M/s. Agrawal Coal Corp. (P) Ltd., Indore V. ACIT-1(1), Indore

ITA 776/Ind/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8126 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 01-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AJAY TULASIYAN
• Keywords: Business expenditure; Question of law; Revised return
• Section: 143(3); 14A; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE KUL BHARAT, JUDICIAL MEMBER AND HONBLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 776/IND/2019 ASSESSMENT YEAR 2016-17 REVENUE BY SHRI ASHISH PORWAL , SR.DR ASSESSEE BY SHRI AJAY TULASIYAN, CA DATE OF HEARING 2 0 . 08.2020 DATE OF PRONOUNCEMENT .08.2020 O R D E R PER MANISH BORAD, AM: THE ABOVE CAPTIONED APPEAL FILED BY THE REVENU E FOR ASSESSMENT YEAR 2016-17 IS DIRECTED AGAINST THE ORDER OF LD. C OMMISSIONER OF INCOME-TAX (APPEALS)-I, INDORE, DATED 17.06.2019, WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT D ATED 25.12.2018 FRAMED BY THE DCIT-1(1), INDORE. M/S. AGRAWAL COAL C ORPORATION PVT.LTD, 5, YASHWANT NIWAS ROAD, INDORE VS. A CIT 1(1) INDORE (APPELLANT) (RESPONDENT ) PAN NO. AACCA8468K AGRAWAL COAL CORPORATION PVT. LTD ITA NO.776/IND/2019 2 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED CIT(A) ERRED IN REJECTING THE CLAIM OF CESS OF RS.21,72,114/- INCURRED DURING THE YEAR UNDER CONS IDERATION AND WHICH WAS CLAIMED DURING THE ASSESSMENT PROCEEDINGS. TH AT ON THE FACTS OF THE CASE AND IN LAW THE APPELLANT IS ENTITLED TO DEDUC TION OF CESS WHICH IS PRAYED TO BE NOW ALLOWED. 2. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, AM END, MODIFY, SUBSTITUTE, DELETE AND/OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL ON OR BEFORE FINAL HEARING, IF NECESSARY SO ARISES. 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE RECORDS ARE THAT THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF COAL TRADING AND OPERATES IN MOST OF THE STATES OF INDIA. THE A PPELLANT PROCURES COAL FROM VARIOUS SOURCES I.E. FROM INDIAN COLLIERI ES, PURCHASE FROM LOCAL MARKET AND ALSO IMPORT COAL FROM DIFFERENT CO UNTRIES. THE APPELLANT HAD FILED ITS RETURN OF INCOME FOR ASSESS MENT YEAR 2016- 17 DECLARING TOTAL INCOME OF RS.21,54,87,530/-. CAS E SELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE APPELLANT FILED WRITTEN SUBMISSIONS PROVIDING INFOR MATION CALLED FOR BY THE LD. A.O. THE APPELLANT MADE A FRESH CLAIM OF DEDUCTION OF EDUCATION CESS BEFORE LD. A.O DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH WAS NOT ACCEPTED BY THE LD. A.O. THE AGRAWAL COAL CORPORATION PVT. LTD ITA NO.776/IND/2019 3 ASSESSMENT U/S 143(3) WAS COMPLETED ON 25.12.2018 M AKING ADDITIONS/DISALLOWANCES AND ASSESSED THE TOTAL INCO ME AT RS.21,60,45,130/-. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) AND PARTLY SUCCEEDED. THE GROUND OF FRES H CLAIM OF EDUCATION WAS DISMISSED BY LD. CIT(A). 4. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L RAISING THE SOLE ISSUE OF ALLOWABILITY OF EDUCATION CESS. 5. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE BY VARIOUS JUDGMENTS MENTIONED HEREIN BELOW:- FOR THE PROPOSITION THAT THE RIGHTFUL CLAIM MADE DU RING THE COURSE OF ASSESSMENT PROCEEDINGS CANNOT BE DENIED BY TAKIN G RECOURSE OF REVISED RETURN AND SHELTER OF THE CASE OF GOETZ IND IA. IT IS THE BENEVOLENT DUTY OF ASSESSING OFFICER TO ASSESS THE CORRECT TAXABLE INCOME OF A PERSON AS PER LAW EVEN IF THE ASSESSEE FAILS TO CLAIM THE SAME IN THE RETURN OF INCOME. (I) HON'BLE APEXT COURT IN THE CASE OF CIT VS. MAHALAXM I SUGAR MILLS CO. LTD 58 CTR 0138. (II) HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PR UTHVI BROKERS & SHAREHOLDERS (P) LTD 349 ITR 0336 GOETZ INDIA (III) HON'BLE INDORE I.T.A.T.IN THE CASE OF ACIT VS. ADMA NUM FINANCE LIMITED, INDORE IN ITA NO.389/IND/2012, 807 & 808/I ND/2014. AGRAWAL COAL CORPORATION PVT. LTD ITA NO.776/IND/2019 4 (IV) HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V/S RAMCO INTERNATIONAL (2011) 332 ITR 306. FOR THE PROPOSITION THAT THE CESS IS AN ALLOWABLE E XPENDITURE AND IS NOT HIT BY THE DISALLOWANCE CONTEMPLATED U/S 40( 1)(II) OF THE ACT. (V) HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CHAMBAL FERTILIZERS AND CHEMICALS LIMITED D.B.I.T.A NO.52/2018 DATED 31.7.2 018. (VI) COPY OF DECISION OF HONOURABLE I.T.A.T. INDORE BENC H, INDORE IN THE APPELLANTS OWN CASE FOR A.Y 2012-2013 TO A.Y. 2014 -15 IN ITA NO. 801 TO 803/IND/2018 FILED BY THE DEPARTMENT AND IN ITA NO. 778/IND/2018 AND C.O.NO.23 & 24/IND/2019 FILED BY T HE APPELLANT. 6. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE STR ONGLY OPPOSED THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND CONTENDED THAT FRESH CLAIMS CANNOT BE MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HOWEVER HE COULD NOT CONTROVERT THE FA CT THAT SUCH CLAIMS IF ALLOWABLE UNDER THE PROVISIONS OF LAW CAN BE ENTERTAINED AT THE APPELLATE STAGE AND ALSO COULD NOT CONTROVERT T HE FACT THAT THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF THE INDORE TRIBUNAL IN ASSESSEES OWN C ASE VIDE ITA NO. 801 TO 803/IND/2018 FILED BY THE DEPARTMENT AND IN ITA NO. 778/IND/2018 AND C.O.NO.23 & 24/IND/2019 ORDER DATE D 28.11.2019. AGRAWAL COAL CORPORATION PVT. LTD ITA NO.776/IND/2019 5 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE JUD GMENTS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. THE SOVE GRIEVAN CE RAISED IN THIS APPEAL BY THE ASSESSEE RELATES TO REJECTION OF CLAI M OF EXPENDITURE OF EDUCATION CESS OF RS.21,72,114/- INCURRED DURING TH E YEAR. WE OBSERVE THAT SIMILAR ISSUE STANDS ADJUDICATED BY US IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2012-13 TO 2014-15 VIDE ITA NO.801 TO 803/IND/2018, ITA NO.778/IND/2018 & CO NO S. 23 & 24/IND/2019 WHEREIN WE HAVE DECIDED IN FAVOUR OF TH E ASSESSEE ALLOWING THE CLAIM OF EDUCATION CESS TO BE ALLOWED AS AN EXPENDITURE AFTER RELYING THE JUDGMENT OF HON'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF CHAMBAL FERTILIZERS AND CHEMICALS LIMITED (SUPRA) OBSERVING AS FOLLOWS:- 38. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED T HE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE JUDGMENTS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. THE OTHER ISSUE COMMONLY RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2013-14 IS THAT WHETHE R THE EDUCATION CESS PAID BY THE ASSESSEE ALONG WITH THE INCOME TAX AND SURCHARGE IS DEDUCTIBLE AS EXPENDITURE U/S 37 OR IT IS NOT DEDUC TIBLE AS PER PROVISIONS OF SECTION 40(A)(II) OF THE ACT WHICH REFERS TO THE AMOUNT NOT DEDUCTIBLE. AGRAWAL COAL CORPORATION PVT. LTD ITA NO.776/IND/2019 6 39. WE OBSERVE THAT SIMILAR ISSUE CAME UP BEFORE TH E