The Singareni Collieries Company Limited V. Principal Commissioner of Income Tax, Circle 1, Hyderabad and Deputy Commissioner of Income Tax, Circle 13(1), Hyderabad

ITTA/88/2021

AI Insights

The case involves M/s. The Singareni Collieries Company Limited, a government sector undertaking engaged in coal extraction, which challenged the taxability of certain expenditures under the Income Tax Act. The expenditures in question were related to the provision of free electricity to employees as per the National Coal Wages Agreement (NCWA). The Income Tax Appellate Tribunal had previously upheld the taxability of these expenditures, which led to the filing of appeals by the company. The main legal contention was whether the expenditures for providing electricity to employees fall under the 'fringe benefits' taxable under Section 115WB of the Income Tax Act. The High Court, referencing various judgments and the statutory nature of the NCWA, concluded that these expenditures are not taxable as they are statutory obligations and not merely welfare measures.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 795514 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 15-02-2024
• Assessment Year: misc
• Other Referred Cases: Mohan Mahto vs. Central Coal Field Ltd., L.P.A.No.17 of 2018, ITA No.24 of 2019
• Laws Referred To: Income Tax Act, 1961, Mines Act, 1952, Industrial Disputes Act, 1947
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: MANOJ REDDY REDDY
• Keywords: Electricity Supply; Employee welfare; Fringe Benefits; Income Tax Tribunal Appeal; National Coal Wages Agreement
• Section: 115WB; 260-A; 115WA

Judgement Text

"[ 337e ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD THURSDAY,THE FIFTEENTH DAY OF FEBRUARY TWO THOUSAND AND TWENW FOUR PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE N.TUKARAMJI INCOME TAX TRIBUNAL APPEAL NOs: 85. 87 AND 88 OF 2021 lTTA.No. 85 ot 2021 lncome Tax Tribunal Appeal Under Section 260-4 of the lncome Tax Act,1961 against the order dated 23.04.2021 passed in ITA No.8B3/H/2014 for assessment Year 2OO7-2OOB onthe file of the lncome Tax Appellate Tribunal, Hyderabad Bench ' A', Hyderabad, prefened against the Order dated 28.02.2014 passed in Appeal No. 234IKMM/C|T (A)^/JA /2009-10 on the file of the Commissioner of lncome Tax (Appeals), Vijayawada, preferred against the order dated 30.12.2009 passed in PAN/GIR.No. AituqCT8873F/T-1O1 on the file of the Additional Commissioner of lncome Tax, Khammam Range, Khammam. Between: M/S The Singareni Collieries Company Limited, Having its Registered Office at Kothagudem Collieries, Bhadradri, Kothagudem District, Telangana Rep. by its Chairman and Managing Director ...Appellant AND 1. Principal Commissioner of lncome Tax, Circle 't, Hyderabad 2. Deputy Commissioner of lncome Tax, Circle 13( t ), Hyderabad. (R2 is not necessary) ...Respondent rTTA.No. 87 ot 2021 lncome Tax Tribunal Appeal Under Section 260-A of the lncome Tax Act,1961 against the order dated 23.04.2021 passed in ITA No.881/Hl2O14 for assessment Year 2006-2007, on the file of the lncome Tax Appellate Tribunal, Hyderabad Bench ' A', Hyderabad, preferred against the Order dated 28.02.2014 passed in Appeal No. 324IKMM/C|T (A)A/JA /2009-10 on the file of the Commissioner of lncome Tax (Appeals), Vijayawada, preferred against the order dated 15.O2.2O1O passed in PANiGlR.No. AAACT8873F/T-10 1 on the file of the Assistant Commissioner of lncome Tax, Circle-|, Khammam Range, Khammam. Between: M/S. The Singareni Collieries Company Limited, Having its Registered Office at Kothagudem Collieries, Bhadradri, Kothagudem District, Telangana Rep. by its Chairman and Managing Director ...Appellant AND 1. Principal Commrssioner of lncome Tax, Circle 1, Hyderabad 2. Deputy Commissioner of lncome Tax, Circle '13(1), Hyderabad (R2 is not necessary) ..,Respondent lTTA.No. 88 ot 2021 lncome Tax Tribunal Appeal Under Section 260-A of the lncome Tax Act,1961 against the order dated 23.04.2021 passed in ITA No.B85/H/2014 