DCIT, CIRCLE - 6(1), KOLKATA, KOLKATA vs. M/S. INTEGRATED COAL MINING LIMITED, KOLKATA

आदेश /O R D E R PER S.S.Godara, Judicial Member:- This Revenue’s appeal for assessment year 1010-11 arises against the Commissioner of Income Tax (Appeals)-8, Kolkata’s order dated 21.11.2017 passed in case No. CIT(A), Kollkatka-8/10181/2013-14, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused. 2. The Revenue’s first substantive ground pleads that the CIT(A) has erred in law and on facts in deleting RE and PE cess disallowance(s) / addition(s) aggregating to ₹46,92,28,486/- made by the Assessing Officer u/s 43B of the Act.

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 2 3. The CIT(A)’s detailed discussion reveals that instant issue is no more res integra as this tribunal’s co-ordinate bench’s decision has already decided the same in taxpayer’s favour as under:-

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 3 Cess aggregating to Rs.38,05,12,458/- collected are nothing but treading receipts of the appellant and taxable in the previous year under consideration. 3(e) That without prejudice to the above having disallowed the RE Cess and PE Cess u/s. 43B of the Act/treating the same as trading receipts in the hands of the appellant, the learned CIT(Appeals) should have allowed deduction u/s. 43B of the Act of the RE Cess and PE actually paid by the appellant from 1st April, 2007 to the due date of filing of return i.e. upto 30th September, 2008.’ 5.2 The Learned AR argued that the cess was collected from customers in the sale invoices and the same are payable only in the succeeding year as per The West Bengal Rural Employment and Production Act, 1976 and The West Bengal Primary Education Act, 1973. He took us to the relevant provisions of the said Acxt in this regard. He argued that the cess collected remains only as a liability and it does not become payable under the relevant law and hence the provisions of section 43B of the Act would not come into operation. In response to this, the Learned DR argued that the cess is collected by the assessee form, the sale invoice and hence takes the character of a trading receipt and accordingly relied on the decision of the Hon'ble apex court as stated supra. 5.3 We find that the Learned CIT(A) also had reproduced the relevant provisions of The West Bengal Rural Employment and Production Act, 1976 and The West Bengal Primary Education Act, 1973 which states that the cess would be collected by the person engaged in the production of coal from, the customers and the same would become payable in the succeeding year only. Hence the concept of accrual of liability to pay the cess had not arose during the asst year under appeal. In other words, the cess does not become payable in the asst year under appeal. Now let us go into the provisions of section 43B of the Act which is reproduced herein below:- [Certain deductions to be only on actual payment] 43B Notwithstanding anything contained in any other provision of this Act, a deduction other-wise allowable under this Act in respect of- [(a)] any sum payable by the assessee by sway of tax, duty, cess or fee, by whatever name called, under any law for the time being in force or](b) to [(f) *** *** *** *** *** *** Shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. [Provided that nothing contained in this section shall apply in relation to any sum, which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. [Explanation 2. – For the purposes of clause (a) as in force at all material times,” any sum payable” means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law] From the aforesaid provisions, it could be seen that what is contemplated in section 43B(a) read with Explanation 2 is tax, duty or cess should become payable under the relevant Act. The expression ‘payable under the relevant Act ’in the context of the impugned issue means the cess payable by the assessee under the provisions of The West Bengal Rural Employment and Production Act, 1976 and The West Bengal Primary Education Act, 1973. Hence in these facts and circumstances, the version of the Learned CIT(A) that the other acts shall not override the provisions of Income Tax Act is not at all relevant. We hold that the cess collected from customers out of sale

