TMI Blog2020 (6) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the file of the Assessing Officer for appropriate adjudication afresh and the ground of appeal of the assessee is allowed for statistical purposes. CMPDIL Expenses - HELD THAT:- We find that the CIT(A) has granted relief with regard to addition made by the AO on account of CMPDIL expenses, which has been approved by the Tribunal by holding as above. In the instant case, the CIT(A) has confirmed addition made by the AO. In our opinion, when the Tribunal has upheld the findings of the CIT(A) thereby deleting the addition made on account of CMPDIL expenses in the assessee s own case for the immediately previous assessment year as cited above, therefore, respectfully following the decision of the Tribunal, we direct the AO to delete the addition made under the head CMPDIL expenses. This ground of appeal of the assessee is allowed. Addition made u/s.14A - HELD THAT:- AO was required to work out the average of such investment, the income from which did not form part of the total income instead of total value of investment. For this view, our stand is fortified by the decision of Special Bench in the case of ACIT vs. Vireet Investment (P) Ltd., [ 2017 (6) TMI 1124 - ITAT DE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Amount (Rs. In Lakhs) 1. Depreciation on Lease hold land 27491.00 2. Valuation of closing stock of coal (due to impact of overburden removal expenditure) 11840.00 3. CSR Expenses 6130.00 4. CMPDIL Expenses 2029.00 5. Addition u/s.14A 576.90 6. Interest on Income tax refund 1692.00 TOTAL 49758.90 4. That the Ld. Authorities below has further erred in allowing short credit of TDS. 5. That the Learned Authorities below would have provided sufficient opportunity to the assessee to explain its case with proper evidences. 6. That the authorities below would not have made addition/disallowances on different heads of accounts as mentioned above and would have allowed all c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.4. CMPDIL Expenses under section 37 of the I.T.Act, 1961. ₹ 2029.00 Lacs. 3.5. Addition u/s. 14A - ₹ 576.90 Lacs. 3.6. Interest on Income tax refund - ₹ 1692.00 Lacs. 4. That the Ld. Authorities below has further erred in allowing short credit of TDS. 5. That the Learned Authorities below would have provided sufficient opportunity to the assessee to explain its case with proper evidences. 6. That the authorities below would not have made addition/disallowances on different heads of accounts as mentioned above and would have allowed all claims. 7. That the Authorities below would have allowed the total credit of TDS. 8. That the authorities below would have accepted the returned income. 9. That the appellant craves leave to add, amend or alter the aforesaid grounds of appeal before or at the time of hearing of the appeal. 3. During the course of hearing, ld. AR of the assessee filed a letter dated 14.01.2020 stating therein that he is withdrawing the additional grounds of appeal and requested for deciding the issue on the basis of grounds of appeal taken in form 36 at the time of filing of the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock as the cost of OBR is part of the cost of production of coal. In response to this, the assessee vide its submission dated 19.12.2017, submitted as under :- 2.2 Vide its submission dated 19.12.2017 the assessee company stated that : In the matter we would like to draw your kind attention towards the fact that, as you are aware, the Assessee Company is a Subsidiary of Coal India Limited, henceforth CR,. The Assessee Company works under the direct guidance and control of CR, indirectly Ministry of Coal, Govt, of India. The CR makes Rules Regulations which is mandatorily to be followed by all its' subsidiaries. Accordingly, as a matter of uniform accounting policy, in the year 2009-10 CIL took a decision not to take into the cost of OBR in the valuation of closing stock of Coal. And since then the Assessee is consistently following the same method of valuation of closing stock. There is no change in the method of valuation of closing stock in comparison to the method applied during the immediate preceding year. In support of our contention we would like to draw your kind attention towards clause 13 14 of the Form 3CD of Tax Audit Report, duly certified by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 20.29crores and claimed as expenses. In this regard, the assessee was asked to justify the claim of expenditure in the profit and loss account. The assessee submitted detailed written submissions and from the submissions made by the assessee the AO observed that the submissions of the assessee is general submissions and without specifying any detail/specific services provided by the CMPDIL and concluded that the assessee company could not deliberate the services received in lieu of which professional charges were paid to the CMPDIL, mere deduction of TDS will not justify the expenses incurred by the assessee in this regard and disallowed to the tune of ₹ 20.29 crores and added to the total income of the assessee. 