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TMI Blog2018 (6) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... see is a public sector undertaking being a wholly owned subsidiary of Coal India Limited engaged in mining/extraction and sale of coal and filed the return of income for the assessment year 2002-03 on 27.12.2007 and the return of income was duly processed u/s.143(1) of the Act and the case was selected for scrutiny under CASS. Subsequently, notice u/s.143(2) & 142(1) of the Act were issued to the assessee. In compliance, the AR of the assessee appeared from time to time and case was discussed. Thereafter the AO completed the assessment and made various additions and passed order u/s.143(3) of the Act, dated 31.03.2005. Thereafter the CIT, Ranchi u/s.263 of the Act found that the assessment order passed by the AO is prejudicial to the interest of Revenue and vide order dated 05.10.2006 directed the AO to make fresh assessment. Accordingly, the AO passed the fresh assessment order dated 27.12.2007 wherein additions on account of installation expenses, slurry at Gidi washery, arrear salary, transfer of free issue of coal, social overhead were made and passed order u/s.143(3)/263 of the Act. 4. Aggrieved by the assessment order, the assessee has filed an appeal with the CIT(A). In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) and dismiss the ground of appeal of Revenue. 9. On the second disputed issue in respect of expenditure incurred on social overheads as revenue expenditure, the CIT(A) observed that no defect in the maintenance of books of accounts have been pointed out and the CIT(A) relying on the judicial decision has allowed this ground of assessee. The observations of the CIT(A) in this regard is as under :- 10.5 I have considered the submissions of the appellant and have also perused the assessment order. The Ld. Assessing Officer has begun Para-5 of the order as follows "As stated in the order'. Apparently, the Ld. Assessing Officer is referring to the 263 order of the Commissioner of Income Tax, Ranchi wherein the Ld. Commissioner of Income Tax, Ranchi had held the order u/s. 143(3) of the Income Tax Act, 1961 to be erroneous and prejudicial to the interest of revenue on several counts, one of them being the lower valuation of the closing stock. I have perused the 263 order. The Commissioner of Income Tax, Ranchi in his 263 order had stated that the closing stock consisted of "E" grade coal while the appellant had valued it as "G" grade coal leading to lower income. He, however, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimated costs necessary to make the sale. 4. Inventories encompass goods purchased and held for resale, for example, merchandise purchased by a retailer and held for resale, computer software held for resale, or land and other property held for resale. Inventories also encompass finished goods produced, or work in progress being produced, by the enterprise and include materials, maintenance supplies, consumables and loose tools awaiting use in the production process. Inventories do not include machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular; such machinery spares are accounted for in accordance with Accounting Standard (AS) 10, Accounting for Fixed Assets. Measurement of Inventories 5. Inventories should be valued at the lower of cost and net realisable value. 10.7 In the case of Sanjeev Woollen Mills v CIT 279 ITR 434 (SC) the Hon'ble Supreme Court has held that: - "To attract section 145 it is necessary that- (c) the assessee has computed the income in accordance with the method of accounting regularly employed by the assessee; and (d) provided where the accounts are correct and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indings of the CIT(A), accordingly, we do not find any good reason to interfere with the above findings of CIT(A) and we upheld the same and dismiss the ground of Revenue. 10. Thus, appeal of the revenue is dismissed. 11. Now, we shall take up appeal of the assessee i.e. ITA No.235/Ran/2016. 12. We find that there is a delay of 30 days in filing the present appeal by the assessee. Ld. AR has filed an application for condonation of delay. Ld. DR has no serious objection in condoning the delay. Accordingly, we allow the application of the assessee and condone the delay of 30 days in filing the present appeal and the appeal is heard finally. 13. The assessee has raised the following grounds:- 1. For that Ld.CIT(Appeals) has erred in not appreciating that the Expenses incurred under the head Donation were in the nature of sports promotion expenses and community development expenses and as such were allowable as business expenditure. The expenses confirmed is unjustified and uncalled for. 2. For that in respect of the expense under the head 'Arrear of Salary' Ld. CIT(A) failed to take into consideration the fact that consequent to the Board's Decision, communicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO stated that the donation is not allowable expenses and earlier also the same was disallowed. In appeal, the CIT(A) observed that the assessee could not bring out any evidence to show as to how the expenses on account of donation is wholly and exclusively for the purpose of business, against which the assessee is in appeal before the Tribunal. 13. Ld. AR before us submitted that the CIT(A) has erred in confirming the donation which is in the nature of sports promotion expenses and community development expenses as such were allowable as business expenditure and prayed for allowing this ground. On the other hand, ld.DR relied on the orders of lower authorities. 14. We have heard rival submissions and perused the material available on record. We find that the assessee could not substantiates its claim before both the authorities below. The CIT(A) while dealing with the disputed issue has observed as under :- "7.4 I have considered the submissions of the appellant and have also perused the assessment order. The arguments advanced by the appellant, if accepted would mean that any expense that is incurred for any purposes (for charitable or otherwise) would qualify as legitimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Tribunal. 16. Ld. AR before us submitted that the ld. CIT(A) has erred in confirming the disallowance made by the AO on account of arrear of salary. This issue is covered by the decision of this bench of the Tribunal in assessee's own case for the assessment year 2004-05 in ITA No.186/Ran/2008, dated 03.12.2014, wherein the Tribunal confirmed the action of CIT(A) in deleting the addition made on account of adhoc provision of pending wage revision. Therefore, ld.AR prayed for allowing the appeal. Contra, ld.DR relied on the orders of lower authorities. 17. We have heard rival submissions and perused the material available on record. We find that this issue has been decided in favour of the assessee by this bench of the Tribunal in assessee's own case for the assessment year 2004-05 vide order dated 03.12.2014 in ITA No.186/Ran/2008, wherein the Tribunal held as under :- 3. The first issue relates to the disallowance of claim relating to "Adhoc provision of pending wage revision. The assessee had provided a sum of Rs. 1708.24 lakhs on account of adhoc provision made towards interim relief pending finalisation of NCWA-VII (National Coal Wage Agreement-VII). The quantum of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year, ftlftce, in accordance with the prudent accounting practice, the assessee has estimated the liability at 10% of the basic pay of non-executive employees as on 30.6.2001. The AO has taken the view that the claim of the assessee falls in the category of unascertained liability, which in our view, is not correct. In the instant case, there is certainty about the liability, but the exact quantification could be known to the assessee in the future upon finalisation of the wage agreement. We find support for this view from the decision rendered by the Mumbai bench of Tribunal in the case of TATA communications Ltd Vs. JCIT (2013)(32 taxmann.com 197), wherein the Hon'ble President was one of the parties. Accordingly, we confirm the order of Ld CIT(A) on this issue." Respectfully following the judicial decision, we allow this ground of appeal of the assessee. 18. On the third disputed issue of disallowance on account of transfer of free issue of coal, the AO observed that expenses claimed by the assessee is to be gratuitous in nature and therefore, not wholly and exclusively laid out for the purpose of business and disallowed the same. On appeal, the CIT(A) upheld the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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