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 4 price in the facts and circumstances of the instant case cannot be construed as trading receipts chargeable to tax as the same are collected in advance for payment to the exchequer in the succeeding year under the relevant Act. Hence we cannot import a different meaning of accrual of liability for payment of cess into this relevant Act when more so the provisions of section 43B of the Act itself specifically states that amounts payable under the relevant law shall be allowed as deduction only on payment basis. Hence in these facts and circumstances, the decision of the Hon'ble Apex Court in the case of Chowringhee Sales Bureau Pvt Ltd. vs CIT reported in 87 ITR 542 (SC) is not applicable to the facts of the assessee. 5.3.1 We also find that Asst Year 2003-04 was the first year of operation for the assessee wherein similar addition made by theld AO was deleted by the Learned CIT(A) and the revenue had not preferred any appeal against the same before this tribunal. Simialrely9 in Asst Year 2006-07, no disallowance under this head was made by the Learned AO even though the assessment was completed u/s. 143(3) of the Act. These are the only two scrutiny assessments done by the Learned AO on the assessee prior to them years under appeal. Hence we find lot of force in the arguments of the Learned AR that the principle of consistency should not be given a go by on the ground that principle of res judica does not apply to income tax proceedings. Reliance in this regard was made on the decision of the Hon'ble Apex Court in the case of Radhasoami Satsang vs. CIT reported in 193 ITR 321 (SC) wherein it was held that: ‘As we are aware of the fact that strictly speaking res judica does not apply to income tax proceedings. Again each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be charged in a subsequent year.’ We find that the assessee has been consistently following this practice of treating the cess collected as a liability and the same are debited as and when the said cess is paid in the immediately succeeding assessment year and in case if the same is not paid in the succeeding year, the same is disallowed u/s. 43B of the Act. This practice of the assessee is evident form the following chart:- Integrated Coal Mining Limited Chart showing amount of Rural Employment (RE) and Primary Education (PE) Cess disallowable under section 43B of the Act. A. Liability incurred during Amount incurred Amount paid on or Amount Y the previou9s year (Rs) during the previous before the due date disallowable under year and remaining for furnishing the section 43B of the outstanding as on the return of income of Income tax Act, last day of the the previous year 1961 (Rs) previous year (Rs) under section 139(1) (Rs) RE Cess PE cess Re Cess PE cess `RE cess PE cess RE cess PE cess 03- -- -- -- -- -- -- -- -- 04 04- 1336432 3340.858 1,113,683 278,403 3,313,02 286,403 -- -- 05 3 05- 81559,086 20,389,77 6,796,590 1,699,14 6,796,59 1,699,14 -- -- 06 6 3 0 8 06- 18419807 46049519 15,34983 3,837459 1534983 3838459 -- -- 07 4 4 4 07- 219738323 62434567 20383320 8095830 20383320 5095830 -- -- 08 08- 250353654 62588318 20667693 5215676 20862693 521676 -- -- 09 09- 281351026 70337757 23445917 5861477 23445017 5861477 -- -- 10

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 5 10- 352232048 88058011 73343078 18335766 61073407 15318445 1206967 301732 11 1 1 11- 342080703 85750098 28582824 7145620 28582824 7145709 -- -- 12 12- 368245007 92061816 50415701 14103879 55770446 13940653 645255 161026 13 *Payment made after the due date of return i.e. in previous year 2010-11 (AY 2011-12) 5.3.2. We hold that the reliance placed by the Learned AR on the decision of the Hon'ble Apex Court in the case of CIT vs. Excel Industries Ltd and CIT vs. Mafatlal Industries P Ltd reported in 358 ITR 295 (SC) wherein their Lordships had held as follows:- ‘Secondly as noted by the tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licenses or under the duty entitlement pass book do not represents the real income of the assessee. Consequently, there is no reason for us to take a different view unless there are very convincing reasons, none of which have been pointed out by the Learned counsel for the revenue. It appears from the record that in several assessment years, the revenue accepted the order of the tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the revenue cannot be allowed to flip-flop on the issue and it ought let the matter rest rather than spend he taxpayers’ money in pursuing litigation for the sake of it. 5.3.3 We are also reminded the observations of Hon'ble Justice P.N. Bhagwati while rendering the judgment in the case of Distributors (Baroda) P Ltd. Vs. Union of India & Otrs reported in 155 ITR 120 (SC) – larger bench decision as below:- ‘To perpetuate an error is no heroism. To rectify the same is the compulsion of judicial conscience.’ In the facts of the instant case, the assessee had commenced its operation from Asst Year 2003-04 and in the very first year, this issue was taken up for disallowance and the same was deleted by the Learned CIT(A) and the revenue chose not to file an appeal before this tribunal. The next scrutiny assessment was made for Ass Year 2006-07 wherein no addition on this account was made. This goes to prove that the revenue had already accepted to the contentions of the assessee on the impugned issue and satisfied that the cess collected from customers haves been duly remitted in the succeeding year in accordance with the provisions of The West Bengal Rural Employment and Production Act, 1976 and The West Bengal Primary Education Act, 1973 and was also satisfied with the manner of treatment of the same by the assessee for tax purposes. Having done so, there is no good reason for the revenue to shift its stand in the assessment year under appeal. To this extent the decisions of the Hon'ble Apex Court and the observation made by the apex court (supra) are relevant to the facts of the instant case. In view of the aforesaid facts and circumstances and in view of the judicial precedents relied upon hereinabove, we hold that the cess collected from customers in the sale invoices shall not be chargeable to tax in the year of collection and accordingly, the grounds raised by the assessee in this regard are allowed.”

