Calcutta High Court
Principal Commissioner Of Income ... vs M/S. Eastern Coalfields Ltd on 14 December, 2021
ITAT 230 of 2017
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction (Income Tax)
ORIGINAL SIDE
RESERVED ON: 25.11.2021
DELIVERED ON:14.12.2021
CORAM:
THE HON'BLE MR. JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE HIRANMAY BHATTACHARYYA
I.A NO. GA/2/2017(Old No. GA/2021/2017)
In
ITAT 230 of 2017
PRINCIPAL COMMISSIONER OF INCOME TAX, ASANSOL
Vs
M/S. EASTERN COALFIELDS LTD.
Appearance:-
Mr. S.N. Dutta, Adv.
Mr. Manabendranath Bandyopadhyay, Adv.
....for the appellant.
Mr. J.P. Khaitan, Sr. Adv.
Ms. Swapna Das, Adv.
Mr. Siddharth Das, Adv.
.....for the respondent.
Page 1 of 14
ITAT 230 of 2017
JUDGMENT
(Judgment of the Court was delivered by T.S.SIVAGNANAM, J.)
ITAT 230 of 2017
1. This appeal filed by the revenue under section 260 A of the
Income Tax Act, 1961 (the act for brevity) is directed against the order
dated 27.07.2016 passed by the Income Tax Appellate Tribunal, "C"
Bench Kolkata (Tribunal) in ITA No. 462 to 464/Kol/2009 for the
Assessment Years 2003-2004, 2004-2005 and 2005-2006.
2. The revenue has raised the following substantial questions of
law for consideration: -
a) Whether on the facts and circumstances of the case and in
law, the Learned Income Tax Appellate Tribunal, "C" Bench,
was justified in reversing the finding of CIT (Appeals) in
holding that depreciation of Rs. 7,19,12,000/- for the A.Y.
2003-04, Rs. 5,82,73,000/- for the A.Y. 2004-05, and Rs.
5,92,06,000/- for the A.Y. 2005-06 respectively claimed
separately under the head "Social Overhead" over and above
depreciation of Rs. 1,38,03,89,764/- Rs. 1,22,80,02,789/-
and Rs. 1,48,84,39,000/- respectively already claimed u/s
32 of the Act as not double claim of depreciation?
b) Whether of the facts and circumstances of the case and in
law, the Learned Income Tax Appellate Tribunal, "C" Bench,
ITAT 230 of 2017
was justified in reversing the finding of CIT (Appeals) in
deleting the addition of Rs. 1,35,87,000/- for A.Y. 2003-04
and Rs. 1,50,00,000/- for the A.Y. 2005-06 respectively
against 'IICM Contribution' claimed under section 40A(9) of
the Act?
c) Whether on the facts and circumstances of the case and in
law, the Learned Income Tax Appellate Tribunal, "C" Bench,
was justified in reversing the finding of CIT (Appeals) in
deleting the addition of Rs. 1,09,53,935/- for the A.Y. 2003-
04, Rs. 10,29,46,358/- for the A.Y. 2004-05 and Rs.
26,91,71,670/- for the A.Y. 2005-06 respectively on account
of closing stock of coal?
d) Whether on the facts and circumstances of the case and in
law, the Learned Income Tax Appellate Tribunal, "C" Bench,
was justified in reversing the finding of CIT (Appeals) in
deleting the addition of Rs. 15,00,000/- for the A.Y. 2003-04,
Rs. 25,00,000/- for the A.Y. 2004-05 and Rs. 11,58,000/- for
the A.Y. 2005-06 respectively on account of 'Guest House
Expenses'?
e) Whether on the facts and circumstances of the case and in
law, the Learned Income Tax Appellate Tribunal, "C" Bench,
was justified in reversing the finding of CIT (Appeals) in
deleting the addition of Rs. 43,80,000/- for the A.Y. 2003-04,
Rs. 47,28,000/- for the A.Y. 2004-05 and Rs. 61,31,000/- for
the A.Y. 2005-06 respectively on account of 'Grant to sports
ITAT 230 of 2017
and recreation' being non-incidental to the business of the
assessee?
