9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (3) TMI 928 - AT - Income TaxMine closure obligation - whether it is not an ascertained liability and if at all any expenditure is to be allowed, it should be spread over evenly for all the years since the date of commencement of mining operations till the date of closure of mining activities? - Held 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, to 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. - Decided in favour of revenue for statistical purposes. Depreciation on intangible assets - CIT(A) allowed the claim holding that the leasehold land is an intangible asset and depreciation on such asset is allowable when intangible assets are such assets which cannot be touched or can be seen - Held that - Issue is squarely covered by the decisions of the coordinate benches of ITAT, Hyderabad in assessee s own case for AYs 2008-09 and 2010-11, allowing the assessee s claim of depreciation - 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 insofar 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 accordance with its business exigencies. - Decided against revenue. Expenses incurred towards corporate social responsibility disallowed - Assessee incurred an amount of ₹ 37,33,00,000 towards flood relief, payments made to various collectorates etc. and claimed that these payments were in the nature of business expenditure and hence allowable as deduction - CIT(A) directed the AO to allow the said expenditure - Held that - The issue in dispute is squarely covered by the decision of coordinate bench in assessee s own case for AY 2005-06 wherein held as the contribution of ₹ 5 crores is only a welfare measure for the upliftment of the Adivasis in the locality 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 assessee s 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 because 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 assessee s employees in the medical college. 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 manner. Therefore, in our opinion, the contribution has to be treated as revenue expenditure for the purpose of the business. - Decided against revenue.
Issues Involved:
1. Mine Closure Obligation 2. Depreciation on Intangible Assets 3. Expenses on Corporate Social Responsibility Issue-wise Detailed Analysis: 1. Mine Closure Obligation The revenue challenged the CIT(A)'s decision to grant relief to the assessee regarding the mine closure obligation, arguing it is not an ascertained liability and should be spread over all years from the commencement of mining operations until closure. The assessee had debited Rs. 10.55 crores towards mine closure obligation in the profit & loss account, which was a provision for future liabilities related to mine closure and environmental restoration, as mandated by the Mines & Minerals Development and Regulation Act, 1957. The AO disallowed this, considering it a contingent liability dependent on future events. However, the CIT(A) allowed the assessee's claim, referencing decisions from previous assessment years (AYs) 2006-07, 2008-09, 2009-10, and 2010-11, where similar claims were allowed. The ITAT upheld the CIT(A)'s decision but remitted the issue back to the AO to verify if the claim was made only for operational mines and to ensure the liability was ascertained year-wise. 2. Depreciation on Intangible Assets The CIT(A) allowed the assessee's claim for depreciation on leasehold land, treating it as an intangible asset. The AO had disallowed this claim, arguing that leasehold land does not qualify as an intangible asset under the Income Tax Act, which specifies intangible assets as know-how, patents, copyrights, trademarks, licenses, franchises, or similar business or commercial rights. The CIT(A) followed decisions from previous AYs 2008-09 and 2010-11, where similar claims were allowed. The ITAT upheld the CIT(A)'s decision, referencing the coordinate bench's decision in AY 2010-11, which treated leasehold rights as intangible assets eligible for depreciation. 3. Expenses on Corporate Social Responsibility (CSR) The AO disallowed the assessee's claim of Rs. 37.33 crores towards CSR expenses, considering them donations not related to the business. The CIT(A) allowed the claim, following decisions from previous AYs 2005-06 to 2010-11, where similar expenses were allowed as business expenditures. The ITAT upheld the CIT(A)'s decision, referencing the coordinate bench's decision in AY 2010-11, which allowed CSR expenses as business expenditures necessary for the smooth conduct of business, especially in remote mining areas. The ITAT directed the AO to examine the expenditure and allow it accordingly. Conclusion The ITAT upheld the CIT(A)'s decisions on all three issues but remitted the mine closure obligation issue back to the AO for verification. The appeal of the revenue was partly allowed for statistical purposes.
|