We adopt the above detailed discussion mutatis mutandis to affirm the CIT(A)’s findings under challenge since the Revenue is fair enough in not pinpointing any distinction on facts of law

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 6 4. Next comes the Revenue’s second substantive grievance seeking to reverse section 14A r.w.s.8D disallowance of ₹55,96,082 in relation to assessee’s exempt income from dividends amounting to ₹30.40 lac. The Assessing Officer’s assessee had admittedly disallowed a sum of ₹44,450/- on its own. The assessment order dated 08.03.2013 disallowed ½ % of average value of investments in the nature of administrative expenses coming to ₹5,96,082/- under Rule 8D(2)(iii) of the Income Tax Rules, 1962. The CIT(A) has gone by this tribunal’s order in preceding assessment year whilst deleting identical addition. 5. Learned CIT-DR strongly contends that the Assessing Officer had rightly disallowed the impugned administrative expenditure component in relation to assessee’s exempt income. The taxpayer on the other hand, has filed its written arguments in support of the CIT(A)’s order as under:- Ground No. 2: Disallowance ujs. 14A r. w. Rule 8D - Rs. 55,96,082 At the outset it is most humbly submitted that the issue is covered squarely in favour of the respondent by the decision of the Hon'ble Tribunal in the respondent's own case for the assessment years 2008-09, 2009-10 and 2012-13. The Hon'ble Tribunal on identical set of facts deleted the disallowance made by the Assessing Officer under section 14A of the Act. Relevant pages of the order of the Hon'ble Tribunal for the assessment years 2008-09, 2009-10 and 2012-13 are placed at pages 75 to 78,98 to 102 and 220 to 223 of the Paper book respectively. Facts 1. During the year under consideration, the respondent earned dividend income aggregating to Rs. 30,40,000. The respondent claimed the same as exempt under section 10(34) of the Act in its return of income for the year under consideration. In earning the aforesaid dividend income, the respondent incurred an aggregate expenditure of Rs. 44,450 which was also certified by the tax auditors in Form No. 3CD (placed at pages 14 to 38 (relevant page 20 of the Paper book). In its return of income for the year under consideration besides claiming the aforesaid dividend income as exempt from tax, the respondent also considered the said amount as disallowable under section 14A of the Act while computing its taxable income under the provisions of the Act other than section 115JB thereof as also while computing its book profit under the provisions of section 115JB of the Act. The acknowledgement of the return of income along with computation of income are collectively placed at pages 63 to 65 of the Paper book. 2. During the course of the assessment proceedings, as desired by the Assessing Officer the respondent duly submitted the break-up of total expenditure of Rs. 44,450 which was considered as disallowable under section 14A of the Act. The letter dated 24th January 2013 filed with the Assessing Officer is placed at pages 66 to 67 of the Paper book. The Assessing Officer has however without giving any cogent reason whatsoever applied Rule 8D of the Income-tax Rules, 1962 (the 'Rules') and summarily disallowed an aggregate amount of Rs. 55,96,082 under section 14A of the Act.