8. Further it was noticed by the AO that the assessee has claimed interest of ₹ 129.08 crores as exempt income received and tax free bond and mutual bond. In this regard, the assessee was asked to provide the details of expenditure incurred against this income along with supporting evidences. In response to which the assessee submitted that he has not made any investment out of borrowed funds to earn income which does not form part of the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 accepting the returned income. Later on, it was selected for scrutiny and the assessment U/s. 143(3) of the 1. T. Act, 1961 was completed vide order dated 31.12.2017 in which the Ld. AO assessed the total income at ₹ 789323.30 Lacs by making substantial additions/disallowances and raising a further tax demand of ₹ 196731.20 Lakhs including interest of ₹ 30349.26 Lakhs u/s, 234B. Subsequently, vide order u/s.154/143(3) dated 31.01.2018 the assessed income was reduced to ₹ 770211 Lakhs and demand was reduced to ₹ 113676.70 Lakhs due to rectification of certain mistakes apparent from the record. Being aggrieved the assessee preferred an appeal before the C!TCA), Cuttack and the Ld. CIT(A) disposed off the appeal vide order dated 28.03.2018 giving substantial relief to the assessee. However, the ld. CIT(A) has sustained certain additions / disallowances against which the assessee is in appeal before your honour, details of which is given below: SI. No. Particulars Amount (Rs. In Lakhs) Grounds of Appeal No. Page No. of Asst. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... got a valid reason/justification because all such accounts head are prescribed by the holding company after due analysis, expert opinion, deliberations with all the stake holders. The assessee is a organized and large entity. The PSU maintains proper books of account and suitable evidences for all income accrued and expenses incurred. Suitable evidence depends on various factors like nature of income/payment, nature of claimant, nature of payer/payee, place of receipt/payment, amount of receipts/payment etc. In such an organization there is suitable internal check and control and Business is carried in a professional manner. 1.1. That the Ld. AO has not allowed sufficient opportunity to the assessee to present its case. The order has been passed without appreciating the facts in correct perspective. The Assessment has been completed with pre conceived ideas and notions without giving sufficient opportunity to submit the required explanations along with supporting documents. 2. Depreciation on leasehold land Page ref. of Asst. order:2-4 Page ref. of CIT(A) order:3-5 ₹ 27491.00 lakhs Grounds of Appeal No.3(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided for allowance of depreciation on 'intangible assets' under the Income tax Act, 1961. Section 32(1)(ii) of the Act provides that any know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature, acquired by the assessee/ appellant on or after 1-4-1998, shall be eligible for depreciation allowance with effect from the assessment year 1999-2000. Consequently, depreciation can now be claimed on intangible assets, acquired for a price, on the satisfaction of the following conditions namely: (a) The intangible assets are acquired by the assessee on or after 1.4.1998; (b) Such assets are owned by him either wholly or partly; and (c) Such assets are used by him for the purpose of his business or profession during the previous year. The applicable rate for depreciation on intangible assets is @25%. Accordingly the assessee has claimed depreciation @25% on addition towards lease hold land made after 01.04.1998. Such depreciation is also certified by the Statutory auditor as allowable depreciation at clause No.18 in page No. 6 of the Tax Audit Report issued U/s.44AB of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below: a. CIT Vs. Techno Shares Ltd., 225 CTR 337 (Bom): The relevant portion of the order is reproduced below: 24. Before concluding, we wish to clarify that our present judgment is strictly confined to the right of membership conferred upon the member under the BSE membership card during the relevant assessment years. We hold that the said right of membership is a business or commercial right which gives a non-defaulting continuing member a right to access the Exchange and to participate therein and in that sense it is a licence or akin to licence in terms of Section 32(1)(ii) of the 1961 Act. That, such a right vests in the Exchange only on default/ demise in terms of the Rules and Bye-laws of BSE, as they stood at the relevant time. Our judgment should not be understood to mean that every business or commercial right would constitute a licence or a franchise in terms of Section 32(1)(ii) of the 1961 Act. That the Hon'ble Apex Court has made it ample clear that this finding is in