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TMI Blog2021 (9) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... of profits below the line and hence is not an allowable expenditure under the Income Tax Act. 2. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in deleting the land acquisition expenses of Rs. 60,70,699/- on account of land acquisition failing to appreciate that the expenditure is directly related to the acquisition of land and is therefore, in the nature of capital expenditure. 3. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in deleting the enhanced compensation towards land acquisition expenses of Rs. 2,00,821/- on account of land acquisition failing to appreciate that the expenditure is directly related to the acquisition of land and is therefore, in the nature of capital expenditure. 4. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was right in deleting the disallowance of Rs. 1,32,19,675/- on account of Corporate Social Responsibility (CSR) and failing to appreciate that as per the Companies Act, Corporate Social Responsibility (CSR) is an appropriation of profits below the line and hence is not an allowable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the deduction of the aforesaid expenditures which were in the nature of donations would be permissible in terms of the provisions of Sec. 80G of the Act. Backed by his aforesaid view, it was observed by the CIT(A) that insofar certain Village Development Expenses that were incurred by the assessee at the instance or direction of the Hon'ble High Court of Kerala/State Government Auhtorities i.e supply of drinking water to residents of Eloor by way of payment of 1/4th share of KSPCB, contribution of Mining Area Welfare Board etc. were concerned, the same being in the nature of expenses/contributions that the assessee was constrained to incur/make in the interest of its business, the same, were thus to be allowed as a deduction on the ground of business expediency. Accordingly, the CIT(A) restored the issue to the file of the A.O, with a direction, that if the assessee was able to adduce evidence to show that the aforesaid expenditure was incurred at the directions of the Government Authorities, whether State or Central, for which approval of its competent authority was obtained during the year under consideration, then, the A.O would allow the consequential relief to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contribution to fishermen Welfare Fund 14,00,000 14,00,000 Providing Uniform, Books, Computers, Furniture to Nearby School 2,99,542 72,548 3,72,090 Providing Medical Facility, Policies to Fishermen Villages/peripherial Villages 4,33,087 4,15,784 8,48,871 Total 17,50,901 1,11,29,852 18,57,087 8,37,881 1,55,75,721 As observed by the CIT(A), the expenditure that was incurred by the assessee insofar the same was in the nature of donations, was to be disallowed, for the reason, that the same was not incurred for the purpose of its business u/s 37(1) of the Act. At the same time, the CIT(A) had observed, that the deductions against the aforesaid donations would be permissible to the assessee in terms of the provisions of Sec.80G of the Act. Also, it was observed by the CIT(A) that as majority of the village development expenditure had been incurred by the assessee at the instance or direction of the Hon'ble High Court of Kerala/State Government Authorities, viz. supply of drinking water to the residents of Eloor by way of a payment of 1/4th share of KSPCB, contributions of Mining Area Welfare Board etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities, we find that the land acquisition expenses of Rs. 60,70,699/- were incurred by the assessee at the direction of the Government of Kerala, towards establishment cost, salary, pension etc. of certain posts sanctioned to look after the land acquisition issues of the assessee company. Before the lower authorities, it was categorically submitted by the assessee that the expenditure in question was nothing but reimbursement of salary, rent, electricity and other office maintenance expenditure of the Land Acquisition office of the Government of Kerala and Tamil Nadu at the site of the assessee company. However, as observed by us hereinabove, the A.O holding a conviction that the expenditure incurred was in the nature of a capital outlay i.e towards acquisition of a capital asset, therefore, disallowed the same. On appeal, it was observed by the CIT(A) that a similar disallowance was vacated by his predecessor while disposing off the assessee's appeal for A.Y. 1997-98 and A.Y. 2012-13. Also, it was observed by the CIT(A) that the order passed by his predecessor for A.Y.2012-13 had thereafter been upheld by the ITAT, Mumbai, vide its order dated 30.01.2019. Backed by the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (ii) rent; (iii) electricity; and (iv) other office maintenance expenditure of the Government of Kerala at the site of the assessee. In our considered view as the assessee in the normal course of its business of mining rare earth minerals was continuously taking lands on lease for extraction of minerals, thus the aforesaid expenditure incurred by it pursuant to an understanding with the Government of Kerala whose intervention was involved at every stage of its mining activity, was thus clearly in the nature of a revenue expenditure that was incurred by the assessee in the course of its business and the same could not be held as being in the nature of a capital expenditure. Apart therefrom, we find from a perusal of the order of the CIT(A) that the expenses on maintenance of the Government of Kerala employees by the assessee had been in existence since long. Rather, the allowability of such expenditure was also one of the issue involved in the appeal of the assessee for A.Y. 1997-98, wherein the Tribunal while disposing off the appeal viz. ITA No. 1664/Mum/2003, dated 06.07.2007 had directed that the same was to be allowed as a deduction, observing as under: "This is apparent fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance of land acquisition expenses during the year under consideration, remains the same, as were there before the Tribunal in the assessee's own for A.Y. 2012-13, therefore, we respectfully follow the same, and therein, uphold the order of the CIT(A) who had rightly vacated the disallowance of the land acquisition expenses of Rs. 60,70,699/-. The Ground of appeal No. (ii) is dismissed. 