2018 (1) TMI 326 - AT - Income Tax

Disallowance of exemption u/s.80G - Held that - The assessee has paid an amount of 2.81 lakhs towards donations and ₹ 2.43.958 towards subscription to different concerns as mentioned in para 21 of this order. The major amounts are paid to Government institutions headed by Government officials like District Magistrate and other Government officials where the assessee company has major active business operations. As regards the subscriptions, the details furnished by the assessee are in the nature of annual membership, etc. The Tribunal in the assessment years 1999-2000, 2000-2001, 2001- 02 and 2002-03 has directed the Assessing Officer to allow such expenditure where the assessee has been able to establish relation over the expenditure of the assessee company. As regards to donation which are eligible for deduction u/s. 80G, the Assessing Officer shall allow the same on submission of the evidence of exemption u/s.80G. But in the present year under consideration, the ld A.R. submitted that there is no such donation which is eligible for deduction u/s.80G. We considering the facts and submissions, set aside the orders of lower authorities and direct the Assessing Officer to allow deduction of ₹ 5.25 lakhs made under the head donation and subscription and allow this ground of appeal of the assessee. Addition on account of claim of 15% on loss on sale/discard of assets - CIT(A) directed the Assessing Officer to verify the correctness of assessee s claim and given effect if any, as the issue is linked with the assessment year 1995-96 to 2008-09 - Held that - We find no infirmity in the order of the CIT(A) as he has only directed the Assessing Officer to verify the correctness of assessee s claim and give effect, if any. Hence, we dismiss this ground of the assessee. Short credit of TDS - Held that - We do not find any flaw in the order of the CIT(A) as he has observed that the credit of TDS should have been allowed to the assessee on the basis of original TDS certificates submitted. Hence, we confirm the order of the CIT(A) on this issue. Depreciation on lease hold rights of coal bearing land u/s.32(1)(ii) being an intangible asset - Held that - We find force in the submission of ld D.R. that the depreciation is not allowable u/s.32(1)(iii) of the Act in respect of intangible assets, which is supported by judicial pronouncements cited above. In view of above, we dismiss these grounds filed by the assessee.

Issues Involved:
1. Disallowance of Prospecting & Boring expenses.
2. Disallowance of Development expenditure.
3. Disallowance of capital expenditure on assets not belonging to the company.
4. Disallowance on reclamation of land.
5. Reversal of interest on income tax refund as expenditure.
6. Addition on account of donation and subscription.
7. Addition on account of deterioration of stock and re-handling of coal.
8. Addition on account of reduction in value of stores due to obsolescence and shortage of stores.
9. Addition on account of loss on sale/discard of assets.
10. Short credit of TDS.
11. Depreciation on leasehold rights of coal-bearing land as an intangible asset.

Detailed Analysis:

1. Disallowance of Prospecting & Boring Expenses:
The assessee claimed ?448.53 lakhs as prospecting & boring expenses, which the Assessing Officer (AO) allowed only 10% of, following the precedent of earlier years. The CIT(A) confirmed this, and the Tribunal upheld the order, dismissing the assessee's ground as there was no change in facts.

2. Disallowance of Development Expenditure:
The AO disallowed ?49.32 lakhs out of ?1244.27 lakhs claimed as development expenditure, allowing only depreciation. The CIT(A) confirmed this disallowance, and the Tribunal, following its earlier decision, dismissed the assessee's appeal.

3. Disallowance of Capital Expenditure on Assets Not Belonging to the Company:
This ground was not pressed by the assessee during the hearing and was dismissed.

4. Disallowance on Reclamation of Land:
The AO disallowed ?858.94 lakhs claimed as a provision for reclamation of land, as it was a provision for future expenditure. The CIT(A) upheld this disallowance, citing the Supreme Court's decision in Indian Molasses Co. Pvt Ltd vs CIT. The Tribunal restored the issue to the AO for verification of whether the provision was offered for taxation in subsequent years.

5. Reversal of Interest on Income Tax Refund as Expenditure:
This issue was not pressed by the assessee and was dismissed.

6. Addition on Account of Donation and Subscription:
The AO disallowed ?5.25 lakhs claimed as donation & subscription due to lack of evidence. The CIT(A) directed the AO to allow such expenditure where the assessee could establish its relation to the business and allow deductions under Section 80G upon submission of evidence. The Tribunal directed the AO to allow the deduction of ?5.25 lakhs.

7. Addition on Account of Deterioration of Stock and Re-handling of Coal:
The AO disallowed ?384.30 lakhs due to the absence of technical reports or evidence. The CIT(A) directed reconsideration based on technical support or evidence. The Tribunal upheld this directive for reconsideration.

8. Addition on Account of Reduction in Value of Stores Due to Obsolescence and Shortage of Stores:
The AO disallowed ?130.09 lakhs claimed for obsolescence of stores. The CIT(A) upheld this disallowance. The Tribunal restored the issue to the AO for fresh consideration in light of details furnished by the assessee.

9. Addition on Account of Loss on Sale/Discard of Assets:
The AO disallowed depreciation of ?110.09 lakhs on loss from sale/discard of assets. The CIT(A) directed the AO to verify the correctness of the claim. The Tribunal found no infirmity in this directive and dismissed the assessee's ground.

10. Short Credit of TDS:
The AO did not allow credit for TDS while processing the return. The CIT(A) held that credit should be allowed based on original TDS certificates. The Tribunal confirmed this order.

11. Depreciation on Leasehold Rights of Coal-bearing Land as an Intangible Asset:
The Tribunal dismissed the assessee's additional grounds regarding depreciation on leasehold rights, following judicial pronouncements that such rights are not eligible for depreciation under Section 32(1)(ii).

Conclusion:
The appeal was partly allowed for statistical purposes, with specific issues restored to the AO for reconsideration and verification. The Tribunal upheld several disallowances and directed appropriate actions based on precedents and judicial pronouncements.

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