TMI Blog2018 (3) TMI 1809X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) gave his findings that the claims of the assessee has to be allowed u/s.35E and not under section 37 of the Act, as the expenses being preliminary and prospecting expenditure. We also find that the Tribunal for the assessment year 2008-09 [2018 (1) TMI 326 - ITAT CUTTACK ] on similar issue has held that the assessee shall approach the respective assessing authorities to consider the claim of the assessee. Following the same, we direct the Assessing Officer to allow the claim of the assessee u/s.35E of the Act. This ground of appeal of the assessee is allowed for statistical purposes. Addition under the head deterioration of stock - HELD THAT:- As the net realizable price is less than notified price and deterioration occurs due to degradation of coal for losing its Useful Heat Value, such provision is to be made to give a true and fair valuation of the stock of coal. Hence, to take care of all such contingency it was found that a provision of 10% is sufficient and accordingly the stock is valued. Ld A.R. submitted that the disallowance made by the Assessing officer is reduced by ₹ 361.20 Lakhs in the order u/s. 154 dated 28/03/2012 pertaining to amount of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DS - HELD THAT:- As decided in own case [ 2018 (1) TMI 326 - ITAT CUTTACK] Tribunal has observed that the credit of TDS should have been allowed to the assessee on the basis of original TDS certificates submitted by the assessee. Since the facts being identical for the present assessment year under consideration, we confirm the order of the CIT(A) and dismiss the ground of appeal of the assessee. Allowability of HEMM rehabilitation expenses - revenue or capital expenditure - HELD THAT:- revenue has not challenged the order of the CIT(A) in assessment year 2003-04 but it was stated in the ground of appeal that the CIT(A) has not considered the issue on merit. But the CIT(A) has observed that the revenue having accepted the claim of the assessee in the earlier assessment year, has not filed second appeal. The findings of the CIT(A) are supported by the decision of Hon ble Supreme Court in the case of Saravana Spg. Mills Pvt. Ltd [ 2007 (8) TMI 16 - SUPREME COURT] . Even before us, the revenue could not point out any specific error in the order of the CIT(A) except relying on the order of the Assessing Officer and no new facts have been brought on record to substantiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that since the assessee is a public sector undertaking, has undertaken number of development work in and around its peripheral area to fulfil its social obligation and in the process made donations and further details of expenditure were duly furnished before the Assessing Officer. Ld A.R. relied on the decision of the Tribunal in assessee s own case for the assessment year 2008-09 order dated 3.1.2018 in ITA No.73/CTK/2012. 9. Contra, ld D.R. supported the order of the CIT(A). 10. We have heard the rival submissions and perused the order of the Tribunal in assessee s own case for assessment year 2008-09 (supra). We find the Tribunal has deleted the addition. The relevant portion of the findings of the Tribunal are as under: 24. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. We find that the Assessing Officer has disallowed the expenditure claimed under the head donation and subscription on the ground that the assessee failed to furnished any evidence before the Assessing Officer as called for. On appeal, the CIT(A) following the order of the Tribunal for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the head CMPDIL expenses appearing in the annual report under schedule 12(B). The Assessing Officer disallowed ₹ 288.10 lakhs considering the same as capital expenditure as this amount was spent on contractual survey paid to M/s. RITES for the purpose of railway lines is not eligible for deduction u/s.37(1) of the Act. 14. On appeal, the CIT(A) confirmed the action of the Assessing Officer with a rider that the said expenditure is to be allowed as per provisions of section 35E of the Act. 15. Ld A.R. of the assessee submitted that the expenditure actually relates to CMPDIL (the proper head of Account being 004959 ) and was incurred for the cost of preparation of pre-feasibility report, Environment Management Plan (EMP), Environment Impact Assessment (EIA) Report etc for the preparation of expansion Project Report which is in the nature of normal revenue expenditure to be allowed u/s. 37 (1). Ld A.R. submitted the details of such expenditure as below: All expenses relates to CMPDIL 1. Trial blasting with SME explosive at Basundhara west ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature and usage of asset is of enduring nature. Therefore, the CIT(A) called for a remand report from the Assessing Officer. The Assessing Officer submitted his report, wherein, it was stated that the work undertaken by CMPDIL are purely contractual nature and obtaining of an asset is of enduring nature. The remand report was furnished to the assessee for its comments and the assessee filed its submissions. 18. The CIT(A)observed that the expenditure is not incurred on existing revenue yielding mine but such expenditure is in connection with a new capital asset. Therefore, this expenditure is in the nature of preliminary and prospecting expenditure covered u/s.35E of the Act and directed the Assessing Officer accordingly. 19. We find that the CIT(A) gave his findings that the claims of the assessee has to be allowed u/s.35E and not under section 37 of the Act, as the expenses being preliminary and prospecting expenditure. We also find that the Tribunal for the assessment year 2008-09 in ITA No.37/ctK/2012 order dated 3.1.2018 on similar issue has held that the assessee shall approach the respective assessing authorities to consider the claim of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat a provision of 10% is sufficient and accordingly the stock is valued. Ld A.R. submitted that the disallowance made by the Assessing officer is reduced by ₹ 361.20 Lakhs in the order u/s. 154 dated 28/03/2012 pertaining to amount of provision on account of deterioration in opening stock.. Hence the net disallowance on this account remains at ₹ 537.87 Lakhs . It was submitted that as per accounting policy consistently followed by the assessee company (clause 10.2 of Schedule - 'O' , Provision @ 10% on the value of closing stock of coal is made to take care of deterioration of stock due to fire and longer period of