M/s. The M.P. State Mining Corpn. Ltd., Bhopal V. The ACIT- 2(1), Bhopal

ITA 592/IND/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2325 (ITAT-INDORE)
• Duration Of Justice: 4 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 03-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PERTAINING TO AYS; US OF ACT A Y
• Keywords: Reopening of assessment; Business expenditure; Commercial expediency
• Section: 43B; 143(3); 234B; 147; 148; 37; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.20/IND/2015 ASSESSMENT YEAR: 2007-08 ITA NO.371/IND/2014 ASSESSMENT YEAR: 2009-10 ITA NO.592/IND/2013 ASSESSMENT YEAR: 2010-11 THE M.P. STATE MINING CORPN. LTD, PARYAVAS BHAWAN, BLOCK-1, JAIL ROAD, ARERA HILLS, BHOPAL VS. ASSTT. COMMISSIONER OF INCOME TAX-2(1), AAYKAR BHAWAN, HOSHANGABAD ROAD, BHOPAL (APPELLANT) (RE SPONDENT ) PAN NO.AABCM0300K THE M.P. STATE MINING CORPN. LTD, PARYAVAS BHAWAN, BLOCK-1, JAIL ROAD, ARERA HILLS, BHOPAL VS. ASSTT. COMMISSIONER OF INCOME TAX-2(1), AAYKAR BHAWAN, HOSHANGABAD ROAD, BHOPAL (APPELLANT) (RESPONDENT ) PAN NO.AABCM0300K THE M.P. STATE MINING CORPN. LTD, PARYAVAS BHAWAN, BLOCK-1, JAIL ROAD, ARERA HILLS, BHOPAL VS. ASSTT. COMMISSIONER OF INCOME TAX-2(1), AAYKAR BHAWAN, HOSHANGABAD ROAD, BHOPAL (APPELLANT) (RESPONDENT ) PAN NO.AABCM0300K THE M.P. STATE MINING CORPN. LTD 2 ORDER PER MANISH BORAD, AM. THESE THREE APPEALS FILED BY THE ASSESSEE PERTAINI NG TO A.YS. 2007-08, 2009-10 & 2010-11 ARE DIRECTED AGAIN ST THE SEPARATE ORDERS OF LD. COMMISSIONER OF INCOME-TAX ( APPEALS)-1, BHOPAL [IN SHORT REFERRED TO AS THE CIT (A)] DATED 18.03.2013, 20.02.2014 & 12.07.2013. ASSESSMENTS WERE COMPLETED U/S U/S 143(3) R.W. SECTION 147 ON 18.03.2013 FOR A.Y. 2007 -08 & U/S 143(3) OF THE ACT FOR A.Y. 2009-10 & 2010-11 ON 21. 10.2011 & 15.02.2013 BY ASSTT. COMMISSIONER OF INCOME TAX-2(1 ), BHOPAL. 2. THE ISSUES RAISED IN ALL THESE THREE APPEAL ARE MOSTLY COMMON AND THEREFORE THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR SAKE OF CONVEN IENCE AND BREAVITY. GROUNDS RAISED BY THE ASSESSEE FOR A.Y. 2007-08 AR E AS UNDER: (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ISSUE OF NOTICE U/S 148 AND THE RE-ASSESSMENT M ADE ARE UNLAWFUL AND WITHOUT JURISDICTION AND, THEREFORE, T HE SAME BE QUASHED. THE LEARNED CIT(A), THEREFORE, IS NOT JUS TIFIED IN HIS FINDINGS THAT THE INITIATION OF RE-ASSESSMENT PROCE EDINGS ARE VALID IN LAW, SUCH FINDINGS BE QUASHED. RESPONDENT BY SHRI RAJEEV JAIN , SR. DR APPELLANT BY SHRI SUMIT NEMA, SR.ADV & SHRI GAGAN TIWARI,ADVOCATE (AR) DATE OF HEARING: 03.01.2018 DATE OF PRONOUNCEMENT: 09.02.2018 THE M.P. STATE MINING CORPN. LTD 3 (2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED AND NOT JUSTIFIED IN SUSTA INING THE DISALLOWANCE OF RS.25 LACS MADE TOWARDS EXPENDITURE -GRATIA PAYMENTS TO LABOURS. THE ASSESSEE SUBMITS THAT IT IS A FULLY ALLOWABLE EXPENDITURE U/S 