Telangana High Court
M/S. The Singareni Collieries Company ... vs Principal Commissioner Of Income Tax on 15 February, 2024
Author: P.Sam Koshy
Bench: P.Sam Koshy, N.Tukaramji
HIGH COURT FOR THE STATE OF TELANGANA
AT HYDERABAD
*****
ITTA Nos.85, 87 AND 88 of 2021
ITTA No.85 of 2021
Between:
# M/s. The Singareni Collieries Company
Limited, Having its Registered Office at
Kothagudem Collieries, Bhadradri,
Kothagudem District, Telangana Rep., by
its Chairman & Managing Director.
... Appellant
And
$ 1. Principal Commissioner of Income
Tax Circle 1, Hyderabad.
2. Deputy Commissioner of Income Tax,
Circle 13(1), Hyderabad.
(Respondent No.2 is not necessary).
... Respondents
ITTA No.87 of 2021
Between:
# M/s. The Singareni Collieries Company
Limited, Having its Registered Office at
Kothagudem Collieries, Bhadradri,
Kothagudem District, Telangana Rep., by
its Chairman & Managing Director.
... Appellant
And
2
$ 1. Principal Commissioner of Income
Tax Circle 1, Hyderabad.
... Respondent
ITTA No.88 of 2021
Between:
# M/s. The Singareni Collieries Company
Limited, Having its Registered Office at
Kothagudem Collieries, Bhadradri,
Kothagudem District, Telangana Rep., by
its Chairman & Managing Director.
... Appellant
And
$ 1. Principal Commissioner of Income
Tax Circle 1, Hyderabad.
2. Deputy Commissioner of Income Tax,
Circle 13(1), Hyderabad.
(Respondent No.2 is not necessary).
... Respondents
DATE OF JUDGMENT PRONOUNCED: 15.02.2024
Submitted for approval.
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE N.TUKARAMJI
1 Whether Reporters of Local
newspapers may be allowed to see Yes/No
the Judgments?
3
2 Whether the copies of judgment
may be marked to Law Yes/No
Reporters/Journals
3 Whether Their Ladyship/Lordship
wish to see the fair copy of the Yes/No
Judgment?
__________________
P.SAM KOSHY, J
__________________
N.TUKARAMJI, J
4
* THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
*THE HON'BLE SRI JUSTICE N.TUKARAMJI
ITTA Nos.85, 87 AND 88 of 2021
% Dated 15.02.2024
ITTA Nos.85 of 2021
# M/s. The Singareni Collieries Company
Limited.
... Appellant
And
$ 1. Principal Commissioner of Income
Tax Circle 1, Hyderabad.
2. Deputy Commissioner of Income Tax,
Circle 13(1), Hyderabad.
(Respondent No.2 is not necessary).
... Respondents
ITTA No.87 of 2021
Between:
# M/s. The Singareni Collieries Company
Limite.
... Appellant
And
$ 1. Principal Commissioner of Income
Tax Circle 1, Hyderabad.
... Respondent
5
ITTA No.88 of 2021
Between:
# M/s. The Singareni Collieries Company
Limited.
... Appellant
And
$ 1. Principal Commissioner of Income
Tax Circle 1, Hyderabad.
2. Deputy Commissioner of Income Tax,
Circle 13(1), Hyderabad.
(Respondent No.2 is not necessary).
... Respondents
! Counsel for the Petitioner: Sri <Manoj Reddy Keshi Reddy
^ Counsel for the Respondents/Department: Sri J.V.Prasad
>HEAD NOTE:
? Cases referred
1 (2007) 8 Supreme Court Cases 549
6
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE N.TUKARAMJI
ITTA Nos.85, 87 AND 88 of 2021
COMMON JUDGMENT:
(per Hon'ble Sri Justice P.SAM KOSHY) These Income Tax Appeals are filed by the same assessee i.e. M/s. Singareni Colleries Company Limited challenging the order passed by the Income Tax Appellate Tribunal, Hyderabad 'A' Bench, Hyderabad, in ITA Nos.881, 883 and 885/H/2014 for the assessment years 2006-07, 2007-08 and 2008-09 decided by a common order dated 23.04.2021.
