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2017 (5) TMI 1567 - AT - Income TaxReopening of assessment - disallowance of claim of amortization of mining land and leasehold land Held that - In the original assessment, the Assessing Officer had not considered the issue of allowability of the Amortization of Mining Land and Leasehold Land. He had simply without making any enquiry allowed the claim of the assessee, which is not the mandate of the law. Therefore, we do not see any reason to interfere into the order of the CIT(A), same is hereby affirmed, this ground of the assessee s appeal is dismissed. Disallowing the claim of Amortization of Mining Land and Leasehold Land - Held that - As decided in assess s own case 2016 (2) TMI 1118 - ITAT JAIPUR AO is directed to treat the expenditure as capital and grant relief if any available under the law - issue of allowability of expenditure is u/s 37(1) decided against assessee Apportionment of establishment and financial expenditure on the basis of turnover of the mining activity and wind power generation activity - Held that - restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expenditure related to operation and maintenance was borne by Suzlon Energies Ltd. So far the contention of Ld. Counsel for the assessee that this item was not subject matter of the reasons recorded for reopening. We do not see any merit as law is well settled that once reopening is valid the AO can also consider the other issues as cropped up the assessment proceedings. - Decided in favour of assessee for statistical purposes Disallowance of Rural Development Expenses by holding that same is not incurred wholly and exclusively for the purpose of business - Held that - The issue of allowability of Rural Development Expenses was not the subject matter of reason recorded. It is settled position of law that once the assessment is validly reopened, the AO can also make assessment in respect of other issues which come to notice during the reopened assessment proceedings. Now, coming to the merit of disallowance, we find that the CIT(A) has given a finding on fact that the amount was not expended wholly and exclusively for the purpose of business. This finding on fact is not rebutted by the assessee. In the absence of material proving the expenses incurred for the business of the assessee same cannot be allowed u/s 37 - Decided against assessee Receipts from Sale of Carbon Emission Certificates - revenue v/s capital receipts - Held that - Deduction u/s 80IA is not allowable on the proceeds of Carbon Credits since this income does not first degree nexus with the industrial undertaking in view of the decision of the Apex Court in the case of Liberty India 2009 (8) TMI 63 - SUPREME COURT . Also sale of excess Carbon Credits is a capital receipt and cannot be business receipt or income - See - My Home Power Ltd. casee 2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT Claim of the assessee u/s 80IA - Held that - Restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expenses related to operation and maintenance were borne by Suzlon Energies Ltd Expenditure in respect of rural development and afforestation, plantation and environment expenses to be allowed u/s 37 Reducing the claim of deduction u/s 80IA - liquidated damages received on account of short fall in the minimum guaranteed generation of power units is not an income derived from power generation business of wind mills - Held that - The absence of operation, the issue of payment of such damages would not arise. It is only when the wind mill becomes operational on short fall on the production such payment is made. Hon ble Madhya Pradesh High Court in the case of CIT vs. Prakash Oils Ltd. 2011 (3) TMI 1623 - MADHYA PRADESH HIGH COURT held that the payment made as an liquidated damages for not honouring the contract for sale of oil and deoiled cake, such income is directly derived from industrial undertaking, hence eligible deduction u/s 80IA. In our view, the Ld. CIT(A) erred in holding that such income is not derive from the business of the undertaking. Therefore, we direct the Assessing Officer to allow deduction u/s 80IA on this receipt. Addition of average investment on account of administrative expenses - no efforts and loan funds were utilized in making the investment - Held that - Assessing Officer in the present case has accepted that there is not direct nexus between the investment and expenses so incurred. After considering the totality of the fact and keeping in view the sum of ₹ 1,138/- had been disallowed by invoking the provision of Rule 8D without being satisfied about the claim of the assessee that no administrative expenses were incurred for earning of the exempt income. We direct the Assessing Officer to delete the disallowance. This ground of the assessee s appeal is allowed. Addition of unpaid land tax u/s 43B - Held that - It is undisputed fact that the land tax was not paid before due date of filing by the return of income u/s 139(1) as required by the provisions of section 43B. In view of the mandate of clause (a) of section 43B of the Act, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed, the ground of the assessee s appeal is dismissed. Payment of MR Cess to the State Government is a liability of the assessee independent of its customers - Held that - The provision of section 145A are not applicable because the cess has been levied with retrospective which could not be recovered from the customers. The factum of levy of MR Cess with retrospective effect is not controverted by the Revenue. Therefore, in our considered view, there is no infirmity into the order of the Ld. CIT(A) same is hereby affirmed. This ground of the Revenue is dismissed. Disallowance of mine closure expenses made in course of assessment proceedings - Held that - Mines closure liability is a ascertained liability. As per matching principle as well as the mercantile system of accounting, the liability is allowable in principle under section 37 AO is directed to given benefit of deduction in respect of mine closure expenses - See BHARAT EARTH MOVERS VERSUS COMMISSIONER OF INCOME-TAX 2000 (8) TMI 4 - SUPREME COURT - This ground of the assessee s appeal is allowed. Disallowance as social welfare expenses - Held that - The assessee has not furnished material suggesting that these expenses were made for the purpose of business of the assessee as the amount u/s 37(1) is allowable only when it is expended wholly and exclusively for the business of purpose. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A) same is hereby affirmed. This ground is dismissed. Reduce the excess amortization of mining/leasehold land written back in the year under consideration on account of change in method of amortization upon the finalization of appeal - Held that - CIT(A) has accepted the change in method of amortization. He ought to have directed the Assessing Officer to reduce the same in computing total income. Therefore, we direct the AO to reduced the excess amortization of mining and leasehold land written back in the year under appeal. Thus, the ground of the assessee s appeal is allowed.
