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TMI Blog2018 (4) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Apex court in the case of SA Builders Ltd. (2006 (12) TMI 82 - SUPREME COURT) and in view of the facts and circumstances of the case, discussed in the preceding para are of the considered view that the alleged expenditure of exgratia payment in the shape of Anugrah Rashi/Protsahan Rashi to labourers working in the mines held on lease by the assessee are allowable as business expenditure and both the lower authorities erred in disallowing the same. In the result the issue of disallowance ex-gratia payment is allowed in favour of the assessee Disallowance of privilege fee - provision in in the nature of additional royalty i.e. tax payable to the state government for mining or it is a privilege fee - Held that:- From the perusal of records, we find that the alleged provision was made as per government order No.F19-95/2004/12/2 dated 13.10.2004 issued by the State Government by the Ministry of Mines and Minerals. The copy of alleged order is not placed on record. Even though the assessee has paid the amount equivalent to the royalty paid on the sand and has also deposited ₹ 15 crores through challans in the government treasury, but still its actual nature is not discerna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a fully allowable expenditure u/s 37 of the I.T. Act. The deduction claimed at ₹ 25 lacs be kindly allowed. ( 3) That on the facts and circumstances of the case and in law, it be held that if the disallowance has been made on wrong concession by the assessee or his counsel on point of law is appealable and, hence the learned CIT(A) is erred and not justified in not adjudicating the issue with regard the allowability of ₹ 3814708 to the State Govt. is a privilege fee and not royalty as contemplated u/s 43B of the I.T. Act, hence the disallowance of the said amount is neither lawful nor justified and, therefore, be deleted. ( 4) That on the facts in the circumstances of the case and in law, in without prejudice to Ground No.(4) even if it is held that the A.O is justified in making the disallowance of deduction of ₹ 3814708 claimed u/s 43B, then the said deduction be directed to be allowed in A.Y. 2008-09 on judicious consideration. ( 5) That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234B 234C are unlawful and hence be cancelled . Grounds raised by the assessee for A.Y. 2009-10 reads as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. and the reason for reopening related was the issue of additional royalty privilege fees and there was no finding of the Ld. AO on this issue in the regular assessment completed u/s 143(3) of the Act. We, therefore, find no merit in the grounds raised by the assessee in view of the facts and circumstances of the case wall as in view of Hon'ble Apex Court judgment in the case Kalyanji Mobji Co. vs. CIT (1976) 102 ITR 287 (SC) wherein Hon'ble Apex Court observed that reassessment can be initiated even when the information is obtained from the record of the original assessment, investigation of the material of the record or facts disclosed thereby from an inquiry or research into facts or law. The information need not be from external source . We accordingly dismiss ground no.1 raised by the assessee and confirm the view taken by Ld. CIT(A) upholding the reassessment proceedings as valid. Now we take up the issue related to disallowance of ex-gratia payment provided for labourers. 5. Brief facts relating to this issue are that the assessee is a government undertaking owned by the Government of Madhya Pradesh and is engaged in the mining and marketing of major ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and mines located in the district of Hoshangabad and Sehore. These labourers are engaged in the excavation and loading of sand in truck which enters into mining area and the truck owners pay royalty to the assessee at the rates specified by the government. In pursuance to decision taken by the State Government in the year 1998 the assessee is making the alleged payment to the labourers as Anugrah Rashi . It is contended by the Ld. counsel that these payments were made in the business interest of the assessee corporation and for commercial expediency. Both the lower authorities treated the alleged payment in the nature of personal expenditure i.e. charity in donation. 9. We further find that the alleged expenditure is in the shape of provision which is made on the basis of estimates available on record. 10. Now the issue to be examined is that whether the alleged payments are allowable as business expenditure or not. We find that Hon'ble Apex Court in the case of SA Builders Ltd. (supra) defines the word commercial expediency as an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elp of ex-gratia payment/Protsahan Rashi, they earn better living, then certainly with the better living and good health they can work more efficiently and also will not be forced to migrate to other areas. If shows that even though the alleged payment to labourers are not directly linked to the revenue earned by the company but they are very much directly linked with the royalty paid by the truck owners which is calculated on the basis of sand excavated from the mines. It is also observed that the alleged payment is made, through constituted body of the local collector which comprise of Sub Divisional Magistrate, Mining Inspector, Tahsildar Nayab Tahsildar. This fact is also not in dispute that the assessee was under legal obligation to abide by the decision/instruction of the Government else the business of the company may get affected if lease rights are terminated by the government. Genuineness of the expenditure has also not been challenged at any stage. The assessee has also furnished the copies of following documents in support of the contention that the expenditure was genuine and allowable u/s 37 of the Act. 1. Board Notification No.9949 dated 25.01.96 2. Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 40(iib) of the Act and submitted that this amendment came in effect from 01.04.2014 by Finance Act 2013 and before this amendment the expenditure in the nature of privilege fee are allowable on due basis. However, the Ld. CIT(A) was of the confirmed view that the alleged expenditure is an additional royalty which is in the nature of tax payable to the state Government and provision of section 43B of the Act are squarely applicable on this expenditure. 18. Now the assessee is in appeal before the Tribunal. Ld. counsel for the assessee submitted that the provision of section 40(iib) of the Act came in fact from 1st April 2014 and therefore, those were not applicable on the assessee for A.Y. 2007-08 and further it was submitted that the alleged expenditure is not an additional royalty but an privilege fee. On the other hand, Ld. DR supported the order of the lower authorities. 19. We have heard the rival contentions and perused material on record placed before us. The only issue before us is whether alleged provision of ₹ 15,38,14,708/- in in the nature of additional royalty i.e. tax payable to the state government for mining or it is a privilege fee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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