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Coal India Ltd. Versus D.C.I.T, Cir – 5, Kolkata

2017 (6) TMI 446 - ITAT KOLKATA

Taxability of Interest earned on funds - belong to the assessee or not - amount / funds contributed by subsidiaries towards the shifting and rehabilitation fund - Held that:- The addition has been framed without understanding the purpose of creation of fund/legal ownership of money lying with the fund etc. It was specifically stated that in respect of ‘shifting and rehabilitation funds’, contribution by subsidiaries along with interest earned on such funds does not belong to the assessee. The as .....

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e, the money (contribution and interest thereon) received by the company will be used as per the directions of the concerned Ministries and the Company had no control to use the money. The Company is merely acting as a custodian of such money and is required to release the same as per the directions of the concerned Ministries. However, the assets generated from such money cannot be treated as assets of the assessee company. Pending utilisation of the funds, the money was kept in the bank accoun .....

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sessment framed by D.C.I.T., Cir-5, Kolkata under Section 147/143(3) of the Income Tax Act for Assessment Year 2008-09 vide his order dated 25.03.2013. 2. The first issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in confirming the addition made by the Ld. AO on account of interest of ₹ 6305.24 Lakhs earned on amount contributed by subsidiaries towards the shifting and rehabilitation fund. In this regard, a small historic background of the issue under consid .....

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vis-à-vis danger to habitations have attracted the attention of authorities concerned technical organizations and institutions from time to time. MMGI of India formed the first subsidence committee in 1922. The second subsidence committee was formed by the same institute, which submitted its report in 1937, recommending remedial measures to minimize the danger due to mine subsidence. A few more committees were set up to examine the problem and areas where danger due to subsidence was app .....

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e Govt. of India, Ministry of Energy (Department of Coal), constituted a committee under the Chairmanship of Mr. S.P. Gugnani, Joint Secretary, Dept. of Coal on 5th January, 1976, to examine the whole question of safety in the nationalized coal mines. The Committee (Gugnani Committee - 1976) also decided to examine the question of safety of surface dwellers arising out of underground workings. The committee constituted a sub-committee with Sri S. Bagchi as convenor on 11.03.76 to make an indepth .....

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es, rivers, jores, roads, railway line etc., in Jharia Coalfield which are standing over small pillars, stocks reported to be water logged. If, by any chance, this water drains away it may cause subsidence. In addition, fire is also active in some areas, causing danger to the surface structure. In many mines, size of pillars, which were left below the surface structures as a protective measure, is not known because of non-availability of off-set plans of abandoned workings. The committee recomme .....

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eeping the unstable workings under observation by measuring surface movement and assessing stability of workings by investigation -15 collieries. e. Stopping further extension or extraction of mine workings or further construction of structure on the surface - 4 collieries. f. Preparation, procurement and updating of mine plans to determine the extent of instability- 4 collieries. g. Controlling underground fire effectively to prevent surface subsidence and breathing of air through subsided area .....

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of safety due to fire and subsidence. Recurrent problems of fire and subsidence in these two coal fields and their spurt in 1996 required identification of subsidence and fire prone areas so that measures could be taken to tackle them. CMRI was engaged by BCCL for identification of such inhabited areas within the leasehold of BCCL. Subsequently, DGMS also identified a number of inhabitated areas, which require attention due to problems of fire and subsidence. It has been felt right from the beg .....

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her part being preparation of Environmental management Plan for JCF). The consultants submitted their study report in 1996, identifying a number of fire projects with their estimated capital requirement. In December 1996, Govt. of India constituted a high Power Committee under the Chairmanship of Secretary, Ministry of Coal with other members from the Govt. of Bihar & West Bengal, Planning Commission, DGMS, Ministry of labour, Chairman CIL, CMDs of ECL, BCCL& CMPDI with director(Tech), M .....

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problems of subsidence and fire in BCCL and ECL, and submit its report. As the fire problem was already studied under World Bank funding, two separate projects relating to subsidence and rehabilitation problems were funded by Ministry of Coal, under Coal S&T Grant as EMSC projects. The projects were as follows: SL No. Name of the Project Sanctioned Capital 1 Generation of data and identification of subsidence prone areas and its segregation into controllable and uncontrollable areas in the .....

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d above (Phase - 11) has been prepared in two parts, one dealing with the technological measures for control of subsidence where feasible and the other dealing with rehabilitation and re-settlement needs for the areas where subsidence control is not feasible. These reports were submitted in January 1999. The Standing Sub-committee of SSRC on Environment and Ecology directed CMPDI in its XVIth meeting held at CIL, Calcutta on 30.06.98 to prepare a Master Plan for dealing with the problems of fire .....

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.03.1999 and BCCL on 16.03.1999. Thereafter, the final report entitled "Master Plan for dealing with fire Subsidence and Rehabilitation in the Leasehold of BCCL" submitted in March '99 incorporating the views expressed in the above meetings. The three reports mentioned above viz., World Bank funded report for "Development of Fire Fighting Programme in JCF" and coal S&T Grant funded EMSC projects, namely, "Generation of data and identification of subsidence prone .....

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t to Assessment Year 2004-05, the appellant in its written submission stated as under: …the Board of Directors of the company pursuant to a decision taken by the Ministry of Coal, Government of India has set up a rehabilitation fund for the purpose of shifting and rehabilitation, dealing with fire and stabilization of the areas under ECL and BCCL, being two subsidiaries of the company. According to the said decision, the Board of directors of the company has directed its subsidiaries (exc .....