respect of BSE membership card only and every business or commercial right would not constitute a licence or a franchise in terms of Section 32(1)(ii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied assets. On a perusal of the meaning of the categories of specific intangible assets referred in s 32(1)(ii) of the Act preceding the term 'business or commercial rights of similar nature , it is seen that the aforesaid intangible assets are not of the same kind and are clearly distinct from one another. The fact that after the specified intangible assets the words business or commercial rights of similar nature have been additionally used, clearly demonstrated that the Legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets, which were neither feasible nor possible to exhaustively enumerate. In the circumstances, the nature of business or commercial rights cannot be restricted to only the aforesaid six categories of assets; viz, knowhow, patents, trademarks, copyrights, licenses or franchises. The nature of business or commercial rights can be of the same genus in which all the aforesaid six assets fall. All the above fall in the genus of intangible assets, viz, business claims; business information; business records; contracts; employees; and knowhow, are all assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. In view of principle of ejusdem generis, the expression any other business or commercial rights has to be read in the company of the Page 7 ITA No. 5054/Del/2010 - A.Y. 2004-05 ITA No. 1140/Del/2011 - A.Y. 2005-06 c.o. NO.104/Del/2011 (In ITA 1140/Del/ll) A. Y. 2005-06 O.N.G.C Videsh Ltd., New Delhi preceding order.. This rule of interpretation makes an attempt to reconcile incompatibility between the specific and general words. The/first category of words like know- how, patents, copyright, etc., form a distinct genesis or category inasmuch as. all those items are specific and elucidated rights of business or commercial nature. In such circumstances, the expression 'any other business or commercial rights of similar nature' also must be in the same genesis or category with specific and elucidated identity of commercial or business nature. Therefore, in the light of the statutory provisions contained in section 32(1) (ii), the commercial rights of exploration of mineral oils, as acquired by the assessee falls under the expression of any other business or commercial rights of the nature similar to one of the category i.e. licenses as stipulated in Section 32(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k and the facilities was held to be Intangible Asset. A photocopy of the judgment is enclosed at Page No.161-169 of the P/B-VOl-I1. 2.13.6 The Hon'ble High Court of Gujarat in case of DCIT vs. Sun Pharmaceuticals Ind. Ltd. (2010) 329 ITR 479 held that- By obtaining the land on lease the capital structure of the assessee did not undergo any change. The assessee only acquired a facility to carry on business profitably by paying nominal lease rent. In light of the aforesaid findings of fact there is no warrant for interference. Even the AO has recorded that the payment was for use of land. There is no Legal lnfirmity committed by the Tribunal. It is necessary to note that the Revenue was not even aggrieved by the aforesaid findings recorded by the Tribunal and had not even proposed a question on this issue when the tax appeal was filed as the memorandum of tax appeal reveals. Tribunal was therefore justified in holding that the lease rent paid by the assessee to GIDC was allowable as revenue expenditure. It is pertinent to mention here that Special Leave Petition filed against such order of Gujarat High court has been dismissed by the Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the P L account in accordance with its business exigencies. A photocopy of the Judgment is enclosed at Page No.173-178 of the P/B- VOl-II. 2.15 That the aforesaid order dated 25/06/2012 of this Hon'ble Tribunal referred at Para-2.14 has been passed after the order was passed in the case of CIT Vs. Techno Shares L'd., 225 CTR 337 (Born) (09/09/2010) as relied upon by the ld. DR. 2.16 Lastly, as a regular process of development the holding company CIL is always in the process of improving the accounting practice in all the subsidiaries and accordingly the following issue was raised during this year :- The company has acquired lease hold land and booked as a capital expenditure and showed it in as a fixed assets in the fixed assets schedule in accounts. One of the pre-condition of acquiring such land is that after completion of mining, such land has to be handed back to the State Govt. Reference is drawn to Sec. 44A and 44B of the Land Acquit ion Act, which prohibits transfer of such land or any part thereof by sale, mortgage etc. Hence the company doesn't have any right over these land except for the mining rights. Therefore it was opined t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. Hence, it is crystal clear that the payment of premium is wholly exclusively for the purpose of business and qualifies for deduction U/s.37(1) of the Income Tax Act, 1961. iii. Therefore, it is prayed that the amount claimed as depreciation on the cost of leasehold land shall be allowed alternatively U/s.37(1) of the Income Tax Act, 1961 or any other section deem appropriate by the Hon' ble Bench. 