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 7 3. On appeal, the learned CIT (Appeals) after analyzing the facts of the present case and finding them to be similar to the facts of the cases of assessment years 2008-09 and 2009-10 decided by the Hon'ble Tribunal deleted the further disallowances inflicted by the Assessing Officer. Issue is squarely covered by the decision of Hon'ble jurisdictional Tribunal in company's own case 1. As already stated above, the Hon'ble Kolkata Tribunal in the respondent's own case for AY 2008-09 reported in 67 taxmann.com 260 (Kolkata - Trib.) (relevant pages of the order placed at 75 to 78 of the Paper book) directed the Assessing Officer to delete the disallowance made under section 14A r.w. Rule 8D. The facts for the year under consideration is identical with the facts of assessment year 2008-09 as follows: During the year under consideration, the company earned dividend income from the following source: Particulars Amount (Rs.) CESC Ltd 30,40,000 Total 30,40,000 In the assessment year 2008-09 also the company had earned dividend from CESC Limited in addition to UTI Mutual Funds. The copy of Investment schedule from the financial statements of the Company for the Financial Year 2009-10 is placed as at page 50 of the Paper book. From the perusal of the investment schedule, your kindself would note that the value of investment in CESC Limited was the same on opening and closing dates i.e. Rs. 26,98,92,628. In the financial years relevant to the AY 2008-09 and AY 2009-10 also, the company held same value of investment in CESC Limited on closing dates. The Hon'ble Members would thus note that the facts of the case for current year is identical with the facts based on which Hon'ble Tribunal deleted the disallowance made under section 1# in earlier years. The Hon'ble ITAT accepted various contentions raised while deleting the disallowance. Further, the Hon'ble Kolkata ITAT has in the case of the respondent itself for the assessment year 2009-10 passed an order dated 16th September, 2016 wherein the disallowance made under section 14A r.w. Rule 8D was deleted. Relevant pages of the said order are placed at pages 98 to 101 of the Paper book. The Hon'ble Kolkata ITAT vide order dated 07th December, 2018 for the assessment year 2012-13 has also dismissed the appeal filed by the department and accordingly the disallowance made under section 14A read with Rule 8D stands deleted. Relevant pages of the same are placed at 220 to 223 of the Paper book. In view of the above, given the identical case at hand, it is most humbly requested before the Hon'ble Members to uphold the deletion of the disallowance made by the Learned CIT (Appeals) under section 14A of the Act amounting to Rs. 55,96,082. No cogent reason I satisfaction provided by the Assessing Officer 1. At the outset, the respondent submits that the Hon'ble Jurisdictional Tribunal at Kolkata in respondent's own case for assessment years 2008-09 & 2009-10 and 2012-13 has deleted the disallowance under section 14A read with Rule 80 since no cogent reason was provided by the Assessing Officer for invoking Rule 80 of the Rules.

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 8 The relevant portion of the order under section 143(3) of the Act by the Assessing Officer for the AY 2008-09 is reproduced below: "1. Disallowance u/s 14A The assessee company has earned exempt income i.e. dividend of Rs. 33,61,665/- during this financial year relevant to the assessment year 2008- 09 for which the assessee company offered Rs. 29,760/- as disallowance u/s 14A. The submission of the assessee company is not acceptable. The disallowance u/s 14A read with Rule 8D is calculated under: Therefore, total amount [12,57,267 + 32,63,961] inadmissible u/s 14A read with Rule 8D is determined at Rs. 45,21,228/-. The assessee has disallowed Rs. 29,760/- u/s 14A. The further disallowance u/s 14A comes to Rs. 44,91,468/-." The Hon'ble Tribunal after going through the said order and the observation recorded by the Assessing Officer therein, as stated above, held as follows: "2.6 ... We find from the facts of the instant case that the Learned AO has not examined the accounts of the assessee and there is no satisfaction recorded by the Learned AO about the correctness of the claim of the assessee and without the same, he invoked Rule 8D of IT Rules. While rejecting the claim of assessee with regard to expenditure in relation to exempt income, the Learned AO has to indicate cogent reasons for the same. We find that the Learned AO had straight away embarked upon computing disallowance under Rule 8D(2) of the Rules." . (emphasis supplied) Relevant portion of the order passed by the Hon'ble Tribunal for the assessment year 2008-09 is placed at page 75 of the Paper book. The Hon'ble Tribunal for the AY 2009-10 also deleted the further disallowance made under section 14A of the Act by holding as under: "11 ... We find from the facts of the instant case that the AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same, the AO invoked Rule BD of IT Rules. In view of the same, the finding of the CIT-A the disallowance as made by the AO will be added to the income computed under the normal provisions of the Act is not justified and the addition made thereon is deleted and the Ground no '1 (a) to 1 (d) raised by the Assessee are allowed. " (emphasis supplied) Relevant portion of the order passed by the Hon'ble Tribunal for the assessment year 2009-10 is placed at page 102 of the Paper book. It may be relevant to reproduce the extract of the order passed under section 143(3) of the Act for the assessment year 2009-10 which is as follows: "1. Disallowance u/s 14A In its return of income the assessee company has earned exempt income aggregating to Rs.55,89,232 for which the assessee company has offered an aggregate sum of Rs.94,312 as shown in the Tax Audit Report as disallowable u/s 14A. The amount offered as disallowable is not accepted and computation of amount disallowable u/s 14A is made as per Rule BD to the IT Rules, 1962 as under- ………” The Assessing Officer in the present case also failed to provide any cogent reason for not accepting the correctness of the claim of expenditure made by' the respondent. Relevant portion of the assessment order for the Assessment year 2010- 11 is now reproduced below:

