D.C.I.T CIR - 6,KOLKATA, KOLKATA vs. M/S INTEGRATED COAL MINING LTD, KOLKATA

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1(e) That the learned CIT (Appeals) erred in dismissing the additional ground of appeal taken before him by the appellant on the issue of disallowance u/s.14A of the Act in limine.

2(a) That on the facts and in the circumstances of the case, the learned CIT (Appeals) erred in upholding the action of the Assessing Officer in disallowing a sum of Rs. 8,14,000 representing amount debited to its Profit & loss A/c. by the appellant towards provision for leave encashment based on actuarial valuation, by invoking the provisions of section 43B of the Act.

2(b) That the learned CIT (Appeals) erred in upholding the action of the Assessing Officer in disallowing the impugned sum of INR 8,14,000 disregarding a binding decision of the Hon'ble High Court of jurisdiction.

2(c) That the learned CIT (Appeals) erred in holding that the Hon'ble Supreme Court has stayed the decision rendered of the Hon'ble High Court of jurisdiction rendered in the case of Exide Industries Ltd. Vs. UOl reported in 292 ITR 470 (Cal).

3(a) That on the facts and in the circumstances of the case, the learned CIT (Appeals) erred in confirming the disallowance of Rural Employment Cess (RE Cess) of INR 31,53,02,826 and Primary Education Cess (PE Cess) of INR 7,88,25,718 aggregating in all to INR 39,41,28,544.

3(b) That the learned CIT (Appeals) erred in not following his predecessor's order for the assessment year 2003-04 (first year) on the same issue which has been accepted by the Department.

3(c) That the learned CIT (Appeals) failed to appreciate that both RE Cess and PE Cess having not statutorily accrued during the financial year under consideration, are outside the ambit of section 43B of the Act. 3(d) That the learned CIT (Appeals) erred in observing that the RE Cess and PE Cess aggregating to INR 39,41,28,544 collected are nothing but trading receipts of the appellant and taxable in the previous year under consideration.

4(a) That on the facts and in the circumstances of the case, the learned CIT (Appeals) erred in directing the Assessing Officer to re-compute the figures of collection upto the year end of assessment years 2008-09 and 2009-10 and then out of the total collection allow payments made upto 30t h September as deduction.

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4(b) That the learned CIT (Appeals) exceeded his jurisdiction in directing the Assessing Officer to effectively bring to tax in the year under appeal, collections of RE & PE Cess made by the appellant in earlier years.

4(c) That the learned CIT (Appeals) while directing the Assessing Officer as above, has erred in effectively seeking to reverse/ nullify the appellate order passed by the learned CIT (Appeals) for the AY 2003-04 on the issue of disallowance of RE & PE Cess.

Opening value of Investments 920,887,174 Closing value of Investments 1,167,840,919 Total 2,088,728,093 Average value (B) 1,044,364,047 Opening value of assets 1,498,820,757 Closing value of assets 1,638,178,749 Total 3,136,999,506

Average Value of assets (C) 1,568,499,753 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 4

Interest (A) 6,234,224 1. AXB/C 4,150,973 2. ½% of avg value of investment 5,221,820 Total 9,372,793

“36. Respectfully, following the decision of the Hon’ble Income Tax Appellate Tribunal, Bench ‘B ‘, Kolkata in the case of M/s. Preotoria Enclave Ltd., Kolkata v. DCIT, Circle-5, Kolkata, it is held that no addition to the book profit can be made on account calculated expenditure as per the provisions of sub-sec. (2) & (3) of section 14A of Rs.92,78,481/- extra expenditure incurred to earn exempt income while computing income u/s. 115JB of the Act. This ground of appeal is allowed. This ground of appeal is allowed holding that the excess disallowance calculated by the Assessing Officer and partly upheld in appeal at an amount of Rs.92,78,481/- cannot be added while computing income u/s. 115JB. This ground appeal 1(d) is accordingly allowed.