3 Valuation of closing stock of coal (due to impact of overburden removal expenditure) Page ref. of Asst. order:4-6 Page ref.of CIT(A) orderL5-13 ₹ 11840.00 lakhs Grounds of Appeal No.3(2) 3.1. That the Ld. AO has made the aforesaid addition on the ground that the expenditure on overburden removal is an operating expenditure and is a part of the cost of production. OBR is a regular process in extracting the coal as accepted by the A/R in his submission as stated above. Only after removal of OBR coal can be extracted. The nature of expenditure on OBR is essentially a part of process of manufacturing/ production of coal. The rules and regulation of CIL may be b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. Further, the second condition has also been satisfied by including any tax, duty cess or fee to bring the goods to the place of its location. And the ld. AO has not brought anything on record to establish that the assessee has violated the provision of section 145A. 3.6. It may be noted here that the addition was made by the ld. AO on this account in AY 2010-11 when there was a change in respect of valuation of inventories to the extent of expenditure relating to OBR. With regard to the change effected in FY 2009-10, it is submitted that based on 'Final recommendations of Uniform Accounting Committee, 2009-10' of Coal India Ltd. vide letter no. CIL/CGM(F)/31025/969 dated 31-03-2010 issued to all subsidiaries the method of calculation of cost per ton followed in the earlier years had been changed and a improved method of valuation had been followed during that year. A copy of such letter of CIL is enclosed at page. No. 19 to 23.. 3.7. In the earlier method OBR adjustment was used to be added as a item of cost while doing the valuation of stock but after a lot of deliberation on the matter and suggestion received from various stakeholders it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the period should be 'taken in. It would be utterly impossible to assess profit and gains mainly on statement of receipt and payment or on the basis of turnover. It is long been recognised that the right method of assessing profit and gains is to be taken into account the value of the stock in trade at the beginning, value of the stock in trade at the end, and put all the item in the computation. Thus, for the purpose of ascertaining profit and gains the ordinary principle of commercial accounting should be applied, so long as they did not conflict with any express provisions of the relevant statutes. b) Objective of Stock Valuation: The object of stock valuation is correct determination of the profit and gains resulting from a year's trading. It is true result of the trading activities of that year, that must be disclosed by books (CIT Vs British Paints India Ltd. (1991) 188 ITR 44 SC ). One cannot arrive at the profit of the year without taking into account the value of the stock one has at the beginning of, and at the end of, the accounting year. c) Source of Profit Gains: It was let down authoritatively by Supreme Court in the case of Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atram Vs. CIT. valuing stock at cost or market price whichever is lower is a sound principle to be followed in arriving at profit for the income tax purpose. f) Assessee's option to change the method of accounting: The assessee is at liberty to alter regular method which he has once employed. It was clearly held in the case of Ram Kumar Kedarnath Vs. CIT. Further, it is clearly held in CIT Vs Eastern Bengal Jute Trading Co. Ltd. IR 223 that there was no malafide in changing the method. Further, the new method was regularly followed. Thus, this change should not be casual for temporary gains for temporary purposes. It must be a bonafide change modified by business consideration (1987) 167 ITR 742(AII) New Vactoria Mills Co. Ltd. Vs. CIT TC IR 231. The recognised method of accounting followed regularly and necessarily result in proper computation of the assessee's real income even if one regular method of accounting is substituted by another regular method, the same result will follow only in, because where the assessee change his regular method of accounting by another method and does not follow the change regularly thereafter, it must be positive on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, there is bound to be some distortion in the calculation of profit in the year in which the change take place. But if the change is brought about bona fide and is in accordance with the normally accepted accounting practice, there is no reason why such a change should not be permitted. [Melmould