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 9 "7. On perusal of records as well as submissions it' is observed from the return that 'A' had exempted income of Rs.30,40,000/- under the head Dividend. The A.R. of 'A' was asked to explain why sec. 14A will not be applicable to this case. In compliance to the above query though the A.R. of assessee has stated that the assessee has already disallowed u/. s 14A of Rs. 44,450/-. 7.1. But since the above calculation was not based as per sec 14A read with Rule BD of I. T Rule RS.SS,96,o82/-[1/2% of Avg. Value of Investment] is added with income from Business treating 'A's expenditure in connection with earning from exempted income. " Thus, from above, the Hon'ble Members would no~ that in the assessment year 2010-11 also the Assessing Officer has not examined the accounts of the assessee and there no is satisfaction recorded by the Assessing Officer about the correctness of the claim of the assessee and without the same the Assessing Officer has invoked Rule BD of the Rules. The said action of the Assessing Officer is not justified and is invalid as held by the Hor.ble Tribunal in the case of the respondent for the assessment years 200B-09 and 2009-10 as stated above. 2. It may be noted that Rule BD has its root in sub-section (2) to section 14A of the Act which was inserted by the Finance Act, 2006 w.e.f, 1-4-2007. Sub-section (2) to section 14A of the Act provides the procedure for determining 'the amount of expenditure incurred by the assessee in relation to such income which does not form part of the total income under this Act', if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Further, sub-section (3) provides that the provisions of sub-section (2) shall apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to the exempt income. Thus the procedure for determining the expenditure incurred by the assessee in relation to exempt income shall apply in both the situations, that is, where the assessee makes a claim that a particular expenditure is incurred in relation to exempt income with which the Assessing Officer is not satisfied and also where the assessee claims that no expenditure has been incurred by him in relation to the exempt income. The procedure mentioned under sub-section (2) for determining the amount of expenditure incurred in relation to the exempt income is to be worked out in accordance with such method as may be prescribed'. The method for such computation has been, in turn, prescribed in Rule 8D. 3. Attention of the Hon'ble ITAT in this regard is drawn to the recent decision of the Hon'ble Apex Court in the case of Maxopp Investment Ltd vs CIT, Delhi ([2018] 91 taxmann.com 154 (Se)] wherein it has been held as under: " .. we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect." (emphasis supplied) The Jurisdictional Kolkata Tribunal in the case of REI Agro Ltd. vs. DCIT [35 taxmann.com 404 (Kol.)], had also held that, "where the assessee makes a claim that only a particular amount is to be disallowed under section 14A or where the assessee does not make a disallowance under section 14A, if the Assessing Officer proposes to invoke section 14A, he is to record a satisfaction on that issue. This