37. Therefore, it is held that disallowance calculated as per Rule 8D amounting to Rs.92,78,481/- will be added back in the normal computation of income. Therefore, the grounds of appeal 1(a),1(b),1(c) and additional ground of appeal are dismissed relating to computation as per normal profit as per part D of Chapter IV of the Income Tax Act, 1961 and ground of appeal 1(d) is allowed.

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2.6. We have heard the rival submissions and perused the materials available on record including the various case laws relied upon by both the sides. 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. We find that the case laws relied upon by the Learned AR on the decision of the Jurisdictional High Court are directly on this point and in favour of the assessee. CIT vs Ashish Jhunjhunwala in G.A.No. 2990 of 2013 in ITAT No. 157 of 2013 dated 8.1.2014 rendered by Calcutta High Court

" While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case, it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J.K. Investors (Bombay) Ltd., supra, we uphold the order of CIT (A)".

CIT vs R.E.I. Agro Ltd in GA 3022 of 2013 in ITAT 161 of 2013 dated 23.12.2013 rendered by Calcutta High Court

“The Assessing Officer also disallowed the expenditure under section 14A of the Income Tax Act, 1961 without first recording that he was not satisfied with the correctness of the claim as regards the claim that “no expenditure” was made by the assessee.

Challenging the order of the tribunal, the present appeal has been filed. We have heard Mr.Bhowmik and are of the opinion that no point of law has been raised. Therefore, this appeal is dismissed”. The aforesaid two decisions of the Jurisdictional High Court are binding on this tribunal and hence the case laws addressed by the Learned CITA in his order are not considered in this order. We also find that one of the decisions relied upon by the Learned CITA is that of Jurisdictional High Court in the case of Dhanuka & Sons (supra)). We find that the facts in the case of Dhanuka & Sons are totally different from the facts of the instant case and moreover, when there are two conflicting decisions of the same court or different courts on the same issue, then the decision favourable to the assessee has to be followed. Reliance in this regard is & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 7 placed on the decision of the Hon’ble Apex Court in the case of Vegetable Products reported in 88 ITR 172 (SC). Hence we hold that the action of the Learned AO in directly embarking on Rule 8D(2) of the Rules is not appreciated and hence no disallowance u/s 14A of the Act could be made in the facts of the instant case. 2.6.1. We also find that the assessee has got sufficient own funds to make these investments and the Learned AO had not brought any nexus between the borrowed funds vis a vis the investments made by the assessee. Without doing the same, he cannot directly presume that the investments were made out of borrowed funds. If the action of the Learned AO and Learned CITA are to be upheld, then no assessee could make any investments when there is a interest bearing loan to be repaid. The fact of making the investments has to be viewed from the point of commercial expediency and from the point of view of businessman and not from the view point of the revenue. It is well settled that businessman knows his interest best. We place reliance on the decision of Hon’ble Bombay High Court in the case of CIT vs Reliance Utilities & Power Ltd ( 313 ITR 340 ) (Bom) in support of our view that if the own funds are available with the assesee and if the same are more than the investments made by the assessee, then it has to be presumed that the investments were made out of own funds and not out of borrowed funds. Hence we hold that no disallowance u/s 14A of the Act could be made in these circumstances. 2.6.2. We also find that the investments made in subsidiaries by the assessee are only strategic investments and were made with a primary object to acquire controlling interest in group concerns and not for earning any income out of that investment. Reliance in this regard is placed on the decision of the co-ordinate bench of this tribunal in the case of DCIT vs Selvel Advertising P Ltd reported in (2015) 58 taxmann.com 196 (Kolkata Trib.). We hold that even on this count, no disallowance u/s 14A of the Act could be made by the Learned AO. 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 14A of the Act read with Rule 8D 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. When there is no income which is claimed as exempt, then there is no scope for provisions of section 14A to operate. In the instant case, the assessee derived dividend income which is exempt only from CESC Ltd and from UTI Mutual Fund (which was purchased and sold during the year itself). Hence even assuming if disallowance is to be made u/s 14A read with Rule 8D, the investments which did not yield any dividend income during the year has to be excluded. We agree with the arguments of the Learned AR in this regard. Reliance in this regard is placed on the following decisions:- • Alliance Infrastructure Projects Pvt Ltd vs DCIT in & 1043 (BNG.)/2013 for Asst Years 2009-10 & 2010-11 dated 12.9.2014 (Bangalore Tribunal) • CIT vs Corrtech Energy Pvt Ltd reported in 352 ITR 97 (Guj) • CIT vs Shivam Motors in ITA No. 88 of 2014 dated 5.5.2014 rendered by Allahabad High Court & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 8 • CIT vs Lakhani Marketing in of 2008 rendered by Punjab & Haryana High Court • CIT vs Delite Enterprises in ITA No. 110 of 2009 rendered by Bombay High Court The decision of special bench of Tribunal in the case of Cheminvest Ltd vs CIT reported in 121 ITD 318 had held that disallowance u/s 14A could be made even in an year in which no exempt income was earned or received by the assessee. But this decision has been overruled by Bangalore Tribunal , Gujarat High Court and Allahabad High Court as stated supra. Moreover we also find that the special bench decision in Cheminvest Ltd vs CIT has been overruled by the recent decision of the Delhi High Court in Cheminvest Ltd case itself and hence it is no longer good law. Hence we hold in favour of the assessee the alternative argument of the Learned AR that only investments yielding dividend income during the year should be considered for disallowance u/s 14A of the Act. Respectfully following the aforesaid judicial precedents, we have no hesitation in directing the Learned AO to delete the addition made u/s 14A of the Act. Accordingly, the ground nos. 1 (a) to (c ) raised by the assessee are allowed.

