TMI Blog2018 (10) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration. Therefore, respectfully following the decision of the coordinate Bench on similar set of facts, we direct the A.O. to recalculate the expenses allowable under CSR after disallowing the sum of capital expenses. Accordingly, Ground No.4 is treated as allowed for statistical purposes. - ITA No.1823 and 1824/Hyd/2017, ITA No.1785 And 1786/Hyd/2017 - - - Dated:- 17-10-2018 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Assessee : Sri Lakshminivas Sharma For The Revenue : Sri J. Siri Kumar, DR ORDER PER Smt. P. Madhavi Devi, J.M.: The captioned appeals are the cross appeals by the assessee as well as the Revenue for the Assessment Years 2013-14 and 2014-15 respectively. Since the facts and circumstances in both the years are the same and the grounds raised by the assessee as well as the Revenue in both the years are the same (except for the quantum), these appeals were heard together and are disposed of by this common and consolidated order. 2. Brief facts of the case are that the assessee-company, a Public Sector Undertaking, engaged in the business of mining of iron ore diamond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of ₹ 268.47 Crs which was still receivable at the end of the year and that based on the judgment of the Hon ble Supreme Court, both the expenses i.e., contribution to SPV and compensation to Statutory Agencies are provided in its books which has already been withheld by Monitoring Committee appointed by the Apex Court and therefore, the disallowance again would amount to double taxation. It was also argued that the payment made by NMDC is compensatory in nature and it cannot be construed as punitive in nature and hence it is an allowable expenditure. 4. The A.O. however did not accept the assessee s explanation and held that the assessee, being a Category-B leaseholder, has been directed to make the payment for infringement of MMDR Act and other allied laws. Therefore, he observed that the payment of ₹ 405.79 Crs is punitive in nature and brought it to tax. 5. Further, A.O. also examined the allowability of the payment made by the assessee towards Mine Closure and held it to be contingent in nature and not a deductible expenditure u/s 37(1) of the Act. He observed that assessee-company has claimed depreciation on intangible assets. Observing that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -, without appreciating the fact that the said liability is not an ascertained liability. 2. The CIT(A) erred in ignoring the fact that Revenue s appeals on identical issue in assessee s own case for the AYs 2009-10 and 2010-11 are pending adjudication by the Hon ble High Court. 3. The CIT(A) erred in allowing the depreciati9on on intangible assets of ₹ 13,85,98,142/-. 4. The CIT(A) erred in ignoring the fact that Revenue s appeals on identical issue is assessee s own case for AYs 2008-09, 2009- 10, 2010-11 2011-12 are pending adjudication by the Hon ble High Court. 5. The CIT(A) erred in directing the A.O. to re-calculate and allow Corporate Social Responsibility expenses of ₹ 72,38,00,000/-. 6. The CIT(A) erred in ignoring the fact that the Revenue s appeals on identical issue in assessee s own case for AYs 2009-10, 2010-11 2011-12 are pending adjudication by the Hon ble High Court. 8. As regards the assessee s appeal, Learned Counsel for the Assessee reiterated the submissions made before the authorities below, while the Learned Departmental Representative supported the orders of the lower authorities (A.O. and the CIT(A)). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has reproduced the same. Relevant paras from the judgement dated 18.04.2013 are reproduced hereunder for ready reference:- 5. We may now proceed to notice the relevant part of the two Reports of the CEC dated 3.2.2012 and 13.3.2012, as referred to hereinabove. IV. CLASSIFICATION OF LEASES IN DIFFERENT CATEGORIES ON THE BASIS OF THE LEVEL OF ILLEGALITIES FOUND. 27. The CEC, based on the extent of illegal mining found by the Joint Team and as appropriately modified by the CEC in its Proceeding dated 25th January, 2012 and after considering the other relevant information has classified the mining leases into three categories namely Category-A , Category-B and Category-C . 28. The Category-A comprises of (a) working leases wherein no illegality/marginal illegality have been found and (b) non working leases wherein no marginal/illegalities have been found. The number of such leases comes to 21 24 respectively. 29. Category-B comprises of (a) mining leases wherein illegal mining by way of (i) mining pits outside the sanctioned lease areas have been found to be up to 10% of the lease areas and/ or (ii) over burden/waste dumps outside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries located in Karnataka and also of those plants located in the adjoining States which have been using the iron ore from the mining leases located in these Districts. Exports, outside the country, should be permissible only in respect of the material which the steel plants and associated industries are not willing to purchase on or above the average price realized by the Monitoring Committee for the corresponding grades of fines/lumps during the sale of about 25 MMT of the existing stock of iron ore. Similarly, the iron ore produced by the beneficiation plants after Page 11 11 processing should also not be permitted to be exported outside the country; ( E) the sale of the iron ore should continue to be through e-auction and the same should be conducted by the Monitoring Committee constituted by this Hon ble Court. However, the quantity to be put up for e-auction, its grade, lot size, its base/floor price and the period of delivery will be decided/provided by the respective lease holders. The Monitoring Committee may permit the lease holders to put up for e-auction the quantities of the iron ore planned to be produced in subsequent months. The system of sale through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) for carrying out the illegal mining outside the lease area, exemplary compensation/ penalty may be imposed on the lessee. It is recommended that: a) For illegal mining by way of mining pits outside the leases area, as found by the Joint Team, the compensation/ penalty may be imposed at the rate of ₹ 5.00 crore (Rs. Five Crore only) for per ha. of the area found by the Joint Team to be under illegal mining