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 10 satisfaction cannot be a plain satisfaction or a simple note. It is to be done with regard to accounts of the assessee." It is submitted that the Hon'ble Calcutta High Court has affirmed the said decision vide order dated 23rd December, 2013 in ITAT 161 of 2013. Copy of the decision is placed at pages 117 to 118 of the Paper book. Thus, it is amply clear from the above that Rule 8D could be invoked by the Assessing Officer only when he is not satisfied with the correctness of the claim of expenditure made by an assessee. In this regard, further reliance is also placed on the following decisions rendered by Hon'ble Jurisdictional Tribunal and various High Courts wherein similar principle has been upheld: • Cellica Developers (P.) Ltd. vs. DCIT [45 taxrnann.com 367 (Ko1.)] • CIT vs. LP. Support Services India (P.) Ltd. lTS-573-HC-2015(De1.)] • CIT vs. Hero Cycles Ltd. [323 ITR 518 (P&H) • Godrej & Boyce Manufacturing Company vs. DCIT [328 ITR 81 (Born.)] • Metro Exporters Ltd. V. ITO [29 SOT 531 (Mum.)] In light of the above, it is prayed that the order of Learned CIT(Appeals)deleting the disallowance made under section 14A of the Act be upheld. Only those investments which yielded exempt income during the year should be considered for Rule 8D calculations. 1. Without prejudice to the above submission, if in an unlikely event, the Hon'ble Members consider that Rule 8D of the Rules is applicable in the present ease, it is submitted that Rule 8D of the Rules would only apply on the investments which actually yielded exempt income during the year. The said principal is also been upheld by the Hon'ble .Iurisdictional Kolkata Tribunal in respondent's own case for AY 2008-09, AY 2009-10 and AY 2012-13. The relevant portion of the order of the Hon'ble Tribunal for AY 2008-09 in this regard is reproduced below: "2.6.3. We also find that the investments that did' not yield any dividend income needs to be excluded from the computation of disallowance. if any, u/s 144 of the Act read with Rule BD of the Rules as the basic intention behind introduction of section 14A itself is only to disallow the expenditure incurred for earning an income which does not form part of the total income. " (emphasis supplied) The aforesaid principal has also been upheld in the following cases: • REI Agro Ltd. v. DCIT [35 taxmann.com 404 (Kol.)] • ACB India Ltd. V. ACIT [62 taxmann.com 71 (Del.)]. 2. In the present case, as already mentioned above since the Company earned exempt income only from CESC Limited, Rule 8D(2)(iii) of the Rules should be applicable on the said investments only which is computed as below: Particulars Amount (Rs.) 0.5% of average value of investment, 0.5% of income from which does not form part of the 26,98,92,628 total income. In light of the above, without prejudice to the contention' of respondent that Rule 8D of the Rules should not be applied in the instant case, the disallowance as per Rule 8D of the Rules should be restricted to Rs. 13,49,463 as per the calculation made above. Disallowance under section 14,A read with rule BD cannot exceed the amount of exempt income:

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 11 1. Without prejudice to the above, it is submitted tha the disallowance under section 14A read with Rule 8D cannot exceed the amount of exempt income earned by the Company. The said principal is upheld by Hon'ble Kolkata ITAT in the case of PDGD Investments & Trading Pvt. Ltd. vs. ITO [ITA No. 1881/Kol/2014 dated 27th August. 2015] (placed at pages 119 to 121 of the Paper book) wherein it has been held that the maximum disallowance under section 14A of the Act cannot exceed the amount of exempt income received by the assessee. Further, following the above decision, the Hon'ble jurisdictional ITAT in the case of GVN Fuels Ltd. vs. DCIT [ITA No. 2278/Kol/2013 dated 25th May, 2016] (copy of the order placed at pages 122 to 127 of the Paper book) has upheld the principle that disallowance under section 14A of the Act shall not exceed the income which does not form part of the total income. Relevant extract from the said decision is quoted below for ease of reference: " ... we direct the Ld. AO to restrict the disallowance u/s. 14A of the Act read with Rule 8D of the Rules after considering only investments yielding dividend income. In any case, we direct that the disallowance to be worked out thereon shall not exceed the income which does not form part of the total income." (emphasis supplied) Also, the Hon'ble Delhi Court in the case of Joint Investments (P.) Ltd. [59 taxmann.com 295 (Del.)] has held that, "By no stretch of imagination can s. 14A or r. 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in s. 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as happened in this case" In the present case, the respondent earned exempt income of Rs. 30,40,000 during the year. However, the Assessing Officer invoking provision of Rule 8D disallowed aggregate amount of Rs.56,40,532, which is far exceeding the exempt income actually earned by the respondent. In light of the judicial precedents as quoted above and without prejudice to the contention of respondent that Rule 8D of the Rules should not be applied, the disallowance as per Rule 8D of the Rules can in no circumstances exceed the amount of exempt income earned by the respondent during the year.” 5. We have given our thoughtful consideration to rival contentions. There is hardly be any dispute that Rule 8D of the Income Tax Rules prescribes computation of disallowance in relation to an assessee’s exempt income applies with effect from AY 2008-09 onwards. These three components of direct cost, proportionate interest and administrative expenses as prescribed under Rule 8D(2) of the said rules. There can further be no quarrel that the former two component of direct cost and proportionate interest expenditure stand altogether on a different footing than administrative expenditure which is indirect in nature. Coming to assessee’s argument that the Assessing Officer had nowhere expressed his satisfaction qua its books of accounts u/s 14A(2)(3), we find that it has itself failed to explain the correctness of suo

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 12 motu disallowance of ₹44,450/- to be falling under administrative expenditure head. This is what made the Assessing Officer to invoke the impugned administrative expenditure disallowance as the assessee had nowhere attributed any expenditure in relation to its exempt income under said last head. We therefore affirm the Assessing Officer action invoking the impugned disallowance in principle and reverse CIT(A)’s findings deleting the impugned addition to this effect. The assessee’s arguments qua the instant issue placing strong reliance as tribunal’s order (supra) stand rejected therefore.