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that the addition has been framed without understanding the purpose of creation of fund/legal ownership of money lying with the fund etc. It was specifically stated that in respect of shifting and rehabilitation funds , contribution by subsidiaries along with interest earned on such funds does not belong to the assessee. The assessee company is merely the custodian of such fund. It was also stated that in the earlier years, the Ld. AO had treated the contribution received from subsidiary as inc .....

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money. The Company is merely acting as a custodian of such money and is required to release the same as per the directions of the concerned Ministries. However, the assets generated from such money cannot be treated as assets of the assessee company. Pending utilisation of the funds, the money was kept in the bank account which has resulted into interest income. 4. The ld. CIT(A), however, did not pay heed to the contentions of the assessee and confirmed the addition by observing as under: This .....

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ry of Coal, Governnment of India set up a rehabilitation fund for the purpose of shifting and rehabilitation, dealing with fire and stabilisation of the areas under ECL and BCCL, being two subsidiaries of the company. The Board of Directors of the appellant company pursuant to this decision directed its subsidiaries (except ECL and BCCL) to contribute to the fund an amount equivalent to ₹ 6/- per tonne of coal realised by each of the said subsidiaries. The said fund is to be maintained by .....

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money and is required to release the money as per the direction of concerned Ministry and therefore the sum of ₹ 9723.28 lacs on account of interest cannot be treated as its income. 15. It is held that the Ministry of Coal, Government of India, New Delhi has instructed to create the funds not in its sovereign capacity but only as a controlling and guiding authority as is usually done by the apex body of the companies. The funds have been collected not as per or under any specific law or A .....

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paying taxes although the money is not in the name of Govt. of India. The income earned has to be taxed as per the income tax law if otherwise exempted under the Income Tax Law. There is no specific exemption provided to the appellant on this income by Law. In the case-of the assessee, it has earned interest of ₹ 9723.28 lakhs but the tax has neither been paid by the assessee nor by any other entity and the fund does not belong to Govt. of India as al sovereign person. Since the assessee .....

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fund is not the part of the business assets and the appellant has not treated-the receipt of rehabilitation fund as part of its business activity and has earned: only interest only form fixed deposit-of the rehabilitation fund amount. Therefore, the addition made by the Assessing-Officer on account of Interest earned on rehabilitation fund amounting to ₹ 9723.28 lakhs is upheld. This ground of appeal is dismissed. During the year under the present appeal, the factual position remains the .....

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contributed by subsidiaries towards the shifting and rehabilitation fund. 2(b) That the finding of the CIT(Appeals) is contrary to the facts and circumstances of the case. 6. The Ld. AR stated that this issue is covered in favour of the assessee in its own case by the order of this tribunal in ITA No. 358/Kol/2013 (for AY 2009-10) ; ITA No. 252/Kol/2014 (for AY 2010-11) dated 5.4.2017. In response to this, the Ld. DR vehemently relied on the findings of the Ld. CIT(A). 7. We have heard the rival .....

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tion of the said funds as per its own wish and is merely acting only as a custodian of the funds by retaining it in its books and earned interest income thereon. The entire fund, including interest is to be utilised in the manner directed/ordered by the concerned Ministries of the Government of India. Hence it could be safely concluded that the assessee has got no control in any manner, whatsoever, over the funds collected by it and interest income thereon. Hence we find lot of force in the argu .....

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ssessee and the assessee is merely acting as a post office for collection and onward distribution of the same as per the directions of the Central Government. We find that similar issue had come up before this Tribunal in the case of DCIT, Circle-2, Kolkata vs. M/s West Bengal State Electricity Transmission Co. Ltd. in ITA No. 1822/Kol/2012 for A.Y. 2009-10, order dt. 30.10/2014, wherein the question raised before this Tribunal and the decision rendered thereon is as under:- 2. First issue in th .....

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cts in deleting the addition on ac. Of interest ₹ 3,46,97,166/- to the total income of the assessee without showing any reasons thereof. 7. We have heard rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that this Interest of ₹ 3,46,97,166/- did not belong to the assessee nor it was an income in the hands of SLDC and the said income should not be considered in the assessment of the assessee. It is a fact that the Income ari .....

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stated that deposits had been made from the funds of the assessee and not of SLDC and the funds did not form parts of the account of the SLDC at all. The Assessing Officer went on to hold that the assessee's PAN had correctly been utilized for the maintenance of the Account. The Assessing Officer also stated that in his Order that the accounts have been opened in terms of the scheme formulated by the West Bengal Electricity Regulatory Commission (WBERC) and it was that body which directed th .....

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; 3,46,97,166/-to the total income of the assessee. But we find that the Interest of ₹ 3,46,97,166 had arisen out of the investment made out of balance of UI charges which belonged to WBERC which was a Commission formed by the Government and consequently that interest income was actually an income in the hands of the Government. Since the interest income was an income of the Government, there could not arise any taxability thereof. It is also a fact that the relevant deposits had been made .....

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e Fund and for all the times to come it is the WBERC which is the owner of the Fund of the Trust. We further find that neither any asset or any income earned out of the UI account could ever be considered as any income in the hands of the assessee. The moneys lying in the UI account always belonged to the Government, viz. under the name of WBERC. It was only for the convenience in the matter of making investment in deposits of UI balances that the PAN of the assessee had been utilized. However, .....

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