2. Heard Sri Manoj Reddy Keshi Reddy, learned Counsel for the appellant and Sri J.V. Prasad, learned counsel for the respondents- Department.
3. Vide the said impugned order, the learned Income Tax Appellate Tribunal has rejected the appeals preferred by the appellant herein confirming the order passed by the Commissioner of Income Tax (Appeals), Vijayawada, as that also of the Assessing Officer. 7
4. The issue involved in the present Income Tax Tribunal Appeals is in respect of the proceedings issued under Section 115 WE of the Income Tax Act, 1961.
5. The facts in brief is that the appellant company which is a public sector undertaking of the Government of Telangana and Government of India is into the business of coal extraction and sale. The establishment is one which is primarily governed under the provisions of Mines Act, 1952. Taking into consideration the compelling work conditions under which the work force under the appellant establishment works, the employees/workers are provided with certain benefits by the appellant herein in the capacity of being the employer towards the welfare of the employees/workers and their family dependent upon them. The service conditions governing the work force i.e. workers and the employees are governed by the National Coal Wages Agreement. The said agreement is entered into between the management of the appellant establishment and the Joint Bipartite Committee for Coal Industry (JBCCI). The JBCCI consists of 8 the representatives of the State Government, the representative of the Central Government, Members of various recognized Trade Unions. The agreement so entered into is known as National Coal Wages Agreement (for short 'NCWA'). The said agreement is a recognized agreement having a binding effect in terms of the definition of "settlement" under the provisions of the Industrial Disputes Act, 1947.
6. In the course of entering into the agreement, the employer undertakes to provide various benefits, incentives and facilities to its employees. The facilities include supply of electricity to their residence, to the township where they stay and also to the streets and roads passing through the important areas particularly the residential locality.
7. Clause 8.3.1 of NCWA envisages providing of 30 KWH of free electricity per month to each of its employees of the appellant. The appellant incurs substantial payment every year towards meeting the cost of the said electricity which is being provided to the employees. Section 115WA of the IT Act deals with the fringe benefits provided by 9 the employer which would be otherwise taxable under the IT Act. Further, the "Explanation" to Section 115WB(2)(E) deals with the employees welfare also being part of the fringe benefits which would be taxable. Further, the "Explanation" to the said Clause E deals with certain facilities which are not to be considered as an expenditure for employees welfare. For proper understanding of the issue involved in the case, it would be relevant at this stage to take note of the provision under Section 115WB(2) and Clause E of the same along with the un- amended explanation that was there till 31.03.2009 and the amended explanation with effect from 01.04.2009.
8. The relevant portion of Clause E of sub-section 2 of Section 115WB of the Income Tax Act, 1961 is re-produced herein under:
(E) Employees'welfare Explanation.--For the purposes of this clause, any expenditure incurred or payment made to--
(i) fulfil any statutory obligation; or
(ii) mitigate occupational hazards; or
(iii) provide first aid facilities in the hospital or dispensary run by the employer; or 10
(iv) provide creche facility for the children of the employee; or
(v) sponsor a sportsman, being an employee; or
(vi) organise sports events for employees, shall not be considered as expenditure for employees' welfare;
9. In view of the explanation so provided to Clause E of sub-section 2 of Section 115WB, the appellant herein have been pursuing with the respondents stating that the expenditure incurred towards providing of electricity to the employees would not be one which would be taxable as it stands exempted in terms of the explanation so provided which perhaps was not accepted by the Assessing Officer, Commissioner of Appeals and subsequently by the ITAT as well.
10. The contention of the Assessing Officer was that firstly, the benefit so provided being a welfare measure, the expenditure would fall squarely within the ambit of Clause E of sub-section 2 of Section 115WB and hence, it becomes taxable. Second condition was that the NCWA is only a settlement between the employer and employees where there is only a contractual obligation for the employer towards 11 its employees. That it is not a statutory document nor does the settlement have any statutory force of law so as to avail the benefits under the explanation to Section 115WB(2)(E) both under the un- amended provision and as also under the amended provision.
