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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
आदेश/ORDER Per Shri A.T.Varkey, JM These cross appeals filed by the assessee and the revenue are against the order of Ld. CIT(A), Asansol dated 19.09.2014 for AY 2007-08.
First we take up revenue appeal. Ground no. 1 of revenue’s appeal is against the order of Ld. CIT(A) in respect of deleting the addition of Rs.71,11,000/- made by the AO on account of grant to sports and recreations. Briefly stated facts are that the assessee company has debited to P&L Account a sum of Rs.71,11,000/- towards grants to sports and recreation. The AO disallowed the same by observing that these expenses are not incidental to business of the assessee and added to the total income of the assessee. Aggrieved, assessee preferred appeal before the Ld. CIT(A), who deleted the addition by following his order in assessee’s own case for AY 2006-07 in appeal No. 195/CIT(A)/Asansol/w- 11/2008-09 dated 18.06.2014. Aggrieved, the revenue is in appeal before us.
We have heard rival submissions and gone through the facts and circumstances of the case. At the time of hearing Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee by the ITAT’s order in assessee’s own case for AYs 2003-04 to 2005-06 dated 27.07.2016. On the other hand, Ld. DR relied on the order of AO. We find that according to the AO, grounds in respect of sports and recreation are not incidental to business of the assessee company, hence he disallowed the claim of the assessee. On appeal Ld. CIT(A) deleted the disallowance by following his earlier year’s order dated 18.06.2014 and according to an agreement between management (Coal India Ltd. and its subsidiaries & Others) in which assessee company is required to pay such grants as per National Coal Wages Agreement. We find that this issue was decided by the coordinate bench of this Tribunal in assessee’s own case for AYs 2003-04 to 2005-06 vide order dated 27.07.2016, wherein the Tribunal vide para 22 and 23 of its order has held as under: “22. After considering the rival submissions, we are of the view that the deduction claimed has to be allowed. As per para 10.8.1 of the NCWA, there is a specific clause which reads thus: " Other Welfare Activities: 10.8.1 Various activities undertaken by the erstwhile Coal Mines Labour Welfare Organisation such as Preventive Health Care, Family Welfare, MP.!., Games and Sports, Cultural programmes, Adult Education, Communication Development etc., will continue to be activated and strengthened by the coal companies so as to improve the quality of life."
A reading of the aforesaid clause clearly reveals that the Assessee was bound to provide as part of the conditions of service to its employees, sports and recreational facilities. The grant in question is in pursuance of the aforesaid agreement. Therefore it cannot be said that the grants given by the Assessee are not for the purpose of business of the Assessee. As an employer provision of grants to provide better conditions of service will be part of the labour cost of the Assessee and it has to be allowed as deduction. As far as the plea of the revenue that the evidence of area-wise expenses were not produced, the plea of the Assessee was that the coal area is scattered over a large area and that the Assessee being a Government of India undertaking, its accounts are subject to review by CAG and no adverse comments have been made by the CAG. This plea in our view, in the facts and circumstances of the present case was enough to disregard the findings of the AO. Taking into consideration the overall facts and circumstances of the case, we are of the view that the deduction claimed had to be allowed. The same is directed to be allowed. The relevant grounds of appeal of the Assessee are allowed.”
Since the issue is identical with the issue raised in AYs. 2003-04 to 2005-06, which is squarely covered in favour of the assessee and the Ld. DR could not controvert the facts and since there is no change in facts or law, we respectfully following the aforesaid order of the Tribunal, cited supra, we confirm the order of ld CIT(A) and dismiss the ground of appeal
of revenue. This ground of revenue’s appeal is dismissed.