pit; and b) For illegal mining by way of over burden dump(s) road, office, etc. outside the sanctioned lease area, the compensation/ penalty may be imposed @ ₹ 1.00 crores (Rs. One Crores only) for per ha. of the area found to be under illegal over burden dump etc. iii) Mining operation may be allowed to be undertaken after (a) the implementation of the R R Plan is physically undertaken and is found to be satisfactory based on the predetermined parameters (b) penalty/ compensation as decided by this Hon ble Page 14 14 Court is deposited and (c) the conditions as applicable in respect of Category-A leases are fulfilled/followed; iv) In respect of the seven mining leases located on/nearby the interstate boundary, the mining operation shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 V.N.K. Menon Ballary A 13.06.2011 2543 10.00 0.05 0.50 0.00 0.32 0.37 2 Veerabhadrapha Sangappa and Company Ballary A 13.06.2011 2296 51.00 0.00 0.29 0.57 2.12 2.41 3 B. Kumara Gowda Ballary A 13.06.2011 2516 54.25 0.03 0.06 0.22 0.41 1.33 6.70 8.28 4 Sri Allum Prashanth Ballary A 02.07.2011 2352 69.64 0.00 0.21 0.30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 134.00 0.00 0.00 0.99 0.99 13 Zeenath Transport Co Ballary A 08.09.2011 2547 50.00 0.22 0.44 0.51 1.02 1.59 2.32 14 Varalakshmi Mining Co Ballary A 08.09.2011 2611 10.66 0.00 0.16 1.50 0.71 0.87 15 HP Manjunath Ballary A 08.09.2011 699 3.03 0.07 2.31 0.00 0.00 0.14 0.21 16 National Minieral Development Corporation Ballary A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marginal illegality have been found and (ii) non-working leases wherein no marginal / illegalities have been found, whereas Category-B comprises of (i) mining leases wherein illegal mining is 10% to 15% of the sanctioned lease areas. However, CEC had recommended that both A and B categories may be allowed to resume the mining activity subject to the payment of penalty / compensation decided by the Court. Thus, according to the assessee, the said expenditure is nothing but a payment which was required to be made without which the assessee could not have carried on the mining activities and therefore, it is a business expenditure . Since the CEC had categorised the assessee as a Category-A company and the Hon ble Supreme Court has accepted the said categorization, there would have 11 Mysore Minerals Ltd (Timmappanagudi) Ballary A 08.09.2011 2805 136.97 0.00 1.82 1.33 1.78 3.60 12 M. Srinivasulu Ballary A 08.09.2011 2552 134.00 0.00 0.00 0.99 0.99 13 Zeenath Transport Co Ballary A 08.09.2011 2547 50.00 0.22 0.44 0.51 1.02 1.59 2.32 14 Varalakshmi Mining Co Ballary A 08.09.2011 2611 10.66 0.00 0.16 1.50 0.71 0.87 15 HP Manjunath Ballary A 08.09.2011 699 3.03 0.07 2.31 0.00 0.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt has also considered the judgment of the Hon ble National Green Tribunal in the case of State Pollution Control Board vs. Swastik Ispat (P.) Ltd wherein at para 38 of the judgment the Tribunal held as under:- Being punitive is the essence of penalty . It is in clear contradistinction to remedial and / or compensatory . penalty essentially has to be for result of a default and imposed by way of punishment. On the contrary, compensatory may be resulting from a default for the advantage already taken by that person and is intended to remedy or compensate the consequences of the wrong done. For instance, if a unit has been granted conditional consent and is in default of compliance, causes pollution by polluting a river or discharging sludge, trade affluent or trade waste into the river or on open land causing pollution, which a Board has to remove essentially to control and prevent the pollution, then the amount spent by the Board, is thus, spent by encashing the bank guarantee or is adjusted thread and this exercise would fall in the realm of compensatory restoration and not a penal consequence. In gathering the meaning of the word penalty in reference to a law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee towards CSR and to disallow the expenditure which are in the nature of capital expenditure which was debited to the CSR. Therefore, the assessee is in appeal before us. 13. Learned Counsel for the assessee sought similar directions as given by the ITAT in the earlier years 2005-06 to 2011012. 14. Learned Departmental Representative supported the orders of the authorities below. 15. Having regard to the rival contentions and the material on record, we find that the direction of the ITAT in the earlier Assessment Years holds good for the relevant assessment years under consideration. Therefore, respectfully following the decision of the coordinate Bench on similar set of facts, we direct the A.O. to recalculate the expenses allowable under CSR after disallowing the sum of capital expenses. Accordingly, Ground No.4 is treated as allowed for statistical purposes. 16. Ground No.5 is general in nature and therefore needs no adjudication. 17. In the result, appeal of the assessee is partly allowed for statistical purposes. 18. As far as the Revenue s appeal (ITA No.1785/H/2017, A.Y. 2013- 14) is concerned, we find that all the issues raised by the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd no.4 raised by the assessee in the A.Y. 2014-15 is similar to that of the Ground No.4 raised in the A.Y. 2013-14 and for the detailed reasons given therein, the Ground No.4 raised by the assessee for the A.Y. 2014-15 is allowed for statistical purposes. 22. At the time of hearing Learned Counsel for the Assessee submitted that the assessee does not wish to press the Ground no.5 and accordingly, the same is rejected as not pressed. 23. In the result, assessee s appeal is partly allowed for statistical purposes. ITA No.1786/H/2017 (A.Y.: 2014-15) ( By Revenue) 24. In this appeal, Revenue raised the following grounds of appeal:- 1. The CIT(A) erred in directing the A.O. to work out the liability and allow the Mine Closure Obligation expenses of ₹ 8,35,00,000/-, without appreciating the fact that the said liability is not an ascertained liability. 2. The CIT(A) erred in ignoring the fact that Revenue s appeals on identical issue in assessee s own case for the AYs 2009-10 and 2010-11 are pending adjudication by the Hon ble High Court. 3. The CIT(A) erred in allowing the depreciati9on on intangible assets of ₹ 11,33,00,000/-. 4. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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