2002 (2) TMI 344 - AT - Income Tax

Summary

Issues Involved:

1. Jurisdiction of CIT(A) in passing orders after ceasing to hold charge.
2. Validity of Assessing Officer's jurisdiction in making reassessment when the reason for reopening did not survive.
3. Validity of reopening of assessment for AY 1989-90 being barred by limitation.
4. Enhancement jurisdiction assumed by CIT(A).
5. Disallowance of Heavy Earth Moving Machinery (HEMM) rehabilitation expenses.
6. Disallowance of expenditure claimed on account of contribution to Coal Price Regulation Account (CPRA).
7. Disallowance of provision for deterioration of closing stock, rehandling charges, and slow-moving items.
8. Treatment of amount collected from employees towards pension fund and interest due thereon.
9. Disallowance of expenditure for payment to State Government and rehabilitation of people for use of land for mining.
10. Disallowance under section 40A(3) and section 40A(9).
11. Disallowance of depreciation on Power Support Long Equipment (PSLE).
12. Enhancement of income by disallowing provision for interim relief payable to employees.
13. Enhancement of income by disallowing interest paid to holding company, Coal India Ltd.
14. Disallowance of community development expenditure.
15. Disallowance of loss on account of irrecoverable business advances.
16. Disallowance of additional expenditure on power and fuel.
17. Disallowance under section 43B.
18. Disallowance of business expenditure arising out of memorandum of understanding on National Coal Wage Agreement.
19. Incorrect set-off of brought forward losses.
20. Imposition of interest under section 234B and section 234C.
21. Disallowance of depreciation on assets used in a guest house and expenditure on current repairs of guest house.
22. Disallowance of provision made for deterioration of coal stock.
23. Alternative claim of depreciation on rehabilitation expenses of HEMM treated as capital expenditure.
24. Disallowance of assessee's contribution to coal mines provident fund.

Summary:

1. Jurisdiction of CIT(A):
The first issue challenging the jurisdiction of CIT(A) in passing orders after ceasing to hold charge was dismissed as not pressed by the assessee.

2. Validity of Assessing Officer's Jurisdiction:
The Tribunal upheld the Assessing Officer's jurisdiction in making reassessment under section (u/s) 147 even when the reason for reopening did not survive, citing that the Assessing Officer had validly reopened the assessments for AY 1989-90 and 1990-91.

3. Validity of Reopening of Assessment:
The Tribunal quashed the notice issued u/s 148 for reopening the assessment for AY 1989-90 as it was issued beyond the period of four years from the end of the relevant assessment year, making it barred by limitation.

4. Enhancement Jurisdiction of CIT(A):
The Tribunal held that CIT(A) acted within his jurisdiction while making enhancement as per the powers conferred u/s 251, as the issues were either appearing in the return of income or were considered by the Assessing Officer.

5. Disallowance of HEMM Rehabilitation Expenses:
The Tribunal allowed the deduction for rehabilitation expenses of HEMM, treating it as revenue expenditure in the nature of "current repairs" allowable u/s 31.

6. Disallowance of Contribution to CPRA:
The Tribunal allowed the deduction for the contribution to CPRA, holding it as a statutory liability incidental to the business of the assessee.

7. Provision for Deterioration of Closing Stock:
The Tribunal dismissed the grounds related to the provision for deterioration of closing stock, rehandling charges, and slow-moving items as not pressed by the assessee.

8. Pension Fund and Interest:
The Tribunal allowed the deduction for the amount collected from employees towards the pension fund and interest thereon, holding that the assessee should get the benefit of deduction u/s 36(1)(va).

9. Expenditure for Land Use and Rehabilitation:
The Tribunal upheld the disallowance of expenditure for payment to the State Government and rehabilitation of people for use of land for mining, treating it as capital expenditure.

10. Disallowance u/s 40A(3) and 40A(9):
The Tribunal dismissed the grounds related to disallowance u/s 40A(3) as not pressed and allowed the expenditure for grants to schools, treating it as an admissible business expenditure.

11. Depreciation on PSLE:
The Tribunal allowed the claim for depreciation on PSLE, holding that the asset had lost its individual identity and the use of the block of assets as such was sufficient for claiming depreciation.

12. Provision for Interim Relief:
The Tribunal allowed the deduction for the provision made for interim relief payable to employees governed by NCWA but disallowed the provision made for employees covered by executive rules.

13. Interest Paid to Holding Company:
The Tribunal remanded the issue of disallowance of interest paid to the holding company, Coal India Ltd., back to CIT(A) for fresh consideration in light of new evidence.

14. Community Development Expenditure:
The Tribunal allowed the community development expenditure, treating it as incurred wholly and exclusively for the purpose of business by considerations of commercial expediency.

15. Irrecoverable Business Advances:
The Tribunal allowed the deduction for bad debts of irrecoverable business advances, holding that the assessee was entitled to the deduction in the year of write-off.

16. Additional Expenditure on Power and Fuel:
The Tribunal upheld the disallowance of additional expenditure on power and fuel, holding that the liability arose in the subsequent year.

17. Disallowance u/s 43B:
The Tribunal allowed the claim for provident fund contribution for March 1995 and remanded the issue of other statutory dues for verification by the Assessing Officer.

18. Expenditure on NCWA:
The Tribunal upheld the disallowance of business expenditure arising out of the memorandum of understanding on National Coal Wage Agreement, holding that the liability arose in the subsequent year.

19. Set-off of Brought Forward Losses:
The Tribunal remanded the issue of incorrect set-off of brought forward losses to the Assessing Officer for verification.

20. Interest u/s 234B and 234C:
The Tribunal directed the Assessing Officer to cancel the levy of interest u/s 234B and upheld the levy of interest u/s 234C based on the income declared in the revised return.

21. Depreciation on Guest House Assets:
The Tribunal allowed the depreciation on assets used in a guest house and expenditure on current repairs, following the view favorable to the assessee.

22. Provision for Deterioration of Coal Stock:
The Tribunal allowed the provision for deterioration of coal stock, holding the change in method bona fide and consistently followed.

23. Alternative Claim for Depreciation on HEMM:
The Tribunal dismissed the alternative claim for depreciation on rehabilitation expenses of HEMM as the main issue was decided in favor of the assessee.

24. Contribution to Coal Mines Provident Fund:
The Tribunal upheld the disallowance of the contribution to the coal mines provident fund, holding that the liability accrued in the subsequent year.

25. Interest u/s 234C:
The Tribunal upheld the levy of interest u/s 234C based on the income declared in the revised return.