10. We shall now take up the claim of the revenue that the CIT(A) had wrongly vacated the disallowance of the provision for enhanced compensation on land acquisition of Rs. 2,00,821/-. As is discernible from the record, the A.O had disallowed the aforesaid expenditure, for the reason, that the same as per him was not in the nature of a revenue expenditure. On appeal, the CIT(A) following the view that was taken by his predecessor in A.Y. 2012-13, vide his order dated 29.03.2017, which thereafter had been upheld by the ITAT, Mumbai in ITA No.4526/Mum/2017, dated 30.01.2019, therein vacated the said disallowance. 11. We find that the issue qua the disallowance of the provision for enhanced compensation on land acquisition had earlier too came up before the Tribunal in the assessee's own ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in the nature of a revenue expenditure and had rightly been claimed by the assessee, therefore, the same was to be allowed while computing the income of the assessee. As regards the payment of Rs. 3,08,047/-, it was observed by the CIT(A) that the assessee in the course of its business would take land falling in the vicinity of its factory on short term lease for mining purpose and thereafter would hand over the same back to the owners. It was observed by the CIT(A) that as the amount of Rs. 3,08,047/- paid by the assessee was towards compensation payable in respect of one such lease transaction and was paid to the State Government of Kerala which was a nodal agency for land acquisition, thus the same was clearly in the nature of a revenue expenditure and was to be allowed as a deduction while computing the income of the assessee. Apart therefrom, it was observed by the CIT(A) that as the interest paid by the assessee on account of late deposit of the amounts under the Kerala State General Tax was in the nature of a revenue expenditure, hence the same too was allowable as a deduction while computing the income of the assessee. On the basis of his aforesaid deliberations the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an area where they were carrying out their mining operations. Also, it was submitted by the assessee that the aforesaid school catered to the wards of all the residents of that area, as well as those of the adjoining areas, and was not restricted to only the children of the employees. However, the A.O did not find favour with the aforesaid claim of the assessee, for the reason, that the school was for all the residents in the area and not restricted to the children of its employees. It was observed by the A.O, that as the employees of the assessee company were drawing education allowance for their children from the assessee company as per the Central Government Rules, therefore, it was not tenable to allow the aforesaid expenditure as a deduction in the hands of the assessee. In sum and substance, the A.O was of the view that as the aforesaid expenditure was not incurred fully and exclusively for the purpose of the business of the assessee company, therefore, the same could not be allowed. Backed by his aforesaid deliberations, the A.O disallowed the assessee's claim for deduction of the school expenses of Rs. 1,32,19,675/-. On appeal, it was observed by the CIT(A) that the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at length on the issue before us and find from a perusal of the orders of lower authorities that the aforementioned school viz. Atomic Energy Central School, Oscom was being run at the place where the assessee had set up its manufacturing units viz. Chatrapur, Orissa. Rather, the assesses major business activity of mining of Rare Earth Minerals and also processing beneficiation of illiminite from the mining activity was being carried out at Chatrapur, Orissa. Apart therefrom, we find from the order of the CIT(A) that the Central school established in Chatrapur, viz. Atomic Energy Central School, Orissa had been operative for over a decade and was providing education to the children of the employees of the assessee as well as the wards of the local residents and those of the adjoining areas. The expenses incurred by the assessee on running and maintenance of the aforementioned school during the year under consideration was comprised of the following: Sr. No. Description Amount(Rs.) 1. Salary 1,19,44,632.00 2. Repair & Maintenance 1,16,745.00 Total 1,20,61,377.00 It is further observed that the aforementioned expenses were being incurred by the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is dismissed in terms of our aforesaid observations. ITA No. 5677/Mum/2019 A.Y.2014-15 15. Briefly stated, the assessee company had e-filed its return of income for A.Y. 2014-15 on 28.11.2014, declaring an income of Rs. 57,25,56,870/-. Return of income filed by the assessee was processed as such u/s 143(1) of the Act. Assessment was thereafter framed by the A.O vide his order passed u/s 143(3), dated 20.12.2016, wherein the income of the assessee was assessed at Rs. 55,95,49,300/- after making the following disallowances: Sr. No. Particular Amount 1. Disallowance of the assessee's claim for deduction of CSR expenditure/contribution. Rs. 1,73,47,296/- 2. Disallowance of the assessee's claim for deduction of land acquisition expenses. Rs. 4,46,229/- 3. Disallowance of the assessee's claim for a deduction of school expense Rs. 1,44,48,556/- 16. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Observing, that the issues, viz. (i) disallowance of land acquisition expenses; and (ii) disallowance of the school expenses, were the same, as were there in the case of the assessee for A.Y. 2012-13, the CIT(A) taking note of the fact that the said r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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