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2017 (7) TMI 1362 - AT - Income TaxAddition on account of grant to sports and recreation - Difference in crediting in P L account under the head sale of scrap and plant machinery - HELD THAT - The assessee is a Government of India Undertaking and is a 100% subsidiary of Coal India Ltd. It is engaged in the business of coal mining. Tribunal in assessee s own case for AYs 2003-04 to 2005-06 it cannot be said that the grants given by the Assessee are not for the purpose of business of the Assessee. As an employer provision of grants to provide better conditions of service will be part of the labour cost of the Assessee and it has to be allowed as deduction. As far as the plea of the revenue that the evidence of areawise expenses were not produced, the plea of the Assessee was that the coal area is scattered over a large area and that the Assessee being a Government of India Undertaking, its accounts are subject to review by CAG and no adverse comments have been made by the CAG. This plea was enough to disregard the findings of the AO. Taking into consideration the overall facts and circumstances of the case, we are of the view that the deduction claimed had to be allowed - Decided in favour of the assessee. Addition of environment expenses - HELD THAT - As decided in own case AY 2003-04 to 2005-06 payment relates to afforestation/tree plantation Land reclamation and Payment of statutory duty for environment clearance like Water cess consent fees to Pollution Control Board etc. As rightly contended by the learned AR such payments cannot be disputed on the ground that there was want of proper vouchers. But for payment of these statutory dues the Assessee could not have carried on its business. In the given circumstances of the case, we are of the view that the deduction in question ought to be allowed. We direct the same to be allowed as deduction. Addition on account of hire charges of bus and ambulance - HELD THAT - Since the Tribunal has set aside the order or the Ld. CIT(A) and remanded the question of incurring these expenses to the AO for fresh consideration with the liberty to assessee to adduce evidence to substantiate its claim for deduction of the aforesaid expenditure, we also set aside the order of the Ld. CIT(A) and remand the matter back to the file of AO to be decided afresh as ordered in AY 2003-04 to 2005-06. This ground of appeal of revenue is allowed for statistical purposes. Addition on account of Cess Equalisation Reserve under the head current liability - AO has treated the amount shown as advance and deposit from customers as fictitious and made the addition - HELD THAT - As decided in own case comments of the statutory auditor are only with regard to absence of partywise details and in the event of the liability of the Assessee not existing, the same should be treated as income. The conclusion of the revenue authorities that the liability in question is fictitious based on the audit report is therefore incorrect. On the question whether the liability of the Assessee ceased to exist or not and the provisions of Sec.41 (l) of the Act are attracted or not, we are of the view that the Assessee continues to show the liability in question as existing. There is no evidence brought on record to show that the Assessee's liability has ceased to exist. In such circumstances, we are of the view that the impugned addition deserves to be deleted. Addition on account of donation made to school and club - CIT-A allowed the claim - HELD THAT - In the light of the aforesaid agreement between the assessee and the National Coal Wage Agreement entered into with the employees Union and as such the said agreement was enforceable under the law both the Indian Contract Act as well as under the Industrial Disputes Act, respectfully following the decision in South Eastern Coal Field Ltd. Vs. JCIT 2002 (2) TMI 344 - ITAT NAGPUR confirm the decision of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. TDS u/s 194A - Disallowance u/s. 40(a)(ia) - interest given to Coal India Ltd. - HELD THAT - Order of AO per se is fragile for violation of natural justice because the assessee was not put on notice as to this disallowance made against it. CIT(A) has taken note of section 194A(3)(iii)(f) read with Notification No. S03489 dated 22.10.1970 and that a company is not required to deduct tax at source from payment of interest to another company in which all the shares are held (whether singly or taken together) by Government or the Reserve Bank of India or a corporation owned by that Bank. Since all shares in Coal India Ltd. are held by Government of India at the relevant assessment year before 10% disinvestment of paid up equity capital as per Press Release dated 15.06.2010. In view of prescribed provisions, no tax was required to be deducted at source by the assessee and, therefore, disallowance u/s. 40(a)(ia) of the Act was not warranted and, therefore, action of the Ld. CIT(A) is upheld and this ground of appeal of revenue is dismissed. CIT(A) not admitting and adjudicating the additional grounds - claim of the assessee for deduction - mistake has taken place at the stage of filing of return of income - HELD THAT - In S. R. Koshti Vs. CIT 2004 (12) TMI 62 - GUJARAT HIGH COURT held, inter alia, that authorities under the Act are under an obligation to act in accordance with law - tax can be collected only as provided under the Act and that if an assessee, under a mistake, misconception or on not being properly instructed, is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. In the light of the aforesaid decisions of the Constitutional courts, we are inclined to admit the additional ground raised before us and remit the matter back to the file of the Ld. CIT(A) to decide in accordance to law afresh the additional grounds which stands admitted after giving opportunity of being heard to the assessee.