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 13 opined that the winning of coal is not doubt production. At paragraph 12 of the juddgmente it hsaid that after wining coal something that was not there comes up, and it is, therefore, a production of coal. The Division Bench followed its own decision in the later case of Khalsa Bros v. CIT [1996] 217 ITR 185. Mr. Bajoria also relied on the interesting case of CIT vs. Shan Finance (P) Ltd. [1998] 231 ITR 308 where the Supreme Court opined that a financier owning machinery might still be entitled to investment allowance even if the machinery is actually used by its lessee for the purpose of production. Going on the language of sub-sections (1) and (2) of the said section the Supreme Court found, on an accurate assessment of the language (we say this with the greatest respect), that the language does not disentitle the financier from investment allowing in the above circumstances. 14. Even considering the later Supreme Court decision given by Mr. Agarwalla, we are still of the opinion that the view taken by our Division Bench as to winning of coal being production is, with due respect, perfectly sound and consistent with common sense. We have absolutely no reason to differ from the reasoning given in Mercantile Construction Co’s case (supra) and we respectfully adopt the same. 15. The point that the assessee is still not an industrial undertaking even though it might be engaged in production of coal is, in our opinion, also be decided against the revenue. Under the definition of an industrial undertaking given under section 33B of the Act. Explanation, mining activity would bring the assessee within the definition of an industrial undertaking. But we need not import the definition of another section to the present one although ordinarily the definition given in one section in a Act can be used for the purposes of another section unless the context indicates otherwise. 16. So far as the assessee is concerned, an undertaking it certainly is. We have found no facts from which we can opine that the assessee is not an industrial undertaking. Ordinarily speaking if a manufacturing activity or an article producing activity is carried on, an undertaking carrying on such activity is to be classed as an industrial one. It might be small scale or large scale, that does not matter much. Even if an undertaking is manufacturing or producing articles, but is still not be classed an industrial one for this, clear indications have to be given as to why this difference should be made in the assessee of the undertaking in question, so that it stands out from the general category. We were not shown any such particular difference excepting that the assessee was also said to carry on transport business. 17. It suffice in this regard to mention that on the principle of Shan Finance (P) Ltd’s case (supra), if the assessee owns the machinery for which investment allowance is claimed, and such machinery is used for production then the section applies, it does not matter if the use for production is made by the lessee or only in one industrial part of the assessee’s business undertaking. Accordingly, the transport business of the assessee does not tilt the question one way or the other.” Respectfully following the aforesaid decision of Hon'ble Calcutta High Court, we find no infirmity in the order of the Learned CIT(A) in this regard. Accordingly, the ground raised by the revenue in this regard is dismissed. 8.3 In following AY 2009-10, ITAT Kolkata co-ordinate ‘A’ Bench [supra] had followed likewise.” 8. Suffice to say, it has come on record that assessee has already succeed on the very issue in earlier assessment year. Learned departmental

ITA No.170/Kol/2018 A.Y. 2010-11 DCIT, Cir-6(1), Kol. Vs. M/s Integrated Coal Mining Ltd. Page 14 representative is fair enough in not pin-pointing any distinction income on facts or law qua the same. We thus adopt judicial consistency to reject the Revenue’s instant last substantive ground. 9. This Revenue’s appeal is partly allowed in above terms. Order pronounced in the open court 15/03/2019 Sd/- Sd/- (लेखा सद%य) (�या'यक सद%य) (Dr.A.L. Saini) (S.S.Godara) (Accountant Member) (Judicial Member) Kolkata, *Dkp, Sr.P.S (दनांकः- 15/03/2019 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-DCIT, Circle-6(1), P-7, Chowringhee Sq. Kolkata-69 2. ��यथ�/Respondent-M/s Integrated Coal Mining Ltd. 6, Church Lane, 1st Fl. Kolkata-001 3. संबं3धत आयकर आयु4त / Concerned CIT Kolkata 4. आयकर आयु4त- अपील / CIT (A) Kolkata 5. 7वभागीय �'त'न3ध, आयकर अपील�य अ3धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड< फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ3धकरण, कोलकाता ।