5. Ground no. 2 of revenue’s appeal is against the order of Ld. CIT(A) in respect of deleting the addition of Rs.83,97,000/- made by the AO on account of Environment Expenses. Briefly stated facts are that the assessee company has debited to P&L Account a sum of Rs.83,97,000/- towards Environment Expenditure. The AO disallowed the same by observing that the assessee could not file any details of such expenses and in absence of such details the expenses made by the assessee could not be verified and remained unverifiable. Hence, he disallowed the same and added to the total income of the assessee. Aggrieved, assessee preferred appeal before the Ld. CIT(A), who deleted the addition by following his order in assessee’s own case for AY 2006-07 in appeal No. 195/CIT(A)/Asansol/w-11/2008-09 dated 18.06.2014. Aggrieved, revenue is in appeal before us.
6. We have heard rival submissions and gone through the facts and circumstances of the case. At the time of hearing Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee by the ITAT’s order in assessee’s own case for AYs 2003-04 to 2005-06 dated 27.07.2016. On the other hand, Ld. DR relied on the order of AO. We find that according to the AO, Environment Expenses as claimed by the assessee are not verifiable and hence, he disallowed the same. On appeal Ld. CIT(A) deleted the disallowance by following his earlier year’s order for AY 2006-07 dated 18.06.2014. We find that this issue was decided by the coordinate bench of this Tribunal in assessee’s own case for AYs 2003-04 to 2005-06 vide order dated 27.07.2016, wherein the Tribunal vide para 27 of its order has held as under: “27. We have considered the rival submissions. We have perused the relevant evidence filed by the Assessee to substantiate claim of the Assessee. For AY 2003-04, these details are available at page 25 of the PB. The revenue does not dispute the fact that these expenses are incidental to the business and are revenue in nature. Similar evidence has been produced in respect of the other two AYs also. The only dispute is with regard to evidence with regard to incurring of these expenses. The plea of the Assessee has been that these are statutory levies and the payments. It can be seen from the evidence on record that the payment relates to aforestation/tree plantation & Land reclamation and Payment of statutory duty for environment clearance like Water cess & consent fees to Pollution Control Board etc. As rightly contended by the learned AR such payments cannot be disputed on the ground that there was want of proper vouchers. But for payment of these statutory dues the Assessee could not have carried on its business. In the given circumstances of the case, we are of the view that the deduction in question ought to be allowed. We direct the same to be allowed as deductions. The relevant grounds of appeal of the assessee are allowed.”
Since the issue is identical with the issue raised in AYs. 2003-04 to 2005-06, which is squarely covered in favour of the assessee and the Ld. DR could not controvert the facts and since there is no change in facts or law, we respectfully following the aforesaid order of the Tribunal, cited supra, we confirm the order of ld CIT(A) and dismiss the ground of appeal of revenue. This ground of revenue’s appeal is dismissed.
8. Ground no. 3 of revenue’s appeal is against the order of Ld. CIT(A) in respect of deleting the addition of Rs.4,20,64,000/- made by the AO on account of Hire Charges of Bus & Ambulance. Briefly stated facts are that the assessee company has debited to P&L Account a sum of Rs.4,20,64,000/- towards Hire charges of bus and ambulance. The AO disallowed the same as the assessee was unable to produce any acceptable reason as to why the expenses should not be disallowed and, therefore, he added to the total income of the assessee. Aggrieved, assessee preferred appeal before the Ld. CIT(A), who deleted the addition by following his order in assessee’s own case for AY 2006-07 in appeal No. 195/CIT(A)/Asansol/w-11/2008-09 dated 18.06.2014. Aggrieved, revenue is in appeal before us.