Corporation Vs. CIT (1993) 111 CTR (Bom) 357: (1993) 202 ITR 789 (Bom): TC2PS.8] 3.13. It is settled law that change in method of valuation of stock (which is a part of the method of accounting of anassessee) is allowable in the eye of law if the change made is bonafide and the new method adopted is a recognized method. Reference is also drawn in this regard to the under noted Court decisions enunciating such principle - CIT vs Corporation Bank Ltd. [174 ITR 616, 620 (Kar.)] The Karnataka High Court has held, following the decision of the Supreme Court in Chainrup Sampatramvs CIT [24 ITR 481 (SC)], that irrespective of the basis adopted for valuation in earlier years, the assessee had the option to change the method of valuation of closing stock at cost or market price, whichever is lower, at any time, provided the change was bona fide and followed regularl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thod, the same result will follow. Only in a case where the assessee changes his regular method of accounting by another method and does not follow the change regularly thereafter, it might be possible for the assessee by introducing successive changes in his method of accounting to exclude items of his income in the computation of,his total income. Therefore, when an assessee changes his regular method of accounting by another regular method, the question of his bonafides have little relevance. Only in the year where a change in the method of accounting is introduced for the first time, it is to be examined by the Revenue Authorities whether the change introduced is meant to be regularly followed or not. Where it is found that an assessee has changed his regular method of accounting by another recognized method and has followed the latter method regularly, it is not open to the Revenue Authorities to go into the bona fides of the introduction and continuance of the change. 3.15. It is submitted that there cannot be any doubt about the bona fide 'for change in the method of valuation because such change is made to reflect a more accurate and correct state of affairs of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock-in-trade either at cost or at market price. A method of accounting adopted by the trader consistently and regularly employed may be discarded, only if in the opinion of the taxing authorities, income of the trade cannot be properly deduced there from. The valuation of stock at cost is one of the recognized methods. No inference may therefore, arise from the employment by the method of valuing stock at cost (or market value whichever is lower). 3.21. Reference is also drawn to the decision of the Supreme Court in the case of Distributors (8aroda) P. Ltd. vs. UOI [ 155 ITR 120, 140. (SC)] wherein the Supreme Court observed that where a decision rendered previously is found to be erroneous, such decision can be overruled subsequently. The doctrine of stare decisis should not deter the Court from overruling an earlier decision, if it is satisfied that such decision is manifestly wrong or proceeds upon a mistaken assumption in regard to the existence or continuance of a statutory provision or is contrary to another decision of the Court. In this decision, the Supreme Court quoted the observation of Jackson J. in Massachusetts vs. United States (333 US 611) : I see no reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before your honour to kindly delete the aforesaid addition and allow full relief to the assessee. 5. CMPDI Expenses ₹ 2029.00 Lakhs Grounds of Appeal No.3(4) Page ref.of Asst Order:6 Page ref. of CIT(A) order:21-23 5.1 The Ld. AO has disallowed this expenditure without any definite finding or reason. He has simply mentioned that- The Assessee company simply refers to Section 37 of the I. TAct which allows any claim relating to business not covered under Section 30 to 36. The assessee company further gave only a general description of services provided by CMPDI without giving the details of any specific services received in lieu of which professional charges were paid to CMPDI. Mere deduction of TDS will not justify the expenses. Furthermore, department is in appeal against the order of Ld CIT(A) on this issue, Hence the Claim is disallowed and added to the income. 5.2 In this regard it is submitted that CMPDIL (Central Mines Planning Design Institute) is anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted income by resorting to Rule 80 to compute the amount of disallowance. 