TMI Blog2018 (12) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Co-ordinate Bench in assessee’s own case and decision of the Hon’ble Rajasthan High Court in case of Pr. CIT vs. Rajasthan State Seed Corporation Ltd [2016 (9) TMI 59 - RAJASTHAN HIGH COURT] we hereby affirm the order of ld. CIT(A). Hence, the ground so taken by the Revenue is dismissed. Disallowance of rural development expenses - Held that:- In case of Ranbaxy Laboratories Ltd.(supra), where the assessee contributed towards construction of the school hospital, it was held that the hospital constructed by the school was engaged in the providing medical facilities to the school children and other people in the vicinity of the school and the business expediency or commercial expediency might require providing facilities like school, hospital etc. for the employees or their children and accordingly claim was held allowable. We are of the view that where the expenditure has been incurred by the assessee in vicinity of its mining areas and its workers and its employees are also benefited by incurrence of such expenditure, the assessee has established the necessary nexus of such expenditure for the purpose of smooth running of its business operation and such expenditure sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axes deposited before filing the return of income were more than the taxes finally determined on regular assessment, the interest under section 234A is held not leviable. We therefore set-aside the matter to the file of the AO for limited purposes of verification of the tax deposit figures before filing of the return of income so submitted by the ld AR and where the same is found to be in order, allow the necessary relief to the assessee. - ITA. No. 47/JP/2018, ITA. No. 183 /JP/2018 - - - Dated:- 24-10-2018 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri P. C. Parwal (CA) For the Revenue : Smt. Roli Agarwal (CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. These are cross appeals filed by the assessee and the Revenue against the order of ld. CIT(A), Jaipur dated 30.11.2017 for Assessment Year 2014-15 wherein respective grounds of appeal are as under:- ITA. No. 183/JP/2018 (i) Whether on the facts in the circumstances of the case and in law the ld. CIT(A) was justified in directing to delete addition of ₹ 20,00,000/- made by the AO by disallowing of contribution to State Renewal Fund despite the fact that it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue is covered in favour of the assessee by the judgment of the Hon ble Rajasthan High Court rendered in the case of CIT vs. Jodhpur Co-operative Marketing Society (2005) 275 ITR 372(Raj.) 78.2 We have heard the rival contentions, we find that the Ld. CIT(A) has decided the issue in para 2.1 and 2.2 by following the judgments of the Hon ble High Court as under:- 2.1. In this year, the assessee has claimed expenditure of ₹ 20,00,000/- in respect of contribution to State Renewal Fund. This issue also arose in the case of appellant in AY 2010-11 and earlier years. The main points of the Assessment Order, on this issue, have been narrated in the appeal order of CIT(A)-II, Jaipur (Appeal no. 325/12-13, dated 05.12.2013) for A.Y. 2010-11. The main points of the submissions of the appellant, on this issue, have been narrated the above appeal order. Therefore, the assessment order and the submissions of the appellant are not being again narrated in this order for the sake of brevity. In AY 2010-11, the CIT(A)-II, Jaipur, has held as under- Assessing Officer disallowed contribution made to State Renewal Fund by treating the same as diversion of income. However, appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by restricting in the State Public Enterprise and that a finding of fact has been recorded that the contribution made to the State Renewal fund is solely for the purposes of the welfare and benefit of the employees. In our view, it is for the assessee to decide whether any expenditure should be incurred in the course of business and expenditure of this nature being for business expediency is certainly allowable deduction under Section 37(1) of the Act. In our view any normal expenditure for the welfare and benefit of employees is allowable expenditure under Section 37(1), the Tribunal has come to a finding of fact that it was a legal obligation of the respondent-assessee towards contribution of the said amount to the State Renewal Fund and there being a legal obligation as well in our view the Tribunal has come to a correct conclusion. 