DCIT, CIRCLE-2(1), SAMBALPUR vs. MAHANADI COALFIELDS LTD., SAMBALPUR

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM आयकर अपीऱ सं./ITA No.181/CTK/2018 (नििाारण वषा / Assessment Year :2015-2016) DCIT, Circle-2(1), Sambalpur Vs. M/s Mahanadi Coalfields Ltd At/PO: Jagruti Vihar, Burla, Dist-Sambalpur-768020 स्थायी ऱेखा सं./PAN No. : AABCM 5188 P (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. राजस्व की ओर से /Revenue by : Shri S.M.Keshkamat, CIT DR ननधााररती की ओर से /Assessee by : Shri S.S.Poddar, FCA

सुनवाई की तारीख / Date of Hearing : 11/09/2019 घोषणा की तारीख/Date of Pronouncement : 24/09/2019 आदेश / O R D E R Per L.P.Sahu, AM: This is an appeal filed by the Revenue against the order of CIT(A), Sambalpur, dated 28.03.2018 for the assessment year 2015-2016. 2. The Revenue has raised the following grounds of appeal :- 1. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made by Assessing Officer towards 'Over Burden Removal Expenditure' to the tune of Rs. 1911.18 crores in contravention of the provision of Section 35E of the IT Act. 2. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made by Assessing Officer under the head "Service Charges" to Coal India Ltd.(CIL) to the tune of Rs. 60.69 Crores. 3. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made by Assessing Officer against the provision made under the head "Reclamation of land and mine closure expenses" of Rs. 115.41 Crores. 4. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made by the Assessing Officer under the head 'Grants to Schools" to the tune of Rs.21.85 crores, even though no proof of exemption to such schools u/s 12AA/80G of the IT Act was submitted before the AO and had that

2 ITA No.181/CTK/2018 been submitted also, maximum deduction of 50% of such payments could have been allowed u/s 80G of the IT Act. 5. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in accepting the plea of the assessee that such 'Grants to Schools" to the tune of Rs.21.85 crores was an employee welfare expense, without ascertaining from the assessee whether corresponding amount has been taxed as "perquisites" u/s 17(2)(iii) of the IT Act in the hands of those employees whose children got free education in such schools. 6. Any other ground(s), if any, that may be urged at the time of appeal hearing. 3. The brief facts of the case are that the assessee is a mini-ratna

company engaged in the business of extraction and sale of coal and

filed its return of income on 27.11.2015 showing net profit at

Rs.5095,39,40,710/- derived from extraction (mining) of coal and sale

thereof. Subsequently, the case was selected for scrutiny under manual

selection and statutory notices u/s. 143(2) & 142(1) of the Act were

issued to the assessee. In response to the same, the assessee appeared,

offered explanations and filed necessary documents. The AO completed

the assessment u/s.143(3) of the Act assessing total income of the

assessee at Rs.7893,22,90,000/- after making certain

additions/disallowances.

before the CIT(A) and the CIT(A) after considering the submissions of

the assessee and findings of the AO partly allowed the appeal of the

assessee.

3 ITA No.181/CTK/2018 5. Now, the Revenue is in appeal before the Income Tax Appellate Tribunal.

expenditure to the tune of Rs.1911.18 crores in contravention of the

provision of Section 35E of the Act, ld.DR submitted that the CIT(A) has

erred in deleting the same and relied on the order of AO.

the decision of this Bench of the Tribunal in ITA No.397/CTK/2013

along with other connected appeals, order dated 20.03.2018, for the

assessment years 2010-2011 to 2014-2015, wherein the Tribunal

while deciding the appeal of Revenue has dismissed this issue,

therefore, this ground may be decided as per the observations given by

the Tribunal in para 105.

available on record along with the order of the tribunal, as placed by

the ld. AR, we find that the Tribunal has already dismissed this issue

while considering the appeal of the Revenue in ITA No.397/CTK/2013

along with other connected appeals, order dated 20.03.2018, for the

assessment years 2010-2011 to 2014-2015, wherein the relevant

observations of the Tribunal in para 105 are as under :-

“105. We heard the rival submissions, perused the orders of lower authorities and materials available on record. The dispute arise in this ground of appeal is whether the expenditure incurred on removal of

4 ITA No.181/CTK/2018

overburden in coal is allowable expenditure or not. We find that similar issue arose in the case of Northern Coalfield ltd, wherein, on similar facts, the Jabalpur Bench of the Tribunal after a thorough and detailed discussion on the issue, has deleted the addition. The relevant portion is reproduced hereunder:

