2015 (4) TMI 1204 - AT - Income Tax

Expenses claimed as compensation of rock phosphate Mineral Extraction expenses Contribution to State Renewal Fund Prior period expenses Social Welfare activities expenditure - allowable revenue expenditure - Held that - We see no infirmity in the order of the ld CIT(A) as the partial disallowance has been retained by following the ITAT order in assessee s own case. Consequently the same is upheld. The C.O. of the assessee is dismissed.

Summary

Issues:
- Allowability of expenses claimed as compensation of rock phosphate
- Allowability of compensation paid to farmers for land use
- Disallowance of contribution to State renewal Fund
- Treatment of prior period expenses
- Disallowance of contribution to Social welfare activities
- Allowability of penal interest
- Disallowance of social welfare expenses

Analysis:
1. Allowability of expenses claimed as compensation of rock phosphate:
The Revenue challenged the allowance of expenses claimed as compensation of rock phosphate. The Revenue contended that such expenses were not allowable revenue expenditure. However, the Judicial Member upheld the decision of the CIT(A) to allow these expenses. The Judicial Member reasoned that the CIT(A) had relied on earlier ITAT orders in the assessee's own case, finding no infirmity in allowing the expenses. Consequently, the Revenue's appeal on this ground was dismissed.

2. Allowability of compensation paid to farmers for land use:
The Revenue also disputed the allowance of compensation paid to farmers for land use for mineral extraction. They argued that such expenditure was of a capital nature. Nonetheless, the Judicial Member, following the CIT(A) decision, upheld the allowance of this compensation. The Judicial Member reiterated that the CIT(A) had based the decision on previous ITAT judgments in the assessee's case. Consequently, the Revenue's appeal on this issue was dismissed.

3. Disallowance of contribution to State renewal Fund:
Regarding the disallowance of the contribution to the State renewal Fund, the Revenue contended that it was not a business expenditure. However, the Judicial Member, in line with the CIT(A) decision, allowed this contribution. The Judicial Member noted that the CIT(A) had followed ITAT orders from previous years in the assessee's case. Consequently, the Revenue's appeal on this ground was dismissed.

4. Treatment of prior period expenses:
The Revenue raised concerns about the treatment of prior period expenses as allowable, contrary to the assessee's accounting policies. Despite this, the Judicial Member, in agreement with the CIT(A), upheld the allowance of these expenses. The Judicial Member emphasized that the CIT(A) had relied on past ITAT orders in the assessee's case. Therefore, the Revenue's appeal on this issue was dismissed.

5. Disallowance of contribution to Social welfare activities:
The Revenue challenged the disallowance of the contribution to social welfare activities, arguing that it was not an allowable business expenditure. However, the Judicial Member, consistent with the CIT(A) decision, allowed this contribution. The Judicial Member highlighted that the CIT(A) had based the decision on ITAT orders from earlier years involving the assessee. Consequently, the Revenue's appeal on this ground was dismissed.

6. Allowability of penal interest:
The Revenue contested the allowance of penal interest, claiming it was not an allowable expenditure under the IT Act. Despite this, the Judicial Member, in alignment with the CIT(A) ruling, allowed the penal interest. The Judicial Member noted that the CIT(A) had followed ITAT orders from the assessee's previous cases. Therefore, the Revenue's appeal on this matter was dismissed.

7. Disallowance of social welfare expenses:
In the cross objection, the assessee challenged the disallowance of social welfare expenses. The Judicial Member acknowledged that a partial disallowance of Rs. 1,20,000 had been retained, following an earlier ITAT order in the assessee's case. The Judicial Member found no fault with the CIT(A)'s decision to uphold this partial disallowance. Consequently, the cross objection of the assessee was dismissed.

In conclusion, both the Revenue's appeal and the assessee's cross objection were dismissed, with the Tribunal upholding the decisions made by the CIT(A) based on previous ITAT orders in the assessee's own case.