5. Undisputedly, there are no changes in the facts and circumstances of case. Following the decision of the Co-ordinate Bench in assessee s own case and decision of the Hon ble Rajasthan High Court in case of Pr. CIT vs. Rajasthan State Seed Corporation Ltd, we upheld the order of the ld. CIT(A). Hence, the ground so taken by the Revenue is dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of mine closure expenses. This ground of the assessee s appeal is allowed. 8. The ld AR further submitted that the matter is now covered in assessee s own case by the decision of Hon ble Rajasthan High Court in case of Pr. CIT vs. Rajasthan State Mines Minerals Ltd., in DB Appeal No. 151/2016 dated 13.10.2017 for AY 2010-11 wherein the relevant findings are as under:- 5. Regarding issue no. 5, counsel for the appellant has relied upon the observations made by the AO which reads as under:- 3.10 Provision for Mines Closure F.Y 2009-10:- During the assessment proceedings the assessee claimed as under: In compliance to guidelines dated 27.08.2009, as amended from time to time, by Ministry of Coal, Government of India, for preparation of Final Mine Closure, company has provided sum of ₹ 2,49,04,000/- towards proportionate mines closure expenses for the financial year 2009-10 in the books of accounts prepared for financial year 2009-10 in the books of accounts prepared for Financial Year 2011-12 as prior period expenses of ₹ 2,49,04,000/- while making computation of total income for the assessment year 2012-13. As the assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nmental concerns. No asset is generated in cost of business but it is generated due to environmental concerns. Therefore, on sale of excess carbon credits correctly held by the Tribunal as a capital receipt. In view of the judgment of Hon ble Andhra Pradesh High Court, we do not see any reason to disturb the finding of Ld. CIT(A), same is hereby affirmed. The Revenue has not brought to our notice any contrary binding precedent. Hence, this ground of Revenue s appeal is dismissed. 12. Undisputedly, there are no change in the facts and circumstances of case. Following the decision of the Co-ordinate Bench in assessee s own case, we hereby affirm the order of the ld CIT(A). Hence, the ground so taken by the Revenue is dismissed. 13. Now, we refer to the assessee s appeal in ITA No. 47/JP/18. In Ground No. 1 of the assessee s appeal, it has challenged the confirmation by the ld CIT(A) of disallowance of ₹ 1,22,76,496/- out of rural development expenses. 14. In this regard, briefly stated, the facts of the case are that the assessee has incurred an expenditure of ₹ 1,22,76,496/- under the head Rural Development Expenses debited to the profit and loss account. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mining area which results in negative feelings, agitations and unrest by the local villagers. These expenses help in the image building and smooth running of the activities of the company. These expenses are incurred solely for the purpose of the business of the assessee but if such expenditure also results in the benefit to third party, the same cannot be disallowed. Therefore, such expenses are allowable u/s 37(1) of the Income Tax Act. 17. In support of his contentions, the ld AR placed reliance on the following decisions: ACIT Vs. Jindal Power Ltd. (2016) 138 DTR 313 (Raipur) (Trib) Sasoon J. David Co. (P) Ltd. Vs. CIT 118 ITR 261 (SC) CIT Vs. Delhi Safe Deposit Co. Ltd (1982) 133 ITR 756 (SC) Sri VenkataSatyanarayana Rice Mill Contractor Vs.CIT 223ITR 101 (SC) ACIT Vs. Rajasthan Spinning Weaving Mills Ltd. 274ITR465 (Raj.) CIT Vs. Rajasthan Spinning Weaving Mills Ltd. 272 ITR 487 (Raj.) CIT Vs. Rupsa Rice Mill 104 ITR 249 (Orissa) (HC) M/s Ranbaxy Laboratories Ltd. Vs. DCIT 2009-TIOL-32-ITAT-DEL India United Mills Ltd. Vs. CIT 98 ITR 426 (Bom.) (HC) Hindustan Petroleum Corporation Ltd. Vs. DCIT 96 ITD 186 (Mum) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusively for the purpose of business. It was further held by the Co-ordinate Bench that this finding on fact is not rebutted by the assessee and in the absence of material proving the expenses incurred for the purpose of the assessee, the same cannot be allowed u/s 37 of the Act. In the instant case, firstly, it has been contended that expenditure has been incurred on repair of roads at the mining site amounting to ₹ 35,21,000/- and the same has, in fact, been allowed by the ld. CIT(A) in AY 2007-08 holding that expenditure incurred by the assessee on repair of road at different mining areas for smooth transportation of vehicles and for street lighting