“40. We are unable to find any legally sustainable merits in this objection either. “The criterion on the basis which call is taken as to be whether a mine can be treated as a development mine or as a revenue mine is, as we have noted in paragraph 22 earlier in this order, is uniform all along not only in this case of this assessee but in the case of other similarly placed assessees, and the revenue authorities have accepted that criterion all along. It is a purely a factual matter which permeates through different assessment years, and for the detailed reasons discussed earlier, there is no good reason to disturb this criterion. In any case, the authorities below have neither suggested any alternative criterion, which will be appropriate on the facts of this case, nor have they have demonstrated that the facts implicit in their stand actually exist. As a matter of fact, the apprehensions of the Assessing Officer seem to be purely hypothetical and in the realm of conjectures and surmises inasmuch as not one instance is shown in which the overburden removal expenses, booked in the accounts as revenue expenditure, actually pertain to removal of overburden only at the surface level and should be, therefore, treated as capital expenditure. Similarly, while -declining the deduction of overburden removal as capital expenditure, the Assessing Officer, as also the CIT(Aj, has not treated any part of this expenditure, which essentially includes the expenditure incurred on removing overburden in the process of coal mining and production, as revenue expenditure. It seems to be more or less an undisputed position, given the nature of overburden removal expenses as we have discussed earlier, that a part of the overburden removal expenses is admittedly revenue expenditure, but if we have to uphold the stand of the authorities below, entire overburden removal expenses is required to be treated as capital expenditure eligible only for amortization under section 35D. In any case, there is nothing on record to establish, or even suggest, that expenses incurred on removal of overburden at the surface level, which were capital expenditure in nature, have been claimed as revenue deduction on the strength of coal mining in another piece of land within that coal mine.

This findings of the Tribunal has been upheld by the Hon’ble M.P.High Court in ITA No.71/Jab/2014 order dated 24.4.2015.Following the above decision, The Jabalpur Bench of this Tribunal in the case of

5 ITA No.181/CTK/2018 Norther Coalfield Ltd for the assessment year 2011-12 has deleted the similar addition. We also find that similar addition made in the case of Western Coalfields Ltd., for the assessment year 1978-79 to 1984-85 by the Assessing Officer was deleted by the CIT(A) and on further appeal, the Nagpur Bench of this Tribunal has upheld the findings of the CIT(A). Before us, ld D.R. could not place any contrary judgment of the higher forum to controvert the above decisions of the Tribunal and also High Court. The CIT(A) has followed the decision of the Tribunal while deleting the addition made by the Assessing Officer. Hence, we do not find any reason to interfere with the order of the CIT(A), which is hereby confirmed and this ground of appeal of revenue is dismissed for the assessment years 2010-11 to 2014-15.”

Respectfully following the above observations of the Tribunal in

assessee’s own case, which the CIT(A) has also followed while deleting

the addition, we do not see any good reason to interfere in the findings

recorded by the CIT(A) in this regard. Accordingly, this ground of

appeal of the Revenue is dismissed.

erred in deleting the addition made by the AO under the head service

charge to Coal India Ltd. and also relied on the order of AO.

is covered by the decision of this Bench of the Tribunal in ITA

No.397/CTK/2013 along with other connected appeals, order dated

20.03.2018, for the assessment years 2010-2011 to 2014-2015,

wherein the Tribunal while deciding the appeal of Revenue has

dismissed this issue, therefore, this ground may be decided as per the

observations given by the Tribunal in para 136.

6 ITA No.181/CTK/2018

available on record along with the order of the tribunal, as placed by

the ld. AR, we find that the Tribunal has already dismissed this issue

while considering the appeal of the Revenue in ITA No.397/CTK/2013

along with other connected appeals, order dated 20.03.2018, for the

assessment years 2010-2011 to 2014-2015, wherein the relevant

observations of the Tribunal in para 136 are as under :-

“136. We after hearing the rival submissions, find no infirmity in the order of the CIT(A) who has followed the decision of the Tribunal order dated 12.9.2011 for the assessment years 2004-05 to 2007-08 in assessee’s own case, wherein, it has been held as under: “ 41. The amount in question is claimed by the assessee- Company to have been paid to Coat India Ltd., (CIL) @ Rs.5 per ton of coal produced towards rendering various services like procurement, foreign contract, marketing & corporate services based n agreement entered with them. The Assessing Officer observed that this payment to Coal India Limited has been worked out on the basis of Rs.5 per ton of coal produced and not for any expenses incurred or services rendered on actual basis by the CIL. Accordingly, he was of the view that this payment is basically on presumptive basis and cannot be said that the whole amount is spent for wholly and exclusively for business purpose. Thereafter, he examined the debit memo and concluded that the payment in question under the head of “apex office expenses” by the assessee to the holding company is totally predetermined and presumptive and without any logical linkage to the quantum of services rendered. This payment by the subsidiary to the holding company which is not commensurate with the services/benefits also cannot escape from the provision of section 40A(2). On the basis of above, the Assessing officer disallowed 10% of such expenditure. It was the stand of the assessee that Coal India Limited was formed by Govt. of India as a Public Sector Undertaking whole 100% shares are held by the President of India and controlled through Ministry of Coal. after making lot of permutation and combinations by CIL, it was found that if Rs.5 per ton of coal produced is contributed by all the subsidiaries are reimbursement of expenses, it will be sufficient to take care of apex office expenses and accordingly, the amount was paid in pursuance of an agreement entered into between the assessee and CIL. These facts are not disputed by the revenue. But, however, the ld AO has disallowed 10% of such expenses presumably u/s.40A(2) on adhoc basis. The AO has not

