PARADEEP PHOSPHATES LIMITED,BHUBANESWAR vs. ACIT, CORPORATE CIRCLE-1(2), BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA Nos.412 & 413/CTK/2017 Assessment Years : 2012-2013 & 2013-2014

Paradeep Phosphates Vs. ACIT, Corporate Circle 1(2), 5th floor, Limited, Bayan Bhubaneswar Bhawan, Pt Jawaharlal Nehru Marg, Bhubaneswar. PAN/GIR No.AABCP 3276 D (Appellant) .. ( Respondent)

Assessee by : Shri A.K.Sabat, AR Revenue by : Shri A.K.Mohapatra, CIT DR

Date of Hearing : 29/08/ 2018 Date of Pronouncement : /08/ 2018

O R D E R Per N.S.Saini, AM These are appeals filed by the assessee against the separate

orders of the CIT(A)-1, Bhubaneswar both dated 18.7.2017 for

the assessment years 2012-13 & 2013-14.

nature and hence, requires no separate adjudication by us.

grievance of the assessee is that the CIT(A) erred in confirming

P a g e 1 | 7 the disallowance of Rs.2,18,90,457/- for the assessment year

2012-13 and Rs.2,39,28,791/- for the assessment year 2013-14.

disallowed Rs.2,18,90,457/- for the assessment year 2012-13 and

Rs.2,39,28,791/- for the assessment year 2013-14 u/s.40A(9) of

the Act being amount paid to DAV School by the assessee for

running the School in the plant premises. The assessee before the

Assessing Officer submitted that payment of DAV school

management was neither falling under ‘setting up’ nor ‘formation

of’ nor under “as contribution to” any fund/trust etc, and,

therefore, the same was allowable as business expenditure which

was not accepted by the Assessing Officer. According to the

Assessing Officer, the claim was covered under the provisions of

section 40A(9) of the Act and, accordingly disallowed the same for

both the assessment years.

the Assessing Officer.

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

No.264/CTK/2015 for the assessment year 2010-2011 order dated

4.8.2017.

P a g e 2 | 7

of the assessee.

orders of lower authorities, we find that similar disallowance was

made by the authorities below in the assessment year 2010-2011

and this Bench of the Tribunal has deleted the disallowance made

u/s.40A(9) of the Act. The relevant discussion in the said decision

read as under:

“23. Ld A.R. relied on the decision of Delhi Benches of the Tribunal in the case of DCIT vs. Gujarat Guardian Ltd., (2006) 152 Taxman 37 (Del) (Mag), wherein, the assessee had incurred an expenditure of Rs.10 lakhs towards contribution to a school and the Assessing Officer disallowed the same u/s.40A(9) of the Act, which bars deduction of contribution made by an employer to any fund, trust, etc, for the benefit of employees. On appeal, the CIT(A) allowed the deduction by following the decision of the Delhi Benches of the Tribunal in the case of Modi Rubber Ltd vs IAC(IT Appeal Nos.6227 (Delhi) of 1986 and 142 (Del) of 1987 dated 29.1.1993. On further appeal, the Tribunal confirmed the order of the CIT(A). 24. Further, ld A.R. relied on the decision of Hon’ble Kerala High Court in the case of CIT vs N.Radhakrishnan, (2000) 243 ITR 284 (Ker) where the assessee a public sector undertaking engaged in the manufacture and sale of certain chemicals claimed in the assessment year 1985-86, deduction for payment of Rs.5,34,406/- made to FACT school where children of its employees were studying by way of reimbursement of the school’s proportionate expenditure on the ground that the same was allowable under section 40A(10) and section 37(1) of the Act as expenditure was incurred for welfare of the employees and for business purposes. However, the Assessing Officer disallowed the claim observing that the payment had no

P a g e 3 | 7 direct relation with the business activity of the assessee and was more or less in the nature of a donation. The CIT(A) confirmed the disallowance. On appeal, the Tribunal accepted the assessee’s claim on the ground the said contribution was for business purposes. On further appeal, Hon’ble High Court held that the expenditure met by the assessee was wholly and exclusively for the welfare of its employees and also for carrying on business of the assessee company more efficiently by having a contended labour force. It was neither a donation covered under section 40A(9) nor a capital in nature not covered by section 37(1) of the Act.. Hence, the Tribunal was justified in allowing the above expenditure towards contribution for the running of the FACT School, as an expenditure for the smooth functioning of the business of the assessee and an expenditure wholly and exclusively for the welfare of the employees of the assessee and thus, allowable under section 37(1) as well as section 40A(10) of the Act.

consideration, respectfully following the precedent, we set aside

the orders of lower authorities and delete the disallowance

Rs.2,18,90,457/- for the assessment year 2012-13 and

Rs.2,39,28,791/- for the assessment year 2013-14 and allow the

ground of appeal of the assessee.

P a g e 4 | 7

2012-13, the grievance of the assessee is that the CIT(A) erred in

confirming the disallowance made for non-deduction of

compensation received from Government of India towards loss on

sale of GOI Bond of Rs.25,49,21,000/-

assessee has claimed ‘diminution in the value of GOI Bonds’ as

allowable expenses in earlier years. Hence, when Government of

India gave compensation of Rs.25.49 crores @ 50% of loss

incurred by the assessee, the same amount was offered for

taxation as an income in the return of income. Since the

department disallowed the claim of the assessee for the earlier

assessment years, the assessee claimed before the Assessing

officer not to consider Rs.25.49 crores as income being

compensation @ 50% against losses in diminution received from

GOI since it would tantamount to double taxation by way of

disallowing 100% of ‘diminution’ in earlier assessment years and

with further taxing 50% compensation received from GOI against

losses and making the same as taxable income. Ld A.R.

submitted that the ITAT, Cuttack has allowed the diminution in

value of GOI Bonds as allowable expenditure/loss vide order dated

27.4.2018 in ITA No.560/CTK/2013 & ITA No.02/CTK/2013

P a g e 5 | 7 (Asst.Year 2009-2010), the compensation of Rs.25.49 crores

received will be taxable as already offered by PPL in return of

income and, accordingly, the ground becomes redundant.

assessee, we dismiss the ground of the appeal of the assessee.

2013-14, the grievance of the assessee is that the CIT(A)erred in

not allowing non-deduction of gain on account of appreciation in

valuation of GOI Bonds of Rs.21,24,60,000/-.

assessment years ‘diminution in value of GOI Bonds’ claimed as

loss by PPL were not allowed. In view of above, appreciation in

value of GOI Bonds of Rs.21,24,60,000/- offered by the assessee

as taxable income in return of income ought not to be taxable and

the authorities below should have considered such issue suo-

motto as consequential issue (due to disallowances made by them

earlier). He submitted that that this Bench of the Tribunal has

allowed the ‘diminution in value of GOI Bonds as loss/allowable

expenditure vide its order dated 27.4.2018 in ITA

No.560/CTK/2013 and ITA No.02/CTK/2013 (Asst.Year 2009-

2010), such appreciation/gain in value of GOI Bonds becomes

taxable as rightly offered in the return of income by the assessee.

P a g e 6 | 7 Hence, the ground becomes redundant.

assessee, we dismiss the ground of the appeal of the assessee.

allowed.

Order pronounced on 29/08/2018. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 29 /08/2018 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : PPl, Bhubaneswar

Sr. Pvt. Secretary, ITAT, Cuttack

P a g e 7 | 7