3. The next ground to be decided in this appeal is that whether the disallowance u/s 14A of the Act could be made to the book profits computed u/s 115JB of the Act. The assessee has raised the following ground before us :- “1(d) That the finding recorded by the learned CIT(Appeals) in the appellate order while confirming the action of the Assessing Officer in making the impugned further disallowance of expenditure amounting to INR 44,91,468 u/s.14A of the read with Rule 8D of the Income-tax Rules, 1962 is based merely on conjecture, surmise and presumptions.” 3.1. The Learned AR argued that Rule 8D is meant only for computation of income under normal provisions of the Act and not for book profit u/s 115JB of the Act. The Learned DR argued that the disallowance u/s 14A of the Act would automatically fall in clause (f) of Explanation to section 115JB of the Act and hence needs to be added back for computation of book profits u/s 115JB of the Act. 3.2. We have heard the rival submissions. We find lot of force in the argument of the Learned AR that computation of disallowance under Rule 8D can be used only for computation of income under normal provisions of the Act and not for book profits u/s 115JB of the Act. Unless an item is debited in the profit and loss account, the same cannot be the subject matter of addition to book profits under clause (f) of Explanation to section 115JB of the Act. The disallowance made u/s 14A of the Act read with Rule 8D is only artificial disallowance and obviously the same is not debited in the profit and loss account and the same cannot be imported into clause (f) of Explanation to Section 115JB of the Act.

14. Heard rival submissions and perused the material available on record. We find that the Co-ordinate Bench supra remanded the issue to the AO in assessee’s own case for AY.2008-09, the relevant of portion of discussion is reproduced herein below:

4.2. The Learned AR relied on the decision of the Jurisdictional High Court in the case of Exide Industries Ltd vs Union of India reported in 292 ITR 470 (Cal) wherein the provisions of section 43B (f) of the Act has been struct down as arbitrary. However he fairly conceded that the Hon’ble Apex Court though had stayed the operation of the judgement of Calcutta High Court initially but later, it had directed the assesses to comply with the provisions of section 43B(f) of the Act and pay taxes thereon but parallely claim deduction for leave encashment on provision basis, as an interim measure till the disposal of the civil appeal by the apex court. In response to this, the Learned DR vehemently supported the order of the lower authorities. 4.3. We have heard the rival submissions and we find case laws quoted by the Learned AR. We find that it is relevant to get into the operative portion of the decision of the Calcutta High Court in the case of Exide Industries Ltd vs Union of India reported in 292 ITR 470 . It was held as below:-

“ 11. In this regard the observation of the apex Court in the case of Bharat Earth Movers (supra) is quoted below:

The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain....