We have heard rival submissions and gone through the facts and circumstances of the case. At the time of hearing Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee by the ITAT’s order in assessee’s own case for AYs 2003-04 to 2005-06 dated 27.07.2016. On the other hand, Ld. DR relied on the order of AO. We find that according to the AO, assessee was unable to produce any acceptable reason for not disallowing the expenditure. Hence, the AO disallowed the claim of the assessee. On appeal Ld. CIT(A) deleted the disallowance by following his earlier year’s order dated 18.06.2014. We find that this issue was decided by the coordinate bench of this Tribunal in assessee’s own case for AYs 2003-04 to 2005-06 vide order dated 27.07.2016, wherein the Tribunal vide para 31 of its order has held as under:
“31. After considering the rival submissions, we are of the view that incurring of the expenses by the Assessee cannot be disputed and in fact has not been disputed by the revenue. There appears to be only a dispute with regard to the evidence of incurring of the expenses. The details to which our attention was drawn by the learned counsel for the Assessee, in our view, requires to be verified by the AO. We, therefore set aside the order of the CIT(A) on this issue and remand the question of incurring of these expenses to the AO for fresh consideration with liberty to the Assessee to let in evidence to substantiate its claim for deduction of the aforesaid expenditure. For statistical purposes the relevant grounds of appeal are treated as allowed.
10. Since the issue is identical with the issue raised in AYs. 2003-04 to 2005-06, and the Ld. DR could not controvert the aforesaid finding of the Tribunal by producing any material before us, following the aforesaid order of the Tribunal, cited supra, we remit this issue to the file of the AO for fresh consideration as per the direction given in the Tribunal’s order dated 27.07.2016 in AYs 2003-04 to 2005-06. This ground of appeal of revenue is allowed for statistical purposes.
11. Ground no. 4 of revenue’s appeal is against the order of Ld. CIT(A) in respect of deleting the addition of Rs.63,74,000/- made by the AO on account of Uniform and Stitching Charges. Briefly stated facts are that the assessee company has debited to P&L Account a sum of Rs.63,74,000/- towards Uniform and Stitching charges. The AO disallowed the same by observing that these expenses are not incidental to business of the assessee and added to the total income of the assessee. Aggrieved, assessee preferred appeal before the Ld. CIT(A), who deleted the addition by observing that no valid reasons were assigned by the AO for the aforesaid disallowance. He also observed that the assessee explained that this expense is for security and Medical Personal as per standing guidelines on hygiene and safety. On the basis of the explanation offered by the assessee, the Ld. CIT(A) was satisfied that the expenses incurred were wholly and exclusively for business purposes and eligible for deduction u/s. 37(1) of the Income-tax Act, 1961. Hence, he directed the AO to delete the addition of Rs.63,74,000/-. Aggrieved, revenue is in appeal before us.
12. We have heard rival submissions and gone through the facts and circumstances of the case. At the time of hearing Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee by the ITAT’s order in assessee’s own case for AYs 2003-04 to 2005-06 dated 27.07.2016. On the other hand, Ld. DR relied on the order of AO. We find that according to the AO, these expenses are not incidental to business of the assessee and added to the total income of the assessee. On appeal, the Ld. CIT(A) deleted the disallowance by observing that no valid reasons were assigned by the AO for the aforesaid disallowance. He also observed that the assessee explained that this expense is for security and Medical Personal as per stranding guidelines on hygiene and safety. On the basis of the explanation offered by the assessee, the Ld. CIT(A) deleted the disallowance as made by the AO by observing that the expenses incurred were wholly and exclusively for business purposes and eligible for deduction u/s. 37(1) of the Income-tax Act, 1961. We find that no such disallowances were made in any of the earlier years and these expenses were duly allowed. Before us, the Ld. DR could not produce any material to controvert the factual finding recorded by the ld CIT(A) in respect of the expenses to be non-incidental to business of the assessee. In view of the above, we find no infirmity in the order of the Ld. CIT(A) in deleting the disallowance as made by the AO and the same is hereby upheld. This ground of appeal of the revenue is dismissed.