amounting to ₹ 1,76,01,218/- has been incurred for the purposes of assessee s business as it facilitates smooth transportation of minerals. It was accordingly submitted that the same expenditure should be allowed. Further, it has been contended by the ld AR that the facts are distinguishable in the instant year and the expenses have been incurred in the different mining areas where the assessee is functioning and its employees are also benefited by such expenditure. It is noted that during the year, the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee s business cannot be regarded as payment opposed to public policy. In case of Rupsa Rice Mill (supra), where the assessee has donated certain sum to the Collector for construction of a primary health centre building at Rupsa where the mill was located, the Hon ble Gujarat High Court held that agreed with the Tribunal view and held that the assessee made a substantial contributions to meet the costs of erection in consideration of the fact that a health care centre located near the factory premises would provide treatment to the ailing workman and the amount so claimed was held allowable. In case of Ranbaxy Laboratories Ltd.(supra), where the assessee contributed towards construction of the school hospital, it was held that the hospital constructed by the school was engaged in the providing medical facilities to the school children and other people in the vicinity of the school and the business expediency or commercial expediency might require providing facilities like school, hospital etc. for the employees or their children and accordingly claim was held allowable. In light of above, we are of the view that where the expenditure has been incurred by the assessee in vicinity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture or revenue expenditure and it was held that the same is capital expenditure. Accordingly, the Tribunal directed the AO to treat the expenditure as capital and grant relief if any available under the law. Therefore, in view of this direction, the expenses incurred by the assessee for acquiring the license to carry out the mining being an intangible asset needs to be allowed over its useful life as held by Hyderabad ITAT in case of NMDC Ltd. Vs. CIT by following the decision of ITAT Cuttack Bench in case of East India Minerals Ltd. Vs. JCIT or alternatively depreciation u/s 32(1)(ii) be allowed to the assessee as the payment for acquiring the leasehold right for extracting mineral is an intangible asset and the view of Tribunal in AY 2010-11 has been affirmed by the Hon ble Rajasthan High Court in its order in DB ITA No.146/2016 dt. 13.12.2017. The Hon ble Rajasthan High Court at Para 13 to 13.2 (PB 54) after referring to the definition of intangible asset held that the rights which are given to the assessee are commercial rights which are akin to license for mining. Accordingly, Hon ble High Court accepted the contention of assessee for allowing depreciation u/s 32(1)(ii) on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected in the Balance Sheet as long term investment. 29. It was submitted by the ld AR that the amount paid to LIC under the above scheme, by mistake, was not claimed in the return of income. Accordingly, assessee vide its letter dt. 08.11.2016 requested the AO to allow the same u/s 37(1) r.w.s. 43B(f). The AO, however, observed that claim could not be allowed to the assessee unless the assessee claim it in the return of income or by filing the revised return as held in case of Goetz India Ltd. Vs. CIT 284 ITR 323. 30. On appeal, the Ld. CIT(A) held that the Hon ble Supreme Court in case of Goetz India Ltd. Vs. CIT 284 ITR 323 has allowed the Tribunal to consider such claim which was not made by way of return of income. Thus, this liberty was not given to the CIT(A) whose powers are coterminous with the AO. Accordingly, the order of AO was confirmed. 31. It was submitted that there is no dispute that amount contributed by the assessee to LIC towards the liability of leave encashment of the employees is allowable u/s 37(1) r.w.s. 43B(f). The only issue is whether the same can be allowed to assessee even when it is not claimed in the return in view of the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... devised by the LIC, which works out the leave encashment liability and fixation of premium as per valuation report. The liability is thus ascertained and crystallized on a scientific method by the LIC. Thus, the assessee's payment of ₹ 29.39 Crores during the year towards the same is within the framework of the leave encashment scheme and in our considered view, the same is an allowable business deduction and the AO is directed to allow the said claim of the assessee even though the same has not been made in the return of income but during the assessment proceedings and all the necessary facts are on record. In the result, assessee s ground of appeal is allowed. 