for assessment Year 2008-2009 on the file of the lncome Tax Appellate Tribunal, Hyderabad Bench 'A', Hyderabad, preferred against the Order dated 28.02.2014 passed in Appeal No. 346/KMM/C|T (A)A/JA 12010-11 on the file of the Commissioner of lncome Tax (Appeals), Vilayawada, preferred against the order dated 29.12.2O1O passed in PAN/GlR.No. AAACT8873F/T-101 on the file of the Additional Commissioner of lncome Tax, Khammam Range, Khammam. - €etween: AND Counsel for the Appellant ln all the ITTA's Sri Manoj Reddy Keshi Reddy Counsel for Respondents ln all ITTA's : Sri J.V. prasad, SC FOR INCOME TAX The Court delivered the following : COMMON JUDGMENT Ivl/S. The Singareni corlieries company Limited, Having its Registered office at Kothagudem Collieries, Bhadradri, Kothagudem District, Telangana Rep. by its Chairman and Managing Director ...Appellant 1. Principal Commissioner of lncome Tax, Circle 1, Hyderabad 2. Deputy Commissioner of lncome Tax, Circle 13(1), Hyderabad ... Respondent 6 THE HON'BLE SRI JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE N.TUKARAMJI ITTA Nos.85 87 AND 88 of 2021 COMMON IUDGMENT: (per Hon'ble Sti lustice P.SAI ,4 KOSH'!, These Income Ta1 Appeals are filed by the same assessee r'e' M/s. Singareni Colleries Company Limited chatlenging the order passedbythelncomeTaxAppellateTribunal,Ilyclerabacl'A'Bench' Hyderabad,inITANos.881,883and885/H/2014fort[re'assessment years 2006-07, 2007-08 and 2008-09 decided by a common orcler datcd 23.04.2021. 2 I{eard Sri Manoj Reddy Keshi Reddy, learned Counsel for the appellant and Sri J.V. Prasad, learned counsel for the responc{ents- Department. 3. Vide the said impugned order, the learned Income Tax Appellate Tribunal has reiected the appeals preferred by the appellant herein confirming the order passed by the Commissioner of Incomc Tax (Appcals), Viiavawada, as that also of the Assessing Officcr 7 4. The issue involved in the present Income Tax Tribunal Appeals is in respect of the proceedings issued under Se Income Tax Act,7g67. o- ^vuuc r urtcrer Section 115 wE of the 5. The facts in brief is that the appellant company sector undertaking of the Government of Telangana of India is into the business of coal extraction establishment is one which is primarily govemed und of Mines Act, 7952. Taking into consideration the c conciitions under which the work force under c'stablishment works, the employees/ workers are which is a public and Government and sale. The er the provisions ompelling work the apfrellant provided with certrin benefits by the appellant herein in the capacity of employer towards the welfare of the employees/workers farnily ciependent upon them. The service conclitions Sove being the and their rning the work force i.e workers and the employees are governecl by the National Coal Wages Ag-reemenl The said agreement rs en tered into lretween the management of the appellant establishm Itiparrite Commirtee for Coal Industry flBCCI). The J ent and the foint BCCI consists of ! I i I I ) 8 the representatives of the State Government, the rc-presentative of the Central Government, Members of various recognized Trade Unions. The agreement so entered into is known as National Coal Wages Agreement (for short 'NCWA'). The said agreement is a recognized agreement having a binding ef fect in tcrms of the clef inition of \"settlement\" under the provisions of the Inclustrial Disprutcs Act,7947. 6. In the course of entering into the agreernc'nt, the employer undertakes to provide various benefits, incc.ntives ancl facilities to its employees. The facilities inclucle supply oI clectricity to their residence, to the township where they stay ancl also to thc streets and roads passing through the important areas particularly the residential locality. 