NATIONAL ALUMINIUM COMPANY LIMITED,BHUBANESWAR vs. PRINCIPAL CIT-1, BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK , CUTTACK (through virtual hearing) BEFORE BEFORE S/SHRI GEORGE MATHAN, JUDICIAL JUDICIAL MEMBER AND GIRISH AGRAWAL, ACCOUNTANT MEMBER , ACCOUNTANT MEMBER Assessment Year : 2016-17 National National Aluminium Aluminium Vs. DCIT, Circle DCIT, Circle -1(2), Company Limited., NALCO Company Limited., NALCO Bhubaneswar Bhubaneswar Bhawan, Bhawan, Nayapalli, Nayapalli, Bhubaneswar. Bhubaneswar. PAN/GIR No. PAN/GIR No.AAACN 7449 M (Appellant) ) .. ( Respondent Respondent) Assessee by Assessee by : Shri Ved Jain, CA and Shri P. Venugopal Rao, CA Venugopal Rao, CA Revenue by : Dr.Abani Kanta Nayak, Abani Kanta Nayak, CIT DR Date of Hearing : 30/11 11/2023 Date of Pronouncement : 30/11 /11/2023 O R D E R Per Bench This is an appeal filed by the assessee against the order of the ld This is an appeal filed by the assessee against the order of the ld This is an appeal filed by the assessee against the order of the ld Pr. CIT-1, Bhubaneswar 1, Bhubaneswar u/s.263 of the Act dated 30.3.201 30.3.201 in Appeal No.PCIT, Bhubaneswar- -1/Revision-263/100000183890/2021 for the assessment year for the assessment year 2016-17.

2. Shri Ved Jain, CA and Shri Ved Jain, CA and Shri P. Venugopal Rao, CA appeared for the Venugopal Rao, CA appeared for the assessee and Dr. Abani Kanta Nayak, ld CIT DR for the assessee and Dr. Abani Kanta Nayak, ld CIT DR for the assessee and Dr. Abani Kanta Nayak, ld CIT DR for the revenue.

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“ GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX DCIT/ACIT, CIRCLE 1(2), BBSR To NATIONAL ALUMINIUM COMPANY LIMITED P/1 NALCO BHAWAN, NAYAPALLI BHUBANESWAR 751013,Orissa India

P a g e 2 | 13 PAN: A.Y. Dated Notice No. AAACN7449M 2016-17 9.11.2018 ITBA/AST/F/142(1)/2018- 19/1013540816(1) Notice under Sub Section (1) of Section 142 of the Income Tax Act, 1961/6090 Sir/ Madam/ M/s, In connection with the assessment for the assessment year 2016-17 you are required to: a) Furnish or cause to be furnished on or before 16/11/2018 at 11:00 AM the accounts and documents specified overleaf b) Furnish and verified in the prescribed manner under Rule 14 of IT. Rules 1962 the information called for as per annexure and on the points or matters specified therein on or before 16/11/2018 at 11:00 AM. c) The above mentioned evidence/information Is to be furnished online electronically In 'E-Proceeding' facility through your account in 'a-filing' website of Income Tax Department. d) Para(s) (a) to (c) are applicable if you have ah account in e-filing website of Income Tax Department. Till such an account is created by you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail Is not available). e) In cases where order has to be passed under section 153A/153C of the Income Tax Act, 1961 read with section 143(3), assessment proceedings would be conducted manually. Yours faithfully. THAMBURAN THOZHAPILLAI AYYAMPERUMAl DCIT/ACIT, CIRCLE 1(2), BBSR

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2. You have claimed deduction u/s 32AC of the Act. In this regard please furnish following details of assets acquired and installed. I. Type of asset ii. Date of acquisition with evidence iii. Date of asset put to use in the business iv. Deduction u/s 32AC claimed in the year of acquisition, if any .