37 OF THE I.T. ACT. THE DEDUCTION CLAIMED AT RS.25 LACS BE KINDLY ALLOWED. (3) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IT BE HELD THAT IF THE DISALLOWANCE HAS BEEN MADE O N WRONG CONCESSION BY THE ASSESSEE OR HIS COUNSEL ON POINT OF LAW IS APPEALABLE AND, HENCE THE LEARNED CIT(A) IS ERRED A ND NOT JUSTIFIED IN NOT ADJUDICATING THE ISSUE WITH REGARD THE ALLOWABILITY OF RS.3814708 TO THE STATE GOVT. IS A PRIVILEGE FEE AND NOT ROYALTY AS CONTEMPLATED U/S 43B OF THE I.T. ACT, HENCE THE DISALLOWANCE OF THE SAID AMOUNT IS NEITHER LAWF UL NOR JUSTIFIED AND, THEREFORE, BE DELETED. (4) THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, IN WITHOUT PREJUDICE TO GROUND NO.(4) EVEN IF IT IS HELD THAT THE A.O IS JUSTIFIED IN MAKING THE DISALLOWANCE OF DEDUCTION OF RS.3814708 CLAIMED U/S 43B, THEN THE SAID DEDUCTION BE DIRECTED TO BE ALLOWED IN A.Y. 2008-09 ON JUDICIOUS CONSIDERATION. (5) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEVY OF INTEREST U/S 234B & 234C ARE UNLAW FUL AND HENCE BE CANCELLED. GROUNDS RAISED BY THE ASSESSEE FOR A.Y. 2009-10 REA DS AS UNDER: (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE FINDINGS OF THE LEARNED CIT(A) IN SUSTAINING TH E DISALLOWANCE OF RS.27,11,416 ARE WHOLLY INJUDICIOUS AND UNLAWFUL HENCE SUCH FINDINGS BE QUASHED AND IT BE HELD THAT IT IS A FULLY ALLOWABLE EXPENDITURE IN COMPUTING INCOME U/S 28 OF THE I.T. ACT OF THE ASSESSEE. THE DEDUCTION CLAIMED AT RS.2 7,11,416 BE KINDLY ALLOWED. GROUNDS RAISED BY THE ASSESSEE FOR A.Y. 2010-11 REA DS AS UNDER: (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE FINDINGS OF THE LEARNED CIT(A) IN SUSTAINING TH E DISALLOWANCE OF RS.25 LACS ARE WHOLLY INJUDICIOUS AND UNLAWFUL H ENCE SUCH FINDINGS BE QUASHED AND IT BE HELD THAT IT IS A FUL LY ALLOWABLE THE M.P. STATE MINING CORPN. LTD 4 EXPENDITURE IN COMPUTING INCOME U/S 28/37(1) OF THE I.T. ACT OF THE ASSESSEE. THE DEDUCTION CLAIMED AT RS.2500000 BE KINDLY ALLOWED. FROM PERUSAL OF GROUNDS RAISED IN ALL THESE THREE A PPEALS, FOLLOWING THREE ISSUES NEEDS TO BE ADJUDICATED FOR WHICH ASSE SSEE IS AGGRIEVED WITH THE ORDER OF LD. CIT(A). I. CHALLENGING THE REOPENING OF ASSESSMENT FOR A.Y. 2007-08. II. DISALLOWANCE OF EX-GRATIA PAYMENTS TO LABOURERS AT RS. RS.25,00,000/-, RS. 27,11,416/- & RS.25,00,000/- F OR A.YS. 2007- 08, 2009-10 & 2010-11 RESPECTIVELY. III. DISALLOWANCE OF CLAIM OF PRIVILEGE FEES OF RS.38,14 ,708/- AND FURTHER TREATING THEM AS ROYALTY AND NOT PRIVILEGE FEE AND APPLYING PROVISION OF SECTION 43B OF THE ACT. WE WILL FIRST TAKE UP THE ISSUE OF VALIDITY OF REAS SESSMENT PROCEEDINGS 3. IN ASSESSEES APPEAL FOR A.Y. 2007-08 THROUGH GR OUND NO.1 OF ASSESSEE HAS CHALLENGED THE LEGALITY OF THE NOTICE ISSUED U/S 148 OF THE ACT AND ALSO CHALLENGED THE REASSESSMENT PROCEE DINGS BEING BAD IN LAW. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED MATERIAL ON RECORD PLACED BEFORE US. WE FIND THAT THE REGULAR A SSESSMENT U/S. 143(3) OF THE ACT COMPLETED ON 31.12.2009 AND DISAL LOWANCE WAS MADE FOR ANUGRAH RASHI OF RS.25 LACS. THE MATTER WE NT UP TO THE TRIBUNAL AND VIDE ORDER DT. 22.5.2012 THE ISSUE WAS SET ASIDE TO THE THE M.P. STATE MINING CORPN. LTD 5 FILE OF LD. AO FOR FRESH ADJUDICATION BY THE TRIBUN AL. DURING THE PERIOD WHEN THE APPEAL WAS PENDING BEFORE THE TRIBU NAL THE NOTICE U/S 148 OF THE ACT WAS ISSUED ON 19.03.2012 RECORDI NG REASONS. WE FIND THAT NOTICE U/S 148 OF THE ACT WAS ISSUED BEFO RE THE EXPIRY OF 4 YEARS FROM THE END OF RELEVANT A.Y. AND THE REASON FOR REOPENING RELATED WAS THE ISSUE OF ADDITIONAL ROYALTY PRIVILE GE FEES AND THERE WAS NO FINDING OF THE LD. AO ON THIS ISSUE IN THE R EGULAR ASSESSMENT COMPLETED U/S 143(3) OF THE ACT. WE, THE REFORE, FIND NO MERIT IN THE GROUNDS RAISED BY THE ASSESSEE IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WALL AS IN VIEW OF HON'BL E APEX COURT JUDGMENT IN THE CASE KALYANJI MOBJI & CO. VS. CIT ( 1976) 102 ITR 287 (SC) WHEREIN HON'BLE APEX COURT OBSERVED THAT REASSESSMENT CAN BE INITIATED EVEN WHEN THE INFORMATION IS OBTA INED FROM THE RECORD OF THE ORIGINAL ASSESSMENT, INVESTIGATION OF THE MATERIAL OF THE RECORD OR FACTS DISCLOSED THEREBY FROM AN INQUIRY O R RESEARCH INTO FACTS OR LAW. THE INFORMATION NEED NOT BE FROM EXTE RNAL SOURCE. WE ACCORDINGLY DISMISS GROUND NO.1 RAISED BY THE ASSES SEE AND CONFIRM THE VIEW TAKEN BY LD. CIT(A) UPHOLDING THE REASSESS MENT PROCEEDINGS AS VALID. NOW WE TAKE UP THE ISSUE RELATED TO DISALLOWANCE OF EX-GRATIA PAYMENT PROVIDED FOR LABOURERS. 5. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE IS A GOVERNMENT UNDERTAKING OWNED BY THE GOVERNMENT OF M ADHYA PRADESH AND IS ENGAGED IN THE MINING AND MARKETING OF MAJOR AND MINOR MINERALS SUCH AS ROCK PHOSPHATE, AND BAUXITE ETC. DURING ALL THE M.P. STATE MINING CORPN. LTD 6 THESE THREE A.YS. UNDER APPEAL RESPECTIVE AMOUNT OF RS.25,00,000/- , RS. 27,11,416/- & RS.25,00,000/- WERE DEBITED UN DER THE HEAD ANUGRAH RASHI TO LABOURERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS CONTENDED THAT THE SAND MINES AR E LOCATED IN THE DISTRICT OF HOSHANGABAD AND SEHORE. MORE THAN 2000 SELF-EMPLOYED LABOURERS ARE ENGAGED IN THE LOADING OF SAND ON THE TRUCK AND ARE HIRED BY THE TRUCK OWNERS WHICH ENTERS INTO MINING AREA FOR THE EXCAVATION OF SAND. THE SAID TRUCK OWNER PAYS ROYAL TY TO THE ASSESSEE COMPANY AT THE RATE SPECIFIED BY THE GOVER NMENT. THESE LABOURERS ARE EMPLOYED BY THE TRUCK OWNERS AND NOT BY THE ASSESSEE. THE STATE GOVERNMENT VIDE MINUTES OF BOAR D MEETING DATED 30.05.1997 RESOLVED THAT EX-GRATIA PAYMENT SH OULD BE GIVEN TO THE LABOURERS WHO WERE FROM THE LOCAL AREA AND A RE GENERALLY POOR AND DO THE LABOUR OF FILLING THE SAND TO EARN THEIR LIVING. IN VIEW OF THESE INSTRUCTIONS AND ALSO IN VIEW OF THE FACTS THAT THESE LABOURERS WERE INDIRECTLY ASSOCIATED WITH THE COMPA NY THROUGH THE TRUCK OWNERS, THE IMPUGNED AMOUNT WAS PAID THROUGH THE GOVERNMENT AGENCY. THE LD. AO HOWEVER, TREATED THE ALLEGED EXPENDITURE AS CHARITY AND ALSO DID NOT APPRECIATE THAT ALLEGED EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE AND ACCORDINGLY DISALLOWED THE SAME DURING ALL THESE THREE YEARS. 