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Applying the abovesaid settled principles to the facts of the case at hand we are satisfied that the provision made by the appellant company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. The High Court was not right in taking the view to the contrary.

13. The appeal succeeds and is allowed. Section 43B(f) is struck down being arbitrary, unconscionable and de hors the apex Court decision in the case of Bharat Earth Movers (supra)”.

It is observed that the revenue had preferred Special Leave Petition (SLP) before the Hon’ble Supreme Court against the judgement of Hon’ble Calcutta High Court. The Hon’ble Apex Court in SLP proceedings in CC 12060 / 2008 dated 8.9.2008 had held as under:- “The petition was called on for hearing today. Upon hearing counsel the court made the following Order. Issue Notice. In the meantime, there shall be stay of the impugned judgement, until further orders.” Later the Hon’ble Supreme Court in CC 22889 / 2008 dated 8.5.2009 had held as under:- “The petition was called on for hearing today. Upon hearing counsel the court made the following Order Delay condoned. Leave granted. Pending hearing and final disposal of the Civil appeal, Department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the department to recover that amount in case Civil Appeal of the department is allowed. We further make it clear that the assessee would, during the pendency of this Civil Appeal , pay tax as if Section 43B(f) is on the statute book but at the same time it would be entitled to make a claim in its returns.” In the aforesaid circumstances, we deem it fit and appropriate , in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to pass orders based on the outcome of the main appeal on merits by the Hon’ble Supreme Court as stated supra. Accordingly, the ground no. 2(a) raised by the assessee is allowed for statistical purposes.

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15. In view of the above, we remit the issue to the file of the AO to decide the same taking into consideration the outcome of the main case in SLP (civil) 22889/2008 of the Hon’ble Supreme Court. Therefore, the grounds raised in 2(a) to 2(c) by the assessee are allowed for statistical purpose.

17. On first appeal, the CIT-A directed the AO to substitute the actual figures up to A.Y 2008-09 and A.Y 2009-10 and disallowance may be calculated on the basis for the figures taken in the A.Y2008-09 by taking into consideration the total collection upto 31-03-2009 and payment upto date of filing of Return of income i.e 26-09-2009.

5.3. We find that the Learned CITA 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 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 14 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 way 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 CITA 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 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 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 15 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 the Learned AO was deleted by the Learned CITA and the revenue had not preferred any appeal against the same before this tribunal. Similarly in Asst Year 2006-07, no disallowance under this head was made by the Learned AO eventhough 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 the assessment 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 judicata 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 judicata 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 changed 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 from the following chart :-

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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:-

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“Secondly as noted by the tribunal, a consistent view has been taken in favour of the assesssee on the questions raised, starting with the assessment year 1992-93 , that the benefits under the advance licences or under the duty entitlement pass book do not represent 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 the taxpayers’ money in purusing litigation for the sake of it. 5.3.3. We are also reminded of the observations of Hon’ble Justice P.N. Bhagwati while rendering the judgement in the case of Distributors (Baroda) P Ltd vs Union of India & Ors 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 operations 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 CITA and the revenue chose not to file an appeal before this tribunal. The next scrutiny assessment was made for Asst 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 have 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.

1. Whether on the facts and circumstances of the case, ld. CIT(A) erred in law in deleting the disallowance of Rs.92,78,481/- u/s. 14A of the IT Act in computation of book profit u/s.115JB.

2. Whether on the facts and circumstances of the case, ld. CIT (A) erred in violating the provisions of Section 115JB of the IT Act by deleting the disallowance u/s. 14A. 3. Whether on the facts and circumstances of the case, ld.CIT(A) erred in law in holding that additional depreciation of rs.1,30,493/- should be allowed by treating the coal mining as production of coal.