Issues Involved:
1. Legality of the reassessment order. 2. Deletion of addition on account of grant to sports and recreation. 3. Deletion of addition on account of environment expenses. 4. Deletion of addition on account of hire charges of bus and ambulance. 5. Deletion of addition on account of 'Cess Equalisation Reserve'. 6. Deletion of addition on account of donation made to school and club. 7. Deletion of addition on account of disallowance under section 40(a)(ia). 8. Non-admission and adjudication of additional grounds by CIT(A). Detailed Analysis: 1. Legality of the Reassessment Order: The primary issue in ITA No. 1636/Kol/2014 was the legality of the reassessment order. The CIT(A) cancelled the reassessment order on the grounds that the Assessing Officer (AO) did not dispose of the objections filed by the assessee against the decision to reopen the assessment. This was in violation of the procedure mandated by the Hon’ble Supreme Court in GKN Driveshaft (India) Ltd. vs. ITO & Ors. The revenue did not challenge this decision, rendering the grounds academic, and thus, the appeal was dismissed. 2. Deletion of Addition on Account of Grant to Sports and Recreation: In ITA No. 1637/Kol/2014, the revenue contested the deletion of ?57,44,000/- added by the AO for grants to sports and recreation. The Tribunal noted that this issue was adjudicated in favor of the assessee in previous years, recognizing the grants as part of the conditions of service under the National Coal Wage Agreement. The Tribunal upheld the CIT(A)’s order, dismissing the revenue’s ground. 3. Deletion of Addition on Account of Environment Expenses: The revenue’s appeal against the deletion of ?78,38,000/- for environment expenses was also addressed. The Tribunal referenced past decisions where such expenses were deemed incidental to business and revenue in nature. The Tribunal upheld the CIT(A)’s order, dismissing this ground as well. 4. Deletion of Addition on Account of Hire Charges of Bus and Ambulance: The issue of ?2,05,86,000/- for hire charges of bus and ambulance was remanded back to the AO for verification of evidence. The Tribunal followed its previous decision where it had directed the AO to reconsider the expenses with the liberty for the assessee to provide supporting evidence. This ground was allowed for statistical purposes. 5. Deletion of Addition on Account of 'Cess Equalisation Reserve': The revenue’s appeal against the deletion of ?87,88,03,000/- for 'Cess Equalisation Reserve' was dismissed. The Tribunal noted that the AO’s claim of fictitious liability was unfounded, as the liability was an advance from customers, and there was no evidence of its cessation. The Tribunal upheld the CIT(A)’s order. 6. Deletion of Addition on Account of Donation Made to School and Club: The deletion of ?2,31,29,000/- for donations to schools and clubs was contested. The Tribunal referenced decisions from other benches which recognized such expenses as statutory obligations under the National Coal Wage Agreement. The Tribunal upheld the CIT(A)’s order, dismissing the revenue’s ground. 7. Deletion of Addition on Account of Disallowance under Section 40(a)(ia): The AO’s disallowance of ?2,32,21,000/- under section 40(a)(ia) was deleted by the CIT(A) on the grounds that the assessee was not required to deduct tax at source for payments to Coal India Ltd., a government-owned entity. The Tribunal upheld this decision, noting the AO’s failure to provide notice to the assessee. 8. Non-Admission and Adjudication of Additional Grounds by CIT(A): The assessee’s appeal concerned the non-admission of additional grounds by the CIT(A). The Tribunal noted that the Supreme Court’s decision in Goetz India Ltd. did not restrict the powers of appellate authorities to admit new claims. The Tribunal remitted the matter back to the CIT(A) to adjudicate the additional grounds in accordance with the law. Conclusion: The Tribunal dismissed the revenue’s appeal in ITA No. 1636/Kol/2014, partly allowed ITA No. 1637/Kol/2014 for statistical purposes, and allowed the assessee’s appeal in ITA No. 1654/Kol/2014 for statistical purposes. The order was pronounced in the open court on 26.07.2017.
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