3. From the return of income it is found that you have claimed deduction u/s 35 (2AA) of the Act. In this regard, please furnish evidence in support payment and details of payee, 4. Please furnish details of 'any other deduction' claimed at Rs. 13,45,47,781/. 5. From the return of income it is found that you have shown value of inventory at Rs. 1126,97,07,5140/- in the balance sheet and at Rs. 456,11,64,722/- in the P&L Account. In this regard please furnish following information:

SI Name Op stock (raw Purchase/manuf Sale/consumption CI stock No. of material/finished acture items product) re Qnt Amount Qnt Amount Qnt Amount Qnt amount

6. From the 26AS it is seen that you have received income by way of 'rent'. However, the same Is not reflected in the P&L Account. Please explain.

7. Please furnish details of Rs. 123,13,00,000/- towards 'tax, duty and cess' debited to P&L Account and evidence in support of payment of the same. 8. From the return it Is found that you have claimed deduction u/s 80IA of the Act. In this regard please explain how the same is admissible under the provisions of the Act. 9. From 3CD it is found that an amount of Rs.J7,85.32,824/- is not paid on or before the due date as specified under section 43B of the Act. However. In the computation of total income you have disallowed Rs. 20,92,64,656/- only. Please explain as to why the differential amount should not be added back to the total income.

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He further drew our attention to pages 224 & 225, which were details of the amount of Rs.123.13 crores towards tax duty and cess which reads as follows:

“Before the Dy. Commissioner of Income Tax Corporate Circle 1(2),Bhubaneswar. NATIONAL ALUMINIUM COMPANY LIMITED –Asst.Year 016-17 7. Pease furnish details of Rs.13,13,00,000/- towards tax, duty and cess debited to P&L account and evidence in support of payment of the same. In our printed account, the following major duties and taxes and cess are charged to expenditure for the financial year 2015-16, extracts placed hereunder: Note 25: Power and fuel Coal 1,85,27 Fuel Oil 398.22 Duty on own generation 172.68 Purchased power 1.89 Power transmission charges 6.55 Sub total 1,864.61 Adjustment pertaining to earlier years - Total : ---------------------------- 1,864.61 Other manufacturing expenses: Royalty & cess 93.14 Water charges 4.18 Contribution to DMF & NMET 36.31 Others 62.64 Sub:Total

P a g e 5 | 13 To summrise the following major head of payment of tax, duties and cess covered under section 43B of the Act is represented.

1. Electricity duty on own generation Rs.172.68 2. Royalty Rs. 93.14 3. Water cess Rs.24.18 Total: Rs.290.00 It is submitted that NALCO is one of the organization almost 100% digital payment enabled. Accordingly, it is submitted that manual/physical receipt is not available. However, we are enclosing the payment details of the payments and voucher details. This fact is also corroborated by the Tax Auditor in the Tax audit report, where the total outstanding as at the year end –unpaid u/s.43B stands at Rs.7,95,32,84/-.” He also drew our attention to page 233 in regard to disallowance u/s.43B as follows:

9. From 3CD, it is found that an amount of Rs.27,95,3,824/- is not paid on or before the due date as specified under section 43B of the Act. However, in the computation of total income you have disallowed Rs.20,9,64,656/- only. Please explain as to why the differential amount should not be added back to the total income. While we appreciate the observation of discrepancy in the sum offered for disallowance by us in our own reasoning, it is humbly submitted that the contention of your good office is incorrect. We submit the item wise details of the sum as per 3CD, subsequent actual payment is placed hereunder. It may be noticed that we have offered an additional sum of Rs.1,41,80,021 for disallowance which we request to allow us.

It was the submission that consequent to reply, the assessee has offered an additional sum of Rs.1,41,80,021/- and the details of payment is at page 234 as under:

“Particulars of liabilities incurred during the year u/s.43B, Clauses (a),(c),(d), (e) and (f) of the Act.