f) Whether on the facts and circumstances of the case and in
law, the Learned Income Tax Appellate Tribunal, "C" Bench,
was justified in reversing the finding of CIT (Appeals) in
deleting the addition of Rs. 16,38,000/- for the A.Y. 2003-04,
Rs. 67,03,000/- for the A.Y. 2004-05 and Rs. 1,38,23,000/-
for the A.Y. 2005-06 respectively on account of
'Environmental Expenditure'?
g) Whether on the facts and circumstances of the case and in
law, the Learned Income Tax Appellate Tribunal, "C" Bench,
was justified in reversing the finding of CIT (Appeals) in
deleting the addition of Rs. 19,97,000/- for the A.Y. 2003-04,
Rs. 57,13,000/- for the A.Y. 2004-05 respectively on account
of 'Miscellaneous Expenses'?
h) Whether on the facts and circumstances of the case and in
law, the Learned Income Tax Appellate Tribunal, "C" Bench,
was justified in reversing the finding of CIT (Appeals) in
deleting the addition of Rs. 6,28,25,18,000/- on account of
'Current Liabilities'?
i) Whether on the facts and circumstances of the case and in
law, the Learned Income Tax Appellate Tribunal, "C" Bench,
was justified in reversing the finding of CIT (Appeals) in
deleting the addition of Rs. 4,35,22,000/- for the A.Y. 2004-05
on account of 'HRA Expenses Arrear'?
ITAT 230 of 2017
3. The assessee company filed its return of loss on 21.10.2003
disclosing the total loss of Rs. 97,36,94,328/- which was processed
under section 143(1) on 08.01.2004. The assessment was taken up for
scrutiny and accordingly notice under section 143(2) was issued on
07.10.2004. Subsequently, notice under section 142(1) along with a
questionnaire was issued on 31.12.2004, the case was discussed with
the authorized representative of the assessee. The Assessing Officer on
considering the following issues completed the Assessment by order
dated 30.03.2006. The different heads under which the assessments
were completed are as here under:-
(i) Depreciation
(ii) IICM contribution
(iii) Closing Stock of Coal
(iv) Guest House Expenses
(v) Grant to Sports and Recreation
(vi) Environmental Expenditure
(vii) Hire Charges of bus/cars/ambulances and school bus
(viii) Miscellaneous expenses under schedule 12(sub heads others)
(ix) And other liabilities shown under Schedule 8.
4. Aggrieved by the order of assessment, the respondent assessee
preferred appeal to the Commissioner of Income Tax (Appeals) (CITA)
which was dismissed by order dated 19.01.2009. Aggrieved by the
same, the respondent assessee preferred appeal to the tribunal. The
ITAT 230 of 2017
tribunal except for one of the issues namely issue No. (vii) (hire
charges of bus, cars, ambulance and school bus) decided all issues in
favour of the respondent assessee and so far as issue no. (vii) the
matter was remanded to the Assessing Officer for fresh consideration.
5. Aggrieved by the same, the revenue is before us by way of this
appeal Mr. S.N. Dutta, Learned Senior Standing Counsel appearing for
the revenue contended that the tribunal was not justified in reversing
the findings of the CITA and should have confirmed the disallowance
of depreciation which was charged to profit and loss account and
added back by the assessee itself in the return of income with cogent
reasons as the assessee failed to produce any details before the
Assessing Officer and also before the CITA. Further, it is submitted
that the tribunal committed an error in reversing the findings of the
CITA and the deduction claimed as expenditure for contribution to
IICM when the same in question is already hit by the provisions of
Section 40 A (9) of the Act. Further it is contended that the tribunal
ought not to have deleted the addition in respect of closing stock of
coal as the assessee failed to produce any evidence to support their
contention that there was no saleable value or realisable value of the
said closing stock of coal. Further the Learned Standing Counsel
contended that the tribunal ought not to have deleted the addition on
account of Guest House Expenses as the assessee had failed to
produce details or produce any reliable and convincing material to
allow such claim. Further the tribunal ought not to have deleted the
addition on account of grant to sports and recreation being non
ITAT 230 of 2017
incidental to the business of the assessee. Similarly, the tribunal
committed an error in deleting the addition on account of
environmental expenditure as no details of such expenditure had been
furnished to allow such claim by the assessee. The Learned Senior
Standing Counsel contended that the tribunal ought to have
confirmed the order passed by the CITA in respect of the
miscellaneous expenses as no details for such expenses had been
furnished to allow such claims by the assessee. Similarly, is the case
in respect of the current liabilities, HRA Expenses Arrear. With the
above submissions the Learned Senior Standing Counsel submitted
that the order passed by the tribunal is a vitiated on account of
perversity and prayed for setting aside the order and answering the
substantial questions of law in favour of the appellant revenue.