6. THE ISSUE CAME UP BEFORE THE LD. CIT(A), IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ALLEGED EXPEN DITURE BEING EX- GRATIA PAYMENT IS DIRECTLY RELATED TO BUSINESS AND SHOULD BE ALLOWED THE M.P. STATE MINING CORPN. LTD 7 AS BUSINESS EXPENDITURE. THE RELIANCE WAS PLACED ON SA, BUILDERS LTD. VS. CIT (2007) 288 ITR 1(HON'BLE SUPREME COURT ) AND OTHER JUDGMENTS. HOWEVER ASSESSEE FAILED TO SUCCEED. THE LD. CIT(A) CONSISTENTLY AFFIRMED THE VIEW TAKEN BY THE LD. AO FOR ALL THESE THREE YEARS. 7. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. LD. COUNSEL FOR THE ASSESSEE RELIED ON THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AS WELL AS WRITTEN SUBMISSIONS GIVEN BE FORE THE TRIBUNAL. ON THE OTHER HAND, LD. DR SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED MATERIAL ON RECORD PLACED BEFORE US. THE COMMON ISSUES RAISED I N ALL THESE THREE APPEALS RELATES TO DISALLOWANCE OF EX-GRATIA PAYMENT TO LABOURERS WORKING AT THE SAND MINES LOCATED IN THE DISTRICT OF HOSHANGABAD AND SEHORE. THESE LABOURERS ARE ENGAGED IN THE EXCAVATION AND LOADING OF SAND IN TRUCK WHICH ENTER S INTO MINING AREA AND THE TRUCK OWNERS PAY ROYALTY TO THE ASSESS EE AT THE RATES SPECIFIED BY THE GOVERNMENT. IN PURSUANCE TO DECISI ON TAKEN BY THE STATE GOVERNMENT IN THE YEAR 1998 THE ASSESSEE IS M AKING THE ALLEGED PAYMENT TO THE LABOURERS AS ANUGRAH RASHI . IT IS CONTENDED BY THE LD. COUNSEL THAT THESE PAYMENTS WE RE MADE IN THE BUSINESS INTEREST OF THE ASSESSEE CORPORATION AND F OR COMMERCIAL THE M.P. STATE MINING CORPN. LTD 8 EXPEDIENCY. BOTH THE LOWER AUTHORITIES TREATED THE ALLEGED PAYMENT IN THE NATURE OF PERSONAL EXPENDITURE I.E. CHARITY IN DONATION. 9. WE FURTHER FIND THAT THE ALLEGED EXPENDITURE IS IN THE SHAPE OF PROVISION WHICH IS MADE ON THE BASIS OF ESTIMATES A VAILABLE ON RECORD. 10. NOW THE ISSUE TO BE EXAMINED IS THAT WHETHER TH E ALLEGED PAYMENTS ARE ALLOWABLE AS BUSINESS EXPENDITURE OR N OT. WE FIND THAT HON'BLE APEX COURT IN THE CASE OF SA BUILDERS LTD. (SUPRA) DEFINES THE WORD COMMERCIAL EXPEDIENCY AS AN EXPRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT B USINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION, BUT YET I T IS ALLOWABLE AS BUSINESS EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY . THE HON'BLE APEX COURT FURTHER HELD CONFIRMING TH E VIEW TAKEN BY THE DELHI HIGH COURT IN CIT VS. DALMIA CEMENT (BHART) LTD . (2002) 254 ITR 377 THAT ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE O F THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF), THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM-CHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EX PENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE ITS PROFIT. THE INCOME TAX AUTHORITIES MUST PUT THEMSELVES IN THE SHOES OF THE ASSESSEE AND SEE HOW A PRUDENT THE M.P. STATE MINING CORPN. LTD 9 BUSINESSMAN WOULD ACT. THE AUTHORITIES MUST NOT LOO K AT THE MATTER FROM THEIR OWN VIEW POINT BUT THAT OF A PRUDENT BUS INESSMAN. 11. FROM PERUSAL OF THE JUDGMENT OF HON'BLE APEX CO URT IN CASE OF SA BUILDERS (SUPRA) AS REFERRED ABOVE AND EXAMINING FACTS OF THE CASE IN LIGHT THEREOF, WE FIND THAT THE ASSESSEE PA ID/PROVIDED FOR THE ALLEGED EXPENDITURE IN PURSUANCE TO LEGAL OBLIGATIO N CASTED UPON IT BY THE STATE GOVERNMENT. RATHER IT WAS COMPELLED TO PAY THE ALLEGED AMOUNT TO THE LABOURERS. SO, IT IS NOT DISP UTED THAT THE ASSESSEE WAS UNDER LEGAL OBLIGATION TO PAY THIS AMO UNT, AS REQUIRED BY THE ORDERS OF THE STATE GOVERNMENT OF MADHYA PRA DESH. 12. EXAMINING FURTHER WHETHER THE ALLEGED EXPENDIT URE WAS FOR BUSINESS NECESSITY, WE OBSERVE THAT THE ALLEGED PA YMENT WAS NOT MADE TO GENERAL PUBLIC OR LABOURERS/WORKERS IN GENE RAL. RATHER THE PAYMENT WAS SPECIFICALLY MADE TO THE LABOURERS WHO WERE WORKING AT THE SAND MINES RUN BY THE ASSESSEE ON LEASE. THE SE LABOURERS WERE WORKING WITH THE TRUCK OWNERS AND IN TURN OF T HE WORK OF THESE LABOURERS FOR FILLING THE SAND IN THE TRUCKS. THE T RUCK OWNER HAS TO PAY ROYALTY TO THE ASSESSEE. IT SHOWS THAT THE ACTI VITY OF LABOURERS OF FILING THE SAND IN THE TRUCK HAS A CONNECTION WITH THE REVENUE EARNING OF THE COMPANY. EVEN, THOUGH THE LABOURERS ARE NOT THE EMPLOYEES OF THE ASSESSEE COMPANY, THEY ARE VERY MU CH CONNECTED TO THE ASSESSEE COMPANY THROUGH TRUCK OWNERS. THE M.P. STATE MINING CORPN. LTD 10 13. FURTHER ALL THESE LABOURERS ARE RESIDING IN THE SAME LOCALITY NEAR SAND MINES AND IF WITH THE HELP OF EX-GRATIA PAYMENT/PROTSAHAN RASHI, THEY EARN BETTER LIVING, T HEN CERTAINLY WITH THE BETTER LIVING AND GOOD HEALTH THEY CAN WOR K MORE EFFICIENTLY AND ALSO WILL NOT BE FORCED TO MIGRATE TO OTHER ARE AS. IF SHOWS THAT EVEN THOUGH THE ALLEGED PAYMENT TO LABOURERS ARE NO T DIRECTLY LINKED TO THE REVENUE EARNED BY THE COMPANY BUT THE Y ARE VERY MUCH DIRECTLY LINKED WITH THE ROYALTY PAID BY THE T RUCK OWNERS WHICH IS CALCULATED ON THE BASIS OF SAND EXCAVATED FROM THE MINES. IT IS ALSO OBSERVED THAT THE ALLEGED PAYMENT IS MAD E, THROUGH CONSTITUTED BODY OF THE LOCAL COLLECTOR WHICH COMPR ISE OF SUB DIVISIONAL MAGISTRATE, MINING INSPECTOR, TAHSILDAR & NAYAB TAHSILDAR. THIS FACT IS ALSO NOT IN DISPUTE THAT TH E ASSESSEE WAS UNDER LEGAL OBLIGATION TO ABIDE BY THE DECISION/INS TRUCTION OF THE GOVERNMENT ELSE THE BUSINESS OF THE COMPANY MAY GET AFFECTED IF LEASE RIGHTS ARE TERMINATED BY THE GOVERNMENT. GENU INENESS OF THE EXPENDITURE HAS ALSO NOT BEEN CHALLENGED AT ANY STA GE. THE ASSESSEE HAS ALSO FURNISHED THE COPIES OF FOLLOWING DOCUMENTS IN SUPPORT OF THE CONTENTION THAT THE EXPENDITURE WAS GENUINE AND ALLOWABLE U/S 37 OF THE ACT. 1. BOARD NOTIFICATION NO.9949 DATED 25.01.96 2. BOARD MEETING MINUTES DATED 30.05.1997 3. BOARD MEETING MINUTES DATED 18.09.1998 4. NOTE SHEET OF THE CHIEF MINISTER DATED 14.08.2008 5. ORDER OF UNDER SECRETARY, GOVT. OF M.P. DATED 17.10 .2002 6. COPY OF NOTE SHEETS OF DIFFERENT DATES AND PAYMENT OF ANUGRIH RASHI RECEIPT SHEET THE M.P. STATE MINING CORPN. LTD 11 7. COPY OF ORDER OF COLLECTOR, HOSHANGABAD DATED 07.05 .2006 14. WE THEREFORE, RESPECTFULLY FOLLOWING THE JUDGME NT OF HON'BLE APEX COURT IN THE CASE OF SA BUILDERS LTD. (SUPRA) AND IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, DISCUSSED IN T HE PRECEDING PARA ARE OF THE CONSIDERED VIEW THAT THE ALLEGED EX PENDITURE OF EX- GRATIA PAYMENT IN THE SHAPE OF ANUGRAH RASHI/PROTSA HAN RASHI TO LABOURERS WORKING IN THE MINES HELD ON LEASE BY THE ASSESSEE ARE ALLOWABLE AS BUSINESS EXPENDITURE AND BOTH THE LOWE R AUTHORITIES ERRED IN DISALLOWING THE SAME. IN THE RESULT THE ISSUE OF DISALLOWANCE EX-GRATIA PAYMENT IS ALLOWED IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY GROUND NO.2 OF A.Y. 2007-08 & GROUN D NO.1 OF A.Y. 2009-10 & 2010-11 ARE ALLOWED. 15. NOW WE TAKE UP THE SECOND ISSUE WHICH RELATES T O THE DISALLOWANCE OF RS.38,14,708/- WHICH WAS CLAIMED BY THE ASSESSEE AS A PRIVILEGE FEE AND NOT AS ROYALTY ON WHICH PROV ISION OF SECTION 43B OF THE I.T. ACT ARE ATTRACTED. 16. BRIEF FACT RELATING TO THE ISSUE ARE THAT THE A SSESSEE MADE A PROVISION OF PRIVILEGE FEES OF RS.15,38,14,708/- (I .E. AN AMOUNT EQUAL TO ROYALTY PAID ON SAND) IN PURSUANCE TO THE GOVERNMENT ORDER NO.F19-95/2004/12/2 DATED 13.10.2004. DURING THE ASSESSMENT PROCEEDINGS WHILE EXAMINING THESE EXPEND ITURE THE LD. AO WAS OF THE VIEW THAT THE ALLEGED AMOUNT IS IN TH E SHAPE OF ADDITIONAL ROYALTY WHICH IS IN THE NATURE OF TAX AN D PAYABLE TO THE THE M.P. STATE MINING CORPN. LTD 12 GOVERNMENT AND SUCH EXPENDITURE IS ALLOWABLE ONLY T O THE EXTENT OF PAYMENT MADE ON OR BEFORE THE DUE DATE FOR FILING R ETURN OF INCOME, AS PROVIDED IN SECTION 43B OF THE ACT. LD. AO ACCOR DINGLY ALLOWED THE CLAIM OF RS.15 CRORES BEING THE PAYMENT BEFORE THE DUE DATE OF FURNISHING OF RETURN OF INCOME U/S 139(1) OF THE AC T AND DISALLOWED THE REMAINING AMOUNT OF RS.38,14,708/- WHICH WAS A CTUALLY PAID ON 24.01.2008 I.E. AFTER THE DUE DATE OF FILING RET URN U/S 139(1) . 17. AGAINST THE SAID DISALLOWANCE, ASSESSEE CAME IN APPEAL BEFORE THE LD. CIT(A) AND CONTENDED THAT THE ALLEGED AMOUN T IS PRIVILEGE FEE AND NOT ROYALTY. THE ASSESSEE REFERRED TO THE P ROVISIONS OF SECTION 40(IIB) OF THE ACT AND SUBMITTED THAT THIS AMENDMENT CAME IN EFFECT FROM 01.04.2014 BY FINANCE ACT 2013 AND B EFORE THIS AMENDMENT THE EXPENDITURE IN THE NATURE OF PRIVILEG E FEE ARE ALLOWABLE ON DUE BASIS. HOWEVER, THE LD. CIT(A) WAS OF THE CONFIRMED VIEW THAT THE ALLEGED EXPENDITURE IS AN A DDITIONAL ROYALTY WHICH IS IN THE NATURE OF TAX PAYABLE TO THE STATE GOVERNMENT AND PROVISION OF SECTION 43B OF THE ACT ARE SQUARELY AP PLICABLE ON THIS EXPENDITURE. 18. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROVISION OF SE CTION 40(IIB) OF THE ACT CAME IN FACT FROM 1 ST APRIL 2014 AND THEREFORE, THOSE WERE NOT APPLICABLE ON THE ASSESSEE FOR A.Y. 2007-08 AND FURTHER IT WAS SUBMITTED THAT THE ALLEGED EXPENDITURE IS NOT AN AD DITIONAL ROYALTY BUT AN PRIVILEGE FEE. ON THE OTHER HAND, LD. DR SUP PORTED THE ORDER OF THE LOWER AUTHORITIES. THE M.P. STATE MINING CORPN. LTD 13 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED MATERIAL ON RECORD PLACED BEFORE US. THE ONLY ISSUE BEFORE US I S WHETHER ALLEGED PROVISION OF RS.15,38,14,708/- IN IN THE NATURE OF ADDITIONAL ROYALTY I.E. TAX PAYABLE TO THE STATE GOVERNMENT FOR MINING OR IT IS A PRIVILEGE FEE. FROM THE PERUSAL OF RECORDS, WE FIND THAT THE ALLEGED PROVISION WAS MADE AS PER GOVERNMENT ORDER NO.F19-95/2004/12/ 2 DATED 13.10.2004 ISSUED BY THE STATE GOVERNMENT BY THE MI NISTRY OF MINES AND MINERALS. THE COPY OF ALLEGED ORDER IS NO T PLACED ON RECORD. EVEN THOUGH THE ASSESSEE HAS PAID THE AMOUN T EQUIVALENT TO THE ROYALTY PAID ON THE SAND AND HAS ALSO DEPOSI TED RS.15 CRORES THROUGH CHALLANS IN THE GOVERNMENT TREASURY, BUT S TILL ITS ACTUAL NATURE IS NOT DISCERNABLE FROM THE RECORDS PLACED B EFORE US. THE FACT NEEDS TO BE INQUIRED BY THE AO DULY ASSISTED B Y THE ASSESSEE AS WELL AS INFORMATION TO BE TAKEN FROM THE MADHYA PRA DESH STATE GOVERNMENT( MINES AND MINERALS DEPARTMENT) DULY, RE FERRING TO THE NOTIFICATION AS DISCUSSED ABOVE AND THEN TO DECIDE ACCORDINGLY. IN CASE THE ALLEGED AMOUNT IS IN THE NATURE OF TAX DUT Y OR CESS ( BY WHATEVER NAME CALLED UNDER ANY LAW FOR THE TIME BEI NG ENFORCE) THEN THE ALLEGED DISALLOWANCE NEEDS TO BE SUSTAINED AND IF FOUND OTHERWISE THEN THE CLAIM OF ASSESSEE SHOULD BE ALLO WED. 20. WE, THEREFORE, ALLOW THIS ISSUE IN FAVOUR OF AS SESSEE FOR STATISTICAL PURPOSES AND REMIT IT TO THE FILE OF LD . AO TO MAKE NECESSARY VERIFICATION AS PER OUR DIRECTIONS GIVEN HEREINABOVE. NEEDLESS TO MENTION THAT PROPER OPPORTUNITY OF BEIN G HEARD IS TO BE THE M.P. STATE MINING CORPN. LTD 14 PROVIDED TO THE ASSESSEE. AS A RESULT GROUND NO.3, 4 & 5 OF ASSESSEES APPEAL FOR A.Y. 2007-08 IS ALLOWED FOR S TATISTICAL PURPOSES. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A.Y. 2007-08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES & APPEAL FO R A.YS. 2009-10 & 2010-11 ARE ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 09.02.201 8. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 9 TH FEBRUARY, 2018 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER PRIVATE SECRETARY/DDO, INDORE