24. Regarding the Ground nos’-1 & 2 of Revenue’s appeal are in respect of deleting the disallowance of Rs.92,78,481/- made by the AO computing such income u/s. 14A r/w Rule 8D of the Rules under book profit u/s.115JB of the Act.

25. Since we decided the identical issue involving Ground no’s-1(a) to 1(d) of assessee’s appeal in favour of Assessee and against the Revenue by following the order of Coordinate Bench of Kolkata Tribunal supra in assessee’s own case for A.Y. 2008-09 wherein it held the disallowance u/sec 14A r/w Rule 8D computed under book profit is not permissible, in view of the same we adopt the same ratio to ground no’s. 1 & 2 raised & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 19 by the revenue. Therefore, the grounds 1 and 2, accordingly, are dismissed.

26. Ground no-3 of Revenue’s appeal regarding additional depreciation. During the year, the assessee has claimed additional depreciation of Rs.1,30,493 on pumps & valves which were acquired on 02.07.2008 and 25.11.2008. The contention of the assessee vide letter dated 13.12.2011 was that the mining involves production of coal and is an excisable goods. The AO was of the view that the Assessee is neither engaged in manufacturing of coal nor producing anything or article and is not eligible for any additional depreciation. Accordingly, the amount of additional depreciation of Rs.1,30,493/- was disallowed.

27. In first appeal before the CIT-A the assessee submitted that it entitled to claim additional depreciation i.e the sum equal to the 20% of the actual cost of machinery u/s. 32(1)(iia) of the Act that in case of a new machinery or plant acquire or installed after 31st day of March 2005 and relied on the decision of Hon’ble High Court of Calcutta in the case of CIT Vs. Atwa & Co. Reported in 254 ITR 592(Cal), wherein it held mining extraction or mining of coal to be regarded as production of an article or thing. The assessee also referred to the order of CIT-A in assessee’s own case for the AY 2008-09 wherein he held the mining or extraction of coal is a process of production and allowed additional depreciation on this issue. Considering the same the CIT-A deleted the impugned addition made u/s. 32(1)(iia) of the Act. & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 20

6.1. The brief facts of this issue is that the assessee claimed additional depreciation of Rs. 75,400/- on survey instrument which was acquired on 8.12.2007. According to the Learned AO , the assessee is enaged in mining of coal and not in manufacturing or producing any thing or article. Hence he felt that the assessee is not eligible for additional depreciation. On first appeal, the Learned CITA held that coal mining would fall under the phrase production of any article or thing by placing reliance on the decision of the Jurisdictional High Court in the case of CIT vs G.S.Atwal & Co reported in 254 ITR 592 (Cal) . Aggrieved, the revenue is in appeal before us on the following ground:- “1. That on the facts and circumstances of the case, ld.CIT(A) erred in law in holding that additional depreciation of rs.75,400/- should be allowed on the basis that coal mining is production of cost.” 6.2. The Learned AR relied on the order of the Learned CITA. In response to this, the Learned DR argued that coal mining does not bring into effect any new product as even after mining, the end product is only coal and hence no transformation happens in the said process. He further placed reliance on the definition of ‘manufacture’ in section 2(29BA) of the Act which defines as follows:- “[29BA) “manufacture “ with its grammatical variations, means a change in a non-living physical object or article or thing- & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 21

(a) Resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) Bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure;.”

6.3. We have heard the rival submissions and we find that the only issue is whether the assessee engaged in coal mining could be construed as production of coal and if so, the assessee is entitled for additional depreciation. We find that this issue is squarely covered by the decision of the Jurisdictional High Court in the case of CIT vs G.S.Atwal & Co reported in 254 ITR 592 (Cal) wherein it was held as below:- “13. Following an old and long standing decision given by Chakravarti C.J in 1959, which was later approved by the Supreme Court, the Division Bench opined that the winning of coal is no doubt production. At paragraph 12 of the judgment it said that after winning 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 v. Shann 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 allowance in the above circumstances.

Order Pronounced in the Open Court on 16th September 2016.