2022 (5) TMI 721 - AT - Income Tax

Disallowance of additional depreciation being 20% of the total claim of additional depreciation - HELD THAT - From a perusal of the aforesaid order of the Tribunal in assessee s own case 2019 (1) TMI 1974 - ITAT KOLKATA on the additional depreciation claim, we note that the issue was restored back to the file of the AO and the assessee was directed to produce all the details as required in support of its claim for deduction in respect of additional depreciation and the Tribunal has directed the AO to grant additional depreciation on such plant and machinery that have been used for the production of coal and reminded the AO the fact that the assessee is a Public Sector Undertaking which undergoes audit by the Comptroller and Audit General (in short CAG); And in this regard it has been brought to our notice, that pursuant to the remand, the AO has allowed the claim of additional depreciation to the assessee. Be that as it may be, we set aside the order of the Ld. CIT(A) and this issue is remanded back to the AO, with the same observation and directions given in the assessee s own case on this issue (Mutatismutandis) and direct him to consider the claim of the assessee and to pass order in accordance to law. Thus, the sole issue is decided on merits for statistical purposes. Claim of deduction regarding donation - HELD THAT - We note that on similar issue i.e. donation/expenditure claimed by an assessee in respect of donation given to the local clubs during Durga Puja etc. the Hon ble Calcutta High Court in CIT vs. Bata India Ltd. 1993 (3) TMI 89 - CALCUTTA HIGH COURT held that the same was an allowable expenses. However we note that in the present case in hand, since the assessee could not submit materials/evidence before the authorities below in respect of its claim of donation given to the local clubs, we direct the assessee to submit materials to substantiate the fact of donation it gave to local clubs/bodies during festival/sports in order to have good relations with them for smooth running of its business. And if the assessee produce evidence/material as directed by us, the AO may verify the same and allow balance 50% of the expenses which are shown to have been made by the assessee to the local clubs for smooth functioning of its business of extraction of coal and its transportation. With the aforesaid direction this issue is set aside back to the file of AO and the AO is directed to pass a fresh order.

Summary

Issues Involved:
1. Reopening of the assessment under sections 147/148 of the Income Tax Act, 1961.
2. Disallowance of additional depreciation claimed by the assessee.
3. Allowance of expenses for donations claimed by the assessee.

Issue-wise Detailed Analysis:

1. Reopening of the Assessment under Sections 147/148 of the Income Tax Act, 1961:
The assessee had initially preferred an appeal against the reopening of the assessment under sections 147/148 of the Act. However, the Tribunal did not adjudicate this legal issue as the primary focus was on the merits of the disallowance of additional depreciation. The Tribunal left the legal issue regarding the validity of reopening open and did not provide a ruling on it.

2. Disallowance of Additional Depreciation Claimed by the Assessee:
The core issue on merits was the disallowance of additional depreciation amounting to Rs. 1,96,37,620/- which was 20% of the total claim of Rs. 9,81,88,100/-. The assessee, a public sector company engaged in coal production/extraction, had initially been allowed 50% of the total claim during the original scrutiny assessment. Upon reassessment, the AO disallowed the total depreciation claim. The CIT(A) provided partial relief by allowing 80% of the claim, sustaining the disallowance of 20%.

The Tribunal noted a similar issue in the assessee’s own case for previous assessment years, where the matter was remanded back to the AO for fresh adjudication. The Tribunal directed the AO to consider the details of plant and machinery used for coal production and to grant additional depreciation accordingly. The AO was reminded that the assessee is a public sector undertaking audited by the Comptroller & Auditor General of India, whose audited statements hold evidentiary value. Following this precedent, the Tribunal set aside the CIT(A)'s order and remanded the issue back to the AO with similar directions.

3. Allowance of Expenses for Donations Claimed by the Assessee:
The assessee claimed expenses of Rs. 27,27,000/- for donations, which the AO disallowed entirely. The CIT(A) allowed 50% of the claim. The Tribunal referred to a similar issue adjudicated in the assessee’s own case for previous years, where donations to local clubs and philanthropic organizations were considered. The Tribunal noted that donations to local clubs during festivals and to organizations like Ram Krishna Mission and Bharat Sevasram Sangha could be allowable if substantiated with evidence.

The Tribunal directed the assessee to produce evidence of the donations made to local clubs and bodies for smooth business operations. The AO was instructed to verify the evidence and allow the balance 50% of the expenses if substantiated. The issue was remanded back to the AO for fresh verification and adjudication.

Conclusion:
The appeals were allowed for statistical purposes, with the Tribunal remanding the issues of additional depreciation and donation expenses back to the AO for fresh adjudication based on the provided directions and evidence. The legal issue regarding the validity of reopening the assessment was left open and not adjudicated. The Tribunal emphasized the need for detailed verification and adherence to legal provisions in reassessing the claims.