11. It is necessary at this juncture to take note of the couple of decisions rendered on the said subject issue. The first being the judgment of the Hon'ble Supreme Court in case of Mohan Mahto v. Central Coal Field Ltd. 1, where considering the provisions of NCWA while determining whether it has binding force of law or not, the Hon'ble Supreme Court in paragraph No.2 and paragraph No.10 held as under:
"2. ..... The terms and conditions of the service of the workmen working in coal mines are inter alia governed by a "settlement" known as National Coal Wage Agreement (NCWA) V. Indisputably, the said settlement, in terms of sub-
section (3) of Section 18 of the Industrial Disputes Act, 1947 is binding on the parties.....".
1 (2007) 8 Supreme Court Cases 549 12 "10. A settlement within the meaning of sub-section (3) of Section 18 of the Industrial Disputes Act is binding on both the parties and continues to remain in force unless the same is altered, modified or substituted by another settlement......".
12. A similar issue came up for consideration before the Jharkhand High Court at Ranchi in L.P.A.No.17 of 2018 which has been decided on 23.04.2019 and where the Division Bench of the Jharkhand High Court, in paragraph 6, relying upon the aforesaid judgment of the Hon'ble Supreme Court, held as under:
"6. We are in agreement with the contention of the appellant that National Coal Wage Agreement is statutory in nature. It is an outcome of tripartite agreement among the Coal Company, Labour Unions and Central Government. It has been held by the Hon'ble Supreme Court in Mohan Mahto Vs. Central Coalfields Ltd. reported in (2007) 8 SCC 549, that it has statutory force. Learned Single Judge came to the aforesaid findings due to following facts and reasons which have been depicted in paragraph 7 of the impugned judgment which reads hereunder:
7. (i) Admittedly, after the death of the deceased-
employee, late Laxmi Ravidas on submission of 13 application for compassionate appointment of her eldest son by Samudri Devi (nominee of the petitioner's father), the Management- Company considered the case of the eldest brother of the petitioner, namely, Santosh Ravidas in the year 2004, but, by that time, the said Santosh Ravidas has died, so it cannot be construed that the respondents did not consider the case of the legal heir of the deceased employee, late Laxmi Ravidas for consideration of compassionate appointment. It appears that the mother of the petitioner had applied for appointment of the petitioner on compassionate ground in the year 2011. Due to indecisiveness on the part of the mother of the petitioner, it was not possible on the part of the respondents to consider the case of the petitioner for compassionate appointment.
(ii) It is a settled position that the compassionate appointment is not a matter of right, rather, it is a matter of concession. On perusal of the impugned Annexure-19 to the writ application, the same does not suffer from any infirmity or irregularity so as to warrant interference of this Court.
(iii) So far as the claim of the petitioner for grant of monetary compensation as admissible under the relevant provisions of the N.C.W.A. is concerned, the mother of the petitioner is entitled, provided that she files an application for grant of the same".
13. Two similar issues under the provisions of the Income Tax itself came up before the Nagpur Bench of the Bombay High Court, first in Income Tax Appeal No.40 of 2015. In the case where it was an appeal 14 filed by the Commissioner of Income Tax against M/s. Western Coalfields Ltd., Nagpur, the Division Bench took the following stand:
"6. Two additional questions, to be looked into here are:
(i) Whether on the facts and in the circumstances of the case in law, the ITAT is justified in holding that the expenditure of Rs.342.42 lacs on account of donation to educational institutions is an allowable expenditure under corporate social responsibility even though it is only application of income?
(ii) Whether on the facts and in the circumstances of the case in law, the ITAT is justified the disallowance of contract charges of Rs.6,25,000/- paid to Nagindevi Agarwal u/s.40(a)(ia) of Income Tax Act, 1961 on account of non deduction of TDS?
Accordingly, we have heard Advocate Parchure for the Department Advocate Dewani for assessee.
We find that the provision for educational facilities is being made by assessee as a part of its obligation under various National Coal Wage Agreement (NCWA), which are legally 15 enforceable in terms of Section 18 of the Industrial Dispute Act. The said provision is also accepted and allowed by Department since 1992. In fact, assessment order itself records that for assessment year 1995-96, appeal filed by Department in this respect before ITAT was withdrawn. It is not the case of Department that aims and objects of assessee do not permit such expenditure. Fact show that, to provide education towards of its employees who are working at sites which are otherwise away from town, schooling facility is being provided by employer. To provide better facility, the central school organization an undertaking of Union of India is requested to offer it at such site.