6.2. The details of Tax free income earned by the assessee during the year is given in Note No. 21- OTHER INCOME to the Financial Statements attached at Page 24 and the ledger copy of Dividends received on Mutual Fund is attached at Page 25, the details of exempted income is given hereunder: Particulars Amount (Rs.in lakhs) Interest on 8.5% tax free Bonds 338.00 Interest on IRFC tax free Bonds 7072.00 Dividend from Mutual Fund 5498.00 TOTAL 12908.00 In this regard it is respectfully submitted as under: a. That the assessee has not incurred any expenditure in respect to exempted income during the accounting year 2014-15. The total exempted income for the year was ₹ 129.08 crore out of which ₹ 74.10 crore was interest earned on Tax Free Bonds and ₹ 54.98 crore was dividend from Mutual Funds. In this regard it will be pertinent to take n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.78 2. SBI Fund Premier Liquid 101 277 -176 31.89 3. UTI Fund Money Market 79 373 -294 20.19 4. Union KBC 20 - 20 0.12 Total : 225 653 -428 54.98 It may be appreciated from the aforesaid details extracted from the Note-14-Current Investment Note-21-0ther Income to the Audited Financial Statement that out of total tax free dividend of ₹ 54.98, ₹ 52.08 crore (31.89+20.19) which is 94.74% pertains to existing mutual fund i.e. SBr Premier Liquid Fund UTI Money Market Fund in which no investment was made during the year. The balance dividend of ₹ 2.90 crare pertains to other mutual fund in which investment of ₹ 42 crore was made during the year. Hence, no expenditure was incurred during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hod prescribed by rule 80 without determining in the first instance the correctness of the claim of the assessee, having regard to the accounts of the assessee. Sub-section (2) of section 14A mandated that it is only when having regard to the accounts of the assessee, the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of expenditure incurred in relation to income which does not form part of the total income under the Act, that he can proceed to make a determination, under the Rules; 6.7. The satisfaction envisaged by sub-section (2) of section 14A is an objective satisfaction that has to be arrived at by the Assessing Officer having regard to the accounts of the assessee. The safeguard introduced by sub section (2) of section 14A for a fair and reasonable exercise of power by the Assessing Officer, conditioned as it is by the requirement of an objective satisfaction, must, therefore, be scrupulously observed., An objective satisfaction contemplates a notice to the assessee, an opportunity to the assessee to place on record all the relevant facts including his accounts and recording of reasons by the Assessing Officer in the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Rules, 1962 has also incorporated the essential requirements of sub-sections (2) of section 14A before the Assessing Officer proceeds to apply the method prescribed under sub-rule(2). 6.13. In view of the aforesaid your honour may appreciate that the application of rule 80 resorted to by the Ld. AO is totally unjustified, unwarranted and bad in law, especially in view of the fact that the AO has not recorded any dissatisfaction about the correctness of the accounts of the assessee and moreover the assessee is a PSU and its accounts are subject to audit- by various Govt. agencies including CAG of India. 6.14. That in the case of Principal commissioner of Income tax vs. India Gelatine and chemicals Itd.(2015) 376 ITR 0353 (Guj) the Honorable Gujarat high court has held that- AO made the disallowance under Section 14A of the Act on the ground that the assessee was not able to justify that the investments made in the shares and mutual funds amounting to ₹ 21,14,07,850j- was made out of the interest free funds. However, it is required to be noted that both, the learned CIT(A) as well as the learned Tribunal have categorically found on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assets generating Tax Free Income 1. 31/03/15 4477.57 6.90 1075.38 247.70 1323.08 1183.70 2. 31/03/14 5563.42 9.14 1098.07 675.71 1773.78 1611.70 It is clear from the above details that the assessee company's Shareholder's Funds i.e. Share Capital and Reserve Surpluses was much more than the amount of investment as on 31/03/2014 as well as 31/03/2015. ; which substantiate that investment generating tax free income were made out of interest free fund available with the company. 6.19. That the Hon'ble Apex Court vide its order dated 02/01/2019 in the case of Commissioner of Income Tax Vs. M/s. Reliance Industries Ltd. has made it ample clear that the provisions of section 14A will be attracted only if the assessee makes investment out of borrowed funds to earn exempt income. The relevant portion of the judgement is reproduced below: n Insofar as the first question is concerned, the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.2 In the aforesaid matter it is to be submitted that alleged amount of ₹ 694.03 Cr, including interest u/s 244A ₹ 16.93 Cr, relevant to AY 2011-12, has been credited in the books of account under the head Income Tax paid under protest account. Due to the fact that as a result of Asst. Order u/s 143(3) for the said AY the assessee had paid a sum of Rs, 761.60 Cr. Including interest u/s 234B, 234C 2340 of ₹ 182.68 Cr. Being dissatisfied, the assessee preferred an Appeal before the appropriate authority and debited the amount to the Income Tax paid under protest account. 