TMI Blog2020 (2) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... ch ascertained liability has to be determined year-wise, we direct the assessee to furnish the relevant data to the Assessing Officer towards mines closure obligation. The Assessing Officer shall verify such data and recompute the disallowance, if any, warranted, in accordance with law and after giving reasonable opportunity of hearing to the assessee. Decided against revenue - ITA No.1022/Hyd/2019 - - - Dated:- 19-2-2020 - Smt. P. Madhavi Devi, Judicial Member AND Shri A. Mohan Alankamony, Accountant Member For the Assessee : Sri Laxmi Niwas Sharma For the Revenue : Smt. T.H. Vijaya Laxmi, DR ORDER PER SMT. P. MADHAVI DEVI, J.M. This is Revenue s appeal for the A.Y 2015-16 against the order of the CIT (A)-4, Hyderabad, dated 22.03.2019. The grounds raised by the Revenue are as under: 1. The learned CIT (A) erred in deleting the addition made towards Disallowance of expenditure toward Special Purpose Vehicle without appreciating the expenditure is punitive in nature and is not allowable u/s 37 of the Act. 2. The learned CIT (A) erred in deleting the addition made towards mine closure obligation when the same is not an ascertained liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee preferred an appeal before the CIT (A) who allowed the same by following the ITAT order in assessee s own case for the A.Ys 2013-14 and 2014-15 and also for the A.Y 2012-13. Against the relief granted by the CIT (A), the Revenue is in appeal before us. 3. The learned DR supported the order of the AO while the learned Counsel for the assessee supported the order of the CIT (A) and has also filed copies of the orders of the Tribunal in the assessee s own case for the earlier A.Ys on the same issue which had arisen during the relevant A.Ys. 4. Having regard to the rival contentions and the material on record, we find that as far as the expenditure paid towards Special Purpose Vehicle as per the directions of the Hon'ble Supreme Court is concerned, the Coordinate Bench of the Tribunal (to which the JM is the signatory) in ITA Nos.1823 and 1824 of 2017 for the A.Ys 2013-14 and 2014-15 and ITA Nos.1785 to 1786 of 2017 for the A.Ys 2013-14 and 2014-15 has considered this issue at length and at Paras 9 to 11 has held as under: 9. Having regard to the rival contentions and the material on record, we find that the assessee is a Central Government Public Sector Und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sanctioned lease areas have been found to be up to 15% of the lease areas and (b) lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Monitoring Committee may be reviewed after say two year; (F) 90% of the sale price ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty 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 should presently remain suspended. The survey sketches of these leases should be finalized after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the table reproduced above, it is seen that the assessee has been classified as Category-A' whereas the Assessing Officer has considered the assessee as Category-B company. The Hon'ble Supreme Court has clearly indicated that Category-A comprises of (i) 'working leases' wherein no illegality / 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 been marginal illegalities committed by the assessee and the compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, the context in which it is used is significant. 11. Applying this ratio to the facts of the case before us, we find from para 43 of the Hon'ble Supreme Court's order reproduced above that the condition of payment for resuming the mining activity by Categories 'A' 'B' companies is to not to punish the companies for any violation of law but is to ensure scientific and planned exploitation of mineral resources in India. Further the Hon'ble Supreme Court had directed as under:- (X) Out of the 20% of sale proceeds retained by the Monitoring Committee in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord. It has been brought to our notice by the learned counsel for the assessee, which has not been controverted by the learned Departmental Representative, that this issue is covered by the decisions of the Tribunal in assessee's own cases dated 28.2.2014 for assessment year 2008-09 in ITA No.714/Hyd/2012 and dated 9.5.2014 for assessment year 2010-11 in ITA No.1795/Hyd/2013. We find that the coordinate benches of this Tribunal, vide Paras 9 and 9.1 of its order dated 28.2.2014 for assessment year 2008-09, cited supra, decided the issue in the following manner: 9. We have heard the arguments of both the parties, perused the record and have gone through the orders of the authorities below as well as the decisions cited. In AY 2006-07, the coordinate bench in assessee's own case (supra), held as follows: 11. We have heard both the parties, perused the record and gone through the orders of the authorities below. It is observed that the basis of calculation for the relevant AY 2006-07 for ₹ 71.18 crores was submitted during the original assessment and accepted by the AO. The detailed calculation of ₹ 21.31 crores charged to P L A/c (on the basis of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h data, then, pro rata h as to be applied. Thus, the CIT(A) has given a categorical finding in Paras 4.3 4.4 of his order. Therefore, we do not find any infirmity on that p art of the order and accordingly, we confirm the same. This ground raised by the assessee is dismissed . Following the above decision of the Tribunal dated 28.2.2014, coordinate bench of this Tribunal, vide Paras 47 and 48 of its order dated 9.5.2014 for the assessment year 2010-11 in ITA No.1795/Hyd/2013, though held that mine closure obligation is not a contingent liability, but an ascertained liability, restored the matter to the file of the Assessing Officer, for recomputing the disallowance, in the following manner- 48. Respectfully following the above decision, we hold that mine closure obligation is not a contingent liability but ascertain liability. However, it has to be verified that whether assessee has made the claim on the mines which are in working condition which are being operated or not. If the assessee has made the claim on mines which have not started operations, the same cannot be allowed. As rightly held by the CIT(A) in A.Y. 2008-09, ascertainability of liability is to be ascer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd the arguments of both the parties and perused the record as well as gone through the orders of the M/s. National Mineral Development Corporation Limited, Hyderabad authorities below. Similar came up for consideration before the coordinate bench of ITAT, Cuttack in case East India Minerals Ltd. Vs. JCIT in ITA No. 224/CTK/2012, vide its order dated 25/06/2012, on which reliance placed by the assessee, wherein it has been held as follows: 7. We have heard the rival contentions of the parties and perused the material available on record. Considering the facts and circumstances of the case, we uphold the contention of the learned Counsel for the assessee for the simple reason that the denial of claim of depreciation has been made on misinterpretation of law and the applicability thereof. Explanation to Section 32(1)(ii) leans in favour of the assessee to the extent that it is the actual action of put to use which entitles the assessee to claim depreciation. A straight line method of claiming the writing off of lease hold rights for the period of lease cannot be denied to the assessee for the simple reason it being intangible asset has been written off which pertains to land bein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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