P a g e 6 | 13 Sl.No. Nature of Amount Amount Amount Payment detail liability incurred mentioned in unpaid on and during the co.3 paid or the due date relevant previous year set off for filing clause of and return/date section remaining of tax audit 43B unpaid on report which March 31st ever is Mar of the earlier previous year under audit 1 2 3 4 5 6 A Bonus 1,11,880 - 1,11,880 B Gratuity 8,60,13,944 - 8,60,13,944 Net paid as on the date of signing of audit report C Cont. to 36,31,19,689 16,96,00,809 19,35,18,880 Voucher No. and dt. DMF & 6/57089/9.3.16/57091/9.03.16, NMET 6/57059/29.3.16, 62/57061/29.3.16, 62/215/15.4.16, 6/63/16.4.16 Grand 44,92,45,513 16,96,00,809 27,96,44,704 Total A to 1 Less :Payment made on account of gratuity : 8,45,60,069 Net sum that need to be disallowed : 19,50,84,635 Sum offered for disallowance : 20,92,64,656 Sum offered for disallowance excess : 1,41,80,021 It was the submission that in respect of issue of 43B, the issue has already been considered by the Assessing Officer and detailed reply had also been filed. It was the submission that the difference which is being claimed by the Pr. CIT in the order u/s.63 of the Act has also been considered is evident from page 234 of PB, extracted above. In respect of second issue, ld AR drew our attention to page Nos. 240 & 241 of PB , which was a further notice u/s.142(1) issued by the Assessing Officer as follows:

“ To The Principal Officer, National Aluminium Company Limited, NALCO Bhawan, P-1, Nayapali, Bhubaneswar Sir,

P a g e 7 | 13 In connection with the assessment for the A.Y.2016-17, you are required to: (a) …… (b) Product or cause to be produced before me at my office at the office of DCIT, Corporate Circle-1(), 3rd floor, Aayakar Bhavan, Rajaswa Vihar, Bhubaneswar-7 on 24.12.018 at 11 AM the accounts and/or documents specified overleaf:

1. 1. Please show cause as to why Rs. 13,04,53,000/- claimed towards 'NPV mines, assets not capitalized' should not be disallowed.

2. You have debited to P&L account Rs. 93,14,00,000/- towards Royalty. From the Auditor's Report it is seen that Rs. 9,46,56,569/- has been paid before the due date for filing of return. In this regard please show cause as to why Rs.83,67,43,43 I/- should not be disallowed and added back u/s 43B of the Act 3. Please show cause as to why profit from long term investment shown at Rs.12,96,43,000/- should not be treated as income from business.

4. You have debited to P&L account Rs. 130,66,93,385/- towards leave encashment. From the Auditor's Report it is found that no amount is paid before the due date. In this regard please show cause as to why Rs.130,66,93,385/- should not be disallowed u/s 43B of the Act.

5. Please show cause as to why additional depreciation claimed should not be disallowed.

6. Please show cause as why water charges not paid before the due date should not be disallowed u/s 43B of the Act.

7. You have debited a-sum of Rs. 27.17 crores towards peripheral development expenditure in your printed annual report. Please furnish the details of expenditure and explain why the amount will not be disallowed in view of recent amendment in the Income tax Act. 8.. Please furnish the details of investment income booked under dividend income, long term capital gain, short term capital gain and details of disallowance claimed u/s. I4A and explain why the same shall not be disallowed keeping in view that the same is deemed to be a normal income.

9. Please furnish the details of expenditure on research and development and the details of amounts which have been charged as revenue amounting to Rs 3,79,52,459, treating the same as a normal expenditure, without any weighted deduction.

10. Please furnish the details of non-moving stores and spares claimed and written off amounting to RS 10.84 crores.

11. You have claimed deduction of Rs.93,699,348 U/s 32AC of the Act. Please show cause as to why the same should not be disallowed, please furnish details of assets acquired and installed.

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Sd/ DCIT, Corporate Circle -1(2), Bhubaneswar” In reply, he drew our attention to para 6 and para 13 of the said notice. He drew our attention to pages 268 to 270 of paper book in respect of the issue of interest, which are as follows: NATIONAL ALUMINIUM COMPANY LIMTIED: Asst. Year -2016-17 Head of query Our reply and submission 12. Pl. show cause as to why Rs.140.22 crore Enclosure -13 towards interest on disputed Govt. dues & other should not be disallowed. The disputed govt dues is the sum booked towards interest on electricity duty emanating out of the principal amount of water charges due and payable to Govt. of Odisha. Interest on water charges During the year a sum of Rs.140.20 crores was provided in the books of account wards interest on disputed Government dues & others out of which a sum of Rs.1,40,20,87,630 was towards interest on disputed dues of water charges. A further break up of the sum debited under the head interest on water charges is presented as under: Profit centre Account Number AY 2015-16 (Rs.) 1200 – 56202-Int-water charges 19,82,18,664.00 Refinery 1300-Captive 562022-Int. water 1,20,38,68,966.00 power plant charges 562022 Total: 1,40,20,87,630.00