HON'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF CHAMBAL FERTILIZERS AND CHEMICALS LIMITED (SUPRA) WHEREIN HON'BLE HIGH COURT REFERRED TO CIRC ULAR NO. NO.91/58/66- ITJ(19) DATED 18.5.1967 AND ALSO VARIOUS JUDGMENTS. THE RELEVANT EXTRACT OF THE JUDGMENT OF THE HONBLE HIGH COURT IN THIS C ASE IS MENTIONED BELOW:- (I) HONBLE HIGH COURT OF JUDICATURE FOR RAJASTHA N BENCH, JAIPUR IN THE CASE OF CIT, KOTA V/S CHAMBAL FERTILIZERS AND CHEMICALS LTD, KOTA D.B. IT NO.52/2018 ORDER DATED 31.7.2018 RAIS ED FOLLOWING SUBSTANTIAL QUESTION OF LAW:- 3.WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF T HE CASE THE LD. ITAT HAS NOT ERRED IN HOLDING THAT THE EDUCAT ION CESS IS A DISALLOWABLE EXPENDITURE U/S 40(A)(II) OF THE ACT ? REGARDING QUESTION NO.3, MR. JHANWAR HAS TAKEN U S TO THE ORDER OF CIT(A) AND TRIBUNAL AND STRONGLY RELIED UPON THE CIRCULAR DT. 18.5.1967 WHICH READS AS UNDER:- CTR ENCYCLOPAEDIA ON INDIAN TAX LAWS CIRCULAR F.NO. 91/58/66-ITJ(19) DT. 18 TH MAY, 1967 BUSINESS EXPENDITURE SECTION 40(A)(II) AGRAWAL COAL CORPORATION PVT. LTD ITA NO.776/IND/2019 7 RECENTLY A CASE HAS COME TO THE NOTICE OF THE BOA RD WHERE THE ITO HAS DISALLOWED THE CESS PAID BY THE ASSESSE E ON THE GROUND THAT THERE HAS BEEN NO MATERIAL CHANGE IN THE PROVISIONS OF S. 10(4) OF THE OLD ACT AND S.40(A) (II) OF THE NEW ACT. 2.THE VIEW OF THE ITO IS NOT CORRECT. CLAUSE 40( A)(II) OF THE IT BILL, 1961 AS INTRODUCED IN THE PARLIAMENT STOOD AS UNDER: (II) ANY SUM PAID ON ACCOUNT OF ANY CESS, RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS O R PROFESSION OR ASSESSED AT A PROPORTION OF, OR OT HERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS. WHEN THE MATTER CAME UP BEFORE THE SELECT COMMITT EE, IT WAS DECIDED TO OMIT THE WORD CESS FROM THE CLAUSE. THE EFFECT OF THE OMISSION OF THE WORD CESS IS THAT ONLY TAXE S PAID ARE TO BE DISALLOWED IN THE ASSESSMENTS FOR THE YEAR 196 2-63 AND ONWARDS. 3.THE BOARD DESIRE THAT THE CHANGED POSITION MAY PLEASE BE BROUGHT TO THE NOTICE OF ALL THE ITOS SO THAT FUR THER LITIGATION ON THIS ACCOUNT MAY BE AVOIDED. RELIANCE WERE PLACED BY THE LD. COUNSEL FOR THE A SSESSEE ON THE FOLLOWING JUDGMENTS; IN INSTALMENT SUPPLY (P) LTD & ORS VS/ UNION OF INDIA & ORS (1962) 2 SCR 644, IT HAS BEEN HELD AS UNDER: - 19. THERE IS ANOTHER ANSWER TO THE POINT OF RES JUDICATA AGRAWAL COAL CORPORATION PVT. LTD ITA NO.776/IND/2019 8 RAISED ON BEHALF OF THE PETITIONERS, RELYING UPO N THE DECISION OF THE PUNJAB HIGH COURT IN INSTALLMENT SUPPLY LTD, NEW DELHI V STATE OF DELHI MANU/PH/0068/195 6. IT IS WELL SETTLED THAT IN MATTERS OF TAXATION T HERE IS NO QUESTION OF RES JUDICATA BECAUSE SUCH YEARS ASSESSMENT IS FINAL ONLY FOR THAT YEAR AND DOES NOT GOVERN LATER YEARS, BECAUSE IT DETERMINES ONLY T HE TAX FOR A PARTICULAR PERIOD. (SEE THE DECISION IN TH E HOUSE OF LORDS IN SOCIETY OF MEDICAL OFFICERS OF HEALTH V . HOPE (VALUATION OFFICER) (1960) A.C. 551 APPROVING AN D FOLLOWING THE DECISION OF THE PRIVY COUNCIL IN B ROKEN HILL PROPRIETARY COMPANY LIMITED V MUNICIPAL COUNCIL OF BROKEN HILL (1925) A.C. 94. IN GODREJ & BOYCE MANUFACTURING COMPANY LTD VS. DY . COMMISSIONER OF INCOME TAX & ORS (2017) 247 TAXMAN 361 (SC), IT HAS BEEN HELD AS UNDER:- 33.WHILE ANSWERING THE SAID QUESTION THIS COURT CONSIDERED THE OBJECT OF INSERTION OF SECTION 14 