33. In Ground No. 4, the assessee has challenged the action of the ld. CIT(A) in holding that issue of chargeability of interest u/s 234A is mandatorily and consequential by not deciding the ground that the return filed on or before the date prescribed u/s 139(1) and thus the same is not leviable. 34. In this regard, the ld. AR has contended that the due date of filing of return of income for the year under consideration was extended by the CBDT vide its order u/s 119 dated 26th September, 2014 from 30th Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In the High Court of Delhi, a writ petition No. 5990/2014 has been filed on this issue. However, before the pronouncement of judgment, the petitioner withdrew the writ petition on 23rd September, 2014. The High Court of Madras passed interim order on 24.09.2014 in writ petitions No.25443 and 26306 to 26310 of 2014 and directed the Board to consider the request of the assessees in general and consider the extension of time for furnishing the return of income, in tune with the order passed by the Board in F. No.133/24/2014-TPL dated 20.08.2014. It has been reported that the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh disposed the writ petition No.28159 and 28627 of 2014 with a direction to the Board to dispose of the representation of the petitioners. The High Court of Bombay disposed of writ petition No.2492 of 2014 vide order dated 25.09.2014 and directed the Board to look into the practical difficulties of the petitioners and take a just and proper decision in this matter. 5. The Gujarat High Court allowed Special Civil Application No.12656 of 2014 with Special Civil Application No.12571 of 2014 and vide judgment dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was due to be filed on 31-10-1995. The return was filed on 29-9-1996, i.e., after a delay of about 11 months. However, the taxes due were paid on 25-9-1995, i.e., before the due date of filing of the return. Though the returned income was accepted on 29-1-1998, yet interest was charged under the provisions of section 234A of the Income-tax Act, 1961 (for short the Act ) on the ground that the tax paid on 25-9-1995 could not be reduced from the tax due on assessment. Being aggrieved, the assessees filed a revision petition under section 264 of the Act on 9-11- 1998, before the Administrative Commissioner requesting to delete the interest charged under section 234A of the Act. The Administrative Commissioner, vide order dated 9-3-1999, upheld the action of the assessing authority and dismissed the revision petition. 3. The assessees, being further aggrieved, filed a writ petition in the High Court of Delhi which has been disposed of by the impugned order. The High Court, while accepting the writ petition and setting aside the interest charged under section 234A of the Act, has come to the conclusion that interest is not a penalty and that the interest is levied by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has decided that no interest under section 234A of the Act is chargeable on the amount of self-assessment tax paid by the assessee before the due date of filing of return of income. 4. This Circular may be brought to the notice of all officers for compliance. 38. In light of above, the position that emerges is that though the due date for filing the return of income has been extended by the CBDT but at the same time, for the purposes of levy of interest under section 234A, the same has not been extended. At the same time, the Hon'ble Supreme Court in the case of Dr Prannoy Roy (supra) has held that the interest under section 234A of the Act on default in furnishing return of income shall be payable only on the amount of tax that has not been deposited before the due date of filing of the incometax return which has been accepted for the relevant assessment year. Therefore, where the taxes have been deposited before the original due date of filing of return of income and even though the return of income has been filed within the extended due date so notified by the CBDT, there won t be any levy of interest under section 234A of the Act where the returned income has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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