P a g e 9 | 13 Principal and interest on water charges has been under dispute since the F.Y. 1999-2000 before various forums including that of the Govt. of Orissa. During the FY 2018-19, NALCO having agreed in principle with Govt. of Odisha to settle outstanding and disputed arrived at a settlement of old water charges. In pursuance to which against the outstanding liability of Rs.839,97,95,235 a sum of Rs.785,71,04,400 was reversed and balance paid. The yearwise reversal and payment has been enclosed. In view of the reversal, since the reversal of water charges happened during March 2018, the period within which company could file a revised return no 5930900180318 dated 28.3.018, added the sum of Rs.134.69 crore reversed net after payment and paid tax on the same approximately amounting to Rs.43.25 crores. Summary of revised return filed is placed as under Head Original Revised during Revised return Filed Dec-17 for considering the considering 32AC remission of benefit. Water chg.

Rs Crore Rs. Crore Rs. Crore a) Total income computed- 1,076.62 1,067.25 1,201.94* Taxable b) Net Tax payable (@ 34.608) 375.55 372.18 418.80 c)Tax already paid i.Advance Tax paid 316.00 316.00 316.00 ii. TDS Credit 44.44 44.44 44.44 iii.Self Assessmt. Tax paid 15.11 15.11 15.11 iv.Self Assessmt. Tax to be paid - - 43.25 alongwith the return. Total Tax paid 375.55 375.55 418.80 d)Tax Payable/(Refund) Nil (3.37) Nil After considering the net remission of liability amounting to Rs.134.69 cr as an income Since company has added the sum and paid tax thereon, it is requested not to add back the same again which may attract taxing an amount twice. We are enclosing the following details in support of our claim.

1. Letters of settlement from Government of Odisha

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3. Copy of Computation of Income Tax. *After considering the net remission of liability amounting to ZU4.69 Cr. as an income. In view of the above, it is humbly submitted that no addition/ disallowance be made in respect of unpaid interest on and water charges.” It was the submission that this issue was also specifically considered by the Assessing Officer. In regard to 3rd issue being the interest calculated u/s.234B of the Act, it was the submission that same was automatic in nature. It was the submission that as the issue which has already been raised by Pr. CIT, has already been considered in depth by the Assessing Officer and the Assessing Officer has already taken a view on the issue, the provisions of section 263 cannot be invoked for forcing the opinion of the Pr. CIT over that of the Assessing Officer. It was the submission that the order u/s.263 deserves to be quashed. 4. In reply, ld CIT DR drew our attention to the order of the Pr. CIT at page 8 to submit that even after all the explanation, there was a difference of Rs.5.53 crores which has not been explained by the assessee. It was the submission that the order u/s.263 is liable to be upheld. 5. In reply, ld AR submitted that this differential amount, which is being raised by ld CIT, DR is in respect of an amount of Rs.134.69 crores, which has been offered by the assessee in its return for the assessment year 2018-19 and this was also brought out to the reply filed to the Assessing Officer in respect of the issue of interest of water charges. It was the submission that the income having already been offered to tax during the P a g e 11 | 13 assessment year 2018-19, there is no tax effect which makes the assessment erroneous and much less prejudicial to the interest of the revenue.

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Order dictated and pronounced in the open court on 30/11/2023.

Sd/- sd/- (Girish Agrawal) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 30/11/2023 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : National Aluminium Company Limited., NALCO Bhawan, Nayapalli, Bhubaneswar 2. The Respondent:DCIT, Circle -1(2), Bhubaneswar 3. The CIT(A)-1, Bhubaneswar 4. Pr. CIT, Bhubaneswar-1 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// By order

Sr.Pvt.secretary ITAT, Cuttack

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