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2020 (9) TMI 30 - AT - Income TaxPeriphery development expenses - As per AO these expenses were not bonafide business expenses therefore was added back to the total income of the assessee - HELD THAT - Periphery Development Expenses are for the purposes of welfare of the peoples residing nearby mining activities and it is responsibility of the company which was carrying out the business of mining and it is mandatory for the mining industry to look after the development of the area in which the mines are operating.These expenses were wholly and exclusively for the business purpose. - Decided in favour of assessee. Addition on account of Exchange Rate Fluctuation - AO was of the view that the assessee company had not exported any raw materials to overseas country in which the exchange loss had accrued - HELD THAT - We note that the exchange loss was incurred on account of purchase of spare parts of the Aircraft and the same had been capitalized during the relevant year. The assessee owned an Aircraft on which expenses were incurred every year to its maintenance and such expenses were revenue in nature and any loss incurred from such activity is also revenue in nature. As per policy of DGCA, certain internal spare parts of Aircraft are to be replaced. The exchange loss which arose on account of purchase of spare parts was capitalized and exchange loss arose on account of undertaking regular maintenance hence it is a revenue expenses. - Decided in favour of assessee. Disallowance of depreciation - AO was of the view that the assessee has not followed extraction of Iron Ore during the relevant year and had no activity of mining during the relevant year and was engaged only lifting of closing stock during the year - HELD THAT - Mining company was a running company. It had stopped production for the time being in order to cater to the decision of the Hon ble Supreme Court. Importantly, when an asset is procured, it goes into the block of assets. The only aspect is the use. If an asset goes into the block of assets, the same goes into depreciation. There is no doubt that the assessee was also the owner of the machinery. The decision of the Calcutta High Court in CIT vs. Norplex Oak India 2011 (3) TMI 620 - CALCUTTA HIGH COURT clearly decides the case in favour of the assessee. Delayed employees contribution to PF - AO examined the tax audit report and noticed that employee s contribution to PF was deposited to the respective accounts beyond the grace period of 5 days - HELD THAT - Contribution towards PF was made by the assessee before the due date of filing Return of Income and before 31st March, 2008.We note that Hon ble Jurisdictional High Court of Calcutta in the case of CIT -vs.- Vijay Shree Limited 2011 (9) TMI 30 - CALCUTTA HIGH COURT has held that if the PF contribution is made by the assessee before the due date of filing Return of Income then it would be sufficient compliance and no addition should be made. Suppression of sale - As per Balance Sheet and Tax Audit Report the assessee had shown shortage or wastage of 7863 M. T. Iron ore, while as per H-1 Form there was no entry of wastage or shortage of Iron Ore - HELD THAT - Assessee stated that the difference was basically due to reconciliation of opening balance as shown in the Balance Sheet and Form H1. The latter is prepared in the month of May and stock taken in H1 is on the basis of volumetric analysis. We note that ld CIT(A) examined the reconciliation statement submitted by the assessee during the appellate proceedings and he found it correct.That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground no. 2 raised by the revenue is dismissed.
Issues Involved:
1. Deletion of addition on account of periphery development expenses. 2. Deletion of addition on account of exchange rate fluctuation. 3. Deletion of addition on account of depreciation. 4. Deletion of addition on account of employees' contribution to PF. 5. Deletion of addition on account of suppression of sales. Detailed Analysis: 1. Deletion of Addition on Account of Periphery Development Expenses: The Assessing Officer (AO) added ?2,63,708/- to the total income of the assessee, questioning the legitimacy of periphery development expenses directly made by the assessee rather than contributing to the Periphery Development Fund (PDF). The Commissioner of Income Tax (Appeal) [CIT(A)] deleted this addition, noting that such expenses are legitimate business expenses under Corporate Social Responsibility (CSR) and fall within the realm of Sections 36 and 37 of the Income Tax Act, 1961. The Tribunal upheld the CIT(A)'s decision, emphasizing that these expenses were for the welfare of people residing near mining activities and were mandatory for the mining industry. 2. Deletion of Addition on Account of Exchange Rate Fluctuation: The AO disallowed ?1,84,620/- claimed by the assessee for exchange rate fluctuation, arguing that the assessee did not export any raw materials to incur such a loss. The CIT(A) deleted the addition, clarifying that the loss was due to the purchase of aircraft spare parts, a mandatory requirement under DGCA rules. The Tribunal upheld the CIT(A)'s decision, recognizing the exchange loss as a revenue expense incurred for regular maintenance. 3. Deletion of Addition on Account of Depreciation: The AO added ?2,54,61,464/- to the assessee's income, arguing that no mining activity occurred during the relevant year. The CIT(A) deleted this addition, stating that the assets were part of the block of assets and eligible for depreciation regardless of temporary cessation of production. The Tribunal upheld the CIT(A)'s decision, referencing the Calcutta High Court's ruling in CIT vs. Norplex Oak India, which supported the assessee's claim. 4. Deletion of Addition on Account of Employees' Contribution to PF: The AO added ?2,93,237/- for delayed deposit of employees' PF contributions. The CIT(A) deleted this addition, citing the Kolkata Tribunal's decision in Animesh Sadhu vs. ACIT and the Calcutta High Court's ruling in CIT vs. Vijay Shree Limited, which held that contributions made before the due date of filing the return are compliant. The Tribunal upheld the CIT(A)'s decision, noting the contributions were made before the due date. 5. Deletion of Addition on Account of Suppression of Sales: The AO added ?2,35,89,000/- for alleged suppression of iron ore sales, based on discrepancies between the Balance Sheet and Form H1. The CIT(A) deleted this addition, finding no actual difference upon careful examination of the records. The Tribunal upheld the CIT(A)'s decision, accepting the reconciliation provided by the assessee. Conclusion: The Tribunal dismissed all the appeals filed by the Revenue, upholding the CIT(A)'s decisions on all issues. The judgments emphasized the legitimacy of business expenses under CSR, the treatment of exchange rate fluctuations and depreciation, compliance with PF contribution timelines, and the reconciliation of sales records.
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