13. Now, we take up assessee’s appeal. Ground Nos. 1 and 2 of assessee’s appeal are against the order of Ld. CIT(A) in not admitting and adjudicating the additional ground raised before him albeit first. Briefly stated facts are that when the Ld. CIT(A) remanded the fresh claim made by the assessee for the first time before him, the AO in his remand report observed that the additional grounds of appeal of the assessee relates to fresh claim of deduction which were not claimed in the return of income. According to AO, since the Hon’ble Supreme Court in a similar case of Goetze (India) Ltd. Vs. CIT (2006) 204 CTR (SC) 182 has accepted the view of the department that a claim for a deduction not made in the return cannot be entertained by Assessing Officer and can be done only by filing revised return. In view of the above he submitted that the additional grounds of appeal filed by the assessee may not be accepted. On appeal, the Ld. CIT(A) did not admit and adjudicate the additional grounds of appeal filed by the assessee by observing as under: “11. The legal provision regarding additional grounds is admissible in view of provisions of section 250(5). As per decision in Ganpatrai & Son Ltd. Vs. Commissioner of Excess Profits Tax 24 ITR 362 (Bom), as long as omission is not wilful or unreasonable, the additional ground can be admitted.
12. In this case the matter concerned does not stem from any decision of Assessing Officer. The mistake took place at the stage of filing of return of income and remedy lies in section 139(5). As no other prejudicial to interest of assessee has been passed by Assessing Officer in the matter, the ground is not admissible. Accordingly no case exists to admit the additional grounds.
13. The additional grounds makes claim for reduction of income. The claim of the assessee is not ·made in the returns of income. These claims are now raised in appeal. In this context the case Goetze (India) Ltd. vs. C.I.T. (SC) 284 ITR 323 applies. As per the decision any changes in return of income can be made only by way of a revised return of income and not in any other manner.
14. In this case the claims are made at appeal stage. If the same is considered, the appellant is making use of a platform not available to majority of assessees in the country. Only those returns of income taken up for scrutiny or rectification come up in appeal. Appeal is for settlement of grievances and is not a platform to extent a statutory time limit set by section 139(5) for making amendments to return of income. Errors in return of income can be corrected upto end of one year from the end of assessment year by filing revised return of income. Every return of income is expected to be correct and complete and is verified by the assessee to be correct. Hence appellate platform cannot be used to extent the statutory set time limit imposed by section 139(5) by which items not claimed in return of income is considered and benefits granted to appellants.
15. The appellant gave exhaustive submission on the matter W.r.t decision in Goetze (India) Ltd. vs. C.I.T. (SC) 284 ITR 323. It was stated that the decision in Commissioner of Income Tax vs Sam Global Securities Ltd. (201) 360 ITR 682(Del) stands in their favour and the Hon. High Court of Delhi has considered the decision reported in Goetze (India) Ltd. vs. C.I.T. (SC) 284 ITR 323. However, in the case of Sam Global Securities Ltd., the claim for additional deduction was made by them before Assessing Officer but if1 this case, the claim was not made before Assessing Officer. Hence the cases are distinguishable.
16. In reason recorded in paragraph 15 the fact that appeal proceedings should not be used to stretch a statutory limit imposed for modifying a verified return was emphasised. Appeal proceedings arise only as a result of grievance and majority of the assessees are not aggrieved after filing return of income. Those not aggrieved do not get benefit of extended statutory limit, if the argument of appellant is accepted. Grievance, if the argument of appellant is accepted, can extend statutory limit to longer periods by continued litigation and goes against principles in Income Tax Act 1961 which puts caps on almost every statutory procedure in regard to time limit. There is a statutory bar on considering the points raised as additional grounds of appeal. In view of all the facts recorded in paragraphs 12 to 15, I decline to admit additional grounds of appeal.” Aggrieved, assessee is in appeal before us.
We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee inadvertently in the tax audit column 21B(j) has disallowed an amount of Rs.2,52,25,000/- as not allowable u/s. 40A(3) of the Act. Likewise, the assessee at column 21B(h)(b) has disallowed Rs.2.33 cr. as inadmissible u/s. 40A(3) of the Act read with Rule 6DD of Income-tax Rules, 1962 (hereinafter referred to as the “Rules”).