In this situation, we find that no substantial questions of law as sought to be raised arise out of concurrent finding of CIT and ITAT".
14. The same view was further reiterated in yet another appeal preferred by the Income Tax Department in ITA No.24 of 2019 again before the Division Bench of Nagpur Bench of the High Court of 16 Bombay. Dealing with the fringe benefits and expenses made in the context of value of free issue of coal, medical facilities, educational facilities, grants to school and institutions, sports and recreational facilities, the Nagpur Bench of the Bombay High Court, wherein the deliberation substantially was what is reflected in paragraph 2 and paragraph 3 of the said judgment and the finding of the Bench is reflected in paragraph 5, as under:
"2. Addition o fRs.597.22 Lacs being value for fringe benefits in respect of expenditure on the welfare of employees by the Assessment Officer and maintained by the Commissioner of Income Tax [Appeals] but reversed by the Income Tax Appeal Tribunal is the subject matter of challenge in this appeal filed at the instance of the Revenue. These fringe benefits pertain to expenditure made in the context of value of free issue of coal, medical facilities, educational facilities, grants to school and institutions, sports and recreational facilities. The Tribunal has held that in view of the provisions of the National Coal Wage Agreement, the provision of such benefits were made being 17 statutory obligations and hence were not exigible to Fringe Benefit Tax.
3. Shri A. Parchure, learned counsel for the appellant submitted that not withstanding the National Coal Wage Agreement, with regard to the head Sports and Recreation Facilities, the provisions of Section 115 WB(2)(E) and explanation thereto introduced by virtue of Finance Act of 2008 such expenditure made was not to be considered as expenditure for employees welfare. He, therefore, submits that since the present proceedings pertain to the assessment year 2006-07, the explanation cannot be given retrospective effect".
5. On hearing the learned counsel for the parties, it is clear that the implementation of the National Coal Wage Agreement has been held to a statutory obligation which is binding on the assessee. The expenditure towards sports and recreation facilities is also a part of that agreement as is clear from Clause 10.8.1".
18
15. From the plain reading of the facts and circumstances of those cases dealt with by the Hon'ble Supreme Court, as also by the High Court of Jharkhand and again that of the two cases by the High Court of Bombay, when we compare the facts of the present case, undisputedly in the instant cases also, the issue is in respect of the benefits provided to the employees by way of supply of electricity to their residence, township and street lights. The question again would be whether this so called benefit is one which is for the welfare of the employees or not and whether it is not part of the statutory obligation. The other undisputed fact is that the said benefit extended by the appellant/employer is in terms of the clauses that are reflected in the NCWA. The judgments referred to in the preceding paragraphs clearly indicate and lay to rest the issue as to whether it is a statutory document or not, where all the judgments referred to above have clearly held that NCWA is a statutory document and it has binding force of law so far as its enforceability is concerned. 19
16. Under the circumstances, if we look into the un-amended "Explanation" to Section 115WB(2)(E) of the Act, it would further make it clear that any expenditure which was incurred in order to fulfill a statutory obligation would not be considered as an expenditure for employees welfare. So also, when we look into the subsequent amendment brought to the "Explanation" to Clause E of Sub-Section 2 of Section 115WB, sub-clause (i) it also clearly excludes expenses incurred or payments made to fulfill any statutory obligation. So, under both the circumstances i.e. even prior to the amendment to the explanation w.e.f. 01.04.2009, the expenditure incurred towards the supply of electricity by the appellant to its employees would be excluded for the purpose of treating it as an expenditure towards the employees benefit is concerned.
17. For all the aforesaid reasons, we are of the considered opinion that the view taken by the Assessing Officer, so also by the Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal are not sustainable and the same is accordingly set 20 aside/quashed. It is held that the expenditure so incurred by the appellant towards the supply of electricity would be excluded from being treated as an expenditure towards the employees welfare.
18. The appeals accordingly stand allowed. No order as to costs. Consequently, miscellaneous petitions pending, if any, shall stand closed.
___________________ P.SAM KOSHY, J __________________ N.TUKARAMJI, J Dated: 15.02.2024 gvl