stocking etc. where the stock is valued at Net Realizable Value. No such provision is made where the stock is valued at cost.' 24. Before us, both the parties agreed that the issue requires reconsideration in view of the decision of the Tribunal in ITA No. 50,51,52, 53 for the assessment year 2004-05 to 2007-08 and also by the Tribunal decision dated 3.1.2018 in ITA No.73/CTK/2012 for the assessment year 2008-09, wherein, it has been observed as under: Having heard both the parties and perusing the material on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein, it has been held that : As per the provisions of s. 145A the income from business under the head Profits and gains from business has to be computed in accordance with method of accounting regularly employed by the assessee. Similarly, s. 145A provides that the inventory shall be valued in accordance with the method of accounting employed by the assessee, therefore, if the method of valuation adopted by the assessee is recognised method then the same cannot be rejected on the ground that the net realisable value/market value has been determined on the basis of certain estimate. It is to be noticed that the AO while holding that the inventories valued by the assessee @ 5 per cent is excessive, did not care to estimate the net realisable value of the store and proceeded to disallow the amount of ₹ 68,59,108 written off as obsolete stores and claimed in P L a/c altogether. It has come on record that the assessee has valued the inventories which were rusted, non-moving and unusable on account of obsolescence/ damage/deterioration by efflux of time at cost and net realisation value, whichever is lower. It has also come on record that these items were 5-6 years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no change in the facts in the assessment year 2009- 10, we restore the issue to the file of the Assessing Officer for fresh consideration in the light of details furnished by the assessee as per law. and this ground of appeal is allowed for statistical purposes. 31. Ground No.3(5) relates to confirmation of addition of ₹ 1769.58 towards charge on lease hold land. Ground No.3(6) relates to depreciation on premium paid for lease hold land as intangible assets. These grounds are interconnected; therefore, they are disposed as under: 32. The Assessing Officer found that the assessee company acquires land from government for exploration of coal out of the designated allotment of land. The assessee claimed before the Assessing Officer that the amount paid for the lease land are the commercial assets of the company. The price paid is actually for purchase of a mining right which is a capital expenditure. The Assessing Officer also noted that in the preceding year, such a claim has been disallowed by the CIT(A)and the Tribunal. Therefore, the Assessing officer did not accept the claim of the assessee and disallowed ₹ 1769.58 lakhs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 lakhs. 37. The Assessee has claimed TDS of ₹ 12805.12 lakhs. However, the Assessing Officer has allowed credit of ₹ 12444.42 lakhs in the assessment u/s.143(3)of the Act and balance of ₹ 368.76 lakhs was considered. Further, the TDS credit has been reduced further to ₹ 12436.36 lakhs in the order passed u/s.154 of the Act dated 28.3.2012, which was confirmed in first appeal. 38. Both the parties agreed that the issue is covered by the decision of this Bench in assessee s own case for the assessment year 2008-09 in ITA No.73CTK/2012 order dated 3.1.2018, wherein, the Tribunal has observed that the credit of TDS should have been allowed to the assessee on the basis of original TDS certificates submitted by the assessee. Since the facts being identical for the present assessment year under consideration, we confirm the order of the CIT(A) and dismiss the ground of appeal of the assessee. 39. Ground No.4 reads as under That the AO has further erred in not allowing interest u/s.244A of the I.T.Act, 1961. 40. At the time of hearing, ld A.R. did not press this ground, hence same is dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eproduced below based on which he has considered the expenditure as Capital; It is observed from the above that rehabilitation expenditure is incurred when 50% to 80% of the completed life of the equipment in terms of working rated hours is spent and the maximum limit of expenditure is bound at 40% of the 'current' basic price of the equipment, excluding service charge if any. Thus it is apparent that in this case expenditure are being incurred upto the level of 40% of the current basic price. It is an admitted fact that repairs overhaul are major in nature. Now the extend of such repairs and overhauls is found to be pegged at a maximum of 40% of the current basic price. Thus 'the expenditure incurred partakes the character of a capital expenditure' From the aforesaid finding it becomes clear that the Ld. AO has considered the expenditure as Capital in nature just on the ground that there is a guideline of CIL which prescribes that such repair expenditure should not exceed 40% of the current basic price of equipment. By no stretch of imagination this guideline can be used to justify the expenditure as Capital in nature for income tax pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instant case there is no replacement of the asset. The expenses only help in making the asset perform as per their rated capacity, efficiency and life. This expenditure was allowed by the AO for Asst.Yr.1993-94 in his order U/s.143(3) dtd.29-03-1996. Further, this expenditure was allowed by my predecessor for Asst.Yr.2003-04 in appeal No.0202/08-09 dtd.03-07-2009. Incidentally this decision of the CIT(A) for Asst.Yr.2003-04 apparently has been accepted by the Department and no appeal has been preferred before ITAT as is clear from the order of ITAT for that year. Considering the overall facts of the case as discussed above, more particularly the fact that the expenditure has not resulted in replacement of the asset, I see no reason to differ from the view taken by the AO earlier and my predecessor in office. Therefore, the disallowance of ₹ 633.19lacs is deleted. Ground No.3(4) is thus decided in favour of the appellant. 47. Ld D.R. submitted that the CIT(A) has erred in granting relief of HEMM expenses of ₹ 663.19 lakhs without going into the merits of the case. Ld D.R. submitted that the Assessing Officer has made a categorical observation in re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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