7.3 That as a continuous practice the company recognizes the interest on income tax refund, once the same is finalized and no dispute is pending. In this case a rectification petition was filed to rectify mistake apparent from the record with regard to the amount of refund and interest thereon which was rectified and interest amount was revised from ₹ 16.92 crore to ₹ 19.84 crore during the financial year 2018-19 and accordingly the same is accounted for as income-interest on income tax refund during the financial year 2018-19 relevant to Assessment Year 2019-20. A phot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax refund is paid by the income tax department only when the assessee paid more than the tax to be paid and it is taxable only in the year of receipt. It is taxable under the head income from other sources in the year of receipt. It is not affected by the system of maintaining books of accounts. 14. After considering the rival submissions of both the sides and perusing the entire material available on record along with the paper book filed by the assessee, we observe from the grounds of appeal taken by the assessee that the ground No.3 relates to the merits of the case. Therefore, we are deciding ground No.3 15. Ground No.1 : Depreciation on lease hold land, we find that this issue is covered by decision of the Tribunal in assessee s own case for the previous assessment year i.e. A.Y.2014-2015 in ITA Nos.264/CTK/2017, order dated 20.03.2018, wherein the Tribunal has observed as under :- 27. The issue common to Ground No.3.4 for the assessment year 2010- 11 and Ground No.3(2) for assessment year 2011-12 relates to addition made towards charges paid for lease hold land. Ground No.3(2) for the assessment year 2012-13, Ground No.3(1) for assessment year 2013-14 and Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(iii) of the Act in respect of intangible assets, which is supported by judicial pronouncements cited above. In view of above, we dismiss these grounds filed by the assessee. 31. In view of above, we hold that the lease hold rights are not eligible for depreciation u/s.32(1)(ii) of the Act considering it as intangible rights and, accordingly, dismiss the ground of appeal of the assessee. Respectfully following the above observations of the Tribunal, we dismiss this ground of appeal of the assessee. 16. Ground No.2: Valuation of closing stock of coal (due to impact of overburden removal expenditure). We find that this issue is covered by decision of the Tribunal in assessee s own case for the previous assessment year i.e. A.Y.2014-2015 in ITA Nos.264/CTK/2017, order dated 20.03.2018, wherein the Tribunal has observed as under :- 16. The second common issue relates to confirmation of addition of ₹ 31475.28 lakhs for the assessment year 2010-2011, ₹ 25778.15 lakhs for the assessment year 2011-12, ₹ 32242.12 lakhs for the assessment year 2012-13, ₹ 24010.50 lakhs for the assessment year 2013-14 and ₹ 15912.00 lakhs for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rall adjustment is as per the Uniform Accounting Policy adopted by the Coal India Limited. Ld A.R. demonstrated before us with a copy of letter of Uniform Accounting Committee recommendation and supported with paper book. Accordingly, we consider it appropriate to restrict our view on the method of valuation of closing stock mine-wise and the valuation of closing stock of coal are interconnected and since we have discussed on the applicability of the provisions, facts and reasons for valuation of stock centre on the first disputed issue. Therefore, we remit this disputed issue to the file of the Assessing Officer for appropriate adjudication afresh and the ground of appeal of the assessee is allowed for statistical purposes. Hence, this issue for the assessment years 2010-11 to 2014-15 is restored to the file of the Assessing officer for fresh adjudication. Respectfully following the above observations of the Tribunal, we remit this issue to the file of AO for fresh adjudication. This ground of appeal of the assessee is allowed for statistical purposes. 17. Ground No.3: CSR Expenses: Ld. AR did not press this ground, accordingly, we dismiss this ground of assessee as not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation suggests that it's a preparatory work for mine development but then what such an approach overlooks is that all the mines are revenue mines and the extraction of coal, on commercial basis, has already started in these cases. Therefore, Assessing Officer's observation to the effect that extraction of coal is a long process and the nature of work done have an enduring benefit to the assessee could have been relevant when coal extraction process had not started but that is not the case here. We have noted that the CMPDIL (i.e. Central Mine Planning Design Institute), a subsidiary of the Coal India Limited, is admittedly providing technical support and services to the assessee it the mining