Issues Involved:
1. Reopening of assessment under Section 147 of the IT Act. 2. Disallowance of amortization of mining and leasehold land. 3. Deduction under Section 80IA for receipts from the sale of Carbon Emission Reduction Certificates (CERs). 4. Apportionment of establishment and financial expenditure for deduction under Section 80IA. 5. Disallowance of rural development expenses. 6. Disallowance of social welfare expenses. 7. Disallowance under Section 14A of the IT Act. 8. Addition on account of unpaid land tax under Section 43B. 9. Contribution to State Renewal Fund. 10. Compensation paid to farmers for excavation of gypsum. 11. Prior period expenses. 12. Mine closure expenses. Detailed Analysis: 1. Reopening of Assessment under Section 147 of the IT Act: The Tribunal upheld the reopening of the assessment by the AO, stating that the AO had reason to believe that income chargeable to tax had escaped assessment. The original assessment did not consider the issue of amortization of mining and leasehold land, which warranted the reopening. 2. Disallowance of Amortization of Mining and Leasehold Land: The Tribunal directed the AO to treat the expenditure on mining and leasehold land as capital expenditure and grant relief available under the law. This decision was based on the precedent set in ITA No. 124/JP/2014, where the Tribunal held that such expenses should be treated as capital expenditure due to their enduring benefit. 3. Deduction under Section 80IA for Receipts from Sale of CERs: The Tribunal affirmed the CIT(A)'s decision that receipts from the sale of CERs are capital in nature and not eligible for deduction under Section 80IA. This decision was supported by the judgment of the Andhra Pradesh High Court in My Home Power Ltd. 365 ITR 82. 4. Apportionment of Establishment and Financial Expenditure for Deduction under Section 80IA: The Tribunal restored the issue to the AO to verify the claim that the entire operation and maintenance of the power plant were given to Suzlon Energies Ltd. The AO was directed to decide afresh based on this verification. 5. Disallowance of Rural Development Expenses: The Tribunal upheld the CIT(A)'s finding that the expenses were not expended wholly and exclusively for the purpose of business, thus disallowing the expenses under Section 37 of the IT Act. 6. Disallowance of Social Welfare Expenses: The Tribunal found no material suggesting that the expenses were made for the business purpose of the assessee. Therefore, the disallowance was upheld as the expenses were not incurred wholly and exclusively for business purposes. 7. Disallowance under Section 14A of the IT Act: The Tribunal directed the AO to delete the disallowance made under Section 14A, as the AO had not satisfied himself about the correctness of the claim that no expenditure was incurred by the assessee for earning exempt income. 8. Addition on Account of Unpaid Land Tax under Section 43B: The Tribunal upheld the addition under Section 43B, as the land tax was not paid before the due date of filing the return of income under Section 139(1). 9. Contribution to State Renewal Fund: The Tribunal affirmed the CIT(A)'s decision to delete the disallowance of the contribution to the State Renewal Fund, following the judgment of the Rajasthan High Court in CIT vs. Jodhpur Co-operative Marketing Society 275 ITR 372 (Raj.). 10. Compensation Paid to Farmers for Excavation of Gypsum: The Tribunal upheld the CIT(A)'s decision to allow the compensation paid to farmers as revenue expenditure, following the precedent set in the assessee's own case in ITA No. 144/JP/2014. 11. Prior Period Expenses: The Tribunal affirmed the CIT(A)'s decision to allow prior period expenses, as the liability for the expenses crystallized in the year under consideration, following the precedent set in the assessee's own case in ITA No. 144/JP/2014. 12. Mine Closure Expenses: The Tribunal directed the AO to allow the deduction for mine closure expenses, following the decision in the assessee's own case in ITA No. 144/JP/2014, where mine closure liability was treated as an ascertained liability allowable under Section 37 of the IT Act. Conclusion: The Tribunal's decisions were largely based on precedents and the specific facts of each case, ensuring that the principles of law were consistently applied. The appeals were partly allowed for statistical purposes, with specific directions given to the AO for verification and reassessment where necessary.
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