7. Clause 8.3.1 of NCWA envisagcs provicling of 30 KWH of free electricity per month to each of its cmplol,ccs of the appellant. The appellant incurs substantial payment evcrv year tort,arc{s meeting the cost of the said electricity which is Lreing provitletl kr the employees. Section 115WA of the I-I'Act deals with the fringe lrenc,fits provided by 9 the employer which would be otherwise taxable under the IT Act. Further, the \"Explanation\" to Section 115W8(2)(E) deals with the employees welfare also being part of the fringe benefits which would be taxable. Further, the \"Explanation,, to the saicl Clause E deals with certain facilities which are not to be considered as an expendifure for employees welfare. For proper understanding of the issue invorved in 'the case, it would be relevant at trris stage to take note of the provision under section 115w8(2) and Crause E of the same along with the un- amended explanation that was thcre tilt 31.03.2009 and the amended explanation with effect from 01.04.2009. 8 The relevant portion of Clause E of sub-section 2 of Section 115WB of the Income Tax Act, 1961 is re-produced herein under: (E) Employees'welfure Explanation. - For tlu purposes of tlis clnusc, any etpenditure incurred or payment made to - O fuW any statutory obligntiort; or (ii) mitigate occupationaL lmznrtls; or (iii) prooide first ail facilitics itt tln lrcsltitnl or dispensary run by the employer; or '.wrr ,3.,' 10 (io) prooide crcche fncility for the children of tlrc eruployee; or (t:) sponsor n sportstnan, being nn entployee; or ftti) orgnnise sports eaents for employees, slmll not he cortsitlcred ns expenditure for employees' uelfare; g. In view of the explanation so provided to Clause E of sub-section 2 of Section 115WB, the appellant herein have been pursuing with the respondents stating that the expenditure incurred towards providing of electricity to the employees would not be one which would be taxable as it stands exempted in terms of the explanation so provided which perhaps ras not accepted by the Assessing Officer, Commissioncr of Appcals and subsequently by the ITAT as well' 10. The contention of the Assessing Officer was that firstly, the benefit so providecl bcing a welfare measure, the expendifure would fall squarely within the ambit of Clause E of sub-section 2 of section 115WB and hence, it l-recornes taxable. second condition was that the NCWA is only a scttlement between the employer and employees where there is onlt, a contractual obligation for the employer towards 16,; 11 its employees. That it is not a stahrtory document nor does the settlement have any statutory force of law so as to avail the benefits under the explanation to Section 115 /B(2XE) both under the un- amended provision and as also under the amended provision' 11. It is necessary at this iuncture to take note of the couple of decisions rcndered on the said sub.iect issue' The first being the judgment of the Hon'blc Supreme Court in case of Mohan Mahto zt' Central Coal Field Ltd.l, wltere considering the provisions of NCWA rvhile cletermirring whether it lras binding force of law or not, thc Hon'ble Supreme Court in paragraph No.2 and paragraph No'10 held as under -2. ..... '!' rc tttrnts and conditions of the serttice of tlrc tLtorktnet toorkbrg in coal mines are inter alia goaemed by a \"sattlcntctrt\" ktntiptt tts National Coal Wage Agreemetfi (NCI^/A) V. Indisputnlrly, the said settlement, in terrus of sub- scctiotr (3) of Scctitttt 13 ttf tltc Industrial Disputes Act, 1947 is bituling ott tltc pnrtics.....\". I (2007) ti 5u Prcmc Court Cascs 5-19 L2 \"10. A scttlement ruitlrin tlu meaning of uilt-srctit:lt (3) of Sectiott 'l8 of tlrc Industinl Disputes Act is bindhry on hoth the pnrties nrtd continues to renmin in force unless Ilrc snttrc is nltered, rtuttlifed or substihied by anotlrcr settlenrcnt......\". 