7 ITA No.181/CTK/2018 justified such disallowance in his order. The ld CIT(A) in his order observed that books of account of the assessee company are audited where the comments of the Comptroller and Auditor General of India u/s.619(4) of the Companies Act, 1956 on the accounts are also available. We fin that the AO has not disputed the payment o apex office expenses to CIL. In view of the above, we have no hesitation to uphold the impugned order of the ld CIT(A) on this issue the AO having disallowed 10% out of such expenses without any cogentreasons. Therefore, the ground raised by the revenue on this issue is dismissed.” We find no good reason could be given by ld D.R. pointing out the requirement to interfere with the order of the CIT(A), which is in consonance with the order of this Bench of the Tribunal in assessee’s own case. Hence, we dismiss this ground of appeal of the revenue for the assessment years 2012-13, 2013-14 and 2014-15, respectively.”

Respectfully following the above observations of the Tribunal in

assessee’s own case, which the CIT(A) has also followed while deleting

the addition, we do not see any good reason to interfere in the findings

recorded by the CIT(A) in this regard. Accordingly, this ground of

appeal of the Revenue is dismissed.

deleting the addition made by the AO against the provision made under

the head Reclamation of land and mine closure expenses and relied on

the order of AO.

is covered by the decision of this Bench of the Tribunal in ITA

No.397/CTK/2013 along with other connected appeals, order dated

20.03.2018, for the assessment years 2010-2011 to 2014-2015,

wherein the Tribunal while deciding the appeal of Revenue has

8 ITA No.181/CTK/2018 dismissed this issue, therefore, this ground may be decided as per the

observations given by the Tribunal in para 131.

available on record along with the order of the tribunal, as placed by

the ld. AR, we find that the Tribunal has already dismissed this issue

while considering the appeal of the Revenue in ITA No.397/CTK/2013

along with other connected appeals, order dated 20.03.2018, for the

assessment years 2010-2011 to 2014-2015. However, before us ld. AR

submitted that the provision was made for Rs.115.41 crores and he

also submitted that the above amount mines wise has been transferred

to the Escrow Account as per the guidelines dated 07.01.2013 issued by

the Ministry of Coal, Govt. of India. But on being asked by the bench as

to when the above provision amount was paid, the ld. AR was unable to

explain the same before us. Therefore, this issue is sent back to the file

of AO for verification as to when the provisions were made by the

assessee in his books of accounts as per the guidelines issued by the

Ministry of Coal (supra) and paid for claiming the deductions as per the

provisions of Income Tax Act. Accordingly, this ground of Revenue is

allowed for statistical purposes.

has erred in deleting the addition made on account of grants to school

9 ITA No.181/CTK/2018 without appreciating the fact that the assessee has not produced any

proof of exemption to such schools u/s.12AA/80G of the Act and relied

on the order of AO.

is covered by the decision of this Bench of the Tribunal in ITA

No.397/CTK/2013 along with other connected appeals, order dated

20.03.2018, for the assessment years 2010-2011 to 2014-2015,

wherein the Tribunal while deciding the appeal of Revenue has

dismissed this issue, therefore, this ground may be decided as per the

observations given by the Tribunal in para 139.

available on record along with the order of the tribunal, as placed by

the ld. AR, we find that the Tribunal has already dismissed this issue

while considering the appeal of the Revenue in ITA No.397/CTK/2013

along with other connected appeals, order dated 20.03.2018, for the

assessment years 2010-2011 to 2014-2015, wherein the relevant

observations of the Tribunal in para 139 are as under :-

“139. Before us, ld A.R. submitted that similar disallowance made by the revenue in the case of Northern Coalfields Ltd., was deleted by the ITAT, Jabalpur vide order dated 21.10.2013. Ld D.R. could not point out any specific reasons to deviate from the findings of the CIT(A). Hence, we dismiss this ground of appeal of revenue the assessment years 2012- 13, 2013-14 and 2014-15, respectively”

10 ITA No.181/CTK/2018 Respectfully following the above observations of the Tribunal in assessee’s own case, which the CIT(A) has also followed while deleting the addition, we do not see any good reason to interfere in the findings recorded by the CIT(A) in this regard. Accordingly, this ground of appeal of the Revenue is dismissed. 18. In the result, appeal of the Revenue is partly allowed for statistical purposes. Order pronounced in the open court on 24/09/ 2019. Sd/- Sd/- (C.M.GARG) (L.P.SAHU) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनांक Dated 24/09/2019 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- 1. DCIT, Circle-2(1), Sambalpur प्रत्यथी / The Respondent- 2. M/s Mahanadi Coalfields Ltd At/PO: Jagruti Vihar, Burla, Dist-Sambalpur-768020 आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. ववभागीय प्रनतननधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, 5. Cuttack गार्ा पाईऱ / Guard file. 6. सत्यावऩत प्रनत //True Copy// आदेशािुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack