2020 (6) TMI 176 - AT - Income Tax

Depreciation on lease hold land - HELD THAT - As decided in own case 2018 (3) TMI 1197 - ITAT CUTTACK depreciation is not allowable u/s.32(1)(iii) of the Act in respect of intangible assets. Valuation of closing stock of coal (due to impact of overburden removal expenditure) - HELD THAT - Valuation of closing stock has been changed due to Uniform Accounting Policy of Coal India Limited. We found that a reference made by the AO on the audited accounts that Reduction in value of stock is due to overall adjustment is as per the Uniform Accounting Policy adopted by the Coal India Limited. Ld A.R. demonstrated before us with a copy of letter of Uniform Accounting Committee recommendation and supported with paper book. Accordingly, we consider it appropriate to restrict our view on the method of valuation of closing stock mine-wise and the valuation of closing stock of coal are interconnected and since we have discussed on the applicability of the provisions, facts and reasons for valuation of stock centre on the first disputed issue. Therefore, we remit this disputed issue to the file of the Assessing Officer for appropriate adjudication afresh and the ground of appeal of the assessee is allowed for statistical purposes. CMPDIL Expenses - HELD THAT - We find that the CIT(A) has granted relief with regard to addition made by the AO on account of CMPDIL expenses, which has been approved by the Tribunal by holding as above. In the instant case, the CIT(A) has confirmed addition made by the AO. In our opinion, when the Tribunal has upheld the findings of the CIT(A) thereby deleting the addition made on account of CMPDIL expenses in the assessee s own case for the immediately previous assessment year as cited above, therefore, respectfully following the decision of the Tribunal, we direct the AO to delete the addition made under the head CMPDIL expenses. This ground of appeal of the assessee is allowed. Addition made u/s.14A - HELD THAT - AO was required to work out the average of such investment, the income from which did not form part of the total income instead of total value of investment. For this view, our stand is fortified by the decision of Special Bench in the case of ACIT vs. Vireet Investment (P) Ltd., 2017 (6) TMI 1124 - ITAT DELHI . None of the parties before us, however, have laid any details to examine as to which of the investments have yielded such income which did not form part of the total income. We, therefore, restore the matter back to the file of the Assessing Officer for calculating the disallowance u/s. 14A read with Rule 8D afresh, in the light of observations made in the body of this order above. Accordingly, ground No.4 is allowed for statistical purposes. Tax liability towards Interest on Income Tax Refund - HELD THAT - The argument of the assessee is that since interest paid u/ss.234B, 234C . 234D is not allowable as a deduction from taxable income, interest received should also not be taxed as income. - This argument is not acceptable. Short Credit of TDS - HELD THAT - We restore this issue to the file of AO and after due verification if the AO finds that the assessee is eligible for credit of TDS, it should be given, otherwise, the AO is free to pass order accordingly. This ground is allowed for statistical purposes. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI

Issues Involved:
1. Depreciation on Leasehold Land
2. Valuation of Closing Stock of Coal (due to impact of overburden removal expenditure)
3. Corporate Social Responsibility (CSR) Expenses
4. CMPDIL Expenses
5. Disallowance under Section 14A
6. Interest on Income Tax Refund
7. Short Credit of TDS

Issue-wise Detailed Analysis:

1. Depreciation on Leasehold Land:
The assessee claimed depreciation on leasehold land, treating it as an intangible asset under Section 32(1)(ii) of the Income Tax Act, 1961. The AO disallowed this claim, stating that leasehold land is not similar to know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights. The Tribunal upheld the AO's decision, referencing previous rulings in the assessee’s own case, concluding that leasehold rights do not qualify for depreciation as intangible assets.

2. Valuation of Closing Stock of Coal:
The AO added the overburden removal (OBR) cost to the closing stock valuation. The assessee argued that it consistently followed a method excluding OBR costs, as per Coal India Limited's (CIL) uniform accounting policy. The Tribunal remitted the issue back to the AO for fresh adjudication, directing verification of the method of valuation in line with the CIL's policy.

3. Corporate Social Responsibility (CSR) Expenses:
The assessee withdrew its ground related to CSR expenses during the hearing. Consequently, this ground was dismissed as not pressed.

4. CMPDIL Expenses:
The AO disallowed CMPDIL expenses due to a lack of detailed justification. The Tribunal found that similar expenses were allowed in previous years and other subsidiaries of CIL. The Tribunal directed the AO to delete the addition, as the expenses were for services provided under a Memorandum of Understanding (MOU) with CMPDIL.

5. Disallowance under Section 14A:
The AO applied Rule 8D to compute disallowance under Section 14A, related to expenditure incurred on earning exempt income. The Tribunal noted that the AO did not provide reasons for dissatisfaction with the assessee's claim. The Tribunal restored the issue to the AO for re-examination, directing verification of whether investments were made from borrowed funds or surplus reserves.

6. Interest on Income Tax Refund:
The AO added interest on income tax refund to the total income, which the assessee had not included. The Tribunal upheld the AO's decision, affirming that such interest is taxable in the year of receipt.

7. Short Credit of TDS:
The Tribunal restored the issue of short credit of TDS to the AO for verification. If the assessee is eligible, the credit should be given accordingly.

Conclusion:
The Tribunal provided a detailed analysis and directions for each issue, ensuring compliance with legal standards and previous rulings. The decision emphasized the importance of consistent accounting policies and proper justification for claims and disallowances.

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