operations. It conducts mine survey in the existing mines in order to ensure that the mining is carried out in the right direction and in the optimal manner. We have also noted that it is beyond and dispute and controversy that none of the mines of the assessee is a development mine, and, as such)' the expenses of this nature cannot said to be relating to preparatory work or of capital nature for that reason. When mining itself is an ongoing activity and the mines are i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses in the assessee s own case for the immediately previous assessment year as cited above, therefore, respectfully following the decision of the Tribunal, we direct the AO to delete the addition made under the head CMPDIL expenses. This ground of appeal of the assessee is allowed. 19. Ground No5: Addition made u/s.14A of the Act. We find that this issue is covered by decision of the Tribunal in assessee s own case for the previous assessment year i.e. A.Y.2014-2015 in ITA No.268/CTK/2017, order dated 20.03.2018 and while deciding the appeal of Revenue, Tribunal has observed as under :- 126. The next issue relates to deletion of disallowance u/s.14A of the Act of ₹ 189.74 lakhs and ₹ 516.59 lakhs towards for the assessment year 2012-13 and 2013-14, respectively. 127. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant case, the assessee had received tax free income of ₹ 18.32 crores from interest on 8.5% tax free bonds, interest on IRFC bonds and dividend from mutual fund. The Assessing officer observed that the value of assets which yielded the above income was ₹ 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 23.09.2019 while deciding the issue of addition made u/s.14A of the Act, has observed as under :- 13. We find that this issue has been decided by the Tribunal in assessee s own case for the assessment year 2010-2011 in ITA No.211/CTK/2016 along with other connected appeals, order dated 29.06.2018 for the assessment year 2013-2014, wherein the Tribunal relying its earlier order dated 27.04.2018, passed in ITA No.352/CTK/2016 for the assessment year 2010-2011 along with other connected appeals has observed as under :- 22. From the above judicial decisions, we find that the Tribunal has restored the disputed issue to the file of AO for re- examination and re-verification and apply the provisions of Section 14A r.w.rule 8D and in the instant case, the issue being similar, we find that the AO has not complied with the mandatory requirement of Section 14A (2) of the Act read with Rule 8D (1) (a) of the Rules and we respectfully follow the above judicial decision of the Tribunal and remit the disputed issue to the file of AO for re-examination and verification and to decide the issue on merits after complying the mandatory requirement of the provisions of Section 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company failed to offer any reasonable explanation for not including the amount of interest received during the year on income tax refund. In appeal, the CIT(A) observed that interest on income tax refund is clearly taxable and confirmed the addition holding as under :- 12.3 I have considered the matter. It is a fact the assessee has received interest of ₹ 16.92 crores on income tax refund for the AY 2011-12 and the same has not been offered for taxation in the return of income. The argument of the assessee is that since interest paid u/ss.234B, 234C . 234D is not allowable as a deduction from taxable income, interest received should also not be taxed as income. This contention of the assessee is not at all acceptable. Interest on income tax refund is clearly taxable. Hence, the addition of ₹ 16.92 crores made by the AO is confirmed. On perusal of the above findings recorded by the CIT(A), we do not see any reason to interfere with the same and accordingly, we uphold the same and dismiss this ground of appeal of the assessee. 22. Ground No.7: Short Credit of TDS : We restore this issue to the file of AO and after due verification if the AO finds t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now),all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment . In the rules so framed, as a result of these directions, the expression ordinarily has been inserted in the requirement to pronounce the order within a period of 90days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any extraordinary circumstances. 25. We also find that the aforesaid issue has been answered by a coordinate Bench of the Tribunal viz; ITAT, Mumbai F Bench in DCIT, Central Circle-3(2), Mumbai vs JSW Limited ors (ITA No.6264/Mum/18 dated 14.5.2020, wherein, it was observed as under: 9. Let us in this light revert to the prevailing situation in the country. On 24th March,2020, Hon ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an ordinary period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only inconsonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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