According to the assessee, Rs.2.52 cr. was the contribution made to schools and institutions which was inadvertently disallowed by the assessee u/s/. 40A(9) of the Act while computing taxable income ignoring the fact that the said expenses are duly allowable u/s. 37(1) of the Act. According to the assessee, after the assessment order was passed it realised the mistake that the said contribution made to schools and institutions should not have been disallowed u/s. 40A(9) of the Act, because restriction in section 40A(9) of the Act applies only in respect of contribution made by an assessee to any non-statutory fund or trust created for the benefit of its employees. According to the assessee, contributions were made to the schools with proper approval of the competent authority to develop proper educational infrastructure not only for the children of the workmen of the company but also for the benefit of public at large. These expenses, according to the assessee, were made particularly as a staff welfare expenses and particularly for social cause as its commitment to the society in the form of CSR activities, which the assessee is bound to do as per the statute. The Ld. AR of the assessee drew our attention to the assessee’s own case for AYs. 2003-04 to 2005-06 wherein the Tribunal based on the notification of the National Coal Wage Agreement and relying on various Hon’ble High Courts’ decisions were pleased to allow the very same claim of the assessee. We note that the AO has made the disallowance based on the tax audit report filed by the assessee before him and since the assessee has not made any claim in the revised return, the AO has disallowed the claim. During the first appellate proceeding, the assessee has made the claim which was not entertained by the Ld. CIT(A) on the ground that the assessee ought to have made the claim before the AO and should have filed the revised return and for doing so relied on the decision of Goetz (India) Ltd. Vs. CIT 284 ITR 323 (SC).
It should be kept in mind that as per the scheme of the Act, the income should be taxed in the right hand, in the right year and it should be on the right income as held by the Hon’ble Supreme Court in ITO Vs. CH. Atchaiah (1996) 218 ITR 239 (SC). The Hon’ble Gujarat High Court in S. R. Costhi Vs. CIT (2005) 276 ITR 165 (SC) held, inter alia, “the authorities under the Income-tax Act, 1961 are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected.” Further, we rely on the decision of the Hon’ble Supreme Court in CIT Vs. V.
MR. P. Firm, Muar (1965) 56 ITR 67 (SC) and Circular No. 114XL 35 of 1955 issued by the CBDT on April 11, 1955 that an officer must not take advantage of ignorance of the assessee as to his rights. The judgment of Hon’ble Supreme Court in the case of Goetz (India) Ltd. (supra) was limited to the power of the AO and did not impinge upon the power of the appellate authorities/Tribunal. Therefore, we are inclined to admit this claim of the assessee and restore this issue back to the file of AO to verify the claim made by the assessee. The assessee is directed to bring all the facts before the AO and in case the issue is already covered by the decision of this Tribunal as claimed by the assessee, then the AO after verification finds that the issue raised has already been settled by this Tribunal then the claim of the assessee should be allowed.
Coming to the claim of Rs.2.33 cr., which was disallowed u/s. 40A(9) of the Act. According to the assessee, since the payments were made to the labourers working in far- flung collieries where no banking facilities were available falls under the exemption given under Rule 6DD(i) of the Rules, therefore, the assessee’s mistake of inadvertently disallowing the said amount needs to revisited and claim needs to be allowed. We admit this issue also and restore the issue back to the file of the AO to decide as to whether the claim made by the assessee is allowable as per Rule 6DD(i) of the Rules. Needless to say, the assessee should be given sufficient opportunity to support its claim and to cooperate with the AO. With this observation, the appeal of the assessee is allowed for statistical purposes.
In the result, both the appeal of the assessee as well as the revenue is partly allowed for statistical purposes. Order is pronounced in the open court on 18.10.2017. Sd/- Sd/- (M. Balaganesh) (Aby. T. Varkey) Accountant Member Judicial Member
Dated :18th October, 2017 Jd.(Sr.P.S.)