12. A simitar issue came up for consideration before the Jharkhand Higlr Court at Ranchi in L.P.A.No.17 of 2078 which has been decicled on 23.04.201.9 and where the Division Bench of the Jharkhand High Court, in paragraph 6, relying upon the aforesaid juc{gment of the Hon'ble Supreme Court held as under: \"6. lNc nre in agreement uith the contention of thc npptllnnt tlnt Nntionnl Coal Wage Agreement is stntutory in ntturL,. lt is ntt ot.ttconrc o.f tripartite agleefient among the Cod (-orttpntnl, Lnltottr llnions and Central Goaernment. lt lns bcctr ltclrl lrll tln' Ilott'ble Supreme Court in Mohan Mnhto Vs. Ctrttrnl Coalfields L,td. reported in (2007) 8 SCC 549, tlmt it lms stntrttonl force. I-eamed Single Judge cntne to tlrc ot'orcsnid f trditrgs due to follotoing facts and reasotls trlich ltm,L: ltcctt depicted in ynragraph 7 of the impugned judgnrcnt ttthich rt'tds lu:rttutdtr: 7. (i) Atlnittedly, after the denth of tlrc Lfuct:rtstl|- tttrplotlec, late Lnxmi Raoidas on srrbntissitttt ttf t3 npplication t'or contpassionate apytoitrttrwil of lrcr ,ld\"rt ,or', by Snmudri Deoi (notninee of tlrc petitioner's fatlrcr), the Management- Cotnpatry 'considered the case of the eldest brother oi tlrc petitioner, natiely, SantoshRauidas in the year 2004' hut, by that timi, tht said Santoslt Raoidas has died' so it iannot be construed that the respondents did rtot consider the ca* of tlrc legat luir cf the deccased enrployee, late Laxmi Rattidas t'or considerntion of contpissionate appointment' It - appears tlmt tlrc tttotiwt of tlrc Ttetitioner hnd applied for tppoittttttctrt of the pe'titioner on compassiondte grountl -itt tlu yaar iTtt. Du, to indecisiaeness on tht part of tlrc motlrcr of tlu petitioner, it uas not possible-on the part of tl-rc iespondents to consider tht case oi the petitiorrcr for comP assionate aPPoinhnent ' (ii) lt is n settled position thnt tht contpassio'iite ',tppointment is not a matter of right' rather' ii is n rnattcr of concession' On perusal of tl.rc irtryrgnad Annexuie-'l'9 to tlrc ruit applicatiott' tlrc srune does not suffer ftom any infimtity or iregtilnrity so ls to ruarrant interferenct of this Court' (iii) So far as the claim of the petitiona-r for grmt of nrcnetary compensation as adntissible undu tlrc releuant\"prooisions of tlte N'C'W'A' is conccrned'. the rnother of the petitioner is entitled, prouided tlnt slrc frles att application for grant of tlrc same\" ' 13. Tw'o similar issues under the provisions of the Income Tax itself camc up before the Nagpur Bench of the Bombay I'Iigh Court' [irst itr Lrcoorc'Iax Appeal No.40 of 2015' In the case where it lvas arl appg;1[ 74 filed by the Commissioner of Income Tax against M/s. Western Coalfields Ltd., Nagpur, the Division Bench took the follor.ving stand: \"6. Ttoo additionnl questions, to ba lookctl into lrcrc nre (i) Wrctlrcr on the facts nnd in tlrc circunrstnnces of tlrc cnse it lau, tlrc ITAT is jttstifed in lrcltling tlmt tlrc etpL:tttlihre of Rs.342.42 lncs on nccoutrt of tlonntiotr to ctlttcntionnl instifutions is an alloruable axpentliture undar corynrntt, socinl responsibility eoen tlnugh it is only nppticntiort of irtconrc? (ii) Wuther on tlrc fncts nnd in tlrc circtur rctntr L.t,s ol' tltc cuse irt laru, tlrc ITAT is jrtstifutl the disnllotonncc oi corttrnct cltrtrges of Rs.6,25,000/- pnid to Nagintleti Agnnunl tt/s.40(n)(in) of lncome T'ax Act, 7961 on nccottttt of non tletluctiott o.l' IDS? Accordingly, utc hnoa henrtl Adttocttte pnrclutrt, fctr tlrc Department Aduocate Detomti for fissesscc. We fnd tlut tlrc prooision for efutcntiortnl fnt ilitits is lrcittg mnde by assessce ns n lrnrt of its obligntion uttdt,r tariotts Nationnl Coal La{nge Agrautrcnt (NCWA), tt,hiclt nrc lL,gnlltl I I l5 enforceable in tenns of Section 78 of tlu lrulustrinl Dispute Act. Tlu said prooision is also acceptcd and allorued by Department since L992' In t'nct, assessnent order itself records that for nssessnrctrt yenr 1995-96, nppenl fled by Deltartnrcnt fut tlis respect before ITAT u'ns zoithdrarun' Ii is not flrc case of Delturtnrcnt that n trc nnd objects of nssessee tlo not permit srtch expetditure. Fnct :;lnu tlnt, to prooide ed:acatiott touards of its entployees rolro nre tttorkittg at siles tolriclL are otlrcrtoise atoay t'rottt ttttutt, scliooling Jnciliiry is being proaided by etnployar. To yrottida hcttcr facility, tltc central school organizntiott mt nulcrtnkitrg of Union of htdia is rcquested to ot't'er it at suclt sitc. ln this situatiott, u'c find thnt ntt sultstaiial questions of lazu as sought to be raiscd nrise out ttf concurrett finding of CIT andITAT\". 