O F C O MPUTATION OF IN C OM E THE ASSESSEE CLAIMED THE EXPENDITURE AS REVENUE WITHOUT PROVI D ING ANY DETAILS OR REASONS. EVEN BEFORE US ALSO, THE ASSESSEE HAS NOT PL A CED ANY EVI D ENCE TO ES T ABLISH THE EXPENDITURE INCURRED AS REVE NU E EXPENDITURE. TH E R E FORE, WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN CON F IRMIN G THE ADDITION OF R S .5,43,27,455/ - ON ACCOUNT O F PRE - OP ER ATIVE EXPENSES AND THE ORDER O F TH E CIT(A) IS HEREBY CONFIRMED. . FACTS AND CIRCUMSTANCES OF THE CASE IN THE YEAR UNDER APPEAL BE ING IDENTICAL TO THOSE CONSIDERED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2008 - 09, AND IN THE ABSENCE OF ANY DECISION TO THE CONTRARY BROUGHT TO OUR NOTICE BY THE LEARNED COUNSEL F OR THE ASSESSEE, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE CIT(A) FO R THIS YEAR AS WELL. WE ACCORDINGLY UPHOLD THE ADDITION OF R S .4,69,41,696 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) TOWARDS DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTION IN RESPECT OF PREOPERATIVE EXPENSE. CON S E Q U E NTLY, ASSESSEES GROUNDS ON THIS ISSUE ARE REJECTED. 30 . IN TH E RESULT, ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009 - 10, BEING ITA NO.288/HYD/2013, IS PARTLY ALLOWED. 31 . TO SUM UP, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ITA NO. 287 & 288 /HYD/ 1 3 M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, HYDERABAD 23 ORDER PRONOUNCED IN THE COURT ON 18.07.2014 SD/ - SD/ - ( B.RAMAKOTAIAH ) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER. JUDICIAL MEMBER. D T/ - 18 TH JU LY , 201 4 COPY FORWARDED TO: 1. M/S. NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED, KHANIJ BHAVAN, MASAB TANK, HYDERABAD 2. DY. COMMISSIONER OF INCOME - TAX CIRCLE 16(1) HYDERABAD 3. 4. 5. COMMISSIONER OF INCOME - TAX(APPEALS) V, HYDERABAD COMMISSIONER OF INCOME - TAX IV, HYDERABAD DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD B.V.S.