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2016 (2) TMI 1118 - AT - Income TaxCompensation paid to farmers for using their land for mineral extraction - justification for claim of revenue expenditure - Held that:- We find that the issue raised in this ground has already been decided by the ITAT in assessee’s own case for earlier AYs holding that the payment made by the assessee to farmers is a part of cost of Gypsum only and no capital asset is acquired by the assessee by incurring this expenditure. Nature of loss to farmers is immaterial while judging the nature of expense in the hands of assessee and therefore same cannot be basis for treating the expenditure as capital in nature - Decided in favour of assessee Contribution to State Renewal Fund - allowable revenue expenditure - Held that:- This issue raised in this ground has already been decided by the ITAT in assessee’s own case for earlier AYs holding that that the contribution made by the assessee to a Public Welfare Fund which is connected or related with his business is an allowable deduction u/s 37 as it was provided for the benefit of the employees - Decided in favour of assessee Deduction for prior period expenses - Held that:- In our view the case of the revenue is required to be dismissed as the case of the assessee is squarely covered by the earlier order of the Tribunal for AY 2009-10, even otherwise, in view of the judgment in the matter of CIT vs. Excel Industries Ltd. (2013 (10) TMI 324 - SUPREME COURT), the appeal of the revenue is required to be dismissed as the rate of tax remain the same in the present year as well as in the subsequent year. Therefore, there will not be any tax effect and the entire exercise of the revenue is only academic in nature. Addition on account of donations - Held that:- CIT (A) correctly deleted the disallowance by holding that the same were contributions made for various activities which also involved display of appellant’s banner and therefore these expenses had advertisement and publicity value for the appellant. However, the ld. CIT (A) confirmed the disallowance of ₹ 50,000/- in respect of payment made to Rose Society by relying on the decision of Hon’ble ITAT in assessee’s own case for AY 2008-09 where the disallowance made by AO in respect of payment made to Rose Society was confirmed by Hon’ble ITAT Disallowance of social welfare expenses - Held that:- The payment made to Rose Society amounting to ₹ 50,000/-, in our view is not in respect of any activity connected necessarily and exclusively for the purpose of business and do not qualify the expenditure u/s 37 of the IT Act. Even otherwise, similar ground of the assessee has been dismissed by the Tribunal in its earlier order. Disallowance in respect of amortization of mining land and leasehold land - allowable expenditure u/s 37 - contention of the assessee is that the sole purpose of acquisition of mining land is to exploit it for extraction of mineral resources and extraction of such mineral is the only economic use of the land for the assessee - Held that:- With the passage of guidelines for protecting the environment, now it is the duty of the lesser/assessee to submit and execute the mine closing plan so as to ensure that the land is used subsequent to the closure of the mining operation. Even otherwise, the mining activity is done not on the surface of the earth but on the core towards the lower side of the surface. The surface, can be put to use for beneficial purposes after the term of lease/mining activity is over and it can be exploited for commercial purposes by the owner/appropriate authority. The assessee was taxed on the basis of the submission made by it before the AO before the assessment for the A.Y. 2010-11 is finalized. The mere acceptance of the methodology by the AO for A.Y. 2011-12 will not withhold us to decide the issue on merit and in law for the A.Y. 2010-11. As per the law and principle, the authorities situated in lower ladder/tire of hierarchy is required to abide law/adjudication done by the superior authority. This is the only way the judicial system works. The AO is a quasi judicial authority and bound to follow the principle laid down by the Tribunal and not the vice versa. Therefore, the submission of the ld. A/R for the assessee on this count is also rejected. However, it is made clear that the assessee would be entitled to all benefits as available in law and the assessee will not be subjected to double taxation for the A.Y. 2011-12. The AO is directed to give effect to the above said direction and nullify the effect of double taxation, if any, as claimed by the assessee. In the light of the above, ground of the assessee is dismissed. Disallowance paid to the DMG for computerization of its data - Held that:- It is an admitted fact that the assessee is one of the beneficiaries of the computerization. There are other lakhs of mine owners/licencees who are/will be benefitted by way of computerization of the department. Moreover, it is the bounden duty of the Government to computerize its department. Once the assessee is paying the lease rent and other charges to the Government for acquiring the rights to mines and minerals, the department, is not expected to ask any amount over and above the statutory charges. Any contribution made by the assessee to the Government for computerization, would be at its own cost and pay-roll. That cost incurred by the assessee for computerization of the department, in our view is not going to benefit the assessee exclusively and wholly. It may be a good-will gesture or an effort to oblige the bureaucrats by the assessee. We are not expressing any opinion/requirement of paying such huge amount to the department for the purpose of computerization Reduction of claim u/s 80IA by not considering the income from sale of CERs and liquidated damages as derived from the business of power generation undertaking - Held that:- The products or the articles supplied are goods. Excise duty, if not exempt, is payable in many cases on ad valorem basis. Similarly, sales tax, if not exempt, is also payable. The standing charges obviously do not form part of the supply made and are not treated as sale consideration or the price of the goods on which excise duty or the sales tax etc. would be or is payable. Keeping in view the nature and character of the standing charges, evidence and finding regarding nature and character of the manufacturing activity undertaken, it cannot be said that the said charges were paid for or towards sale consideration of the goods supplied. This is not a case where goods were produced but not purchased or supplied etc. The factual matrix as found does not support the claim of the appellant under Section 80IC of the Act. We add by way of caveat that in a given case, and depending upon the factual matrix/evidence, charges similar to standing charges may represent cost/sale price or price for failure to purchase produced/manufactured goods. - Decided against assessee Not allowing the income of the assessee from sale of CERs as capital receipt - Held that:- CER is capital receipt and the AO is directed to treat the sale of CER as capital receipt. Thus the ground of the assessee on account of sale of CER is allowed. Deduction in respect of mines closure expenses - Held that:- As per matching principle as well as the mercantile system of accounting, the liability is allowable in principle under section 37 of the Act. In view of the above, the ground of the assessee is allowed and the AO is directed to give the benefit of deduction towards mines closure expenses in the A.Y. 2010-11.
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