14. The sarne view rvas further rciteraLecl in yet another appeal preferred by the Incorne 'Iax Dcpartnreut in ITA No'24 of 20'19 again before the Division Bench of Nagpul tlench of the High Court of 76 Bombay. Dealing witrr the fringe benefits and expenses made in the context of value of frec issuc of coal, medicar facilities, educational facilities, grants to school and institutions, sports and recreational facilities, the Nlagp'r Irench of the Bombay High Court, wherein the deliberation substantially was what is reflected in paragraph 2 and paragraph 3 of thc saicl judgment and the finding of the Bench is reflected in paragr.aph 5, as uncler: \"2. Additiort o _llls.S9t.22 Lacs being onlue for fringe benef.ts in respcct of uTtcndihrc Llrr the twlfnre of employees by the Asscssnu,nt Officrr ad nnintninad by tlrc Conmtissioner of lncorrrc Tn [Aprynls] hul rct,erscd by tlu lncome Tax Appeal Tribunnl is tlre ttltjcL-t mnttcr of chnllenge in this appenl fiIed nt the instnrrcc of tlu, R-cuerura. These fringe benefts pertain to expendiltrrt urndt itr Ilrc contcrt of ztnlue of free issue of conl, rnedicnl fncilitirs, tducntionnl fncitities, grnnts to school anrl ittsti ttttiotrs, sltot.ts n,d recrcntionnl fncilities. The Tribunal has hcld tlnt itt t'it,rp of tlrc Ttrot,isiotrs of thc Nntional Conl Wage Agrcetruttt, tlr ltrooisiott of *clt hcnefits tuere nmde being 17 statutory obligntiotts rtnd lrence uare tlot etigible to Fringe Burcft'inx. 3. Stui A. Pnrcltu'c, leanrcd counxl for tlc appellant subt'tilted tlmt not tuitlrctnntlitrg tlrc Nntional Coal Wage Agteentent, toitlr regnrtl to tltc ltnd Sports and Recteation Facilities, tlrc prouisiotrs of SectiorL 115 Wts(2)(E) and erlanatiot thereto irtrodttccd by ttirtttc ttf Finance Act of 2008 such expenditure ttnde rons rnl to Lte cottsidered as expenditure for entployces toclfnrc. He, tlurct'orc, srtbirtits that since the prexnt ltrocceilirrys pcrtnitr to tlrc assessment year 2006-07, the axplruntiorr cantrot ba git'cn retrospectitte effect\" ' 5. Ott ltcnring tfu lennttrl cotntseL for tlrc parties, it is clear that tlrc intplcttrcttntion of tlw N ational Coal lVage Agreement lus beert ltcltl to n strtttttottl ol'ligation tohich is binding on thc tTsscssc(:. T-hc ctpctvlitttrc tottards sports and recreation fnciiitits is also t pnrt of thttt ngreenrcnt as is clear from Aausc 10.8.1\". I 18 15. From the plain rcading of the facts and circumstances of those cases c{ealt with by the Hon'ble Supreme Court, as also by the I{igh Court of Jharkhand and again that of the two cases by the High Court of Bombay, u..hen we compare the facts of the present case, undisputedly in the instant cases also, the issue is in respect of the benefits provided to the employees by way of supply of electricity to their residerrce, township and skeet lights. The question again would be rvhether this so called benefit is one which is for the welfare oi the employccs or not and whether it is not part of the statutory obtigation. The other unclisputed fact is that the said benefit extcncled b), th\" appellan t/ernp loyer is in terms of the clauses that are rcflected in the NCWA. -fhc' jutlgments referred to in the preceding paragraphs clearly indicate antl lav to rest the issue as to whether it is a statutory clocument or r1ot, where all the judgments referrecl to abovc have clearly hclcl that NCWA is a statutory document and it has bincling force of lan'so far as its enforceability is concerned. 19 1rs. Under the cilcuiris'ta-t rces' :: we Iooll iirto ths tLn-i';l':i\"ctcd \"Expl.rL'.a'-ion' to Section 115W8(2XE) of the Act' it \"arould {urthei rnake it clear that any cxpenditule which was incurred ir\" order to iulfill a stal-utory obligation u oulcl not be considered as an expcn