A IN THE INCOME TAX ACT BY FINANCE ACT, 2001, DETAILS OF WHICH HAVE ALREADY BEEN NOTICED. NOTICING THE OBJECTS AND REASONS BEHIND INTRODUCTION OF SECTION 14A OF TH E ACT THIS COURT HELD THAT: EXPENSES ALLOWED CAN ONLY BE IN RESPECT OF EARNI NG OF TAXABLE INCOME. IN PARAGRAPH 17, THIS COURT WENT ON TO OBSERVE T HAT: THEREFORE, ONE NEEDS TO READ THE WORDS EXPENDIT URE INCURRED IN SECTION 14A IN THE CONTEXT OF THE S CHEME OF AGRAWAL COAL CORPORATION PVT. LTD ITA NO.776/IND/2019 9 THE ACT AND, IF SO READ, IT IS CLEAR THAT IT DIS ALLOWS CERTAIN EXPENDITURE INCURRED TO EARN EXEMPT INCO ME FROM BEING DEDUCTED FROM OTHER INCOME WHICH IS INCLUDIBLE IN THE TOTAL INCOME FOR THE PURPOSE OF CHARGEABILITY TO TAX. THE VIEWS EXPRESSED IN WALFORT SHARE AND STOCK BRO KERS P.LTD (SUPRA), IN OUR CONSIDERED OPINION, YEAR AGAIN MIL ITATE AGAINST THE PLEA URGED ON BEHALF OF THE ASSESSEE. 34. FOR THE AFORESAID REASONS, THE FIRST QUESTION FORMULATED IN THE APPEAL HAS TO BE ANSWERED AGAINST THE APPELLANT-AS SESSEE BY HOLDING THAT SECTION 14A OF THE ACT WOULD APPLY TO DIVIDEND INCOME ON WHICH TAX IS PAYABLE UNDER SECTION 115-0 OF THE ACT. THE HONBLE HIGH COURT DECIDED THE ISSUE HOLDING T HAT; 12. WE HAVE HEARD COUNSEL FOR THE PARTIES. 13. ON THE THIRD ISSUE IN APPEAL NO.52/2018, IN V IEW OF THE CIRCULAR OF CBDT WHERE WORD CESS IS DELETED, IN OUR CONSIDERED OPINION, THE TRIBUNAL HAS COMMITTED AN ERROR IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE. APART F ROM THE SUPREME COURT DECISION REFERRED THAT ASSESSMENT Y EAR IS INDEPENDENT AND WORD CESS HAS BEEN RIGHTLY INTERP RETED BY THE SUPREME COURT THAT THE CESS IS NOT TAX IN THA T VIEW OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT THE VIEW TAKEN BY THE TRIBUNAL ON ISSUE NO.3 IS REQUIRED TO BE R EVERSED AND THE SAID ISSUE IS ANSWERED IN FAVOUR OF THE ASSES SEE 40. WE, THEREFORE RESPECTFULLY FOLLOWING THE JUDGM ENT OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT, KOTA V/S CHAMBAL AGRAWAL COAL CORPORATION PVT. LTD ITA NO.776/IND/2019 10 FERTILIZERS AND CHEMICALS LIMITED (SUPRA) FIND THA T THE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS OF THE CASE IN APP EAL BEFORE US AND THUS ARE INCLINED TO HOLD THAT THE EDUCATION CESS IS NOT A TAX AND THUS IS AN EXPENDITURE U/S 37 OF THE ACT WHICH CA NNOT BE CLAIMED AGAINST THE PROFITS AND GAINS OF THE BUSINESS CARR IED OUT BY THE ASSESSEE. THUS FINDING OF LD. CIT(A) IS REVERSED. THE ADDITIONAL GROUND NO.3 RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2012-13 AND GROUND NO.1 OF CROSS OBJECTION NOS. 23 & 34/IN D/2019 FOR A.Y. 2013-14 & 2014-15 STANDS ALLOWED. 8. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCE S OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF INDORE I TAT IN THE ASSESSEES OWN CASE DIRECT THE REVENUE AUTHORITIES TO ALLOW THE CLAIM OF EDUCATION CESS OF RS.21,72,114/- AS AN EXP ENDITURE. THUS THE SOLE GROUND RAISED BY THE ASSESSEE STANDS ALLOW ED. 9. THE OTHER GROUND IS GENERAL IN NATURE WHICH NEED S NO ADJUDICATION. AGRAWAL COAL CORPORATION PVT. LTD ITA NO.776/IND/2019 11 10. IN THE RESULT THE APPEAL OF THE ASSESSE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 24.08.2020. SD/- SD/- (KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 24 AUGUST, 2020 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE