RAJASTHAN STATE MINES & MINERALS LTD.,JAIPUR vs. ACIT, JAIPUR

PER SHRI KUL BHARAT, JM.

This is a bunch of 14 appeals filed by the Assessee and Revenue, are directed

against the orders of the Ld. Commissioner of Income Tax(A)-2, Jaipur pertaining to

the different assessment years i.e.2006-07, 2007-08, 2008-09, 2009-10, 2011-12,

2012-13, 2013-14. Since common issues are involved in all these appeal, therefore,

all these appeals were taken up together for hearing and are being disposed of by

way of consolidated order for the sake of convenience and brevity.

At the time of hearing, the Ld. Counsel for the assessee submitted that the

Appeal in ITA No. 253/JP/2015 pertaining to the A.Y. 2007-08 may be taken

up first, accordingly appeal pertaining to the assessment year 2007-08 is taken as

lead case.

Assessee’s appeal in ITA No. 253/JP/2015.

The Assessee has raised the following grounds of appeal.

5 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

“1. The Ld. CIT(A) has erred on facts an in law in upholding the validity of the order passed by the AO u/s 147 of the IT Act. 2. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO in disallowing the claim of amortization of mining land of Rs. 92,99,632/- and leasehold land of Rs. 7,26,239/- aggregating to Rs. 1,00,25,871/-. He has further erred in disallowing this claim only on the basis on the finding of his predecessor on this issue in AY 2010-11 ignoring that this claim was allowed in all earlier years and in subsequent years upto AY 2009-10 in regular assessment proceedings and that the claim is also supported by the decision of ITAT, Hyderabad Bench in case of NMDC Ltd. Vs. JCIT in ITA No. 714/Hyd/2012 dt. 28.02.2014. 3. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO by holding that receipts from sale of CERs cannot be considered as income derived from the business of power generation undertaking and therefore deduction u/s 80IA is not allowable on such receipts. 4. The Ld. CIT(A) has erred on facts and in law in directing the AO to apportion the establishment and financial expenditure of Rs. 15,98,59,668/- on the basis of turnover of the mining activity and wind power generation activity for allowing deduction u/s 80IA on the income from generation of power ignoring the fact and expenditure relatable to power generation undertaking has already been debited for working out the income of the said units. 4.1 The Ld. CIT(A) has erred on facts and in law in confirming the said disallowance even when it was not a reason recorded for issuance of notice u/s 148 and that the said disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. 5. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 1,20,47,954/- out of rural development expenses by holding that same is not incurred wholly and exclusively for the purpose of business. 5.1 The Ld. CIT(A) has erred on facts and in law in confirming the said disallowance even when it was not a reason recorded for issuance of notice u/s 148 and that the said disallowance is not in nature of the income escaping assessment as per Explanation 3 to section 147. 6. The assessee craves right to add, alter or amend any of the grounds of the appeal. 7. The appropriate cost be awarded to the assessee.”

assessment and assessment under section 143(3)of the Income-tax Act, 1961

(hereinafter referred to as the Act) was framed vide order dated 21.01.2015.

6 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

While framing the assessment, the Assessing Officer disallowed the claim amounting

to Rs. 1,00,25,871/- of Amortization of Mining Land and Amortization of Leasehold

Land. The Assessing Officer also made disallowance of deduction u/s 80IA in

respect of sale of CERs amounting to Rs. 3,50,00,162/- disallowance of Rural

Development Expenses and afforestation, plantation and environment expenses of

Rs. 2,96,49,172/- and Rs. 60,60,486/- respectively and disallowance of claim of

deduction u/s 80IA on account of apportionment of the expenses and thus made an

addition of Rs. 1,98,91,437/- on account of excess deduction claimed u/s 80IA of the

Act.

considering the submissions upheld the action of the assessee for reopening of the

assessment. Further, in respect of claim of amortization the Ld. CIT(A) by following

the decision of his predecessor sustained the addition. However, in respect of

allowability of deduction u/s 80IA in respect of receipt from sale of carbon emission

reduction certificates (CERs in short), the Ld. CIT(A) held that the sale of Carbon

emission reduction certificate are capital in nature. Therefore, the alternate ground

taken by the assessee was allowed. However, the claim of the assessee before Ld.

CIT(A) was with regard to allowability of deduction u/s 80IA in respect of sale of

carbon emission reduction certificate was held to be not allowable. The Ld. CIT(A)

in respect of apportionment of the expenses for the purpose of claim of deduction

u/s 80IA directed the Assessing Officer to apportion the common expenditure of Rs.

15,98,59,668/- related to income from wind power in the ratio of turnover and to

compute deduction u/s 80IA accordingly. In respect of the disallowance of

expenditure related to Rural Development Expenses and afforestation, plantation

7 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

and environmental expenses, the Ld. CIT(A) upheld the disallowance to the extent

of Rs. 1,20,47,954/- rest of the expenditure was directed to be deleted, on the

bassis that same were incurred for the business purpose.

Aggrieved by this order both Revenue and the Assessee have filed the separate

appeals before this Tribunal.

The Ld. Counsel for the assessee reiterated the submissions as made in the written

submissions. The Ld. Counsel stated that the assessee had been regularly claiming

the Amortization of Mining Land and Leasehold Land in the computation of the total

income based on the accounting policy followed by it. Therefore, he submitted that

the Assessing Officer was not justified in reopening the assessment, on this ground.

4.1 On the contrary, the Ld. Departmental Representatives opposed the

submissions and submitted that the assessment was reopened on the basis that the

assessee had claimed deduction amounting of Rs. 1,00,25,871/- as Amortization of

Mining land and Amortization on Leasehold land in the computation of the total

income. It was observed by the Assessing Officer that land is not depreciable asset

falling under the provisions of section 32 of the Act, moreover, the amortization of

land is not specified u/s 35D(2) of the Act. The Ld. DR submitted that in the original

assessment proceedings no query was raised in this respect. Therefore, the

Assessing Officer had not applied his mind on the issue of allowability of such claim

hence non-considering of this issue resulted into the income escaped assessment.

Therefore, the Assessing Officer was justified in re-opening the assessment, in

rejoinder Ld. Counsel for the assessee placed reliance upon the judgment of the

Hon’ble Himachal Pradesh High Court rendered in the case of CIT vs. Sahil Knit Fab

8 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

70 DTR 345 (HP) (HC) and also the judgment of the Hon’ble Andhra Pradesh

rendered in the case of Sirpur Paper Mills Ltd. vs. ITO 114 ITR 404 (AP) (HC) to

buttress the contention that the re-opening of the assessment was not justified.

4.2 We have heard the rival submissions, perused the material available on record

and gone through the order of the authorities below. There is no dispute with

regard to the position of law that the Assessing Officer can reopen the assessment,

if he has reason to believe that any income chargeable to tax has escaped

assessment for any assessment year. In the present case, in the original

assessment, the Assessing Officer had not considered the issue of allowability of the

Amortization of Mining Land and Leasehold Land. He had simply without making

any enquiry allowed the claim of the assessee, which is not the mandate of the law.

Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A),

same is hereby affirmed, this ground of the assessee’s appeal is dismissed.

disallowing the claim of Amortization of Mining Land of Rs. 92,99,632/- and

Leasehold Land of Rs. 7,26,239/- aggregating to Rs. 1,00,25,871/-. The Ld. Counsel

for the assessee vehemently argued that Ld. CIT(A) was not justified in confirming

the action of the Assessing Officer with regard to disallowing the claim of

amortization of mining land and leasehold land. He submitted that the Ld. CIT(A)

disallowed the claim on the basis of the finding of his predecessor ignoring the fact

that claim was earlier allowed and in the subsequent years also upto assessment

year 2009-10 in the regular assessment proceedings and that the claim is also

supported by the decision of the Hon’ble ITAT, Hyderabad Bench in the case of

NMDS Ltd. vs. JCIT in ITA No. 714/Hyd/2012, dated 28/2/2014.

9 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

5.1 The Ld. Counsel submitted that, assessee is engaged in the business of

mining. The mining lands so acquired by the assessee are wasting asset. These

mining lands do not have any economic use after the extraction of mineral since

after excavation there would be deep pits filled up with the overburden which

cannot be used for agriculture or otherwise. The water is highly saline which cannot

be used for the drinking or agricultural purpose. In these circumstances, the land

has a limited useful life which can never be put to any other use. He submitted that

mining land which is a wasting asset, cannot be equated with a normal land as the

value of normal land usually appreciate whereas value of the mining land erode after

extraction of mineral lies beneath it. In case of the normal land, it has an unlimited

life, but in the case of mining land it has a limited life after the mineral is extracted

or lease period is expired, such land has no value for the assessee. The usage of the

normal land is for several purposes like habitation, agricultural etc. In case of

Wasting Mining Land besides extracting mineral there is no other alternate use of

this land, as it is not fit for farming and habitation. The normal land is, but in the

case of the mineral land it can be done only by person who holds valid mining lease

from the Government. These lands are not freely transferable. The Normal land

can be mortgaged and owner can avail loan on it, whereas in the case of wasting

mining land, the assessee can neither mortgage these lands nor can avail loan on it.

Therefore, the cost incurred for acquiring these lands is only for extracting the

mineral which needs to be amortized over its useful life and is hence allowable u/s

37(1) of the Act. The Ld. Counsel of the assessee for this proposition relied upon

the judgment of the Hon’ble Supreme Court in the case of Madras Industrial

Investment Corporation Ltd. vs. CIT 225 ITR 802, and also the judgment of the

10 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Hon’ble Gujrat High Court rendered in the case of DCIT vs Sun Pharmaceuticals Ind.

Ltd. 329 ITR 479.

5.2 Per contra Ld. Departmental Representatives submitted that this issue was

before this Hon’ble Tribunal in Appeal of the Assessee pertaining to the year 2010-

11 in ITA No. 124/JP/2014. The Hon’ble Tribunal was pleased to reject the claim of

the assessee. He submitted that the issue of allowability of expenditure is u/s 37(1)

of the Act has already been decided against the assessee.

5.3 We have heard the rival contentions, perused the material available on

record. The identical issue was before this Hon’ble Tribunal in ITA No. 124/JP/2014

wherein the Tribunal had decided the issue against the assessee as under:-

“20.1 The vexed question before us is the amortization of amount paid for getting the mining land/leasehold land by the assessee. Whether it is required to be treated as revenue expenditure and is required to be allowed u/s 37(1) of the Act or not? For the purpose of allowing any expenditure, it is necessary to look into the nature of expenditure. Section 37 of the Act provides as under:- “Sec. 37(1) : Any expenditure (not being expenditure of the nature descried in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head “profits and against of business of professions”.

[Explanation: For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]

[(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.]

11 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Section 37, therefore, contemplates that if the nature of expenditure is not the capital/personal in nature, and is laid out or expended wholly and exclusively for the purpose of business or profession, then it is required to be allowed by the authority. In our view, the expenditure which were incurred for getting the mining land on leasehold basis on mining basis, is to be treated as capital expenditure because the leas will have the enduring benefit for making such an investment. Our view is also fortified by the judgment of Hon’ble supreme Court in the matter of Aditya Mineral vs. CIT(1999) 8SSC 97 and also by the judgment of Hon’ble Supreme Court in the matter of Enterprising Enterprises vs. DCIT in the Civil Appeal No. 5655 of 2006 whereby Hon’ble Supreme Court has held that “where the entire amount of lease is paid either at a time or in installment, it would be capital expenditure”. Therefore, we are bound by the judgments passed by the Hon’ble Supreme Court. Thus the expenses laid by the assessee for the purposes of getting the mining land and leasehold land, are required to be treated as capital expenditure. The AO is, therefore, directed to treat the amount paid for getting the mining land and leasehold land as capital expenditure. The AO is further directed to give all benefits as a capital expenditure. The judgment relied upon by the assessee of Hon’ble Supreme Court in the matter of Madras Industrial Investment Corporation Ltd. Vs. CIT, 225 ITR 802 is not applicable to the facts and circumstances of the case. However, the judgment of Hon’ble Supreme court in the matter of Enterprising Enterprises (2007) 160 Taman 188 (SC) is squarely applicable to the facts and circumstances of the case and further the said judgment is of later date and, therefore, is required to be followed by the Bench. The judgment of NMDC Ltd. vs. JCIT (supra) is not applicable to the facts and circumstance of the case as in the said judgment the issue was not with respect to applicability of section 37 but was in respect to allowing the depreciation u/s 32 of the Act. The submission of the Ld. A/R for the Assessee is that the value of wasting asset will depreciate with the extraction of mineral, in our view, is preposterous. In our view, with passage of

12 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

guidelines for protecting the environment, now it is the duty of the lesser/ assessee to submit and execute the mine closing plan so as to ensure that the land is used subsequent to the closure of the mining operation. Even otherwise, the mining activity is done not on the surface of the earth but on the core towards the lower side of the surface. The surface can be put to use for beneficial purpose after the term of lease/mining activity is over and it can be exploited for commercial purposes by the owner/appropriate authority. The contention of the assessee is that the assessee will be double taxed as the AO has already completed the assessment for the A.Y. 2011-12 on the basis of the written back of the amortization of the assets amounting to Rs. 5,79,10,137/-. In our view the assessee was taxed on the basis of the submissions made by it before the AO before the assessment for the A.Y. 2010-11 is finalized. The mere acceptance of the methodology by the AO for A.Y. 2011-12 will not withhold us to decide the issue on merit and in law for the A.Y. 2010-11. As per the law and principle, the authorities situated in lower ladder/tire of hierarchy is required to abide law/adjudication done by the superior authority. This is only way the judicial system works. The AO is quasi judicial authority and bound to follow the principle laid down by the Tribunal and not the vice versa. Therefore, the submission of the Ld. A/R for the assessee on this count is also rejected. However, it is made clear that the assesee would be entitled to all benefits as available in law and the assessee will not be subjected to double taxation for the A.Y. 2011-12. The AO is directed to give effect to the above said direction and nullify the effect of double taxation, if any, as claimed by the assessee. In the light of the above, ground no. 2 of the assessee is dismissed.”

5.4 Therefore, taking a consistent view, apropos to ground no. 2, the AO is

directed to treat the expenditure as capital and grant relief if any available under the

law. Thus, ground no. 2 is disposed of in terms indicated hereinbefore.

13 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

the assessee. Therefore, ground no. 3 is dismissed as not pressed.

establishment and financial expenditure of Rs. 15,98,59,668/- on the basis of

turnover of the mining activity and wind power generation activity. Ld. Counsel for

the assessee reiterated the submissions as made in the written brief. The Ld.

Counsel submitted that Ld. CIT(A) has rightly held that establishment and finance

expense incurred on mining activity which has no nexus with the generation of wind

power. However, he gave a finding that the expenditure incurred on head office and

corporate office can be attributed to generation of income from wind power by not

accepting the contention of the assessee that the entire operation and maintenance

of wind power plant has been given to Suzlon Energies Ltd. Therefore, the assessee

was not required to incur any expenditure. He submitted that Ld. CIT(A) has rightly

held that the apportionment is to be made in the ratio of turnover of the wind power

vis-a-vis the total turnover of the assessee as against the ratio of the total income

done by the Assessing Officer.

7.1 On the contrary, the Ld. Departmental Representatives supported the order of

the authorities below and submitted that the Ld. Authorized Representative made no

submissions before the Assessing Officer, that the entire operation and maintenance

of the wind power plant had been given to Suzlon Energies Ltd. therefore, the

assessee was not required to incur any other expenditure.

7.2 We have heard the rival contentions, perused the material available on record

and gone through the order of the authorities below. The Ld. CIT(A), after

considering the submissions decided the issue as under:-

14 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

“5.3 I have perused the facts of the case, the assessment order and the submissions off the appellant. The assessee has two streams of income (i) income from generation of power from wind power plant which is eligible for deduction u/s 80IA, (ii) income from mining activity. The Assessing Officer has held that establishment and financial expenses amounting to Rs. 35,03,29,513/- were common to both the revenue streams and yet had not been apportioned to the business of wind power, eligible for deduction u/s 80IA. The appellant has given a detailed breakup of the expenditure debited under the head – ‘Establishment & Financial Expenses’. These expenses include establishment and finance expenses incurred by the divisions of mining of Phosphate, lignite, gypsum, limestone which has no nexus with the generation of wind power as well as expenses incurred at the head office and corporate office. It is the establishment and finance expenditure incurred at the head office and corporate office which can be attributable to generation of income from wind power. Such expenditure amount to Rs. 21,20,64,848/- for the corporate office and a sum of Rs. 47,56,632/- for the head office, totaling Rs. 21,68,21,480/-. This includes donation of Rs. 5,00,00,000/- Which has been disallowed by the Assessing Officer in the statement of total income and is not an allowable expenditure. Out of the balance expenditure; a Sum of Rs. 69,61,812/- has been incurred rural development expenses which has been disallowed in para 6 of this order. Therefore, the admissible expenditure, claimed as a deduction which needs to the apportioned between generation from wind power and mining activity amounts to Rs. 15,98,59,668/-. The Assessing Officer has apportioned this expenditure on the basis of the respective income. The appellant has stated that no expenditure out of the above is attributable to generation of income from wind power. This contention of the appellant cannot be accepted because certain amount of establishment expenses would definitely have been incurred

15 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

in the business of generation of wind power and obtaining carbon credit certificates. However, in my view the correct basis for apportioning this expenditure is in the ratio of turnover and not income. The Assessing Officer is therefore, directed to apportion common expenditure of Rs. 15,98,59,668/- relating to income from wind power in the ratio of the turnover and compute deduction u/s 80IA accordingly. The balance addition, on the issue is directed to be deleted. This ground is partly allowed.

7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee

stated that in respect of the unallocated expenses of Rs. 15,67,45,594/- that none of

these expenses pertain to the 80IA undertakings in as much as the entire operation

and the maintenance of the power plant had been given to Suzlon Energies Ltd.

Therefore, the assessee had not to incur any expenditure on salary/employees

benefit, travelling conveyance and other expenses debited under the various heads

of expense in corporate office/head office. No strategic planning, day to day

management and supervision, financial management, marketing management,

tendering, work allocation, contract awarding, control etc. was required for operating

these power plants by the corporate office/head office. Hence, withdrawal of

deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly

unjustified. Further, it is stated by the assessee, the ground no. 4.1 before this

Tribunal that this issue was not taken while recording the reasons for issuance of

notice and the said disallowance is not in the nature of income escaping essessment

as per Explanation 3 to section 147. After considering the totality of the fact, we

restore this issue to the file of the Assessing Officer to decide afresh after verifying

the claim of the assessee that the entire expenditure related to operation and

16 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

maintenance was borne by Suzlon Energies Ltd. So far the contention of Ld.

Counsel for the assessee that this item was not subject matter of the reasons

recorded for reopening. We do not see any merit as law is well settled that once

reopening is valid the AO can also consider the other issues as cropped up the

assessment proceedings. Thus, Ground no. 4 of the assessee ‘s appeal is allowed for

statistical purposes. However, ground no. 4.1 is dismissed.

1,20,47,954/- out of Rural Development Expenses by holding that same is not

incurred wholly and exclusively for the purpose of business.

8.1 Apropos to ground no. 5.1, the Ld. Counsel submitted that this

disallowance has been confirmed even when it was not a reason recorded for

issuance of notice u/s 148 when such disallowance is not in the nature of income

escaping assessment as per Explanation 3 to section 147.

8.2 On the contrary, Ld. Departmental Representatives, supported the order of

the authorities below and submitted that once the reopening is validly done the

Assessing Officer is within its power to make assessment in respect of the issues

which were not even taken into consideration while issuance of notice u/s 148 as

after reopening the Assessing Officer would have the same power as in the original

assessment.

8.3 We do not see any merit into the contention of the assessee that the issue of

allowability of Rural Development Expenses was not the subject matter of reason

recorded. It is settled position of law that once the assessment is validly reopened,

the AO can also make assessment in respect of other issues which come to notice

during the reopened assessment proceedings. Now, coming to the merit of

17 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

disallowance, we find that the Ld. CIT(A) has given a finding on fact that the amount

was not expended wholly and exclusively for the purpose of business. This finding

on fact is not rebutted by the assessee. In the absence of material proving the

expenses incurred for the business of the assessee same cannot be allowed u/s 37

of the Act. Hence, this ground of assessee’s appeal is dismissed.

argument to demonstrated as to why cost should be awarded. Hence, this ground of

the assessee’s appeal is dismissed.

allowed for statistical purposes.

Revenue’s appeal in ITA No. 295/JP/2015

Now, we take up the Revenue’s appeal in ITA No. 295/JP/2015 pertaining to

A.Y. 2007-08.

The Revenue has raised the following grounds of appeal.

“1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing relief to the assessee of Rs. 3,50,00,162/- by holding that receipts from Sale of Carbon Emission Certificates are of capital in nature. 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing relief to the assessee u/s 80IA amounting to Rs. 1,67,18,177/- by not appreciating the facts brought out by the AO in assessment order with regard to establishment and financial expenses. 3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing relief of Rs. 1,76,01,218/- expenditure incurred by the assessee under the head “Rural Development” and Rs. 60,60,486/- Under the head ‘afforestation, plantation and environment expenses’ without appreciating the fact that these expenses have not been incurred in connection with the business of the assessee.

18 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Certificates (CERs) as capital in nature. Ld. Departmental Representatives

vehemently argued that the Ld. CIT(A) was not justified in holding the receipts from

sale of CERs as capital in nature.

12.1 On the contrary, the Ld. Counsel for the assessee reiterated the submissions

as made in the written submissions and submitted that Ld. CIT(A) has followed the

decision of the Hon’ble Andhra Pradesh High Court rendered in the case of CIT vs.

My Home Power Ltd. 365 ITR 82.

12.2 We have heard the rival contention, perused the material available on record

and gone through the order of the authorities below. The Ld. CIT (A) has

considered the submissions of the assessee and decided the issue in para 4.3 as

under:-

“4.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The assessee had claimed deducting u/s 80IA amounting to Rs. 3,50,00,162/- on account of Sale of Carbon Emission Certificates. This issue also arose during the proceeding for A.Y. 2010-11 where the CIT (A)-II, Jaipur, in appeal no. 325/12-13, dated 05.12.2013 has held as under:- "Assessing Officer did not allow deduction under section 80 1A on...... income on sale of CERs by holding that these are not having first-degree nexus with industrial undertaking engaged in the business of generation of electricity." As regards appellant's claim of deduction under section 80 1A on CERs and further claim in Ground-8 that CER is capital in nature and to be excluded from computation of taxable income, it is necessary to understand the background and source of CERs entitlement (or carbon credit, as popularly known). "A carbon credit is a generic term for any tradable

19 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

certificate or permit representing the right to emit one tonne of carbon dioxide or the mass of another greenhouse gases (GHG in short) (with a carbon dioxide equivalent (CO2e)), equivalent to one tonne of carbon dioxide." The Collins English Dictionary also defines a carbon credit as "a certificate showing that a Government of company has paid to have a certain amount of carbon dioxide removed from the environment." The "Investopedia Inc. investment dictionary" defines a carbon credit as a "permit that allows the holder to emit one tonne of carbon dioxide". Such permits (or CERs) "can be traded in the international market at their current market price." Certain industries especially in power, cement, steel, textile, fertilizer sectors rely on fossil fuels (coal, electricity derived from coal, natural gas and oil). The burning of fossil fuels is a major source of GHG emissions. The major greenhouse gases emitted by these industries are carbon dioxide, methane, nitrous oxide, hydro-fluorocarbon (HFCs), etc., all of which increase the atmosphere’s ability to trap infra-red energy and, thus, affect the climate. Under the UN umbrella about 170 countries signed "KYOTO PROTOCOL" under which a cap was put on such carbon and GHGs emissions. Total amount of GHGs emission in the atmosphere by all the countries in a year was fixed and equivalent number of CERs was worked out and distributed among the member countries. The member countries, in turn, distributed or assigned these certificates among the designated industries in their country. An industry in power sector would become entitled to these certificates. If they used fossil fuel they would have to restrict the GHG emission to the level as per CER assigned to them. The CERs are also tradable at Stock Exchange. In brief, the carbon credits are CERs, which give permission to emit assigned amount GHGs. Whether CERs are akin to "import entitlements"? - The CERs are, therefore, incentives given by the Government to avoid use of fossil fuel in the industry. If saving in CERs is made, the industry can make money by selling them. They have almost similar features as in an "import entitlement". Bases on the quantum of exports, the exporters are given import entitlements. The exporters can either import the raw material/goods covered by the IEs or without importing the goods they can sell the IEs. If they import they consume or exhaust the IEs to that extent. If they do not, then to the extent they save they can sell and earn money. CERs are also entitlements for consuming fossil fuel. Savings in these are available for sale. Both are rights or permits given by Government. "If an assessee exploits the IEs by actually importing the goods referred to therein and sells the same, the sale proceeds cannot, in any sense, be said to be a capital

20 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

receipt. The fact that the assessee chooses to exploit the IEs in a different manner, other than actual import, will not make any change in the character of the receipt. The sale of import entitlement is one of the modes of exploiting the import entitlement and therefore, will clearly be a revenue receipt [George Maijo & Co. (Viag) v. CIT [1986] 157 ITR 475 (Mad.)]. Similar view has been taken in 1. Swadeshi Cotton Mills Co. Ltd. v. CIT [1989] 47 Taxman 215 (All.), 2. Jeewanlal (1929) Ltd v. CIT [1991] 57 Taxman 123 (Cal.), 3. Gedore Tools Pvt. Ltd. v. CIT [1999] 105 Taxman 3 (Delhi). Whether CERs should be taxable as revenue receipt under section 28 (iv)?- Further, section 28 (iv) clearly brings the receipt from sale of CERs within the ambit of taxability. It reads as follows: 28. Profits and gains of business or profession.--The following income shall be chargeable to income- tax under the head "Profits and gains of business or profession".....(iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. There are following two conditions: (i) assessee receives any benefit or perquisite, (ii) they should arise in the course of business. "Benefit" means "advantage; Profit; Gains; Interest; Use; Promotion of welfare or Prosperity; helpful result; A benefaction or deed of Kindness; favour bestowed; privilege. "Benefit" is a word of wide import. It could be express or otherwise. The term "perquisite" means that it is an additional benefit and not a complete substitution of one's income. This is the benefit given to the industry during the course of production it has either not consumed fossil fuel or has consumed less than what was assigned to it. Therefore, sale proceeds of such savings of CERs arise, during the course of business, and as a result of carrying on business. Thus (i) right to receive CERs arises only if business is carried on by the assessee, (ii) such business is carried on by saving fossil fuel, (iii) CERs have a market value, (iv) Quantities of CERs assigned by Govt. vary with the size of the industry or production target, (v) Quantities of saved CERs are variable, depending upon saving made in consumption of fossil fuel, (vi) sale proceeds of saved CERs compensate for incurring extra expenditure on using alternate fuel (other than fossil fuel). Therefore, sale proceeds of CERs are revenue receipts not only from the intrinsic nature of the entitlement but also because these are closely connected with carrying out business. They are taxable under section 28 (iv) as benefit arises during the course of carrying on business. However, on such revenue receipts which are akin to import entitlements like duty drawback, deduction under section 80 IA cannot be given in view of the apex court decision in the case of liberty India Ltd since there is no first degree nexus.

21 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Accordingly, the decision of AO in not allowing deduction under section 80 IA and treating CER income as revenue as against appellant’s claim of capital, are confirmed." 4.4 Following the above order, it is held that deduction u/s 80IA is not allowable on the proceeds of Carbon Credits since this income does not first degree nexus with the industrial undertaking in view of the decision of the Apex Court in the case of Liberty India.

4.5.1 With respect to the contention of the appellant that receipt from sale of CERs is capital in nature, it is also to be stated that subsequent to passing of the above order by the CIT (A)-II, Jaipur on 06.12.2013, the Andhra Pradesh High Court in the case of My Home Power Ltd. 365 ITR 82 has (on 19.02.2014) upheld the order of the ITAT, Hyderabad in this case that sale of excess Carbon Credits is a capital receipt and cannot be business receipt or income. The relevant extract of this order is given below-

“We have considered the aforesaid submission and we are unable to accept the same, as the learned Tribunal has factually found that "carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset is generated in the course of business but it is generated due to environmental concerns". We agree with this factual analysis as the assessee is carrying on the business of power generation. The carbon credit is not even directly linked with power generation. On the sale of excess carbon credits the income was received and hence as correctly held by the Tribunal it is capital receipt and it cannot be business receipt or income."

4.5.2 Also, the ITAT, Jaipur in the case of Shree Cernent Ltd. in ITA No. 503, 504, 564, 569, 570, 505/JP/2012, dated 27.01.2014 has followed the decision of the ITAT, Hyderabad in the case of My Home Power Ltd and the decisions of the Chennai Tribunal in the cases of Sri Velayudhaswamy Spinning Mills Pvt. Ltd. and Ambika Cotton Mills Ltd. and has held that receipt on account of Carbon Credit is capital in nature and not chargeable to tax. The relevant extract of this order is given below-

22 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

"We have heard the rival submissions and perused the evidence on record. We find that Appellate Tribunal in Y Home Power Ltd Vs. DCIT [supra], have, after detailed examination, concluded that the receipts from Carbon Credit are capital in nature. We are inclined to follow the said decision and the other two decisions of Chennai Tribunal in Sri Velayudhaswamy Spinning Mills (P.) Ltd Vs DCIT [supra] and Ambika Cotton Credit is capital in nature & neither chargeable to tax under the head Business Income nor liable to tax under the head Capital Gains. Our above view is also supported by the decision of Supreme Court in the case of Vodafone International Holdings Vs. UOI [supra] wherein Supreme Court has held that treatment of any particular item in different manner in the 1961 Act and DTC serves as an important guide in determining the taxability of said item. Since DTC by virtue of the deeming provisions specifically provides for taxability of carbon credit as business receipt and Income Tax Act does not do so, our view gets duly fortified by the principles stated in the above decision of Supreme Court. Accordingly this ground off the assessee is allowed and the addition made by the AI is deleted."

4.5.3 Following the above orders of the Andhra Pradesh High Court and the jurisdictional ITAT, it is held that receipts from sale of Carbon Emission Reduction Certificate are capital in nature and therefore, cannot be taxed. Ground no. 3 is dismissed while Ground no. 3.1 is allowed.

12.3 Since, the Ld. CIT(A) has followed the judgment of the Hon’ble Andhra

Pradesh High Court rendered in the case of My Home Power Ltd. 365 ITR 82(supra)

where the Hon’ble court, under the identical facts confirmed the view of the Tribunal

in holding that Carbon credit is not an offshoot of business but an offshoot of

environmental concerns. No asset is generated in cost of business but it is

generated due to environmental concerns. Therefore, on sale of excess carbon

credits correctly held by the Tribunal as a capital receipt. In view of the judgment of

Hon’vble Andhra Pradesh High Court, we do not see any reason to disturb the

finding of Ld. CIT(A), same is hereby affirmed. The Revenue has not brought to our

23 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

notice any contrary binding precedent. Hence, this ground of Revenue’s appeal is

dismissed.

to Rs. 1,67,18,177/-. The Ld. Departmental Representatives vehemently argued

that the Ld. CIT(A) was not justified in deleting the disallowance and allowing the

relief to the assessee. He submitted that the Assessing Officer has given a finding

that many expenses are of common nature i.e. head office and other day to day

management and supervision expenses have not been apportioned.

13.1. On the contrary, Ld. Counsel for the assessee reiterated the submissions as

made in the written brief. That the allocation of expenses in the ratio of the total

income of the eligible units to the total income of the assessee is incorrect. Even if

allocation is to be made it should be made in the ratio to total turnover of the

eligible units u/s 80IA to the total turnover of the assessee. The total turnover of

the eligible units from sale of power is Rs. 8,49,48,646/- whereas the total turnover

of the assessee is Rs. 530,88,19,416/-. Thus, the total turnover of the eligible units

is only 1.60% of the total turnover of the assessee.

13.2 We have heard the rival contentions. We find that the assessee had also

challenged the finding of the Ld. CIT(A) on this issue in ITA No. 253/JP/2015 and we

have restored the issue to the file of the Assessing Officer by observing as under:-

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee stated that in respect of the unallocated expenses of Rs. 15,67,45,594/- that none of these expenses pertain to the 80IA undertakings in as much as the entire operation and the maintenance of the power plant had been given to Suzlon Energies Ltd. Therefore, the assessee had not to incur any expenditure on salary/employees benefit, travelling conveyance and

24 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

other expenses debited under the various heads of expense in corporate office/head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work allocation, contract awarding, control etc. was required for operating these power plants by the corporate office/head office. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1 before this Tribunal that this issue was not taken while recording the reasons for issuance of notice and the said disallowance is not in the nature of income escaping essessment as per Explanation 3 to section 147. After considering the totality of the fact, we restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expenses related to operation and maintenance were borne by Suzlon Energies Ltd. So far the contention of Ld. Counsel for the assessee that this item was not subject matter of the reasons recorded for reopening. We do not see any merit as law is well settled that once reopening is valid the AO can also consider the other issues as cropped up the assessment proceedings. Thus, Ground no. 4 of the assessee‘s appeal is allowed for statistical purposes. However, ground no. 4.1 is dismissed.

13.3 Therefore, in the light of above this ground of the Revenue’s appeal is also

restored to the file of the Assessing Officer for decision afresh.

development and afforestation, plantation and environment expenses of Rs.

1,76,01,218/-. The Ld. Departmental Representatives supported the order of the

Assessing Officer, he submitted that Ld. CIT(A) was not justified in deleting the

disallowance as these expenses were not relatable to the business of the assessee.

14.1 On the contrary, the Ld. Counsel for the assesee reiterated the submissions

as made in the written brief.

25 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

14.2 We have heard the rival contentions, perused the material available on

record. We find that Ld. CIT(A) has given a finding on fact by observing as under:- “6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld. 6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”.

26 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

14.3 This finding on fact is not controverted by the Revenue by placing any

contrary material on record. Therefore, we do not see any reason to interfere into

the order of the Ld. CIT(A), same is hereby affirmed. The ground of the Revenue’s

appeal is dismissed.

allowed for statistical purpose.

i.e. 769/JP/2016 and 804/JP/2016 pertaining to the A.Y. 2006-07.

Assessee’s appeal in ITA No. 769/JP/2016

The Assessee has raised the following grounds of appeal i.e. in ITA No.

769/JP/2016.

“1. The Ld. CIT(A) has erred on facts and in law in upholding the validity of the order passed by AO u/s 147 of the IT Act. 2. the Ld. CIT(A) has erred on facts and in law in confirming the action of AO in disallowing the claim of amortization of mining land of Rs. 92,99,632/- and leasehold land of Rs. 6,50,091/- aggregating to Rs. 99,49,723/- by treating it as capital expenditure. 2.1 The Ld. CIT(A) has erred on facts and in law in confkriming the above disallowance on the basis of findings of Hon’ble ITAT in assessee’s own case for AY 2010-11 but at the same time not allowing the benefit of treating such expenditure as capital expenditure as directed by Hon’ble ITAT. 3. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 18,70,932/- out of rural development expenses by holding that same is in the nature of expenditure on corporate social responsibility and thus not allowable u/s 37(1). 3.1 the Ld. CIT(A) has erred on facts and in law in confirming the said disallowance even when it was not a reason recorded for issuance of notice u/s 148 and that the said disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147.

27 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

253/JP/2015 pertaining to the A.Y. 2007-08. The Parties have adopted the

same argument in ITA No. 253/JP/2015. The Ld. Counsel for the assessee

reiterated the submissions as made before the Ld. CIT(A).

Act. We have decided this issue in ITA No. 253/JP/2015 by observing as under:-

“4.2 We have heard the rival submissions, perused the material available on record and gone through the order of the authorities below. There is no dispute with regard to the position of law that the Assessing Officer can reopen the assessment if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. In the present case, in the original assessment, the Assessing Officer had not considered the issue of allowability of the Amortization of Mining Land and Leasehold Land. He had simply without making any enquiry allowed the claim of the assessee, which is not the mandate of the law. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed, this ground of the assessee’s appeal is dismissed.” 19.2 For the same reasoning this ground of the assessee’s appeal is dismissed.

mining land and leasehold land by treating the same as capital expenditure. The

identical ground was raised by the assessee in ITA NO. 253/JP/2015 pertaining to

the A.Y. 2007-08. The Representatives of the parties have adopted the same

arguments. In the ITA No. 253/JP/2015, we have decided the issue by observing

as under:-

28 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

“5.3 We have heard the rival contentions, perused the material available on record. The identical issue was before this Hon’ble Tribunal in ITA No. 124/JP/2014 wherein the Tribunal has decided the issue against the assessee. However, the Tribunal has decided the issue as under:- “20.1 The vexed question before us is the amortization of amount paid for getting the mining land/leasehold land by the assessee. Whether it is required to be treated as revenue expenditure and is required to be allowed u/s 37(1) of the Act or not? For the purpose of allowing any expenditure, it is necessary to look into the nature of expenditure. Section 37 of the Act provides as under:- “Sec. 37(1) : Any expenditure (not being expenditure of the nature descried in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head “profits and against of business of professions”.

[Explanation: For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]

[(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.] Section 37, therefore, contemplates that if the nature of expenditure is not the capital/personal in nature, and is laid out or expended wholly and exclusively for the purpose of business or profession, then it is required to be allowed by the authority. In our view, the expenditure which were incurred for getting the mining land on leasehold basis on mining basis, is to be treated as capital expenditure because the leas will have the enduring benefit for making such an investment. Our view is also fortified by the judgment of Hon’ble supreme Court in the matter of Aditya Mineral vs. CIT(1999) 8SSC 97 and also by the judgment of Hon’ble Supreme Court in the matter of Enterprising Enterprises vs. DCIT in the Civil Appeal No. 5655 of 2006 whereby Hon’ble Supreme Court has held that “where the entire amount of lease is paid either at a time or in installment, it would be capital expenditure”. Therefore, we are bound by the judgments passed by the Hon’ble Supreme Court. Thus the expenses laid by the assessee for the purposes of getting the mining land and leasehold land, are required to be treated as capital expenditure. The AO is, therefore, directed to treat the amount paid for getting the mining land and leasehold land as capital

29 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

expenditure. The AO is further directed to give all benefits as a capital expenditure. The judgment relied upon by the assessee of Hon’ble Supreme Court in the matter of Madras Industrial Investment Corporation Ltd. Vs. CIT, 225 ITR 802 is not applicable to the facts and circumstances of the case. However, the judgment of Hon’ble Supreme court in the matter of Enterprising Enterprises (2007) 160 Taman 188 (SC) is squarely applicable to the facts and circumstances of the case and further the said judgment is of later date and, therefore, is required to be followed by the Bench. The judgment of NMDC Ltd. vs. JCIT (supra) is not applicable to the facts and circumstance of the case as in the said judgment the issue was not with respect to applicability of section 37 but was in respect to allowing the depreciation u/s 32 of the Act. The submission of the Ld. A/R for the Assessee is that the value of wasting asset will depreciate with the extraction of mineral, in our view, is preposterous. In our view, with passage of guidelines for protecting the environment, now it is the duty of the lesser/ assessee to submit and execute the mine closing plan so as to ensure that the land is used subsequent to the closure of the mining operation. Even otherwise, the mining activity is done not on the surface of the earth but on the core towards the lower side of the surface. The surface can be put to use for beneficial purpose after the term of lease/mining activity is over and it can be exploited for commercial purposes by the owner/appropriate authority. The contention of the assessee is that the assessee will be double taxed as the AO has already completed the assessment for the A.Y. 2011-12 on the basis of the written back of the amortization of the assets amounting to Rs. 5,79,10,137/-. In our view the assessee was taxed on the basis of the submissions made by it before the AO before the assessment for the A.Y. 2010-11 is finalized. The mere acceptance of the methodology by the AO for A.Y. 2011-12 will not withhold us to decide the issue on merit and in law for the A.Y. 2010-11. As per the law and principle, the authorities situated in lower ladder/tire of hierarchy is required to abide law/adjudication done by the superior authority. This is only way the judicial system works. The AO is quasi judicial authority and bound to follow the principle laid down by the Tribunal and not the vice versa. Therefore, the submission of the Ld. A/R for the assessee on this count is also rejected. However, it is made clear that the assesee would be entitled to all benefits as available in law and the assessee will not be subjected to double taxation for the A.Y. 2011-12. The AO is directed to give effect to the above said direction and nullify the effect of double taxation, if any, as claimed by the assessee. In the light of the above, ground no. 2 of the assessee is dismissed.”

5.4 Therefore, taking a consistent view, apropos to ground no. 2 is directed to treat the expenditure as capital and grant relief if any available under the law. Thus, ground no. 2 is disposed of in forms indicated hereinbefore.”

30 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

20.1 For the same reasoning, these grounds of the assessee’s appeal is decided in

terms of our decision in ITA No. 253/JP/2015 (supra).

18,70,932/- out of Rural Development Expenses by holding same is in the nature of

expenditure on corporate social responsibility and thus not allowable u/s 37(1) of the

Act. Ground nos. 3 to 3.1 are identical as were in ITA No. 253/JP/2015. The

Representative Parties have adopted the same argument. We have decided the

issue by observing as under:-

“8.3 We do not see any merit into the contention of the assessee that the issue of allowability of Rural Development Expenses was not the subject matter of reason recorded. It is settled position of law that once the assessment is validly reopened, the AO can also make assessment in respect of other issues which come to notice during the reopened assessment proceedings. Now, coming to the merit of disallowance, we find that the Ld. CIT(A) has given a finding on fact that the amount was not expended wholly and exclusively for the purpose of business. This finding on fact is not rebutted by the assessee. In the absence of material proving the expenses incurred for the business of the assessee same cannot be allowed u/s 37 of the Act. Hence, this ground of assessee’s appeal is dismissed.”

21.1 Therefore, taking a consistent view, this ground of the assessee’s appeal is

dismissed.

the assessee in support of this claim and identical claim was made in ITA No.

253/JP/2015.

31 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

“10. Ground no. 7 is prayer for cost; the assessee has not addressed any argument to demonstrated as to why cost should be awarded. Hence, this ground of the assessee’s appeal is dismissed.”

23.1 For the same reasoning, this ground of the assessee’s appeal is dismissed.

allowed for statistical purpose.

Revenue’s appeal in ITA No. 804/JP/2016.

Assessment Year 2006-07.

The Revenue has raised the following grounds of appeal.

“1. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) was justified in restricting the disallowance made by AO on account of Rural Development Expenses to Rs. 18,70,932/-. 2. Whether on the facts and in circumstances of the case and in Law, the Ld. CIT(A) was justified in deleting the disallowance of Rs. 1,51,24,052/- made by AO on account of afforestation, plantation, & environment expenses. 3. The appellant craves its rights to add, amend or alter any of the grounds on or before the hearing.”

Officer on Rural Development Expenses to Rs. 18,70,932. The identical ground was

raised in the Revenue’s appeal in ITA No. 295/JP/2015 as ground no. 3,

pertaining to the Assessment year 2007-08 by observing as under:-

“14.2 We have heard the rival contentions, perused the material available on record. We find that Ld. CIT(A) has given a finding on fact by observing as under:-

32 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd. “6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld. 6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”. 14.3 This finding on fact is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere

33 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

into the order of the Ld. CIT(A), same is hereby affirmed. The ground of the Revenue’s appeal is dismissed.”

26.1 For the same reasoning, as the parties have adopted the same arguments.

This ground of the Revenue’s appeal is dismissed.

afforestation, plantation & environment expenses. The identical ground was raised

by the Revenue in ITA No 295/JP/2015. The parties have adopted the same

argument. This Tribunal in ITA No. 295/JP/2015 decided the issue as under:-

“14.2 We have heard the rival contentions, perused the material available on record. We find that Ld. CIT(A) has given a finding on fact by observing as under:- “6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the

34 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld. 6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”. 14.3 This finding on fact is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. The ground of the Revenue’s appeal is dismissed.”

27.1 For the same reasoning, this ground of the Revenue’s appeal is dismissed.

No.769/JP/2016 is partly allowed or statistical purpose whereas the Revenue’s

appeal in ITA No. 804/JP/2016 is dismissed.

296/JP/2015 pertaining to the A.Y. 2008-09 respectively.

Assessee’s appeal in ITA 254/JP/2015

First we take up assessee’s appeal in ITA No. 254/JP/2015 pertaining to the A.Y.

2008-09.

Assessee has raised the following grounds of appeal.

35 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

“1. The Ld.CIT(A) has erred on facts and in law in upholding the validity of the order passed by AO u/s 147 of the IT Act. 2. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO in disallowing the claim of amortization of mining land of Rs. 92,99,632/- and leasehold land of Rs. 8,02,482/- aggregating to Rs. 1,01,02,114/-. He has further erred in disallowing this claim only on the basis of the finding of his predecessor on this issue in AY 2010-11 ignoring that this claim was allowed in all earlier years and in subsequent years upto AY 2009-10 in regular assessment proceedings and that the claim is also supported by the decision of ITAT, Hyderabad Bench in case of NMDC Ltd. vs. JCIT in ITA No. 714/HYd/ 2012 dt. 28.02.2014. 3. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO by holding that receipts from sale of CERs cannot be considered as income derived from the business of power generation undertaking and therefore deduction u/s 80IA is not allowable on such receipts. 4. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO in reducing he claim of deduction u/s 80IA by Rs. 5,91,46,480/- by holding that liquidated damages received on account of shortfall in the minimum guaranteed generation of power units in not an income derived from the power generation business of windmills. 4.1 The Ld. CIT(A) has erred on facts and in law in reducing the claim of deduction u/s 80IA with reference to the receipts of the liquidated damages even when it was not a reason recorded for issuance of notice u/s 148 and that the said reduction is not n the nature of income escaping assessment as per Explanation 3 to section 147/ 5. The Ld. CIT(A) has erred on facts and in law in directing the AO to apportion the establishment and financial expenditure of Rs. 14,20,35,074/-on the basis of turnover of the mining activity and wind power generation activity or allowing deduction u/s 80IA on the income form generation of power ignoring the fact and expenditure relatable to power generation undertaking has already been debited for working out the income of the said units. 5.1 The Ld. CIT(A) has erred on facts and in law in confirming the said disallowance even when it was not a reason recorded for issuance of notice u/s 148 and that the said disallowance is not in the nature of income escaping assessment as per explanation 3 to section 147. 6. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 17,56,444/- out of rural development expenses by holding that same is not incurred wholly ad exclusively for the purpose of business. 6.1 The Ld. CIT(A) has erred on facts and in law in confirming the said disallowance even when it was not a reason recorded for issuance of notice u/s 148 and that the said disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. 7. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 1,138/- u/s 14A of the IT Act, 1961. He has

36 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

further erred in confirming the said disallowance even when it was not a reason recorded for issuance of notice u/s 148 and that the said disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. 8. The Ld. CIT(A) has erred on facts and in law in confirming an addition of Rs. 3,15,50,975/- on account of unpaid land tax u/s 43B of the Act ignoring the fact that same is already offered for tax in AY 2010-11 and assessed by the AO. 9. The assessee craves right to add, alter or amend any of the grounds of the appeal. 10. The appropriate cost be awarded to the assessee.”

the ITA No. 253/JP/2015 pertaining to the A.Y. 2007-08. The respective

Representative of the Parties have adopted the same argument in ITA No.

253/JP/2015 for these grounds.

Act.

The identical grounds were raised in ITA No 253/JP/2015 pertaining to the

Assessement Year 2007-08. The Respective Representative of the Parties have

adopted the same argument as were adopted in the ITA No. 253/JP/2015.

We have decided this ground by observing as under:-

“4.2 We have heard the rival submissions, perused the material available on record and gone through the order of the authorities below. There is no dispute with regard to the position of law that the Assessing Officer can reopen the assessment if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. In the present case, in the original assessment, the Assessing Officer had not considered the issue of allowability of the Amortization of Mining Land and Leasehold Land. He had simply without making any enquiry allowed the claim of the assessee, which is not the mandate of the law. Therefore, we do

37 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed, this ground of the assessee’s appeal is dismissed.”

32.1 For the same reasoning, this ground of the assessee’s appeal is dismissed. 33. Ground no.2, the ground and the facts are identical in ITA No. 253/JP/2015

pertaining to the AY 2007-08. The Respective Representative of the Parties have

adopted the same argument as were adopted in the ITA No. 253/JP/2015. We have

decided this ground by observing as under:-

“5.2 Per contra Ld. Departmental Representatives submitted that this issue was before this Hon’ble Tribunal in Appeal of the Assessee pertaining to the year 2010-11 in ITA No. 124/JP/2014. The Hon’ble Tribunal was pleased to reject the claim of the assessee. He submitted that the issue of allowability of expenditure is u/s 37(1) of the Act has already been decided against the assessee. 5.3 We have heard the rival contentions, perused the material available on record. The identical issue was before this Hon’ble Tribunal in ITA No. 124/JP/2014 wherein the Tribunal has decided the issue against the assessee. The Tribunal has decided the issue as under:- “20.1 The vexed question before us is the amortization of amount paid for getting the mining land/leasehold land by the assessee. Whether it is required to be treated as revenue expenditure and is required to be allowed u/s 37(1) of the Act or not? For the purpose of allowing any expenditure, it is necessary to look into the nature of expenditure. Section 37 of the Act provides as under:- “Sec. 37(1) : Any expenditure (not being expenditure of the nature descried in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head “profits and against of business of professions”.

[Explanation: For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an

38 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]

[(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.] Section 37, therefore, contemplates that if the nature of expenditure is not the capital/personal in nature, and is laid out or expended wholly and exclusively for the purpose of business or profession, then it is required to be allowed by the authority. In our view, the expenditure which were incurred for getting the mining land on leasehold basis on mining basis, is to be treated as capital expenditure because the leas will have the enduring benefit for making such an investment. Our view is also fortified by the judgment of Hon’ble supreme Court in the matter of Aditya Mineral vs. CIT(1999) 8SSC 97 and also by the judgment of Hon’ble Supreme Court in the matter of Enterprising Enterprises vs. DCIT in the Civil Appeal No. 5655 of 2006 whereby Hon’ble Supreme Court has held that “where the entire amount of lease is paid either at a time or in installment, it would be capital expenditure”. Therefore, we are bound by the judgments passed by the Hon’ble Supreme Court. Thus the expenses laid by the assessee for the purposes of getting the mining land and leasehold land, are required to be treated as capital expenditure. The AO is, therefore, directed to treat the amount paid for getting the mining land and leasehold land as capital expenditure. The AO is further directed to give all benefits as a capital expenditure. The judgment relied upon by the assessee of Hon’ble Supreme Court in the matter of Madras Industrial Investment Corporation Ltd. Vs. CIT, 225 ITR 802 is not applicable to the facts and circumstances of the case. However, the judgment of Hon’ble Supreme court in the matter of Enterprising Enterprises (2007) 160 Taman 188 (SC) is squarely applicable to the facts and circumstances of the case and further the said judgment is of later date and, therefore, is required to be followed by the Bench. The

39 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

judgment of NMDC Ltd. vs. JCIT (supra) is not applicable to the facts and circumstance of the case as in the said judgment the issue was not with respect to applicability of section 37 but was in respect to allowing the depreciation u/s 32 of the Act. The submission of the Ld. A/R for the Assessee is that the value of wasting asset will depreciate with the extraction of mineral, in our view, is preposterous. In our view, with passage of guidelines for protecting the environment, now it is the duty of the lesser/ assessee to submit and execute the mine closing plan so as to ensure that the land is used subsequent to the closure of the mining operation. Even otherwise, the mining activity is done not on the surface of the earth but on the core towards the lower side of the surface. The surface can be put to use for beneficial purpose after the term of lease/mining activity is over and it can be exploited for commercial purposes by the owner/appropriate authority. The contention of the assessee is that the assessee will be double taxed as the AO has already completed the assessment for the A.Y. 2011-12 on the basis of the written back of the amortization of the assets amounting to Rs. 5,79,10,137/-. In our view the assessee was taxed on the basis of the submissions made by it before the AO before the assessment for the A.Y. 2010-11 is finalized. The mere acceptance of the methodology by the AO for A.Y. 2011-12 will not withhold us to decide the issue on merit and in law for the A.Y. 2010-11. As per the law and principle, the authorities situated in lower ladder/tire of hierarchy is required to abide law/adjudication done by the superior authority. This is only way the judicial system works. The AO is quasi judicial authority and bound to follow the principle laid down by the Tribunal and not the vice versa. Therefore, the submission of the Ld. A/R for the assessee on this count is also rejected. However, it is made clear that the assesee would be entitled to all benefits as available in law and the assessee will not be subjected to double taxation for the A.Y. 2011-12. The AO is directed to give effect to the above said direction and nullify the effect of double taxation, if any, as claimed by the assessee. In the light of the above, ground no. 2 of the assessee is dismissed.”

40 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

5.4 Therefore, taking a consistent view, apropos to ground no. 2 the AO is directed to treat the expenditure as capital and grant relief if any available under the law. Thus, ground no. 2 is disposed of in terms indicated hereinbefore.

33.1 For the same reasoning, this ground of the assessee’s appeal is disposed off. 34. Ground no.3, the ground and the facts are identical as were in ITA No.

253/JP/2015 pertaining to the AY 2007-08. The Respective Representative of the

Parties have adopted the same argument as were adopted in the ITA No.

253/JP/2015. We have decided this ground by observing as under:-

“6. At the time of hearing Ground no. 3 was not pressed by the Ld. Counsel for the assessee. Therefore, ground no. 3 is dismissed as not pressed. 34.1. For the same reasoning, this ground is dismissed as not pressed. 35. Ground no.4 is against the confirming the action of Assessing Officer in

respect of reducing the claim of deduction u/s 80IA of the Act, by holding that

liquidated damages received on account of short fall in the minimum guaranteed

generation of power units is not an income derived from power generation business

of wind mills and Ground no. 4.1 is against the action for reducing the claim u/s

80IA in respect of levy liquidated damages despite the facts that there was not a

reason recorded for issuance of notice u/s 148 of the Act.

35.1 So far as the contention of the Ld. Counsel for the assessee that this was not

the item in the reason recorded for re-opening of the assessement. We have

already decided this issue against the assessee in another year. Therefore, taking a

consistent view, this issue is decided against the assessee, in respect of ground no.

4, the Ld. Counsel or the assessee reiterated the submissions as made in the written

41 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

synopsis. He submitted that the authorities below have misdirected themselves for

not allowing the claim of deduction u/s 80IA in respect of the liquidated damages.

He submitted that liquidated damages are the charges paid by Suzlon Energy Ltd. to

the assessee due to short-fall in the minimum guaranteed generation of power units

given by it. These charges are nothing but the income from sale of power only as it

was the commitment of the supplier of the wind mill that plant supplied by him

would generate minimum guaranteed units of electricity. In case generation is less

than fixed guaranteed units, the supplier i.e. Suzlon Energy Ltd. would fulfill the

shortfall by making payment of fixed amount per unit which it generated less.

Hence, amounts so received is nothing but the additional amount realized by the

assessee in respect of the electricity generated by its power plant. The amount so

received is therefore the profit or gain derived by the power undertaking from the

business of generation and distribution of power. The Ld. Counsel for the assessee

placed reliance upon the judgment of the Hon’ble Madhya Pradesh High Court

rendered in the case of CIT vs. Prakash Oils Ltd. 58 DTR 276 (MP) also the

judgment of the Hon’ble Delhi High Court in the case of CIT vs. Advance Detergents

Ltd. 339 ITR 81 (2011) (Del.) further reliance is placed upon the judgment of the

Hon’ble Supreme Court in the case of CIT vs. Meghalaya Steels Ltd. 383 ITR 217.

The Ld. Counsel submitted that the damages are directly linked with the business of

the assessee. Therefore, the deduction u/s 80IA is allowable on this amount.

35.2 On the contrary, the Ld. Departmental Representatives supported the order of

the Ld. CIT(A).

35.3 We have heard the rival contentions, perused the material available on

record. The Ld. CIT(A) disallowed the claim on the basis that the first degree in

42 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

nexus with the operation of the undertaking is missing. The Ld. CIT(A) has followed

the decision of his predecessor pertaining to the A.Y. 2010-11. Admittedly, this

payment is related to the contract between the assessee and the supplier. The

contract is related to the wind mill independent of operation of the wind mill the

payment of liquidated damages would not arise. It is only on the operation of the

wind mill and the output of the equipment so installed this liability of the payment of

damages arises.

In the absence of operation, the issue of payment of such damages would not arise.

It is only when the wind mill becomes operational on short fall on the production

such payment is made. Hon’ble Madhya Pradesh High Court in the case of CIT vs.

Prakash Oils Ltd. (supra) held that the payment made as an liquidated damages for

not honouring the contract for sale of oil and deoiled cake, such income is directly

derived from industrial undertaking, hence eligible deduction u/s 80IA. In our view,

the Ld. CIT(A) erred in holding that such income is not derive from the business of

the undertaking. Therefore, we direct the Assessing Officer to allow deduction u/s

80IA on this receipt. This ground of the assessee’s appeal is allowed.

to the AY 2007-08. The Respective Representatives of the parties have adopted the

same argument as were adopted in the ITA No. 253/JP/2015 as ground no. 4 to 4.1.

We have decided this ground by observing as under:-

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee stated that in respect of the unallocated expenses of Rs. 15,67,45,594/- that none of these expenses pertain to the 80IA undertakings in as much as the entire operation and the maintenance of the power plant had been given to Suzlon Energies Ltd. Therefore, the assessee had not to

43 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

incur any expenditure on salary/employees benefit, travelling conveyance and other expenses debited under the various heads of expense in corporate office/head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work allocation, contract awarding, control etc. was required for operating these power plants by the corporate office/head office. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1 before this Tribunal that this issue was not taken while recording the reasons for issuance of notice and the said disallowance is not in the nature of income escaping essessment as per Explanation 3 to section 147. After considering the totality of the fact, we restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expense related to operation and maintenance were borne by Suzlon Energies Ltd. So far the contention of Ld. Counsel for the assessee that this item was not subject matter of the reasons recorded for reopening. We do not see any merit as law is well settled that once reopening is valid the AO can also consider the other issues as cropped up the assessment proceedings. Thus, Ground no. 4 of the assessee‘s appeal is allowed for statistical purposes. However, ground no. 4.1 is dismissed.”

36.1 For the same reasoning, this ground of the assessee’s appeal is allowed for

statistical purpose. The AO is directed to verify the claim of the assessee, with

regard to the contention that the entire operation and maintenance given to Suzlon

Energies Ltd.

No. 253/JP/2015 pertaining to the AY 2007-08. The Respective Representative of the

Parties have adopted the same argument as were adopted in the ITA No.

44 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

253/JP/2015 as ground no. 5 to 5.1. We have decided this ground by

observing as under:-

“8. Ground nos. 5 to 5.1 are against confirmation of disallowance of Rs. 1,20,47,954/- out of Rural Development Expenses by holding that same is not incurred wholly and exclusively for the purpose of business. 8.1 Apropos to ground no. 5.1, the Ld. Counsel submitted that this disallowance has been confirmed even when it was not a reason recorded for issuance of notice u/s 148 when such disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. 8.2 On the contrary, Ld. Departmental Representatives, supported the order of the authorities below and submitted that once the reopening is validly done the Assessing Officer is within its power and make assessment in respect of the issues which were not even taken into consideration while issuance of notice u/s 148 as after reopening the Assessing Officer would have the same power as in the original assessment. 8.3 We do not see any merit into the contention of the assessee that the issue of allowability of Rural Development Expenses was not the subject matter of reason recorded. It is settled position of law that once the assessment is validly reopened, the AO can also make assessment in respect of other issues which come to notice during the reopened assessment proceedings. Now, coming to the merit of disallowance, we find that the Ld. CIT(A) has given a finding on fact that the amount was not expended wholly and exclusively for the purpose of business. This finding on fact is not rebutted by the assessee. In the absence of material proving the expenses incurred for the business of the assessee same cannot be allowed u/s 37 of the Act. Hence, this ground of assessee’s appeal is dismissed.” 37.1 For the same reasoning, this ground of the assessee’s appeal is dismissed.

submissions as made in the written brief.

45 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

38.1 On the contrary, Ld. Departmental Representatives supported the order of the

Assessing Officer.

38.2 We have heard the rival contentions, perused the material available on

record. It is contended that the Assessee had earned tax free dividend income from

shares of Rs. 10 lakhs. It is stated that no efforts and loan funds were utilized in

making the investment. Accordingly, no disallowance is called for. It is stated that

the Assessing Officer accepted that no direct expenses incurred. However, he

disallowed Rs. 1,138/- being ½% of the average investment on account of

administrative expenses.

38.3 We find merit into the contentions of the assessee that on investment of Rs. 1

lakhs the assessee had earned dividend income on Rs. 10 lakhs only in respect of

the shares of Mayura Inorganics Ltd. This fact is not disputed by the Revenue. In

our considered view, the operation of Rule 8D is not automatic. The assessing

officer is required to satisfy himself about the correctness of the claim that no

expenditure was incurred by the assessee. The Assessing Officer in the present case

has accepted that there is not direct nexus between the investment and expenses so

incurred. After considering the totality of the fact and keeping in view the sum of

Rs. 1,138/- had been disallowed by invoking the provision of Rule 8D without being

satisfied about the claim of the assessee that no administrative expenses were

incurred for earning of the exempt income. We direct the Assessing Officer to delete

the disallowance. This ground of the assessee’s appeal is allowed.

account of unpaid land tax u/s 43B of the Act ignoring the fact that same is already

offered for tax in AY 2010-11 and assessed by the AO. The ld. Counsel for the

46 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

assessee reiterated the submissions as made in the written brief. The relevant

contentions of the assesee are reproduced as under:-

“4. It may be noted that though Rs. 3,15,50,975/- remained unpaid as on 31-03-2008 but such amount has been written back and offered for tax in AY 2010-11. This was explained to the AO vide letter dated 30.9.2013 (PB 41). In AY 2010-11 the amount so written back has been taxed by the AO. The assessment for AY 10-11 has become final. Thus, this amount has been taxed twice, once in AY 2008-09 when the AO has disallowed it againt in AY 2010-11 where assesseee has offered if for tax. The Supreme Court in case of Excel Industries Limited 358 ITR 290 has held that when the rate of tax remained the same in present AY as well as in subsequent AY, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with the litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public cofferes. Considering this judgment of Supreme Court and the fact that assessee has offered this amount for tax in AY 10-11 which has become final, the addition confirmed by the CIT(A) has resulted into double taxation and therefore the addition so confirmed by him needs to be deleted. 39.1 On the contrary, Ld. Departmental Representatives supported the order of the

Assessing Officer and submitted that there is no illegality into the order of the

authorities below.

39.2 We have heard the rival contentions, it is undisputed fact that the land tax

was not paid before due date of filing by the return of income u/s 139(1) as required

by the provisions of section 43B. In view of the mandate of clause (a) of section

47 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

43B of the Act, we do not see any reason to interfere into the order of the Ld.

CIT(A), same is hereby affirmed, the ground of the assessee’s appeal is dismissed.

by the assessee in support of this claim and identical claim was made in ITA No.

253/JP/2015.

“10. Ground no. 7 is prayer for cost; the assessee has not addressed any argument to demonstrated as to why cost should be awarded. Hence, this ground of the assessee’s appeal is dismissed.” 41.1 For the same reasoning, this ground is dismissed.

In the result, appeal of the assessee in ITA No. 254/JP/2015 is partly allowed for statistical purpose.

Revenue’s appeal in ITA No. 296/JP/2015

the Assessment Year 2008-09.

The Revenue has raised the following grounds of appeal.

“1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing relief to the assessee of Rs. 88,60,842/- by holding that receipts from sale of Carbon Emission Certificates are of capital in nature. 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing relief to the assessee u/s 80IA amounting to Rs. 2,33,19,587/- by not appreciating the facts brought out by the AO in assessment order with regard to establishment and financial expenses. 3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing relief of Rs. 3,07,81,040/- on a/c of expenditure incurred by the assessee under the head ‘Rural Development’ and Rs. 59,09,228/- under the head ‘afforestation, plantation and environment expenses’ without appreciating the fact

48 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

that these expenses have not been incurred in connection with the business of the assessee. 4. The appellant craves its rights to add, amend or alter any of the grounds on or before the hearing.”

295/JP/2015 pertaining to the AY 2007-08. The Respective Representative of the

Parties have adopted the same argument as were adopted in the ITA No.

295/JP/2015 as ground no. 1. We have decided this ground by observing as

under:-

“12.3 Since, the Ld. CIT(A) has followed the judgment of the Hon’ble Andhra Pradesh High Court rendered in the case of My Home Power Ltd. 365 ITR 82(supra) where the Hon’ble court, under the identical facts confirmed the view of the Tribunal in holding that Carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset is generated in cost of business but it is generated due to environmental concerns. Therefore, on sale of excess carbon credits correctly held by the Tribunal as a capital receipt. In view of the judgment of Hon’vble Andhra Pradesh High Court, we do not see any reason to disturb the finding of Ld. CIT(A), same is hereby affirmed. This ground of Revenue’s appeal is dismissed.”

43.1 For the same reasoning, this ground of the Revenue’s appeal is dismissed.

295/JP/2015 pertaining to the AY 2007-08. The Respective Representative of the

Parties have adopted the same argument as were adopted in the ITA No.

295/JP/2015 as ground no. 2. We have decided this ground by observing as

under:-

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee stated that in respect of the unallocated expenses of Rs.

49 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

15,67,45,594/- that none of these expenses pertain to the 80IA undertakings in as much as the entire operation and the maintenance of the power plant had been given to Suzlon Energies Ltd. Therefore, the assessee had not to incur any expenditure on salary/employees benefit, travelling conveyance and other expenses debited under the various heads of expense in corporate office/head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work allocation, contract awarding, control etc. was required for operating these power plants by the corporate office/head office. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1 before this Tribunal that this issue was not taken while recording the reasons for issuance of notice and the said disallowance is not in the nature of income escaping essessment as per Explanation 3 to section 147. After considering the totality of the fact, we restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expenses related to operation and maintenance were borne by Suzlon Energies Ltd. So far the contention of Ld. Counsel for the assessee that this item was not subject matter of the reasons recorded for reopening. We do not see any merit as law is well settled that once reopening is valid the AO can also consider the other issues as cropped up the assessment proceedings. Thus, Ground no. 4 of the assessee ‘s appeal is allowed for statistical purposes. However, ground no. 4.1 is dismissed.” 13.3 Therefore, this ground of the Revenue’s appeal is also restored to the file of the Assessing Officer for decision afresh.” 44.1 For the same reasoning, this ground of the Revenue’s appeal is restored to

the file of the AO for decision afresh.

the AY 2007-08. The Respective Representative of the Parties have adopted the

50 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

same argument as were adopted in the ITA No. 295/JP/2015 as ground no. 3.

We have decided this ground by observing as under:-

“14. Ground no. 3 is against deleting the disallowance in respect of rural development and afforestation, plantation and environment expenses of Rs. 1,76,01,218/-. The Ld. Departmental Representatives supported the order of the Assessing Officer, he submitted that Ld. CIT(A) was not justified in deleting the disallowance as these expenses were not relatable to the business of the assessee. 14.1 On the contrary, the Ld. Counsel for the assesee reiterated the submissions ad made in the written brief. 14.2 We have heard the rival contentions, perused the material available on record. We find that Ld. CIT(A) has given a finding on fact by observing as under:- “6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the

51 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld. 6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”. 14.3 This finding on fact is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. The ground of the Revenue’s appeal is dismissed.

45.1 For the same reasoning, this ground of the Revenue’s appeal is dismissed.

allowed for statistical purpose.

ITA No. 255/JP/2015 & ITA No. 297/JP/2015

No. 255/JP/2015 & 297/JP/2015 pertaining to the A.Y. 2009-10.

First we take up assessee appeal in ITA No. 255/JP/2015.

The assessee has raised the following grounds of appeal:-

“1. The Ld. CIT(A) has erred on the facts and in law in upholding the validity of the order passed by AO u/s 147 of the IT Act. 2. The Ld. CIT(A) has erred in facts and in law in confirming the action of the AO in disallowing the claim of amortization of mining land of Rs. 92,99,632/- leasehold land of Rs. 7,99,470/- aggregating to Rs.

52 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

1,00,99,102/-. He has further erred in disallowing this claim only on the basis of the finding of his predecessor on this issue in AY 2010-11 ignoring that this claim was allowed in all earlier years AY 2009-10 in regular assessment proceedings and that the claim is also supported by the decision of ITAT, Hyderabad Bench in case of NMDC Ltd. vs. JCIT in ITA No. 714/Hyd/ 2012 dt. 28.02.2014. 2.1 The Ld. CIT(A) has erred on facts and in law in confirming the said disallowance even when it was not a reason recorded for issuance of notice u/s 148 and that the said disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. 3. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO in reducing the claim of deduction u/s 80IA by Rs. 1,68,53,256/- by holding that liquidated damages received on account of shortfall in the minimum guaranteed generation of power units is not an income derived from the power generation business of windmills. 3.1 The Ld. CIT(A) has erred on facts and in law in reducing claim of deduction u/s 80IA with reference to the receipts of the liquidated damaged even when it was not a reason recorded for issuance o notice u/s 148 and that the said reduction is not in the nature of income escaping assessment as per Explanation 3 to section 147. 4. The Ld. CIT(A) has erred on facts an in law in directing the AO to apportion the establishment and financial expenditure of Rs. 21,24,40,947/- on the basis of turnover of the mining activity and wind power generation activity for allowing deduction u/s 80IA on the income from generation of power ignoring the fact that expenditure relatable to power generation undertaking has already been debited for working out the income of the said units. 4.1 The Ld. CIT(A) has erred on facts and in law in confirming the said disallowance even when it was not a reason recorded for issuance of notice u/s 148 and that the said disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. 5. The Ld.CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 17,95,838/- out of rural development expenses by holding that same is not incurred wholly and exclusively for the purpose of business. 5.1 The Ld. CIT(A) has erred on facts and in law in confirming the said disallowance even when it was not a reason recorded for issuance of notice u/s 148 and that the said disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. 6. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 3,612 u/s 14A of the IT Act, 1961. He has further erred in confirming the said disallowance even when it was not a reason recorded for issuance of notice u/s 148 and that the said disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. 7. The Ld. CIT(A) has erred on facts and in law in confirming an addition of Rs. 35,51,084/- on account of unpaid land tax u/s 43B of the Act

53 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

ignoring the fact that same is already offered for tax in AY 2011-12 and assessed by the AO. 8. The assessee craves right to add, alter or amend or any of the grounds of the appeal. 9. The appropriate cost be awarded to the assessee.”

Act. The Respect Representatives of the parties adopted the same argument as

were in the ITA No. 253/JP/2015 pertaining to the Assessment Year 2007-08.

The issue in ITA No. 253/JP/2015 pertaining to the validity of the order decided (in

para 4 to 4.2) against the assessee by observing as under:-

“4.2 We have heard the rival submissions, perused the material available on record and gone through the order of the authorities below. There is no dispute with regard to the position of law that the Assessing Officer can reopen the assessment if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. In the present case, in the original assessment, the Assessing Officer had not considered the issue of allowability of the Amortization of Mining Land and Leasehold Land. He had simply without making any enquiry allowed the claim of the assessee, which is not the mandate of the law. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed, this ground of the assessee’s appeal is dismissed.”

49.1 Taking a consistent view, this ground of the assessee’s appeal is dismissed.

of expenses of mining land and leasehold land. Ground no. 2.1 is with regard to the

confirmation of disallowance even when issue was not recorded in the reasons for

issuance of notice u/s 148 of the Act. The Ld. Respective Representatives of the

54 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Parties have adopted the same argument as were adopted in ITA No. 253/JP/2015

qua the ground no. 2 therein.

50.1 We have heard the rival contentions; the issue in this year is identical as was

in the Assessment Year 2007-08 in ITA No. 253/JP/2015 as ground no. 2.

We have decided this issue by observing as under:-

5.2 Per contra Ld. Departmental Representatives submitted that this issue was before this Hon’ble Tribunal in Appeal of the Assessee pertaining to the year 2010-11 in ITA No. 124/JP/2014. The Hon’ble Tribunal was pleased to reject the claim of the assessee. He submitted that the issue of allowability of expenditure is u/s 37(1) of the Act has already been decided against the assessee. 5.3 We have heard the rival contentions, perused the material available on record. The identical issue was before this Hon’ble Tribunal in ITA No. 124/JP/2014 wherein the Tribunal has decided the issue against the assessee. The Tribunal has decided the issue as under:- “20.1 The vexed question before us is the amortization of amount paid for getting the mining land/leasehold land by the assessee. Whether it is required to be treated as revenue expenditure and is required to be allowed u/s 37(1) of the Act or not? For the purpose of allowing any expenditure, it is necessary to look into the nature of expenditure. Section 37 of the Act provides as under:- “Sec. 37(1) : Any expenditure (not being expenditure of the nature descried in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head “profits and against of business of professions”.

[Explanation: For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]

55 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

[(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.] Section 37, therefore, contemplates that if the nature of expenditure is not the capital/personal in nature, and is laid out or expended wholly and exclusively for the purpose of business or profession, then it is required to be allowed by the authority. In our view, the expenditure which were incurred for getting the mining land on leasehold basis on mining basis, is to be treated as capital expenditure because the leas will have the enduring benefit for making such an investment. Our view is also fortified by the judgment of Hon’ble supreme Court in the matter of Aditya Mineral vs. CIT(1999) 8SSC 97 and also by the judgment of Hon’ble Supreme Court in the matter of Enterprising Enterprises vs. DCIT in the Civil Appeal No. 5655 of 2006 whereby Hon’ble Supreme Court has held that “where the entire amount of lease is paid either at a time or in installment, it would be capital expenditure”. Therefore, we are bound by the judgments passed by the Hon’ble Supreme Court. Thus the expenses laid by the assessee for the purposes of getting the mining land and leasehold land, are required to be treated as capital expenditure. The AO is, therefore, directed to treat the amount paid for getting the mining land and leasehold land as capital expenditure. The AO is further directed to give all benefits as a capital expenditure. The judgment relied upon by the assessee of Hon’ble Supreme Court in the matter of Madras Industrial Investment Corporation Ltd. Vs. CIT, 225 ITR 802 is not applicable to the facts and circumstances of the case. However, the judgment of Hon’ble Supreme court in the matter of Enterprising Enterprises (2007) 160 Taman 188 (SC) is squarely applicable to the facts and circumstances of the case and further the said judgment is of later date and, therefore, is required to be followed by the Bench. The judgment of NMDC Ltd. vs. JCIT (supra) is not applicable to the facts and circumstance of the case as in the said judgment the issue was not with respect to applicability of section 37 but was in respect to allowing the

56 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

depreciation u/s 32 of the Act. The submission of the Ld. A/R for the Assessee is that the value of wasting asset will depreciate with the extraction of mineral, in our view, is preposterous. In our view, with passage of guidelines for protecting the environment, now it is the duty of the lesser/ assessee to submit and execute the mine closing plan so as to ensure that the land is used subsequent to the closure of the mining operation. Even otherwise, the mining activity is done not on the surface of the earth but on the core towards the lower side of the surface. The surface can be put to use for beneficial purpose after the term of lease/mining activity is over and it can be exploited for commercial purposes by the owner/appropriate authority. The contention of the assessee is that the assessee will be double taxed as the AO has already completed the assessment for the A.Y. 2011-12 on the basis of the written back of the amortization of the assets amounting to Rs. 5,79,10,137/-. In our view the assessee was taxed on the basis of the submissions made by it before the AO before the assessment for the A.Y. 2010-11 is finalized. The mere acceptance of the methodology by the AO for A.Y. 2011-12 will not withhold us to decide the issue on merit and in law for the A.Y. 2010-11. As per the law and principle, the authorities situated in lower ladder/tire of hierarchy is required to abide law/adjudication done by the superior authority. This is only way the judicial system works. The AO is quasi judicial authority and bound to follow the principle laid down by the Tribunal and not the vice versa. Therefore, the submission of the Ld. A/R for the assessee on this count is also rejected. However, it is made clear that the assesee would be entitled to all benefits as available in law and the assessee will not be subjected to double taxation for the A.Y. 2011-12. The AO is directed to give effect to the above said direction and nullify the effect of double taxation, if any, as claimed by the assessee. In the light of the above, ground no. 2 of the assessee is dismissed.” 5.4 Therefore, taking a consistent view, apropos to ground no. 2 is directed to treat the expenditure as capital and grant relief if any available

57 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

under the law. Thus, ground no. 2 is disposed of in the terms indicated hereinbefore.

50.2 For the same reasoning, this ground of the assessee’s appeal is disposed off.

So far as the contention that the issue was not subject matter of reasons recorded is

concerned, we have already decided this issue by holding that once the assessment

is validly re-opened the AO can decided other issues as well. Hence, the ground no.

2.1 is dismissed.

that liquidated damages received on account of shortfall in the minimum guaranteed

generation of the power units is not an income derived from the power generation

business of windmills.

51.1 Ground no. 3.1 is connected to ground no. 3, which is against reducing the

claim when the issue was not a reason recorded for issuance of notice u/s 148 and

the reduction is not in the nature of income escaping assessment as per Explanation

3 to section 147.

51.2 The identical grounds were raised in ITA No 254/JP/2015 pertaining to

the Assessement Year 2008-09. The Respective Representative of the Parties

have adopted the same argument as were adopted in the ITA No. 254/JP/2015.

We have heard the rival contentions, in ITA No. 254/JP/2015 pertaining to the AY

2008-09 , we have decided this ground by observing as under:-

“35.1 So far as the contention of the Ld. Counsel for the assessee that this was not the item in the reason recorded for re-opening of the assessement. We have already decided this issue against the assessee in another year. Therefore, taking a consistent view, this issue is decided against the

58 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

assessee, in respect of ground no. 4, the Ld. Counsel or the assessee reiterated the submissions as made in the written synopsis. He submitted that the authorities below have misdirected themselves for not allowing the claim of deduction u/s 80IA in respect of the liquidated damages. He submitted that liquidated damages are the charges paid by Suzlon Energy Ltd. to the assessee due to short-fall in the minimum guaranteed generation of power units given by it. These charges are nothing but the income from sale of power only as it was the commitment of the supplier of the wind mill that plant supplied by him would generate minimum guaranteed units of electricity. In case generation is less than fixed guaranteed units, the supplier i.e. Suzlon Energy Ltd. would fulfill the shortfall by making payment of fixed amount per unit which it generated less. Hence, amounts so received is nothing but the additional amount realized by the assessee in respect of the electricity generated by its power plant. The amount so received is therefore the profit or gain derived by the power undertaking from the business of generation and distribution of power. The Ld. Counsel for the assessee placed reliance upon the judgment of the Hon’ble Madhya Pradesh High Court rendered in the case of CIT vs. Prakash Oils Ltd. 58 DTR 276 (MP) also the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Advance Detergents Ltd. 339 ITR 81 (2011) (Del.) further reliance is placed upon the judgment of the Hon’ble Supreme Court in the case of CIT vs. Meghalaya Steels Ltd. 383 ITR 217. The Ld. Counsel submitted that the damages are directly linked with the business of the assessee. Therefore, the deduction u/s 80IA is allowable on this amount. 35.2 On the contrary, the Ld. Departmental Representatives supported the order of the Ld. CIT(A). 35.3 We have heard the rival contentions, perused the material available on record. The Ld. CIT(A) disallowed the claim on the basis that the first degree nexus with the operation of the undertaking is missing. The Ld. CIT(A) has followed the decision of his predecessor pertaining to the A.Y. 2010-11. Admittedly, this payment is related to the contract between the assessee and

59 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

the supplier. The contract is related to the wind mill independent of operation of the wind mill the payment of liquidated damages would not arise. It is only on the operation of the wind mill and the output of the equipment so installed this liability of the payment of damages arises. In the absence of operation, the issue of payment of such damages would not arise. It is only when the wind mill becomes operational on short fall on the production such payment is made. Hon’ble Madhya Pradesh High Court in the case of CIT vs. Prakash Oils Ltd. (supra) held that the payment made as an liquidated damages for not honouring the contract for sale of oil and deoiled cake, such income is directly derived from industrial undertaking, hence eligible deduction u/s 80IA. In our view, the Ld. CIT(A) erred in holding that such income is not derive from the business of the undertaking. Therefore, we direct the Assessing Officer to allow deduction u/s 80IA on this receipt. This ground of the assessee’s appeal is allowed.”

51.3 So far as the contention that the issue was not subject matter of reasons

recorded is concerned, we have already decided this issue by holding that once the

assessment is validly re-opened the AO can decided other issues as well. Hence, the

ground no. 3.1 is dismissed.

Taking a consistent view, this ground no. 3 of the assessee’s appeal is allowed.

and financial expenditure on the basis of turnover. Ground no. 4.1 is connected with

ground no. 4, which is against the confirmation of disallowance even when it was

not a reason recorded for issuance of notice u/s 148 and that the said disallowance

is not in the nature of income escaping assessment as per Explanation 3 to section

147.

60 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

52.1 The identical ground was raised in ITA No. 253/JP/2015 pertaining to the

assessment year 2007-08. The Respective Representative of the Parties have

adopted the same argument as were adopted in the ITA No. 253/JP/2015.

52.2 We have heard the rival contentions, in ITA No. 253/JP/2015 pertaining to the

AY 2007-08 , we have decided this ground by observing as under:-

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee has stated that in respect of the unallocated expenses of Rs. 15,67,45,594/- that none of these expenses pertain to the 80IA undertakings in as much as the entire operation and the maintenance of the power plant has been given to Suzlon Energies Ltd. Therefore, the assessee has not to incur any expenditure on salary/employees benefit, travelling conveyance and other expenses debited under the various heads of expense in corporate office/head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work allocation, contract awarding, control etc. is required for operating these power plants by the corporate office/head office. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1 before this Tribunal that this issue was not taken while recording the reasons for issuance of notice and the said disallowance is not in the nature of income escaping essessment as per Explanation 3 to section 147. After considering the totality of the fact, we restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expense related to operation and maintenance has been given to Suzlon Energies Ltd. So far the contention of Ld. Counsel for the assessee that this item was not subject matter of the reasons recorded for reopening. We do not see any merit as law is well settled that once reopening is valid the AO can also consider the other issues as cropped up the assessment proceedings. Thus, Ground no. 4 of the assessee ‘s appeal is allowed for statistical purposes. However, ground no. 4.1 is dismissed.”

61 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

52.3 For the same reasoning ground no. 4 of the assessee’s appeal is allowed for

statistical purposes and the AO is directed to verify the claim of the assessee, while

deciding the issue afresh. However, the ground no. 4.1 is dismissed.

Development Expenses. The identical issue was raised in 235/JP/2015 as ground no.

5 to 5.1, the ld. Representatives of the parties have adopted the same argument as

were in ITA No. 253/JP/2015. We have decided this issue by observing as under:-

“8.1 Apropos to ground no. 5.1, the Ld. Counsel submitted that this disallowance has been confirmed even when it was not a reason recorded for issuance of notice u/s 148 when such disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. 8.2 On the contrary, Ld. Departmental Representatives, supported the order of the authorities below and submitted that once the reopening is validly done the Assessing Officer is within its power to make assessment in respect of the issues which were not even taken into consideration while issuance of notice u/s 148 as after reopening the Assessing Officer would have the same power as in the original assessment. 8.3 We do not see any merit into the contention of the assessee that the issue of allowability of Rural Development Expenses was not the subject matter of reason recorded. It is settled position of law that once the assessment is validly reopened, the AO can also make assessment in respect of other issues which come to notice during the reopened assessment proceedings. Now, coming to the merit of disallowance, we find that the Ld. CIT(A) has given a finding on fact that the amount was not expended wholly and exclusively for the purpose of business. This finding on fact is not rebutted by the assessee. In the absence of material proving the expenses incurred for the business of the assessee same cannot be allowed u/s 37 of the Act. Hence, this ground of assessee’s appeal is dismissed.

62 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

53.1 Therefore, taking a consistent view, we do not see any reason to interfere

into the order of the Ld. CIT(A), same is hereby affirmed, these grounds of the

assessee’s appeal are dismissed.

3,612/-. Similarly, the ground was raised in ITA No 254/JP/2015 pertaining to the

AY 2008-09. The Ld. Representative of the parties have adopted the same argument

as were in ITA No.254/JP/2015 as Ground No. 7. We have decided this issue

by observing as under:-

“38. Apropos to ground no. 7 the Ld. Counsel for the assessee reiterated the submissions as made in the written brief. 38.1 On the contrary, Ld. Departmental Representatives supported the order of the Assessing Officer. 38.2 We have heard the rival contentions, perused the material available on record. It is contended that the Assessee had earned tax free dividend income from shares of Rs. 10 lakhs. It is stated that no efforts and loan funds were utilized in making the investment. Accordingly, no disallowance is called for. It is stated that the Assessing Officer accepted that no direct expenses incurred. However, he disallowed Rs. 1,138/- being ½% of the average investment on account of administrative expenses. 38.3 We find merit into the contentions of the assessee that on investment of Rs. 1 lakhs the assessee had earned dividend income on Rs. 10 lakhs only in respect of the shares of Mayura Inorganics Ltd. This fact is not disputed by the Revenue. In our considered view, the operation of Rule 8D is not automatic. The assessing officer is required to satisfy himself about the correctness of the claim that no expenditure was incurred by the assessee. The Assessing Officer in the present case has accepted that there is not direct nexus between the investment and expenses so incurred. After considering the totality of the fact and keeping in view the sum of Rs. 1,138/- had been disallowed by invoking the provision of Rule 8D without being satisfied about

63 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

the claim of the assessee that no administrative expenses were incurred for earning of the exempt income. We direct the Assessing Officer to delete the disallowance. This ground of the assessee’s appeal is allowed.”

54.1 Taking a consistent view, in this year, the AO is directed to delete the

disallowance. Ground no. 6 of the assessee’s appeal is allowed.

account of unpaid land u/s 43B of the Act. Similar ground was raised in ITA No.

254/JP/2015 pertaining to AY 2008-09 as Ground No. 8. The Ld. Representatives of

the Parties have adopted the same argument as were in ITA No. 254/JP/2015 as

ground no. 8. We have decided this ground of appeal by observing as under:-

“39.2 We have heard the rival contentions, it is undisputed fact that the land tax was not paid by due date of filing by the return of income u/s 139(1) as required by the provisions of section 43B. In view of the mandate of clause (a) of section 43B. We do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed, the ground of the assessee’s appeal is dismissed.” 55.1 There is no change into facts and circumstances. Therefore taking a

consistent view, we do not see any reason to interfere into the order of the Ld.

CIT(A), same is hereby affirmed. The ground of the assessee’s appeal is dismissed.

record under the facts of the present case, we do not see any reason to award the

cost to assessee. Therefore, we do not seen any reason to interfere into the order

of the Ld. CIT(A), same is hereby affirmed, this ground of the assessee’s appeal is

dismissed.

64 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

for statistical purposes.

Revenue’s appeal in ITA No. 297/JP/2015

The revenue has raised the following grounds of appeal:

“1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing relief of Rs. 95,64,749/- out of expenditure incurred by the assessee under the head of ‘Rural Development Expenses’. 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing relief of Rs. 64,01,492/- under the head ‘afforestation, plantation and environment expenses’ without appreciating the fact that these expenses have not been incurred in connection with the business of the assessee. 3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing relief to the assessee u/s 80IA amounting to Rs. 1,85,03,376/- by not appreciating the facts brought out by the AO in assessment order with regard to establishment and financial expenses. 4. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in partly allowing the appeal of the assessee by holding that the payment of MR Cess to the State Government is a liability of the assessee independent of its customers and is cover u/s 43B of the Income tax Act, 1961. 5. The appellant craves its rights to add, amend or alter any of the grounds on or before the hearing.”

under the head ‘Rural Development Expenses’. Similar ground was raised in ITA No.

295/JP/2015 by the revenue pertaining to AY 2007-08 as Ground No. 3. We have

decided the issue by observing as under against the revenue.

“14.2 We have heard the rival contentions, perused the material available on record. We find that Ld. CIT(A) has given a finding on fact by observing as under:-

65 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd. “6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld. 6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”. 14.3 This finding on fact is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere

66 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

into the order of the Ld. CIT(A), same is hereby affirmed. The ground of the Revenue’s appeal is dismissed.

60.1 Since no change into facts and circumstances was pointed out. Therefore,

taking a consistent view, this ground of the Revenue’s appeal is dismissed.

‘afforestation, plantation and environment expenses’. We find that identical ground

was raised in ITA No. 295/JP/2015, wherein the issue has been decided against the

revenue as ground no. 3 by observing as under:-

“14. Ground no. 3 is against deleting the disallowance in respect of rural development and afforestation, plantation and environment expenses of Rs. 1,76,01,218/-. The Ld. Departmental Representatives supported the order of the Assessing Officer, he submitted that Ld. CIT(A) was not justified in deleting the disallowance as these expenses were not relatable to the business of the assessee. 14.1 On the contrary, the Ld. Counsel for the assesee reiterated the submissions ad made in the written brief. 14.2 We have heard the rival contentions, perused the material available on record. We find that Ld. CIT(A) has given a finding on fact by observing as under:- “6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of

67 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd. school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld. 6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”. 14.3 This finding on fact is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. The ground of the Revenue’s appeal is dismissed.”

61.1 Taking a consistent view, as no change into facts and circumstances were

pointed out by the Revenue. Therefore, we do not see any reason to interfere into

the order of the Ld. CIT(A), same is hereby affirmed, this ground of the assessee’s

appeal is dismissed.

68 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

amounting to Rs. 1,85,03,376/- by not appreciating the facts brought out by the AO

in assessment order with regard to establishment and financial expenses.

The identical ground was raised in ITA No. 295/JP/2015, pertaining to the A.Y.

2007-08 as ground no. 2 by observing as under:-

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee stated that in respect of the unallocated expenses of Rs. 15,67,45,594/- that none of these expenses pertain to the 80IA undertakings in as much as the entire operation and the maintenance of the power plant had been given to Suzlon Energies Ltd. Therefore, the assessee had not to incur any expenditure on salary/employees benefit, travelling conveyance and other expenses debited under the various heads of expense in corporate office/head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work allocation, contract awarding, control etc. was required for operating these power plants by the corporate office/head office. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1 before this Tribunal that this issue was not taken while recording the reasons for issuance of notice and the said disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. After considering the totality of the fact, we restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expenses related to operation and maintenance were borne by Suzlon Energies Ltd. Thus, Ground no. 4 to 4.1 of the assessee ‘s appeal is allowed for statistical purposes.” 13.3 Therefore, this ground of the Revenue’s appeal is also restored to the file of the Assessing Officer for decision afresh.”

69 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

62.1 For the same reasoning, this ground is restored to the file of the AO for

decision afresh.

holding that the payment of MR Cess to the State Government is a liability of the

assessee independent of its customers. The Ld. Departmental Representatives

supported the order of the AO. He submitted that MR Cess is indirect tax collected

through customer at the time of sale at the rate specified by the State Government.

63.1. On the contrary, Ld. Counsel for the assessee reiterated the submissions as

made in the written brief and submitted that the addition has been made by the AO

for the difference in MR Cess paid and the MR Cess recovered from the customers.

Payment of MR Cess to the Government is an independent liability of the assessee.

The recovery of MR Cess from its customer is independent of its liability of payment

of such cess to the Government. Therefore, whether the assessee could collect the

MR cess from its customer or not would not reduced his liability of the payment of

the same. There is no dispute as to the fact that assessee has paid MR Cess of Rs.

60,31,23,017/- to the Government in the year under consideration but could recover

only Rs. 13,99,44,564/- from its customers which was credited to income. He

submitted that the observation of the AO that since the assessee had not collected

difference from its customers to this extent the amount was not payable u/s 43B is

far fetched in the absence of any statutory provisions.

63.2 We have heard the rival contentions, the Ld. CIT(A) has decided this issue in

para 8.3 of his order which is reproduced herein for the sake of clarity:-

“8.3 I have perused the facts of the case, he assessment order and the submission of the appellant. MR cess was imposed by the Government

70 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

of Rajhasthan w.e.f. 25.02.2008 on dispatch of certain minerals, including rock phosphate. Thereafter, on 23.01.2009, the MR Cess on rock phosphate was increased from Rs. 35 per ton to Rs. 500 per ton with retrospect effect from 01.04.2008. Therefore, prior to 23.01.2009, rock phosphate has been dispatched from the mines with a levy of MR Cess of only Rs. 35 per ton. However, from 23.1.2009, the assessee was under obligation to pay to the Government of Rajasthan, MR Cess @ Rs. 500 per ton for the rock phosphate which has been dispatched from 01.04.2008 to 22.01.2009 irrespective of whether it was able to recover this amount from its customers. The appellant has debited expenditure towards MR Cess of Rs. 60,31,23,017/- whereas it was able to recover an amount of Rs. 13,99,44,564/- only, from its customers(which has been credited in its P & L account). The appellant has stated that the balance amount of Rs. 46,26,42,839/- could not be collected as its customers went to the court against recovery of MR Cess with retrospective effect. The Assessing Officer has disallowed expenditure of thi balance amount of MR Cess which could not be recovered from the cutomers, first by invoking section 145A and then by holding that this amount was not payable by the assessee. This contention of the AO is incorrect because the appellant was legally bound to pay the enhanced rate of MR Cess irrespective of whether it was able to recover the same from its customers. The Hon’ble Supreme Court of India in the case of CIT Vs. Shoorji Vallabhadas & Co, (46 ITR 144) has held that in any accrual system, the probability of improbability of realization has also to be considered in a realistic manner. In the case of Chainrup Sampatram v. CIT (24 ITR 481) the Hon’ble Apex Court held that while anticipated loss is taken into account, anticipated profit is not brought in account, as no prudent trader would care to show increased profit before its actual realization. The Accounting Standar-9 (AS-9) is also in conformity with the above judgments. Therefore, the appellant could

71 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

not have credited receipts from customers on account of unrecovered MR Cess. The provisions of Section 145A are not applicable in the present case because the cess has been levied with retrospective effect which could not be recovered from the customers. Moreover, expenditure on account of MR Cess, paid to the State Government of Rajasthan, is clearly an allowable expenditure like other cess, levies or indirect taxes. Therefore, the disallowance made by the AO is not correct. The AO is directed to verify whether the MR cess of Rs. 60,31,23,017/- has been paid in accordance with the provisions of Sec. 43B, and allow deduction, accordingly.

The Ld. CIT(A) decided the issue by observing that the provision of section 145A are

not applicable because the cess has been levied with retrospective which could not

be recovered from the customers. The factum of levy of MR Cess with retrospective

effect is not controverted by the Revenue. Therefore, in our considered view, there

is no infirmity into the order of the Ld. CIT(A) same is hereby affirmed. This ground

of the Revenue is dismissed.

allowed for statistical purpose.

pertaining to the A.Y. 2011-12.

Assessee’s appeal in ITA No. 256/JP/2015.

First we take up assessee’s appeal in ITA No. 256/JP/2015 pertaining to the

AY 2011-12.

The assessee has raised the following grounds of appeal:-

72 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

“1. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 6,61,487/- out of rural development expenses by holding that same is not incurred wholly and exclusively for the purpose of business. 2. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO in disallowing the claim of amortization of mining and leashold land of Rs. 14,04,582/-. He further erred in disallowing this claim only on the basis on the finding of his predecessor on this issue in AY 2010- 11 ignoring that this claim was allowed in all earlier year upto AY 2009- 10 in regular assessment proceeding and that the claim is also supported by the decision of ITAT, Hyderabad Bench in case of NMDC Ltd. Vs. JCIT in ITA No. 714/Hyd/ 2012 dt. 28.02.2014. 3. The Ld. IT(A) has erred on facts an in law in confirming the action of AO by holding that receipts from sale of CERs cannot be considered as income derived from the business of power generation undertaking and therefore deduction u/s 80IA is not allowable on such receipt. 4. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO in disallowing the claim of deduction of Rs. 4,69,61,000/- in respect of mine closure expenses made in course of assessment proceedings. He has further erred in confirming the disallowance only on the basis of finding of his predecessor in AY 2010-11. 5. The Ld. CIT(A) has erred on facts and in law in directing the AO to apportion the establishment and financial expenditure of Rs. 23,61,30,172/- on the basis of turnover of the mining activity and wind power generation activity for allowing deduction u/s 80IA on the income from generation of power ignoring the fact that expenditure relatable to power generation undertaking has already ;been debited for working out the income of the said units. 6. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 5,49,980/- out of social welfare expenses. 7. The Ld. CIT(A) has erred on fats and in law in confirming the disallowance of Rs. 6,725/- u/s 14A of the IT Act, 1961. 8. The assessee craves right to add, alter or amend any of the grounds of the appeal. 9. The appropriate cost be awarded to the assessee.”

pertaining to the AY 2007-08. The Respective Representative of the Parties have

adopted the same argument as were adopted in the ITA No. 295/JP/2015 as

ground no. 3. We have decided this ground by observing as under:-

“14. Ground no. 3 is against deleting the disallowance in respect of rural development and afforestation, plantation and environment expenses of Rs.

73 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

1,76,01,218/-. The Ld. Departmental Representatives supported the order of the Assessing Officer, he submitted that Ld. CIT(A) was not justified in deleting the disallowance as these expenses were not relatable to the business of the assessee. 14.1 On the contrary, the Ld. Counsel for the assesee reiterated the submissions ad made in the written brief. 14.2 We have heard the rival contentions, perused the material available on record. We find that Ld. CIT(A) has given a finding on fact by observing as under:- “6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld.

74 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”. 14.3 This finding on fact is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. The ground of the Revenue’s appeal is dismissed.

67.1 Therefore, taking a consistent view, this ground of the assessee’s appeal is

dismissed.

the AY 2007-08. The Respective Representative of the Parties have adopted the

same argument as were adopted in the ITA No. 253/JP/2015 as ground no. 2.

We have decided this ground by observing as under:-

“5.2 Per contra Ld. Departmental Representatives submitted that this issue was before this Hon’ble Tribunal in Appeal of the Assessee pertaining to the year 2010-11 in ITA No. 124/JP/2014. The Hon’ble Tribunal was pleased to reject the claim of the assessee. He submitted that the issue of allowability of expenditure is u/s 37(1) of the Act has already been decided against the assessee. 5.3 We have heard the rival contentions, perused the material available on record. The identical issue was before this Hon’ble Tribunal in ITA No. 124/JP/2014 wherein the Tribunal has decided the issue against the assessee. The Tribunal has decided the issue as under:-

75 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

“20.1 The vexed question before us is the amortization of amount paid for getting the mining land/leasehold land by the assessee. Whether it is required to be treated as revenue expenditure and is required to be allowed u/s 37(1) of the Act or not? For the purpose of allowing any expenditure, it is necessary to look into the nature of expenditure. Section 37 of the Act provides as under:- “Sec. 37(1) : Any expenditure (not being expenditure of the nature descried in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head “profits and against of business of professions”.

[Explanation: For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]

[(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.] Section 37, therefore, contemplates that if the nature of expenditure is not the capital/personal in nature, and is laid out or expended wholly and exclusively for the purpose of business or profession, then it is required to be allowed by the authority. In our view, the expenditure which were incurred for getting the mining land on leasehold basis on mining basis, is to be treated as capital expenditure because the leas will have the enduring benefit for making such an investment. Our view is also fortified by the judgment of Hon’ble supreme Court in the matter of Aditya Mineral vs. CIT(1999) 8SSC 97 and also by the judgment of Hon’ble Supreme Court in the matter of Enterprising Enterprises vs. DCIT in the Civil Appeal No. 5655 of 2006 whereby Hon’ble Supreme Court has held that “where the entire amount of lease is paid either at a time or in installment, it would be capital expenditure”. Therefore, we are bound by the judgments passed by the

76 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Hon’ble Supreme Court. Thus the expenses laid by the assessee for the purposes of getting the mining land and leasehold land, are required to be treated as capital expenditure. The AO is, therefore, directed to treat the amount paid for getting the mining land and leasehold land as capital expenditure. The AO is further directed to give all benefits as a capital expenditure. The judgment relied upon by the assessee of Hon’ble Supreme Court in the matter of Madras Industrial Investment Corporation Ltd. Vs. CIT, 225 ITR 802 is not applicable to the facts and circumstances of the case. However, the judgment of Hon’ble Supreme court in the matter of Enterprising Enterprises (2007) 160 Taman 188 (SC) is squarely applicable to the facts and circumstances of the case and further the said judgment is of later date and, therefore, is required to be followed by the Bench. The judgment of NMDC Ltd. vs. JCIT (supra) is not applicable to the facts and circumstance of the case as in the said judgment the issue was not with respect to applicability of section 37 but was in respect to allowing the depreciation u/s 32 of the Act. The submission of the Ld. A/R for the Assessee is that the value of wasting asset will depreciate with the extraction of mineral, in our view, is preposterous. In our view, with passage of guidelines for protecting the environment, now it is the duty of the lesser/ assessee to submit and execute the mine closing plan so as to ensure that the land is used subsequent to the closure of the mining operation. Even otherwise, the mining activity is done not on the surface of the earth but on the core towards the lower side of the surface. The surface can be put to use for beneficial purpose after the term of lease/mining activity is over and it can be exploited for commercial purposes by the owner/appropriate authority. The contention of the assessee is that the assessee will be double taxed as the AO has already completed the assessment for the A.Y. 2011-12 on the basis of the written back of the amortization of the assets amounting to Rs. 5,79,10,137/-. In our view the assessee was taxed on the basis of the submissions made by it before the AO before the assessment for the A.Y. 2010-11 is finalized. The mere acceptance of the methodology by the AO for

77 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

A.Y. 2011-12 will not withhold us to decide the issue on merit and in law for the A.Y. 2010-11. As per the law and principle, the authorities situated in lower ladder/tire of hierarchy is required to abide law/adjudication done by the superior authority. This is only way the judicial system works. The AO is quasi judicial authority and bound to follow the principle laid down by the Tribunal and not the vice versa. Therefore, the submission of the Ld. A/R for the assessee on this count is also rejected. However, it is made clear that the assesee would be entitled to all benefits as available in law and the assessee will not be subjected to double taxation for the A.Y. 2011-12. The AO is directed to give effect to the above said direction and nullify the effect of double taxation, if any, as claimed by the assessee. In the light of the above, ground no. 2 of the assessee is dismissed.” 5.4 Therefore, taking a consistent view, apropos to ground no. 2 is directed to treat the expenditure as capital and grant relief if any available under the law. Thus, ground no. 2 is disposed of in the terms indicated hereinbefore. 68.1 For the same reasoning, this ground of the assessee’s appeal is disposed of.

pertaining to the AY 2007-08. The Respective Representative of the Parties have

adopted the same argument as were adopted in the ITA No. 253/JP/2015 as

ground no. 3. We have decided this ground by observing as under:-

“6. At the time of hearing Ground no. 3 was not pressed by the Ld. Counsel for the assessee. Therefore, ground no. 3 is dismissed as not pressed.”

69.1 For the same reasoning, this ground of the assessee’s appeal is dismissed as

not pressed.

78 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

deduction of Rs. 4,69,61,000/- in respect of mine closure expenses made in course

of assessment proceedings. The Ld. Counsel for the assessee reiterated the

submission as made in the written submissions. The Ld. Counsel for the assessee

submitted that as per this guidelines the assessee was fastened a liability of Rs.

4,69,61,000/- such liability which is an ascertained liability is allowable under the

mercantile system of accounting followed by the assessee. For allowability of claim

of expenditure, there is no requirement that it should be debited in the books of

accounts for this proposition the Ld. Counsel for the assesssee relied upon the

judgment of the Hon’ble Supreme Court rendered in the case of Satluj Cotton Mills

vs CIT 116 ITR 1. He submitted that the Tribunal in assessee’s own case pertaining

to the AY 2010-11 has decided the issue in favour of the assessee.

70.1 On the contrary, the Ld. Departmental Representatives supported the order of

the authorities below.

70.2 We have heard the rival contention, perused the material available on record.

The Ld. CIT(A) has rejected the claim by following the decision of his predecessor

pertaining to the AY 2010-11. The Co-ordinate Bench in assessee’s own case has

held as under:-

“30.5 Further the judgment in the matter of Bharat Earth Movers Ltd Vs. CIT, 112 Taxman 61 (SC) and Calcutta Company Ltd, 37 ITR are applicable. Beside, in the said judgment it was categorically held that the mines closure liability is a ascertained liability. As per matching principle as well as the mercantile system of accounting, the liability is allowable in principle under section 37 of the Act. In view of the above, the ground of the assessee is allowed and the AO is directed to give the benefit of

79 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

deduction of Rs. 2,94,04,000/- towards mines closure expenses in the A.Y. 2010-11.” The facts are identical in this year, as well taking a consistent view, the AO is

directed to given benefit of deduction of Rs. 4,69,61,000/- in respect of mine closure

expenses. This ground of the assessee’s appeal is allowed.

AY 2007-08. The Respective Representative of the Parties have adopted the same

argument as were adopted in the ITA No. 253/JP/2015 as ground no. 4. We

have decided this ground by observing as under:-

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee stated that in respect of the unallocated expenses of Rs. 15,67,45,594/- that none of these expenses pertain to the 80IA undertakings in as much as the entire operation and the maintenance of the power plant had been given to Suzlon Energies Ltd. Therefore, the assessee had not to incur any expenditure on salary/employees benefit, travelling conveyance and other expenses debited under the various heads of expense in corporate office/head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work allocation, contract awarding, control etc. was required for operating these power plants by the corporate office/head office. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1 before this Tribunal that this issue was not taken while recording the reasons for issuance of notice and the said disallowance is not in the nature of income escaping assessment as per Explanation 3 to section 147. After considering the totality of the fact, we restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expenditure related to operation and maintenance was borne by Suzlon Energies Ltd.

80 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

71.1 For the same reasoning, this ground of the assessee’s appeal is allowed for

statistical purpose, and issue is restored to the file of AO for decision afresh.

claimed as social welfare expenses. The Ld. Counsel for the assessee reiterated the

submissions as made in the written brief and he submitted that expenditure was

incurred by the assessee either for publicity or toward its economic and social

obligation. He placed reliance on the decision of Supreme Court rendered in the

case of Shri Venkata Satyanarayana Rice Mill Contractors Co. Vs. CIT 223 ITR

101(SC) and also the decision the Co-ordinate Bench rendered in the case of

Hindustan Petroleum Corporation Ltd. Vs. DCIT 96 ITD 186 (Mum.), the Hon’ble

Madras High Court rendered in the case of CIT Vs. Madras Refinery Ltd. 266 ITR 170

(Mad.) (HC) and CIT Vs. India Radiators Ltd. 236 ITR 719 (Mad.) (HC).

72.1 On the contrary, the Ld. Departmental Representatives supported the order of

the authorities below.

72.3 We have heard the rival contentions; we are unable to accept the contentions

of the Ld. Counsel for the assessee that the expenditure is allowable as the same

was related to the business of the assessee. The assessee has not furnished

material suggesting that these expenses were made for the purpose of business of

the assessee as the amount u/s 37(1) is allowable only when it is expended wholly

and exclusively for the business of purpose. Therefore, we do not see any reason to

interfere into the order of the Ld. CIT(A) same is hereby affirmed. This ground is

dismissed.

the AY 2008-09. The Respective Representative of the Parties have adopted the

81 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

same argument as were adopted in the ITA No. 254/JP/2015. We have decided

this ground by observing as under:-

“38.3 We find merit into the contentions of the assessee that on investment of Rs. 1 lakhs the assessee had earned dividend income on Rs. 10 lakhs only in respect of the shares of Mayura Inorganics Ltd. This fact is not disputed by the Revenue. In our considered view, the operation of Rule 8D is not automatic. The assessing officer is required to satisfy himself about the correctness of the claim that no expenditure was incurred by the assessee. The Assessing Officer in the present case has accepted that there is not direct nexus between the investment and expenses so incurred. After considering the totality of the fact and keeping in view the sum of Rs. 1,138/- had been disallowed by invoking the provision of Rule 8D without being satisfied about the claim of the assessee that no administrative expenses were incurred for earning of the exempt income. We direct the Assessing Officer to delete the disallowance. This ground of the assessee’s appeal is allowed.” 73.1 For the same reasoning, this ground is allowed.

record under the facts of the present case, we do not see any reason to award the

cost to assessee. Hence, this ground is dismissed.

for statistical purpose

ITA No. 298/JP/2015

AY 2011-12.

The Revenue has raised the following grounds of appeal:-

82 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

“1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 20,00,000/- towards contribution made by the assessee towards State Renewal Fund.

contribution made by assessee towards State Renewal Fund. At the outset, the Ld.

83 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Counsel submitted that this issue is covered in favour of the assessee by the

judgment of the Hon’ble Rajasthan High Court rendered in the case of CIT vs.

Jodhpur Co-operative Marketing Society (2005) 275 ITR 372(Raj.)

78.1 On the contrary, Ld. Departmental Representatives supported the order of the

Assessing Officer.

78.2 We have heard the rival contentions, we find that the Ld. CIT(A) has decided

the issue in para 2.1 and 2.2 by following the judgments of the Hon’ble High Court

as under:-

“2.1. In this year, the assessee has claimed expenditure of Rs. 20,00,000/- in respect of contribution to State Renewal Fund. This issue also arose in the case of appellant in AY 2010-11 and earlier years. The main points of the Assessment Order, on this issue, have been narrated in the appeal order of CIT(A)-II, Jaipur (Appeal no. 325/12-13, dated 05.12.2013) for A.Y. 2010-11. The main points of the submissions of the appellant, on this issue, have been narrated the above appeal order. Therefore, the assessment order and the submissions of the appellant are not being again narrated in this order for the sake of brevity. In AY 2010-11, the CIT(A)-II, Jaipur, has held as under-

“Assessing Officer disallowed contribution made to State Renewal Fund by treating the same as diversion of income. However, appellant submitted that this issue is covered in its favour by the order of ITAT. It is seen that similar addition was made in AY 2006-07 in the case of the appellant, but it was decided by Hon’ble ITAT Bench ‘A’ Jaipur in ITA No. 783/JP/2009 & 740/JP/2009 in AY 2006-07 through order dated 31.03.2010 in f avour of the appellant, where in para 15 Hon’ble Tribunal relied upon its decision dated 22.05.2009 in case of Rajasthan State Seeds Corporation Ltd, wherein relying upon Hon’ble Rajasthan High Court decisions in the case of CIT Vs. Rajasthan Spinning and Weaving Mills Ltd. 274 ITR 465 and CIT vs. Shri Rajasthan Syntex Ltd. 221 CTR 410 held that the contribution made by the assessee to a Public Welfare Fund which is connected or related with his business is an allowable deduction u/s 37 as it was provided for the benefit of the employees. Hon’ble Tribunal distinguished the decision of Hon’ble Rajasthan High Court in the case of CIT Vs. Jodhpur Co-operative Marketing Society 275 ITR 372 (Raj) stating that in that case the amount was set apart for the shareholders of the society whereas in the

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present case amount was provided for the benefit of the employees and the contribution made to State Renewal Fund was found allowable u/s 37(1). Respectfully following the decision of ITAT in appellant’s own case, addition made by the AO is deleted. Following the above order of the CIT(A)-II, Jaipur and the order of 2.2 ITAT, Jaipur in the case of the assessee, the disallowance made by the AO is directed to be deleted. This ground is allowed.”

78.3 Since the Ld. CIT(A) rightly followed the judgment of the Rajasthan High

Court in the case of CIT vs. Jodhpur Co-operative Marketing Society(2005) 275 ITR

372 (Raj.). We do not see any reason to interfere into the order of the Ld. CIT(A),

same is hereby affirmed. This ground is dismissed.

the AY 2007-08. The Respective Representative of the Parties have adopted the

same argument as were adopted in the ITA No. 295/JP/2015. We have decided

this issue by observing as under:-

“14.2 We have heard the rival contentions, perused the material available on record. We find that Ld. CIT(A) has given a finding on fact by observing as under:- “6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the

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appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld. 6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”. 14.3 This finding on fact is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. The ground of the Revenue’s appeal is dismissed.”

79.1 For the same reasoning, this ground is dismissed.

on account of compensation paid to farmers. The Ld. Departmental Representatives

supported the order of the Assessing Officer and submitted that Ld. CIT(A) was not

justified in deleting the addition. He submitted that the Assessing Officer has rightly

held the expenditure incurred on compensation paid to the farmers for excavation of

gypsum, is not allowable, being capital expenditure.

86 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

80.1 On the contrary, the Ld. Counsel for the assessee supported the order of the

Ld. CIT(A) and submitted that there is no infirmity into the order of the Ld. CIT(A).

80.2 We have heard the rival contentions, perused the material available on

record and gone through the order of the authorities below. The Ld. CIT(A) has

followed the decision of his predecessor pertaining to AY 2010-11. Against this

order, the Revenue had filed an appeal before this Tribunal in ITA No. 144/JP/2014

wherein the Tribunal was pleased to dismiss the ground raised by the Revenue.

Therefore, taking a consistent view, for the same reasoning, the ground raised in

this appeal is also dismissed. Ground no. 3 of the Revenue’s appeal is dismissed.

account of prior period expenses. Ld. D/R supported the order of the AO.

81.1 On the contrary, the Ld. Counsel for the assessee supported the order of the

AO and submitted that this issue also cropped up in the Assessment Year 2010-11

and matter traveled up to the stage of Tribunal wherein the issue was decided in

favour of the assessee. The facts are identical in this year also since the expenses

have crystallized in the year under consideration. Therefore, the Ld. CIT(A) was

justified in deleting the addition

81.2 We have heard the rival contention, we have find that in Ld. CIT has given

finding on fact in para 6.1 and 6.2 of his order as under:-

“6.1 In this year, the assessee has claimed prior period expenditure of Rs. 1,75,79,531/-. This issue also arose in the cae of appellant in AY 2010-11 and earlier years. The main points of the Assessment order, on this issue, have been narrated in the appeal order of CIT(A)-II, Jaipur (Appeal no. 325/12-13, dated 05.12.2013) for AY 2010-11. The main points of the submissions of the appellant, on this issue, have been narrated the above

87 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

appeal order. Therefore, the assessment order and the submissions of the appellant are not being again narrated in this order for the sake of brevity. In AY 2010-11, the CIT(A)-II, Jaipur, has held as under- “From the submission of the appellant it is clear that Hon’ble ITAT, Jaipur Bench has been allowing Prior Period Expenses in the case of various Government Undertakings in the year in which such expenses are finally sanctioned and approved. Even in the appellant’s own case the issue has been decided in favour of the appellant in AY 2000-01 by Hon’ble Jaipur Bench ITAT vide order dated 22-12-2006. My predecessors have allowed prior period expenses in orders dated 10.08.2011 in AY 2008-09 and 18.10.2012 in AY 2009-10. Respectfully following Hon’ble ITAT’s order in the case of appellant in AY 2000-01 dated 22-12-2006 in ITA No. 600/JP/2003, the AO is directed to delete the addition of Rs. 4,40,113 because the table in the appellant’s submission shows that the liability for the expenses got crystallized in the year under consideration.

6.2 following the above order of CIT(A)-II, Jaipur and the orders of the ITAT, Jaipur, in the case of the assessee, the above disallowance is directed to be deleted. This ground is allowed.” 81.3 This finding is not controverted by the Revenue by placing any contrary

material on record and also no change into facts and circumstances is pointed out.

Therefore, this ground of the Revenue’s appeal is dismissed.

pertaining to the AY 2007-08. The Respective Representative of the Parties have

adopted the same argument as were adopted in the ITA No. 295/JP/2015 as

ground no. 1. We have decided this issue by observing as under:-

“12.3 Since, the Ld. CIT(A) has followed the judgment of the Hon’ble Andhra

Pradesh High Court rendered in the case of My Home Power Ltd. 365 ITR

82(supra) where the Hon’ble court, under the identical facts confirmed the

view of the Tribunal in holding that Carbon credit is not an offshoot of

business but an offshoot of environmental concerns. No asset is generated in

cost of business but it is generated due to environmental concerns.

88 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Therefore, on sale of excess carbon credits correctly held by the Tribunal as a

capital receipt. In view of the judgment of Hon’vble Andhra Pradesh High

Court, we do not see any reason to disturb the finding of Ld. CIT(A), same is

hereby affirmed. The Revenue has not brought to our notice any contrary

biding precedent. Hence, this ground of Revenue’s appeal is dismissed.”

82.1 For the same reasoning, this ground of the Revenue’s appeal is dismissed.

pertaining to the AY 2007-08. The Respective Representative of the Parties have

adopted the same argument as were adopted in the ITA No. 295/JP/2015 as

ground no. 2. We have decided this issue by observing as under:-

“13.2 We have heard the rival contentions. We find that the assessee had

also challenged the finding of the Ld. CIT(A) on this issue in ITA No.

253/JP/2015 and we have restored the issue to the file of the Assessing

Officer by observing as under:-

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee stated that in respect of the unallocated expenses of Rs. 15,67,45,594/- that none of these expenses pertain to the 80IA undertakings in as much as the entire operation and the maintenance of the power plant had been given to Suzlon Energies Ltd. Therefore, the assessee had not to incur any expenditure on salary/employees benefit, travelling conveyance and other expenses debited under the various heads of expense in corporate office/head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work allocation, contract awarding, control etc. was required for operating these power plants by the corporate office/head office. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1

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before this Tribunal that this issue was not taken while recording the reasons for issuance of notice and the said disallowance is not in the nature of income escaping essessment as per Explanation 3 to section 147. After considering the totality of the fact, we restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expenditure related to operation and maintenance was borne by Suzlon Energies Ltd.” 13.3 Therefore, in the light of above this ground of the Revenue’s appeal is

also restored to the file of the Assessing Officer for decision afresh.”

83.1 For the same reasoning this ground is allowed for statistical purpose and AO

is directed to decided the issue afresh.

mines development expenses. Ld. Departmental Representatives supported the

order of the Assessing Officer.

84.1 On the contrary, Ld. Counsel for the assessee supported the order of the Ld.

CIT(A).

84.2 We have heard the rival contention, perused the material available on record.

The Ld. CIT(A) has given finding on fact in para 5.3 of his order as under:

“5.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The AO has disallowed mines development expenditure of Rs. 32,75,233/- on the mistaken belief that it pertains to the Sonari Lignite Mines. The appellant has clarified that this expenditure pertains to Kasanu and Matasukh Mines at Nagor which are already operational and mines development expenses are allowable u/s 35E. The appellant has stated that it has itself added back the mine development expenses of Sonari Lignite Mines and therefore, there is no question of any further disallowance. The contention of the appellant is correct. The AO is directed to delete the disallowance of the above mine development expenses

90 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

since it does not pertain to Sonari Lignite Mines but to operational Mines which have not completed ten years of operations. This ground is allowed.” 84.3 This finding is not controverted by the Revenue by placing any contrary

material on record. Therefore, this ground of the Revenue’s appeal is dismissed.

by the assessee on account of written back excess amortization. Ld. Departmental

Representatives supported the order of the AO.

85.1 On the contrary, Ld. Counsel for the assessee reiterated the submissions and

supported the order of the Ld. CIT(A).

85.2 We have heard the rival contentions, perused the material available on

record. We find that Ld. CIT(A) has given a finding on fact that appellant has

written back excess amortization during the year on account of change in the

method of amortization and credited its income by this amount. Amortization of

mining and leasehold land has been disallowed by the AO in the precedent year,

which has been confirmed by the Ld. CIT(A). This fact is not controverted by the

Revenue. Therefore, we do not see any reason to interfere into the order of the Ld.

CIT(A), same is hereby affirmed. Thus, this ground of Revenue’s appeal is

dismissed.

Revenue’s appeal in ITA No. 299/JP/2015 pertaining to the Assessment

Year 2012-13.

91 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

The parties have adopted the same argument as were in the Assessment year 2011-

12.

ITA No. 257/JP/2015

The assessee has raised the following grounds of appeal.

“1. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 1,30,98,423/- out of rural development expenses by holding that same is not incurred wholly and exclusively for the purpose of business. 2. The Ld. CIT(A) has erred on acts and in law in confirming the disallowance of mine development expenses of Rs. 6,64,150/- claimed u/s 35E in respect of Sonari Mines. 3. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO in disallowing the claim of amortization of mining and leasehold land of Rs. 25,62,746/-. He has further erred in disallowing this claim only on the basis of the finding of his predecessor on this issue in AY 2010-11 ignoring that this claim was allowed in all earlier years upto AY 2009-10 in regular assessment proceedings and that the claim is also supported by the decision of ITAT, Hyderabad Bench in case of NMDC Ltd. vs. JCIT in ITA No. 714/Hyd/ 2012 dt. 28.02.2014. 3.1 The Ld. CIT(A) has erred on facts and in law in directing the AO to reduce the excess amortization of mining/leasehold land of Rs. 5,79,10,137/- written back in the year under consideration on account of change in the method of amortization upon the finalization of appeal proceedings on this issue instead of directing the AO to reduce the same in computing the total income. 4. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO in reducing the claim of deduction u/s 80IA by Rs. 2,71,43,220/- by holding that liquidated damages received on account of shortfall in the minimum guaranteed generation of power units is not an income derived from the power generation business of windmills. 5. The Ld. CIT(A) has erred on facts and in law in directing the AO to apportion the establishment and financial expenditure of Rs. 27,45,50,244/- on the basis of turnover of the mining activity and wind power generation activity for allowing deduction u/s 80IA on the income from generation of power ignoring the fact that expenditure relatable to power generation undertaking has already been debited for working out the income of the said units. 6. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO in disallowing the claim of deduction of Rs. 7,96,71,000/- in respect of mine closure expenses provided in the books of accounts. He has further erred in confirming the disallowance only on the basis

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of finding of his predecessor in AY 2010-11 and also erred in not allowing the claim of mine closure expenses made in AY 2010-11 of Rs. 2,49,04,000/- and in AY 2011-12 of Rs. 4,69,61,000/- which is provided in the books in the year under consideration but disallowed in the respective years for the reason that the same is not provided in the books in those years. 7. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 4,20,073/- out of social welfare expenses. 8. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 35,475/- u/ 14A of the IT Act, 1961. He has further erred in confirming the disallowance at Rs. 35,475/- even when the amount of dividend earned is only Rs. 10,000/- 9. The assessee craves right to add, alter or amend any of the grounds of the appeal. 10. The appropriate cost be awarded to the assessee.”

account of Rural Development Expenses. We find that identical ground was raised

in ITA No. 253/JP/2015 in Assessment Year 2007-08. We have decided this ground

by observing as under:-

“8.3 We do not see any merit into the contention of the assessee that the issue of allowability of Rural Development Expenses was not the subject matter of reason recorded. It is settled position of law that once the assessment is validly reopened, the AO can also make assessment in respect of other issues which come to notice during the reopened assessment proceedings. Now, coming to the merit of disallowance, we find that the Ld. CIT(A) has given a finding on fact that the amount was not expended wholly and exclusively for the purpose of business. This finding on fact is not rebutted by the assessee. In the absence of material proving the expenses incurred for the business of the assessee same cannot be allowed u/s 37 of the Act. Hence, this ground of assessee’s appeal is dismissed.”

90.1 For the same reasoning, this ground is dismissed.

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6,64,150/-. The Ld. Counsel for the assessee submitted that Ld. CIT(A) was not

justified in confirming the addition.

91.1 On the contrary, the Ld. Departmental Representatives has supported the

order of the Ld. CIT(A).

91.2 We have heard the rival contentions, we find that the Ld. CIT(A) has given

finding on fact in para 5.3 as under:-

“5.3 I have perused the facts of the case, the assessment order and the submission of the appellant. The AO has disallowed mines development expenditure of Rs. 6,64,150/- pertaining to the Sonari Lignite Mines on the ground that the assessee has not been able to show that commercial production has been started in these mines during the previous year under consideration. The appellant has stated that it has filed a letter of acceptance dated 21.11.2011 from one M/s Durga Construction Co., Vodobara for the work of renewal of overburden, raising and loading of saleable lignite form these mines, transportation etc. I have examined the submissions of the appellant and find that it has not been able to shown that commercial production from these mines have commenced during the year under consideration. Mere acceptance of a work by a contractor does not enable the appellant to discharge its onus that commercial production has commenced during the year under consideration. Therefore, the disallowance of mines development expenses made by the AO is unheld. This ground is dismissed.” 91.3 This finding is not controverted by the assessee by placing any contrary

material on record as the Ld. CIT(A) has given finding on fact, that no commercial

production had commenced. Under these facts, we do not see any reason to

interfere into the order of the Ld. CIT(A), same is hereby affirmed. Therefore, this

ground of the assessee’s appeal is dismissed.

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was not justified in confirming the action of the Assessing Officer.

92.1 On the contrary, Ld. Departmental Representatives, supported the order of

the authorities below.

92.2 We have heard the rival contentions and we find that identical ground was

raised in ITA No. 253/JP/2015. We have decided this ground by observing as

under:-

5.3 We have heard the rival contentions, perused the material available on

record. The identical issue was before this Hon’ble Tribunal in ITA No.

124/JP/2014 wherein the Tribunal has decided the issue against the assessee.

The Tribunal has decided the issue as under:-

“20.1 The vexed question before us is the amortization of amount paid for getting the mining land/leasehold land by the assessee. Whether it is required to be treated as revenue expenditure and is required to be allowed u/s 37(1) of the Act or not? For the purpose of allowing any expenditure, it is necessary to look into the nature of expenditure. Section 37 of the Act provides as under:- “Sec. 37(1) : Any expenditure (not being expenditure of the nature descried in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head “profits and against of business of professions”.

[Explanation: For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]

[(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an

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assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.] Section 37, therefore, contemplates that if the nature of expenditure is not the capital/personal in nature, and is laid out or expended wholly and exclusively for the purpose of business or profession, then it is required to be allowed by the authority. In our view, the expenditure which were incurred for getting the mining land on leasehold basis on mining basis, is to be treated as capital expenditure because the leas will have the enduring benefit for making such an investment. Our view is also fortified by the judgment of Hon’ble supreme Court in the matter of Aditya Mineral vs. CIT(1999) 8SSC 97 and also by the judgment of Hon’ble Supreme Court in the matter of Enterprising Enterprises vs. DCIT in the Civil Appeal No. 5655 of 2006 whereby Hon’ble Supreme Court has held that “where the entire amount of lease is paid either at a time or in installment, it would be capital expenditure”. Therefore, we are bound by the judgments passed by the Hon’ble Supreme Court. Thus the expenses laid by the assessee for the purposes of getting the mining land and leasehold land, are required to be treated as capital expenditure. The AO is, therefore, directed to treat the amount paid for getting the mining land and leasehold land as capital expenditure. The AO is further directed to give all benefits as a capital expenditure. The judgment relied upon by the assessee of Hon’ble Supreme Court in the matter of Madras Industrial Investment Corporation Ltd. Vs. CIT, 225 ITR 802 is not applicable to the facts and circumstances of the case. However, the judgment of Hon’ble Supreme court in the matter of Enterprising Enterprises (2007) 160 Taman 188 (SC) is squarely applicable to the facts and circumstances of the case and further the said judgment is of later date and, therefore, is required to be followed by the Bench. The judgment of NMDC Ltd. vs. JCIT (supra) is not applicable to the facts and circumstance of the case as in the said judgment the issue was not with respect to applicability of section 37 but was in respect to allowing the depreciation u/s 32 of the Act. The submission of the Ld. A/R for the

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Assessee is that the value of wasting asset will depreciate with the extraction of mineral, in our view, is preposterous. In our view, with passage of guidelines for protecting the environment, now it is the duty of the lesser/ assessee to submit and execute the mine closing plan so as to ensure that the land is used subsequent to the closure of the mining operation. Even otherwise, the mining activity is done not on the surface of the earth but on the core towards the lower side of the surface. The surface can be put to use for beneficial purpose after the term of lease/mining activity is over and it can be exploited for commercial purposes by the owner/appropriate authority. The contention of the assessee is that the assessee will be double taxed as the AO has already completed the assessment for the A.Y. 2011-12 on the basis of the written back of the amortization of the assets amounting to Rs. 5,79,10,137/-. In our view the assessee was taxed on the basis of the submissions made by it before the AO before the assessment for the A.Y. 2010-11 is finalized. The mere acceptance of the methodology by the AO for A.Y. 2011-12 will not withhold us to decide the issue on merit and in law for the A.Y. 2010-11. As per the law and principle, the authorities situated in lower ladder/tire of hierarchy is required to abide law/adjudication done by the superior authority. This is only way the judicial system works. The AO is quasi judicial authority and bound to follow the principle laid down by the Tribunal and not the vice versa. Therefore, the submission of the Ld. A/R for the assessee on this count is also rejected. However, it is made clear that the assesee would be entitled to all benefits as available in law and the assessee will not be subjected to double taxation for the A.Y. 2011-12. The AO is directed to give effect to the above said direction and nullify the effect of double taxation, if any, as claimed by the assessee. In the light of the above, ground no. 2 of the assessee is dismissed.” 5.4 Therefore, taking a consistent view, apropos to ground no. 2 is

directed to treat the expenditure as capital and grant relief if any available

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under the law. Thus, ground no. 2 is disposed of in the terms indicated

hereinbefore.

92.3 For the same reasoning, this ground of the assessee is also disposed of in the

terms of the above direction.

92.4 Ground no. 3.1 is against directing the AO to reduce the excess amortization

of mining/leasehold land of Rs 5,79,10,137/- written back in the year under

consideration on account of change in method of amortization upon the finalization

of appeal proceedings on this issue.

92.5 On the contrary, Ld. Departmental Representatives supported the order of the

Assessing Officer.

92.6 We have heard the rival contention, perused the material available on record.

We find merit into the contention of the Ld. Counsel for the assessee when the Ld.

CIT(A) has accepted the change in method of amortization. He ought to have

directed the Assessing Officer to reduce the same in computing total income.

Therefore, we direct the AO to reduced the excess amortization of mining and

leasehold land written back in the year under appeal. Thus, the ground of the

assessee’s appeal is allowed.

2,71,43,220/- by holding that liquidated damages received on account of shortfall in

the minimum guaranteed generation power units is not an income derived from the

power generation business of windmills. The identical ground was raised in ITA

No. 254/JP/2015 as ground no. 4. The parties have adopted the same

arguments. We have decided the issue by observing as under:-

98 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

“35.3 We have heard the rival contentions, perused the material available on record. The Ld. CIT(A) disallowed the claim on the basis that the first degree in nexus with the operation of the undertaking is missing. The Ld. CIT(A) has followed the decision of his predecessor pertaining to the A.Y. 2010-11. Admittedly, this payment is related to the contract between the assessee and the supplier. The contract is related to the wind mill independent of operation of the wind mill the payment of liquidated damages would not arise. It is only on the operation of the wind mill and the output of the equipment so installed this liability of the payment of damages arises. In the absence of operation, the issue of payment of such damages would not arise. It is only when the wind mill becomes operational on short fall on the production such payment is made. Hon’ble Madhya Pradesh High Court in the case of CIT vs. Prakash Oils Ltd. (supra) held that the payment made as an liquidated damages for not honouring the contract for sale of oil and deoiled cake, such income is directly derived from industrial undertaking, hence eligible deduction u/s 80IA. In our view, the Ld. CIT(A) erred in holding that such income is not derived from the business of the undertaking. Therefore, we direct the Assessing Officer to allow deduction u/s 80IA on this receipt. This ground of the assessee’s appeal is allowed.” 93.1 Therefore, taking a consistent view, this ground is allowed in the light of our

decision in para 35.3 in ITA No. 254/JP/2015 pertaining to AY 2008-09. The AO is

directed to allow the deduction u/s 80IA on this receipt.

expenditure of Rs. 27,45,50,244/-. We find that identical issue was raised in ITA No

253/JP/2015 pertaining to AY 2007-08. We have decided this ground by observing

as under:-

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee stated that in respect of the unallocated expenses of Rs. 15,67,45,594/- that none of these expenses pertain to the 80IA undertakings

99 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

in as much as the entire operation and the maintenance of the power plant had been given to Suzlon Energies Ltd. Therefore, the assessee had not to incur any expenditure on salary/employees benefit, travelling conveyance and other expenses debited under the various heads of expense in corporate office/head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work allocation, contract awarding, control etc. was required for operating these power plants by the corporate office/head office. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1 before this Tribunal that this issue was not taken while recording the reasons for issuance of notice and the said disallowance is not in the nature of income escaping essessment as per Explanation 3 to section 147. After considering the totality of the fact, we restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expenditure related to operation and maintenance was borne by Suzlon Energies Ltd.” 94.1 Therefore, taking a consistent view, this issue is also allowed for statistical

purpose. The ground is restored to file of AO for decision afresh in the light of

above direction.

disallowing the claim of Rs. 7,96,71,000/- in respect of mine closure expenses

provided in the books of accounts. We find that identical issue was raised in ITA No

256/JP/2015 pertaining to AY 2011-12. We have decided this ground by observing

as under:-

“70. Ground no. 4 is confirming the action of the AO disallowed the claim of deduction of Rs. 4,69,61,000/- in respect of mine closure expenses made in course of assessment proceedings. The Ld. Counsel for the assessee reiterated the submission as made in the written submissions. The Ld.

100 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Counsel for the assessee submitted that as per this guidelines the assessee was fasten a liability of Rs. 4,69,61,000/- such liability which is an ascertained liability is allowable under the mercantile system of accounting followed by the assessee. For allowability of claim of expenditure, there is no requirement that it should be debited in the books of accounts for this proposition the Ld. Counsel for the assesssee relied upon the judgment of the Hon’ble Supreme Court rendered in the case of Satluj Cotton Mills vs CIT 116 ITR 1. He submitted that the Tribunal in assessee’s own case pertaining to the AY 2010- 11 has decided the issue in favour of the assessee. 70.1 On the contrary, the Ld. Departmental Representatives supported the order of the authorities below. 70.2 We have heard the rival contention, perused the material available on record. The Ld. CIT(A) has rejected the claim by following the decision of his predecessor pertaining to the AY 2010-11. The Co-ordinate Bench in assessee’s own case has held as under:- “30.5 Further the judgment in the matter of Bharat Earth Movers Ltd Vs. CIT, 112 Taxman 61 (SC) and Calcutta Company Ltd, 37 ITR are applicable. Beside, in the said judgment it was categorically held that the mines closure liability is a ascertained liability. As per matching principle as well as the mercantile system of accounting, the liability is allowable in principle under section 37 of the Act. In view of the above, the ground of the assessee is allowed and the AO is directed to give the benefit of deduction of Rs. 2,94,04,000/- towards mines closure expenses in the A.Y. 2010-11.” The facts are identical in this year, as well taking a consistent view, the AO is directed to given benefit of deduction of Rs. 4,69,61,000/- in respect of mine closure expenses. This ground of the assessee’s appeal is allowed.” 95.1 Therefore, taking a consistent view, this issue is also allowed. The AO is

directed to allow deduction on mine closure expenses.

101 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

facts are identical in ITA No. 256/JP/2015 pertaining to the AY 2011-12. The

Respective Representative of the Parties have adopted the same argument as were

adopted in the ITA No. 256/JP/2015 as ground no. 6. We have decided this

issue by observing as under:-

“72. Ground no. 6, is against confirming the disallowance of Rs. 5,49,980/-. The Ld. Counsel for the assessee reiterated the submissions as made in the written brief and he submitted that expenditure was incurred by the assessee either for publicity or toward its economic and social obligation. He placed reliance on the decision of Supreme Court rendered in the case of Shri Venkata Satyanarayana Rice Mill Contractors Co. Vs. CIT 223 ITR 101(SC) and also the decision the Co-ordinate Bench rendered in the case of Hindustan Petroleum Corporation Ltd. Vs. DCIT 96 ITD 186 (Mum.), the Hon’ble Madras High Court rendered in the case of CIT Vs. Madras Refinery Ltd. 266 ITR 170 (Mad.) (HC) and CIT Vs. India Radiators Ltd. 236 ITR 719 (Mad.) (HC). 72.1 On the contrary, the Ld. Departmental Representatives supported the order of the authorities below. 72.3 We have heard the rival contentions; we are unable to accept the contentions of the Ld. Counsel for the assessee that the expenditure is allowable as the same was related to the business of the assessee. The assessee has not furnished material suggesting that these expenses were made for the purpose of business of the assessee as the amount u/s 37(1) is allowable only when it is expend wholly and exclusively for the business of purpose. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A) same is hereby affirmed. This ground is dismissed.”

96.1 For the same reasoning, this ground of assessee’s appeal is dismissed.

102 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

pertaining to the AY 2008-09. The Respective Representative of the Parties have

adopted the same argument as were adopted in the ITA No. 254/JP/2015 We

have decided this issue by observing as under:-

“38.3 We find merit into the contentions of the assessee is that on investment of Rs. 1 lakhs the assessee has earned dividend income on Rs. 10 lakhs only in respect of the shares of Mayura Inorganics Ltd. This fact is not disputed by the Revenue. In our considered view, the operation of Rule 8D is not automatic. The assessing officer is required to satisfy himself about the correctness of the claim that no expenditure was incurred by the assessee. The Assessing Officer in the present case has accepted that there is not direct nexus between the investment and expenses so incurred. After considering the totality of the fact and keeping in view the sum of Rs. 1,138/- had been disallowed by invoking the provision of Rule 8D without being satisfy about the claim of the assessee that no administrative expenses were incurred for earning of the exempt income. We direct the Assessing Officer to delete the disallowance. This ground of the assessee’s appeal is allowed.” 97.1 For the same reasoning, this ground is allowed. The AO is directed to delete

the disallowance.

the AY 2011-12. The Respective Representative of the Parties have adopted the

same argument as were adopted in the ITA No. 256/JP/2015 as ground no. 9.

We have decided this issue by observing as under:-

“75. Ground no. 9 is prayer for cost, the assessee has not placed any material on record under the facts of the present case, we do not see any reason to award the cost to assessee. Therefore, we do not seen any reason

103 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

to interfere into the order of the Ld. CIT(A), same is hereby affirmed, this ground of the assessee’s appeal is dismissed.” 99.1 Therefore, taking a consistent view, this ground is dismissed.

ITA No. 299/JP/2015

AY 2012-13.

The Revenue has raised the following grounds of appeal:-

“1. Whether on the facts and in the circumstances of the cases and in law the Ld. CIT(A) erred in deleting the addition of Rs. 20,00,000/- towards contribution made by the assessee towards State Renewal Fund. 2. Whether on the facts and in the circumstances of the cases and in law the Ld. CIT(A) erred in allowing relief of Rs. 11,37,196 out of expenditure incurred by the assessee under the head ‘Rural Development Expenses’ and Rs. 50,91,457/- under the head ‘afforestation, plantation and environment expenses’ without appreciating the fact that these expenses have not been incurred in connection with the business of the assessee. 3. Whether on the facts and in the circumstances of the cases and in law the Ld. CIT(A) erred in deleting the addition of Rs. 8,20,55,029/- made by the AO on account of compensation paid to farmers for excavation of Gypsum. 4. Whether on the facts and in the circumstances of the cases and in law the Ld. CIT(A) erred in deleting the addition of Rs. 1,09,30,255/- made by the AO on account of prior period expenses. 5. Whether on the facts and in the circumstances of the cases and in law the Ld. CIT(A) erred in allowing relief to the assessee u/s 80IA amounting to Rs. 1,37,05,264/- by not appreciating the facts brought out by the AO in assessment order with regard to establishment and financial expenses. 6. The appellant craves its rights to add, amend or alter any of the grounds on or before the hearing.

pertaining to the AY 2011-12. The Respective Representative of the Parties have

104 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

adopted the same argument as were adopted in the ITA No. 298/JP/2015 as

ground no. 1. We have decided this issue by observing as under:-

“78.2 We have heard the rival contentions, we find that the Ld. CIT(A) has

decided the issue in para 2.1 and 2.2 by following the judgments of the

Hon’ble High Court as under:-

“2.1. In this year, the assessee has claimed expenditure of Rs. 20,00,000/- in respect of contribution to State Renewal Fund. This issue also arose in the case of appellant in AY 2010-11 and earlier years. The main points of the Assessment Order, on this issue, have been narrated in the appeal order of CIT(A)-II, Jaipur (Appeal no. 325/12-13, dated 05.12.2013) for A.Y. 2010-11. The main points of the submissions of the appellant, on this issue, have been narrated the above appeal order. Therefore, the assessment order and the submissions of the appellant are not being again narrated in this order for the sake of brevity. In AY 2010-11, the CIT(A)-II, Jaipur, has held as under-

“Assessing Officer disallowed contribution made to State Renewal Fund by treating the same as diversion of income. However, appellant submitted that this issue is covered in its favour by the order of ITAT. It is seen that similar addition was made in AY 2006-07 in the case of the appellant, but it was decided by Hon’ble ITAT Bench ‘A’ Jaipur in ITA No. 783/JP/2009 & 740/JP/2009 in AY 2006-07 through order dated 31.03.2010 in f avour of the appellant, where in para 15 Hon’ble Tribunal relied upon its decision dated 22.05.2009 in case of Rajasthan State Seeds Corporation Ltd, wherein relying upon Hon’ble Rajasthan High Court decisions in the case of CIT Vs. Rajasthan Spinning and Weaving Mills Ltd. 274 ITR 465 and CIT vs. Shri Rajasthan Syntex Ltd. 221 CTR 410 held that the contribution made by the assessee to a Public Welfare Fund which is connected or related with his business is an allowable deduction u/s 37 as it was provided for the benefit of the employees. Hon’ble Tribunal distinguished the decision of Hon’ble Rajasthan High Court in the case of CIT Vs. Jodhpur Co-operative Marketing Society 275 ITR 372 (Raj) stating that in that case the amount was set apart for the shareholders of the society whereas in the present case amount was provided for the benefit of the employees and the contribution made to State Renewal Fund was found allowable u/s 37(1). Respectfully following the decision of ITAT in appellant’s own case, addition made by the AO is deleted.

105 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

2.2 Following the above order of the CIT(A)-II, Jaipur and the order of ITAT, Jaipur in the case of the assessee, the disallowance made by the AO is directed to be deleted. This ground is allowed.”

78.3 Since the Ld. CIT(A) rightly followed the judgment of the Rajasthan

High Court in the case of CIT vs. Jodhpur Co-operative Marketing

Society(2005) 275 ITR 372 (Raj.). We do not see any reason to interfere into

the order of the Ld. CIT(A), same is hereby affirmed. This ground is

dismissed.

102.1 Therefore, taking a consistent view, this ground is dismissed.

expenses related to afforestation, plantation and environment. The facts are

identical to the facts in ITA No. 298/JP/2015 pertaining to the AY 2011-12. The

Respective Representative of the Parties have adopted the same argument as were

adopted in the ITA No. 298/JP/2015 as ground no. 2. We have decided this

issue by observing as under:-

“79. Ground no. 2, the facts are identical in ITA No. 295/JP/2015

pertaining to the AY 2007-08. The Respective Representative of the Parties

have adopted the same argument as were adopted in the ITA No.

295/JP/2015. We have decided this issue by observing as under:-

“14.2 We have heard the rival contentions, perused the material available on record. We find that Ld. CIT(A) has given a finding on fact by observing as under:- “6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the

106 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd. ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld. 6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”. 14.3 This finding on fact is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. The ground of the Revenue’s appeal is dismissed.”

79.1 For the same reasoning, this ground is dismissed.”

107 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

103.1 As the finding of Ld. CIT(A) that expenses were incurred for the business

purpose is not rebutted by the Revenue Therefore, taking a consistent view, this

ground of Revenue’s appeal is dismissed.

298/JP/2015 pertaining to the AY 2011-12. The Respective Representative of the

Parties have adopted the same argument as were adopted in the ITA No.

298/JP/2015 as ground no. 3. We have decided this issue by observing as

under:-

“80. Ground no. 3, is against the deleting the addition o Rs. 3,16,22,808/-. The Ld. Departmental Representatives supported the order of the Assessing Officer and submitted that Ld. CIT(A) was not justified in deleting the addition. He submitted that the Assessing Officer has rightly held the expenditure incurred on compensation paid to the farmers for excavation of gypsum. 80.1 On the contrary, the Ld. Counsel for the assessee supported the order of the Ld. CIT(A) and submitted that there is no infirmity into the order of the Ld. CIT(A). 80.2 We have heard the rival contentions, perused the material available on record and gone through the order of the authorities below. The Ld. CIT(A) has followed the decision of his predecessor pertaining to AY 2010-11 against this order. The Revenue had filed an appeal before this Tribunal in ITA No. 144/JP/2014 wherein the Tribunal had dismissed the ground raised by the Revenue. Therefore, taking a consistent view, the ground raised in this appeal is also dismissed. Ground no. 3 of the Revenue’s appeal is dismissed.”

104.1 Therefore, taking a consistent view, this ground of Revenue’s appeal is

dismissed.

108 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

pertaining to the AY 2011-12. The Respective Representative of the Parties have

adopted the same argument as were adopted in the ITA No. 298/JP/2015 as

ground no. 4. We have decided this issue by observing as under:-

“81. Ground no. 4, is against deleting the addition of Rs. 1,75,79,531/- on

account of prior period expenses. Ld. D/R supported the order of the AO.

81.1 On the contrary, the Ld. Counsel for the assessee supported the order

of the AO and submitted that this issue also cropped up in the Assessment

Year 2010-11 and matter traveled up to the stage of Tribunal. The facts are

identical in this year also since the expenses have crystallized in the year

under consideration.

81.2 We have heard the rival contention, we have find that in Ld. CIT has

given finding on fact in para 6.1 and 6.2 of his order as under:-

“6.1 In this year, the assessee has claimed prior period expenditure of Rs. 1,75,79,531/-. This issue also arose in the cae of appellant in AY 2010-11 and earlier years. The main points of the Assessment order, on this issue, have been narrated in the appeal order of CIT(A)-II, Jaipur (Appeal no. 325/12-13, dated 05.12.2013) for AY 2010-11. The main points of the submissions of the appellant, on this issue, have been narrated the above appeal order. Therefore, the assessment order and the submissions of the appellant are not being again narrated in this order for the sake of brevity. In AY 2010-11, the CIT(A)-II, Jaipur, has held as under- “From the submission of the appellant it is clear that Hon’ble ITAT, Jaipur Bench has been allowing Prior Period Expenses in the case of various Government Undertakings in the year in which such expenses are finally sanctioned and approved. Even in the appellant’s own case the issue has been decided in favour of the appellant in AY 2000-01 by Hon’ble Jaipur Bench ITAT vide order dated 22-12-2006. My predecessors have allowed prior period expenses in orders dated 10.08.2011 in AY 2008-09 and 18.10.2012 in AY 2009-10. Respectfully following Hon’ble ITAT’s order

109 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

in the case of appellant in AY 2000-01 dated 22-12-2006 in ITA No. 600/JP/2003, the AO is directed to delete the addition of Rs. 4,40,113 because the table in the appellant’s submission shows that the liability for the expenses got crystallized in the year under consideration.

6.2 following the above order of CIT(A)-II, Jaipur and the orders of the ITAT, Jaipur, in the case of the assessee, the above disallowance is directed to be deleted. This ground is allowed.” 81.3 This finding is not controverted by the Revenue by placing any contrary

material on record. Therefore, this ground of the Revenue’s appeal is

dismissed.”

105.1 Therefore, taking a consistent view, this ground is dismissed.

pertaining to the AY 2012-13. The Respective Representative of the Parties have

adopted the same argument as were adopted in the ITA No. 257/JP/2015 as

ground no. 5. We have decided this issue by observing as under:-

“94. Ground no. 5, is against apportion the establishment and financial

expenditure of Rs. 27,45,50,244/-. We find that identical issue was raised in

ITA No 253/JP/2015 pertaining to AY 2007-08. We have decided this ground

by observing as under:-

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee stated that in respect of the unallocated expenses of Rs. 15,67,45,594/- that none of these expenses pertain to the 80IA undertakings in as much as the entire operation and the maintenance of the power plant had been given to Suzlon Energies Ltd. Therefore, the assessee had not to incur any expenditure on salary/employees benefit, travelling conveyance and other expenses debited under the various heads of expense in corporate office/head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work

110 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

allocation, contract awarding, control etc. was required for operating these power plants by the corporate office/head office. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1 before this Tribunal that this issue was not taken while recording the reasons for issuance of notice and the said disallowance is not in the nature of income escaping essessment as per Explanation 3 to section 147. After considering the totality of the fact, we restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expenditure related to operation and maintenance was borne by Suzlon Energies Ltd.” 94.1 Therefore, taking a consistent view, this issue is also allowed for

statistical purpose. The ground is restored to file of AO for decision afresh in

the light of above direction.”

106.1 Therefore, taking a consistent view, this ground is restored to the file of AO

for decision afresh in the light of above direction.

(Assessee)pertaining to the AY 2013-14 & ITA No. 1097/JP/2016

(Revenue) pertaining to the AY 2013-14

ITA No. 1028/JP/2016

the AY 2013-13.

The Assessee has raised the following grounds of appeal:-

“1. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 23,95,996/- out of rural development expenses by

111 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

holding that same is not incurred wholly and exclusively for the purpose of business. 2. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of mine development expenses of Rs. 6,64,150/- claimed u/s 35E in respect of Sonari Mines. 3. The Ld. CIT(A) has erred on facts and in law in confirming the action of AO in disallowing the claim of amortization of mining and leasehold land of Rs. 1,57,17,105/- and 8,18,720/- respectively, ignoring that this claim was allowed in all earlier years upto AY 2009-10 in regular assessment proceedings and that the claim is also supported by the decision of ITAT, Hyderabad Bench in case of NMDC Ltd. Vs. JCIT in ITA No. 714/Hyd 2012 dt. 28.02.2014. 4. The Ld. CIT(A) has erred on facts an in law in confirming the action of AO in reducing the claim of deduction of u/s 80IA by Rs. 3,92,20,020/- by holding that liquidated damages received on account of shortfall in the minimum guaranteed generation of power units is not an income derived from the power generation business of windmills ignoring the decision of Supreme Court in case of CIT vs. Meghalaya Steel 383 ITR 217. 5. The Ld. CIT(A) has erred on facts and in law in directing the AO to apportion the establishment and financial expenditure of Rs. 24,09,78,291/- on the basis of turnover of the mining activity and wind power generation activity for allowing deduction u/s 80IA on the income from generation of power ignoring the fact that expenditure relatable to power generation undertaking has already been debited for working out the income of the said units. 6. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 2,77,218/- out of social welfare expenses. 7. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 64,225/- u/s 14A of the Act, 1961. He has further erred in confirming the disallowance at Rs. 64,225/- even when the amount of dividend earned is only Rs. 10,000/- 8. The assessee craves right to add, alter or amend any of the appeal. 9. The appropriate cost be awarded to be assessee.”

find that identical ground was raised in ITA No. 257/JP/2015 as ground no. 1,

pertaining to Assessment Year 2011-12. We have decided this ground by observing

as under:-

“90. Ground no. 1, is against confirming the disallowance of Rs.

1,30,98,423/-. We find that identical ground was raised in ITA No.

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253/JP/2015 in Assessment Year 2007-08. We have decided this ground by

observing as under:-

“8.3 We do not see any merit into the contention of the assessee that the issue of allowability of Rural Development Expenses was not the subject matter of reason recorded. It is settled position of law that once the assessment is validly reopened, the AO can also make assessment in respect of other issues which come to notice during the reopened assessment proceedings. Now, coming to the merit of disallowance, we find that the Ld. CIT(A) has given a finding on fact that the amount was not expended wholly and exclusively for the purpose of business. This finding on fact is not rebutted by the assessee. In the absence of material proving the expenses incurred for the business of the assessee same cannot be allowed u/s 37 of the Act. Hence, this ground of assessee’s appeal is dismissed.” 90.1 For the same reasoning, this ground is dismissed.” 111.1 For the same reasoning, this ground is dismissed.

6,64,150/-. The facts are identical in ITA No. 257/JP/2015 as ground no. 2,

pertaining to the Assessment Year 2012-13. We have decided this ground by

observing as under:-

“91. Ground no. 2, is against disallowance of mine development expenses of Rs. 6,64,150/-. The Ld. Counsel for the assessee submitted that Ld. CIT(A) was not justified in confirming the addition. 91.1 On the contrary, the Ld. Departmental Representatives has supported the order of the Ld. CIT(A). 91.2 We have heard the rival contentions, we find that the Ld. CIT(A) has given finding on fact in para 5.3 as under:- “5.3 I have perused the facts of the case, the assessment order and the submission of the appellant. The AO has disallowed mines development expenditure of Rs. 6,64,150/- pertaining to the Sonari

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Lignite Mines on the ground that the assessee has not been able to show that commercial production has been started in these mines during the previous year under consideration. The appellant has stated that it has filed a letter of acceptance dated 21.11.2011 from one M/s Durga Construction Co., Vodobara for the work of renewal of overburden, raising and loading of saleable lignite form these mines, transportation etc. I have examined the submissions of the appellant and find that it has not been able to shown that commercial production from these mines have commenced during the year under consideration. Mere acceptance of a work by a contractor does not enable the appellant to discharge its onus that commercial production has commenced during the year under consideration. Therefore, the disallowance of mines development expenses made by the AO is unheld. This ground is dismissed.” 91.3 This finding is not controverted by the assessee by placing any contrary material on record as the Ld. CIT(A) has given finding on fact, that no commercial production had commenced. Under these facts, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. Therefore, this ground of the assessee’s appeal is dismissed.” 112.1 For the same reasoning, this ground is dismissed.

257/JP/2015 as ground no. 3 pertaining to the Assessment Year 2012-13. We

have decided this ground by observing as under:-

“92. Ground no. 3 the Ld. Counsel for the assessee submitted that the Ld. CIT(A) was not justified in confirming the action of the Assessing Officer. 92.1 On the contrary, Ld. Departmental Representatives, supported the order of the authorities below. 92.2 We have heard the rival contentions and we find that identical ground was raised in ITA No. 253/JP/2015. We have decided this ground by observing as under:-

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5.3 We have heard the rival contentions, perused the material

available on record. The identical issue was before this Hon’ble

Tribunal in ITA No. 124/JP/2014 wherein the Tribunal has decided the

issue against the assessee. The Tribunal has decided the issue as

under:-

“20.1 The vexed question before us is the amortization of amount paid for getting the mining land/leasehold land by the assessee. Whether it is required to be treated as revenue expenditure and is required to be allowed u/s 37(1) of the Act or not? For the purpose of allowing any expenditure, it is necessary to look into the nature of expenditure. Section 37 of the Act provides as under:- “Sec. 37(1) : Any expenditure (not being expenditure of the nature descried in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head “profits and against of business of professions”.

[Explanation: For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]

[(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.] Section 37, therefore, contemplates that if the nature of expenditure is not the capital/personal in nature, and is laid out or expended wholly and exclusively for the purpose of business or profession, then it is required to be allowed by the authority. In our view, the expenditure which were incurred for getting the mining land on leasehold basis on mining basis, is to be treated as capital expenditure because the leas will have the enduring benefit for making such an investment. Our view is also fortified by the judgment of

115 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Hon’ble supreme Court in the matter of Aditya Mineral vs. CIT(1999) 8SSC 97 and also by the judgment of Hon’ble Supreme Court in the matter of Enterprising Enterprises vs. DCIT in the Civil Appeal No. 5655 of 2006 whereby Hon’ble Supreme Court has held that “where the entire amount of lease is paid either at a time or in installment, it would be capital expenditure”. Therefore, we are bound by the judgments passed by the Hon’ble Supreme Court. Thus the expenses laid by the assessee for the purposes of getting the mining land and leasehold land, are required to be treated as capital expenditure. The AO is, therefore, directed to treat the amount paid for getting the mining land and leasehold land as capital expenditure. The AO is further directed to give all benefits as a capital expenditure. The judgment relied upon by the assessee of Hon’ble Supreme Court in the matter of Madras Industrial Investment Corporation Ltd. Vs. CIT, 225 ITR 802 is not applicable to the facts and circumstances of the case. However, the judgment of Hon’ble Supreme court in the matter of Enterprising Enterprises (2007) 160 Taman 188 (SC) is squarely applicable to the facts and circumstances of the case and further the said judgment is of later date and, therefore, is required to be followed by the Bench. The judgment of NMDC Ltd. vs. JCIT (supra) is not applicable to the facts and circumstance of the case as in the said judgment the issue was not with respect to applicability of section 37 but was in respect to allowing the depreciation u/s 32 of the Act. The submission of the Ld. A/R for the Assessee is that the value of wasting asset will depreciate with the extraction of mineral, in our view, is preposterous. In our view, with passage of guidelines for protecting the environment, now it is the duty of the lesser/ assessee to submit and execute the mine closing plan so as to ensure that the land is used subsequent to the closure of the mining operation. Even otherwise, the mining activity is done not on the surface of the earth but on the core towards the lower side of the surface. The surface can be put to use for beneficial purpose after the term of lease/mining activity is over and it can be exploited for commercial purposes by the owner/appropriate authority.

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The contention of the assessee is that the assessee will be double taxed as the AO has already completed the assessment for the A.Y. 2011-12 on the basis of the written back of the amortization of the assets amounting to Rs. 5,79,10,137/-. In our view the assessee was taxed on the basis of the submissions made by it before the AO before the assessment for the A.Y. 2010-11 is finalized. The mere acceptance of the methodology by the AO for A.Y. 2011-12 will not withhold us to decide the issue on merit and in law for the A.Y. 2010-11. As per the law and principle, the authorities situated in lower ladder/tire of hierarchy is required to abide law/adjudication done by the superior authority. This is only way the judicial system works. The AO is quasi judicial authority and bound to follow the principle laid down by the Tribunal and not the vice versa. Therefore, the submission of the Ld. A/R for the assessee on this count is also rejected. However, it is made clear that the assesee would be entitled to all benefits as available in law and the assessee will not be subjected to double taxation for the A.Y. 2011-12. The AO is directed to give effect to the above said direction and nullify the effect of double taxation, if any, as claimed by the assessee. In the light of the above, ground no. 2 of the assessee is dismissed.” 5.4 Therefore, taking a consistent view, apropos to ground no. 2 is

directed to treat the expenditure as capital and grant relief if any available

under the law. Thus, ground no. 2 is disposed of in the terms indicated

hereinbefore.

92.3 For the same reasoning, this ground of the assessee is also disposed of in terms of the above direction.” 113.1 For the same reasoning, this ground of the assessee is also disposed of in

terms of the above direction.

no. 4, pertaining to the Assessment Year 2012-13. We have decided this ground by

observing as under:-

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Rs. 2,71,43,220/- by holding that liquidated damages received on account of

shortfall in the minimum guaranteed generation power units is not an income

derived from the power generation business of windmills. The identical

ground was raised in ITA No. 254/JP/2015 as ground no. 4. The

parties have adopted the same arguments. We have decided the issue by

observing as under:-

“35.3 We have heard the rival contentions, perused the material available on record. The Ld. CIT(A) disallowed the claim on the basis that the first degree in nexus with the operation of the undertaking is missing. The Ld. CIT(A) has followed the decision of his predecessor pertaining to the A.Y. 2010-11. Admittedly, this payment is related to the contract between the assessee and the supplier. The contract is related to the wind mill independent of operation of the wind mill the payment of liquidated damages would not arise. It is only on the operation of the wind mill and the output of the equipment so installed this liability of the payment of damages arises. In the absence of operation, the issue of payment of such damages would not arise. It is only when the wind mill becomes operational on short fall on the production such payment is made. Hon’ble Madhya Pradesh High Court in the case of CIT vs. Prakash Oils Ltd. (supra) held that the payment made as an liquidated damages for not honouring the contract for sale of oil and deoiled cake, such income is directly derived from industrial undertaking, hence eligible deduction u/s 80IA. In our view, the Ld. CIT(A) erred in holding that such income is not derive from the business of the undertaking. Therefore, we direct the Assessing Officer to allow deduction u/s 80IA on this receipt. This ground of the assessee’s appeal is allowed.” 93.1 Therefore, taking a consistent view, this ground is allowed in the light

of our decision in para 35.3 in ITA No. 254/JP/2015 pertaining to AY 2008-

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09, this ground of assessee’s appeal is allowed. The AO is directed to allowed

deduction u/s 80IA on this receipt.”

114.1 For the same reasoning, this ground is allowed.

257/JP/2015 as ground no. 5 pertaining to the Assessment Year 2012-13. We

have decided this ground by observing as under:-

“94. Ground no. 5, is against apportion the establishment and financial

expenditure of Rs. 27,45,50,244/-. We find that identical issue was raised in

ITA No 253/JP/2015 pertaining to AY 2007-08. We have decided this ground

by observing as under

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the

assessee stated that in respect of the unallocated expenses of Rs.

15,67,45,594/- that none of these expenses pertain to the 80IA undertakings

in as much as the entire operation and the maintenance of the power plant

had been given to Suzlon Energies Ltd. Therefore, the assessee had not to

incur any expenditure on salary/employees benefit, travelling conveyance and

other expenses debited under the various heads of expense in corporate

office/head office. No strategic planning, day to day management and

supervision, financial management, marketing management, tendering, work

allocation, contract awarding, control etc. was required for operating these

power plants by the corporate office/head office. Hence, withdrawal of

deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is

grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1

before this Tribunal that this issue was not taken while recording the reasons

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for issuance of notice and the said disallowance is not in the nature of income

escaping essessment as per Explanation 3 to section 147. After considering

the totality of the fact, we restore this issue to the file of the Assessing Officer

to decide afresh after verifying the claim of the assessee that the entire

expenditure related to operation and maintenance was borne by Suzlon

Energies Ltd.”

94.1 Therefore, taking a consistent view, this issue is also allowed for

statistical purpose. The ground is restored to file of AO for decision afresh in

the light of above direction.”

115.1 For the same reasoning, this ground is allowed for statistical purpose and the

issue is restored to file of AO for decision afresh in light of above direction

as ground no. 7 pertaining to the Assessment Year 2012-13. We have decided this

ground by observing as under:-

“96. Ground no. 7, the facts are identical in ITA No. 256/JP/2015

pertaining to the AY 2011-12. The Respective Representative of the Parties

have adopted the same argument as were adopted in the ITA No.

256/JP/2015 as ground no. 6. We have decided this issue by observing

as under:-

“72. Ground no. 6, is against confirming the disallowance of Rs. 5,49,980/-. The Ld. Counsel for the assessee reiterated the submissions as made in the written brief and he submitted that expenditure was incurred by the assessee either for publicity or toward its economic and social obligation. He placed reliance on the decision of Supreme Court rendered in the case of Shri Venkata Satyanarayana Rice Mill Contractors Co. Vs. CIT 223 ITR

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101(SC) and also the decision the Co-ordinate Bench rendered in the case of Hindustan Petroleum Corporation Ltd. Vs. DCIT 96 ITD 186 (Mum.), the Hon’ble Madras High Court rendered in the case of CIT Vs. Madras Refinery Ltd. 266 ITR 170 (Mad.) (HC) and CIT Vs. India Radiators Ltd. 236 ITR 719 (Mad.) (HC). 72.1 On the contrary, the Ld. Departmental Representatives supported the order of the authorities below. 72.3 We have heard the rival contentions; we are unable to accept the contentions of the Ld. Counsel for the assessee that the expenditure is allowable as the same was related to the business of the assessee. The assessee has not furnished material suggesting that these expenses were made for the purpose of business of the assessee as the amount u/s 37(1) is allowable only when it is expend wholly and exclusively for the business of purpose. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A) same is hereby affirmed. This ground is dismissed.” 96.1For the same reasoning, this ground of assessee’s appeal is dismissed.” 116.1 For the same reasoning, this ground is dismissed. 117. Ground no. 7, the facts are identical in ITA No. 257/JP/2015 as ground

no. 8 pertaining to the Assessment Year 2012-13. We have decided this ground by

observing as under:-

“97. Ground no. 8 the facts are identical in ITA No. 254/JP/2015

pertaining to the AY 2008-09. The Respective Representative of the Parties

have adopted the same argument as were adopted in the ITA No.

254/JP/2015 We have decided this issue by observing as under:-

“38.3 We find merit into the contentions of the assessee is that on investment of Rs. 1 lakhs the assessee has earned dividend income on Rs. 10 lakhs only in respect of the shares of Mayura Inorganics Ltd. This fact is not disputed by the Revenue. In our considered view, the operation of Rule 8D is not automatic. The assessing officer is required to satisfy himself about the

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correctness of the claim that no expenditure was incurred by the assessee. The Assessing Officer in the present case has accepted that there is not direct nexus between the investment and expenses so incurred. After considering the totality of the fact and keeping in view the sum of Rs. 1,138/- had been disallowed by invoking the provision of Rule 8D without being satisfy about the claim of the assessee that no administrative expenses were incurred for earning of the exempt income. We direct the Assessing Officer to delete the disallowance. This ground of the assessee’s appeal is allowed.” 97.1 For the same reasoning, this ground is allowed. The AO is directed to

delete the disallowance.”

117.1 For the same reasoning, this ground is allowed.

no. 10 pertaining to the Assessment Year 2012-13. We have decided this ground

by observing as under:-

“99. Ground no. 10, the facts are identical in ITA No. 256/JP/2015

pertaining to the AY 2011-12. The Respective Representative of the Parties

have adopted the same argument as were adopted in the ITA No.

256/JP/2015 as ground no. 9. We have decided this issue by observing

as under:-

“75. Ground no. 9 is prayer for cost, the assessee has not placed any material on record under the facts of the present case, we do not see any reason to award the cost to assessee. Therefore, we do not seen any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed, this ground of the assessee’s appeal is dismissed.” 99.1 Therefore, taking a consistent view, this ground is dismissed.”

119.1 For the same reasoning, this ground is dismissed.

122 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

allowed for statistical purpose.

ITA No. 1097/JP/2016

pertaining to the AY 2013-14.

The Revenue has raised the followings grounds of appeal:-

“1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in directing to delete addition of Rs. 20,00,000/- made by the AO by disallowing of contribution to State Renewal Fund despite the fact that it was application of income and not expenditure incurred for business expediency. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in restricting the disallowance made out of Rural Development Expenses to Rs. 23,95,996/- out of Rs. 60,94,904/- disallowed by the AO. 3. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in deleting the disallowance made out of Afforestation, Plantation, & Environment Expenses of Rs. 53,09,413/-. 4. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in allowing the compensation paid to farmers amounting to Rs. 5,43,36,708/- for using their land for mineral extraction without appreciating the fact that the expenditure is of capital in nature. 5. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in restricting disallowance of mines development expenses to Rs. 6,64,150/- as against addition of Rs. 33,41,648/- made by AO. 6. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in holding prior period expenses of Rs. 11,43,417/- as allowable expenses even when it was not in accordance with the accounting policies followed by the assessee. 7. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in allowing deduction of Rs. 8,36,54,000/- in respect of mines closure expenses even the expenditure has not been debited in the books of accounts. 8. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in allowing excess deduction u/s 80IA of Rs.

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1,19,29,213/- by reducing head office expenses towards the income derived from power generating undertaking. 9. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in deleting the addition of Rs. 2,80,61,921/- and in allowing income of the assessee from sale of CERs as capital receipts. 10. The appellant craves its right to add, amend or alter any of the grounds on or before the hearing.”

pertaining to the AY 2011-12. The Respective Representatives of the parties have

adopted the same argument as were adopted in ITA No. 298/JP/2015. We have

decided this issue by observing as under:-

“78. Ground no. 1 is against deleting the addition of Rs. 20 lakhs towards

contribution made by assessee towards State Renewal Fund. At the outset,

the Ld. Counsel submitted that this issue is covered in favour of the assessee

by the judgment of the Hon’ble Rajasthan High Court rendered in the case of

CIT vs. Jodhpur Co-operative Marketing Society (2005) 275 ITR 372(Raj.)

78.1 On the contrary, Ld. Departmental Representatives supported the

order of the Assessing Officer.

78.2 We have heard the rival contentions, we find that the Ld. CIT(A) has

decided the issue in para 2.1 and 2.2 by following the judgments of the

Hon’ble High Court as under:-

“2.1. In this year, the assessee has claimed expenditure of Rs. 20,00,000/- in respect of contribution to State Renewal Fund. This issue also arose in the case of appellant in AY 2010-11 and earlier years. The main points of the Assessment Order, on this issue, have been narrated in the appeal order of CIT(A)-II, Jaipur (Appeal no. 325/12-13, dated 05.12.2013) for A.Y. 2010-11. The main points of the submissions of the appellant, on this issue, have been narrated the above appeal order. Therefore, the assessment order and the

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submissions of the appellant are not being again narrated in this order for the sake of brevity. In AY 2010-11, the CIT(A)-II, Jaipur, has held as under-

“Assessing Officer disallowed contribution made to State Renewal Fund by treating the same as diversion of income. However, appellant submitted that this issue is covered in its favour by the order of ITAT. It is seen that similar addition was made in AY 2006-07 in the case of the appellant, but it was decided by Hon’ble ITAT Bench ‘A’ Jaipur in ITA No. 783/JP/2009 & 740/JP/2009 in AY 2006-07 through order dated 31.03.2010 in f avour of the appellant, where in para 15 Hon’ble Tribunal relied upon its decision dated 22.05.2009 in case of Rajasthan State Seeds Corporation Ltd, wherein relying upon Hon’ble Rajasthan High Court decisions in the case of CIT Vs. Rajasthan Spinning and Weaving Mills Ltd. 274 ITR 465 and CIT vs. Shri Rajasthan Syntex Ltd. 221 CTR 410 held that the contribution made by the assessee to a Public Welfare Fund which is connected or related with his business is an allowable deduction u/s 37 as it was provided for the benefit of the employees. Hon’ble Tribunal distinguished the decision of Hon’ble Rajasthan High Court in the case of CIT Vs. Jodhpur Co-operative Marketing Society 275 ITR 372 (Raj) stating that in that case the amount was set apart for the shareholders of the society whereas in the present case amount was provided for the benefit of the employees and the contribution made to State Renewal Fund was found allowable u/s 37(1). Respectfully following the decision of ITAT in appellant’s own case, addition made by the AO is deleted.

2.2 Following the above order of the CIT(A)-II, Jaipur and the order of ITAT, Jaipur in the case of the assessee, the disallowance made by the AO is directed to be deleted. This ground is allowed.”

78.3 Since the Ld. CIT(A) rightly followed the judgment of the Rajasthan

High Court in the case of CIT vs. Jodhpur Co-operative Marketing

Society(2005) 275 ITR 372 (Raj.). We do not see any reason to interfere into

the order of the Ld. CIT(A), same is hereby affirmed. This ground is

dismissed.”

122.1 For the same reasoning, this ground is dismissed.

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as ground no. 3, pertaining to the AY 2007-08. We have decided this ground by

observing as under:-

“14. Ground no. 3 is against deleting the disallowance in respect of rural

development and afforestation, plantation and environment expenses of Rs.

1,76,01,218/-. The Ld. Departmental Representatives supported the order of

the Assessing Officer, he submitted that Ld. CIT(A) was not justified in

deleting the disallowance as these expenses were not relatable to the

business of the assessee.

14.1 On the contrary, the Ld. Counsel for the assesee reiterated the

submissions ad made in the written brief.

14.2 We have heard the rival contentions, perused the material available on

record. We find that Ld. CIT(A) has given a finding on fact by observing as

under:-

“6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has

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been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld. 6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”. 14.3 This finding on fact is not controverted by the Revenue by placing any

contrary material on record. Therefore, we do not see any reason to interfere

into the order of the Ld. CIT(A), same is hereby affirmed. The ground of the

Revenue’s appeal is dismissed.”

123.1. For the same reasoning, this ground is dismissed.

295/JP/2015 as ground no. 3, pertaining to the AY 2007-08. We have decided this ground by observing as under:-

“14. Ground no. 3 is against deleting the disallowance in respect of rural

development and afforestation, plantation and environment expenses of Rs.

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1,76,01,218/-. The Ld. Departmental Representatives supported the order of

the Assessing Officer, he submitted that Ld. CIT(A) was not justified in

deleting the disallowance as these expenses were not relatable to the

business of the assessee.

14.1 On the contrary, the Ld. Counsel for the assesee reiterated the

submissions ad made in the written brief.

14.2 We have heard the rival contentions, perused the material available on

record. We find that Ld. CIT(A) has given a finding on fact by observing as

under:-

“6.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has disallowed rural development expenses amounting to Rs. 2,96,49,172/- and afforestation, plantation and environment expenses amounting to Rs. 60,60,487/- on the ground that these expenses have been incurred for a social cause and general public good. The Assessing Officer has stated that this expenditure has not been laid out or expended wholly and exclusively for the purposes of business and therefore, is not an admissible expenditure u/s 37 (1) of the I. T Act. The appellant has stated that rural development expenditure has been incurred on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting as well as for organizing medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. In my view, the expenditure incurred by the appellant on repairs of road at different mining areas for the smooth transportation of vehicles, street lighting amounting to Rs. 1,76,01,218/- has been incurred for the purposes of the assessee's business as it facilitates smooth transportation of minerals. Disallowance of the above expenditure is therefore, directed to be deleted. The balance expenditure incurred under the head - rural development expenses, amounting to Rs. 1,20,47,954/- on account of medical camps, supply of school bags and stationary items to students of rural areas, construction of teen shades, meeting halls etc. is in the nature of expenditure on corporate social responsibility which has not been incurred wholly and exclusively for the purposes of the appellant's business

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and is not allowable u/s 37 (1) of the IT Act. Disallowance of this expenditure amounting to Rs. 1,20,47,954/- is therefore, upheld. 6.4 As regards, expenditure debited under the head - afforestation, plantation and environment expenses, it is seen from the ledger account that this expenditure has been incurred for maintaining the gardens at its corporate office, mining sites offices, obtaining environmental clearances, obtaining mining area lease, fees paid to Pollution Control Board, for assessing the quality of water etc. This expenditure therefore, has been made out and expended wholly and exclusively for the purposes off the assessee's business. The above disallowance is therefore, directed to be deleted”. 14.3 This finding on fact is not controverted by the Revenue by placing any

contrary material on record. Therefore, we do not see any reason to interfere

into the order of the Ld. CIT(A), same is hereby affirmed. The ground of the

Revenue’s appeal is dismissed.”

124.1 For the same reasoning, this ground is dismissed.

the AY 2011-12. The Respective Representatives of the parties have adopted the

same argument as were adopted in ITA No. 298/JP/2015. We have decided this

issue by observing as under:-

“80. Ground no. 3, is against the deleting the addition o Rs. 3,16,22,808/-. The Ld. Departmental Representatives supported the order of the Assessing Officer and submitted that Ld. CIT(A) was not justified in deleting the addition. He submitted that the Assessing Officer has rightly held the expenditure incurred on compensation paid to the farmers for excavation of gypsum, is not allowable, being capital expenditure. 80.1 On the contrary, the Ld. Counsel for the assessee supported the order of the Ld. CIT(A) and submitted that there is no infirmity into the order of the Ld. CIT(A).

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80.2 We have heard the rival contentions, perused the material available on record and gone through the order of the authorities below. The Ld. CIT(A) has followed the decision of his predecessor pertaining to AY 2010-11. Against this order, the Revenue had filed an appeal before this Tribunal in ITA No. 144/JP/2014 wherein the Tribunal was pleased to dismiss the ground raised by the Revenue. Therefore, taking a consistent view, for the same reasoning, the ground raised in this appeal is also dismissed. Ground no. 3 of the Revenue’s appeal is dismissed.” 125.1 For the same reasoning, this ground is dismissed.

the AY 2011-12. The Respective Representatives of the parties have adopted the

same argument as were adopted in ITA No. 298/JP/2015. We have decided this

issue by observing as under:-

“84. Ground no. 7 is against deletion of addition of Rs. 32,75,233/- on

account of mines development expenses. Ld. Departmental Representatives

supported the order of the Assessing Officer.

84.1 On the contrary, Ld. Counsel for the assessee supported the order of the Ld. CIT(A). 84.2 We have heard the rival contention, perused the material available on record. The Ld. CIT(A) has given finding on fact in para 5.3 of his order as under: “5.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The AO has disallowed mines development expenditure of Rs. 32,75,233/- on the mistaken belief that it pertains to the Sonari Lignite Mines. The appellant has clarified that this expenditure pertains to Kasanu and Matasukh Mines at Nagor which are already operational and mines development expenses are allowable u/s 35E. The appellant has stated that it has itself added

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back the mine development expenses of Sonari Lignite Mines and therefore, there is no question of any further disallowance. The contention of the appellant is correct. The AO is directed to delete the disallowance of the above mine development expenses since it does not pertain to Sonari Lignite Mines but to operational Mines which have not completed ten years of operations. This ground is allowed.” 84.3 This finding is not controverted by the Revenue by placing any ontrary material on record. Therefore, this ground of the Revenue’s appeal is dismissed.” 126.1 For the same reasoning, this ground is dismissed.

pertaining to the AY 2011-12. The Respective Representatives of the parties have

adopted the same argument as were adopted in ITA No. 298/JP/2015. We have

decided this issue by observing as under:-

“81. Ground no. 4, is against deleting the addition of Rs. 1,75,79,531/- on account of prior period expenses. Ld. D/R supported the order of the AO. 81.1 On the contrary, the Ld. Counsel for the assessee supported the order of the AO and submitted that this issue also cropped up in the Assessment Year 2010-11 and matter traveled up to the stage of Tribunal wherein the issue was decided in favour of the assessee. The facts are identical in this year also since the expenses have crystallized in the year under consideration. Therefore, the Ld. CIT(A) was justified in deleting the addition 81.2 We have heard the rival contention, we have find that in Ld. CIT has given finding on fact in para 6.1 and 6.2 of his order as under:- “6.1 In this year, the assessee has claimed prior period expenditure of Rs. 1,75,79,531/-. This issue also arose in the care of appellant in AY 2010-11 and earlier years. The main points of the Assessment order, on this issue, have been narrated in the appeal order of CIT(A)- II, Jaipur (Appeal no. 325/12-13, dated 05.12.2013) for AY 2010-11. The main points of the submissions of the appellant, on this issue,

131 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

have been narrated the above appeal order. Therefore, the assessment order and the submissions of the appellant are not being again narrated in this order for the sake of brevity. In AY 2010-11, the CIT(A)-II, Jaipur, has held as under- “From the submission of the appellant it is clear that Hon’ble ITAT, Jaipur Bench has been allowing Prior Period Expenses in the case of various Government Undertakings in the year in which such expenses are finally sanctioned and approved. Even in the appellant’s own case the issue has been decided in favour of the appellant in AY 2000-01 by Hon’ble Jaipur Bench ITAT vide order dated 22-12-2006. My predecessors have allowed prior period expenses in orders dated 10.08.2011 in AY 2008-09 and 18.10.2012 in AY 2009-10. Respectfully following Hon’ble ITAT’s order in the case of appellant in AY 2000-01 dated 22-12-2006 in ITA No. 600/JP/2003, the AO is directed to delete the addition of Rs. 4,40,113 because the table in the appellant’s submission shows that the liability for the expenses got crystallized in the year under consideration.

6.2 following the above order of CIT(A)-II, Jaipur and the orders of the ITAT, Jaipur, in the case of the assessee, the above disallowance is directed to be deleted. This ground is allowed.” 81.3 This finding is not controverted by the Revenue by placing any contrary material on record and also no change into facts and circumstances is pointed out. Therefore, this ground of the Revenue’s appeal is dismissed.” 127.1 For the same reasoning, this ground is dismissed.

pertaining to the AY 2012-13. The Respective Representatives of the parties have

adopted the same argument as were adopted in ITA No. 257/JP/2015 as ground no.

“95. Ground no. 6, is in respect of confirming the action of Assessing

Officer in disallowing the claim of Rs. 7,96,71,000/- in respect of mine closure

expenses provided in the books of accounts. We find that identical issue was

raised in ITA No 256/JP/2015 pertaining to AY 2011-12. We have decided

this ground by observing as under:-

132 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

“70. Ground no. 4 is confirming the action of the AO disallowed the claim of deduction of Rs. 4,69,61,000/- in respect of mine closure expenses made in course of assessment proceedings. The Ld. Counsel for the assessee reiterated the submission as made in the written submissions. The Ld. Counsel for the assessee submitted that as per this guidelines the assessee was fasten a liability of Rs. 4,69,61,000/- such liability which is an ascertained liability is allowable under the mercantile system of accounting followed by the assessee. For allowability of claim of expenditure, there is no requirement that it should be debited in the books of accounts for this proposition the Ld. Counsel for the assesssee relied upon the judgment of the Hon’ble Supreme Court rendered in the case of Satluj Cotton Mills vs CIT 116 ITR 1. He submitted that the Tribunal in assessee’s own case pertaining to the AY 2010- 11 has decided the issue in favour of the assessee. 70.1 On the contrary, the Ld. Departmental Representatives supported the order of the authorities below. 70.2 We have heard the rival contention, perused the material available on record. The Ld. CIT(A) has rejected the claim by following the decision of his predecessor pertaining to the AY 2010-11. The Co-ordinate Bench in assessee’s own case has held as under:- “30.5 Further the judgment in the matter of Bharat Earth Movers Ltd Vs. CIT, 112 Taxman 61 (SC) and Calcutta Company Ltd, 37 ITR are applicable. Beside, in the said judgment it was categorically held that the mines closure liability is a ascertained liability. As per matching principle as well as the mercantile system of accounting, the liability is allowable in principle under section 37 of the Act. In view of the above, the ground of the assessee is allowed and the AO is directed to give the benefit of deduction of Rs. 2,94,04,000/- towards mines closure expenses in the A.Y. 2010-11.” The facts are identical in this year, as well taking a consistent view, the AO is directed to given benefit of deduction of Rs. 4,69,61,000/- in respect of mine closure expenses. This ground of the assessee’s appeal is allowed.”

133 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

95.1 Therefore, taking a consistent view, this issue is also allowed. The AO

is directed to allow deduction of mine closure expenses.”

128.1 For the same reasoning, this ground is also allowed, the AO is directed to

allow deduction of mine closure expenses.

pertaining to the AY 2007-08. The Respective Representatives of the parties have

adopted the same argument as were adopted in ITA No. 253/JP/2015 as ground no.

“7.3 We find that in para 3 of the submissions before Ld. CIT(A), the assessee stated that in respect of the unallocated expenses of Rs. 15,67,45,594/- that none of these expenses pertain to the 80IA undertakings in as much as the entire operation and the maintenance of the power plant had been given to Suzlon Energies Ltd. Therefore, the assessee had not to incur any expenditure on salary/employees benefit, travelling conveyance and other expenses debited under the various heads of expense in corporate office/head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work allocation, contract awarding, control etc. was required for operating these power plants by the corporate office/head office. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,98,91,437/- on this account is grossly unjustified. Further, it is stated by the assessee, the ground no. 4.1 before this Tribunal that this issue was not taken while recording the reasons for issuance of notice and the said disallowance is not in the nature of income escaping essessment as per Explanation 3 to section 147. After considering the totality of the fact, we restore this issue to the file of the Assessing Officer to decide afresh after verifying the claim of the assessee that the entire expenditure related to operation and maintenance was borne by Suzlon Energies Ltd. So far the contention of Ld. Counsel for the assessee that this item was not subject matter of the reasons recorded for reopening. We do

134 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

not see any merit as law is well settled that once reopening is valid the AO can also consider the other issues as cropped up the assessment proceedings. Thus, Ground no. 4 of the assessee ‘s appeal is allowed for statistical purposes. However, ground no. 4.1 is dismissed. 129.1 For the same reasoning, this ground is allowed for statistical purposes.

the AY 2007-08. The Respective Representatives of the parties have adopted the

same argument as were adopted in ITA No. 295/JP/2015 as ground no. 1. We have

decided this issue by observing as under:-

“12.3 Since, the Ld. CIT(A) has followed the judgment of the Hon’ble Andhra Pradesh High Court rendered in the case of My Home Power Ltd. 365 ITR 82(supra) where the Hon’ble court, under the identical facts confirmed the view of the Tribunal in holding that Carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset is generated in cost of business but it is generated due to environmental concerns. Therefore, on sale of excess carbon credits correctly held by the Tribunal as a capital receipt. In view of the judgment of Hon’vble Andhra Pradesh High Court, we do not see any reason to disturb the finding of Ld. CIT(A), same is hereby affirmed. The Revenue has not brought to our notice any contrary binding precedent. Hence, this ground of Revenue’s appeal is dismissed.” 130.1 For the same reasoning, this ground is dismissed.

253/JP/2015, 769/JP/2016, 254/JP/2015, 255/JP/2015, 256/JP/2015, 257/JP/2015,

1028/JP/2016 pertaining to Assessment Years 2007-08, 2006-07, 2008-09, 2009-10,

2011-12, 2012-13, 2013-14 are partly allowed for statistical purposes. & the

135 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.

Appeals of the Revenue in ITA Nos. 295/JP/2015, 296/JP/2015, 297/JP/2015,

298/JP/2015, 299/JP/2015, 1097/JP/2016 pertaining to the Assessment Years 2007-

08, 2008-09, 2009-10, 2011-12, 2012-13, 2013-14 are partly allowed for statistical

purposes and ITA No. 804/JP/2016 pertaining to the Assessment Year 2006-07 is

dismissed.

Order pronounced in the open court on Tuesday, the 30th day of May 2017.

Sd/- Sd/- ( dqy Hkkjr) ¼foØe flag ;kno½ (VIKRAM SINGH YADAV) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 30/05/2017. Pooja/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

136 ITA No. 253/JP/2015 along with 13 other appeals. M/s Rajasthan State Mines & Minerals Ltd.