6. Mr. J.P. Khaitan, Learned Senior Counsel appearing for the
respondent assessee submitted that the issues which are now raised
by the revenue before this Court are entirely factual and there are no
questions of law much less substantial questions of law arising for
consideration in this appeal and prayed for dismissal of the appeal
filed by the revenue.
7. We have elaborately heard the Learned Counsels for the parties
and carefully perused the materials placed on record. As pointed out
earlier the Assessing Officer considered the loss return filed by the
assessee on various heads which have been enumerated above. The
Assessing Officer was of the view that the sufficient documents have
not been produced by the assessee to sustain the various claims
ITAT 230 of 2017
under the above heads. The Learned Senior Counsel for the
respondent assessee pointed out that all the documents and records
were placed before the Assessing Officer as well as before the CITA
and the tribunal, the Assessing Officer and the CITA did not properly
appreciate the contention put forth by the assessee and rejected their
case. Further, the tribunal being as last fact finding authority had
elaborately discussed the matter and granted relief to the respondent
assessee on the different heads as mentioned above.
8. To examine as to whether the contention advanced by the
appellant revenue was justified or whether the respondent assessee
are right, we had carefully perused the orders passed by the Assessing
Officer, CITA as well as the tribunal. From the order passed by the
tribunal we find that the tribunal at the first instance noted the
findings recorded by the CITA on all issues, and thereafter proceeded
to consider the submissions of the assessee, and the relevant
documents which were already available on record and granted relief
to the assessee. It may not be necessary for us to deal with all the
issues raised as if we are satisfied that the matters are entirely
factual, we would refrain from interfering with the order of the
tribunal. Only if we are not convinced with the same and we find that
substantial questions of law arise for consideration then we have to
elaborately discuss each and every issue which have been framed for
consideration.
9. The first issue was with regard to the disallowance of
depreciation. The CITA confirmed the order of the Assessing Officer on
ITAT 230 of 2017
the ground that the assessee failed to furnish any details either before
Assessing Officer or before him and failed to produce any reliable and
convincing material to reverse the findings of the Assessing Officer
and therefore confirmed the findings of the Assessing Officer. The
documents referred to by the assessee were taken note of by the
tribunal and after carefully considering the computation of total
income for all the three Assessment Years, found that the depreciation
claimed in the profit and loss account was depreciation claimed as per
the Companies Act 1956 and that depreciation has been added to the
profit and loss as per profit and loss account and depreciation as
admissible under the provisions of section 32 of the Income Tax Act,
1961 was claimed by providing the relevant depreciation schedule
which was given as annexure to the computation of total income in all
the three years. In this regard the tribunal noted the depreciation
chart at Page No. 3 read with Page Nos. 73 to 75 of the paper book
which was filed by the assessee before the tribunal containing the
records which were already available on file. On going through the
records, the tribunal was satisfied that the assessee has added back
the depreciation as per profit and loss account to the loss as per the
profit and loss account and thereafter claimed depreciation which is
permissible under section 32 of the Act. Thus, the tribunal concluded
that the action of the Assessing Officer in disallowing the claim is
based on the premise that the assessee has made a double claim
which was found to be factually incorrect by the tribunal. Accordingly,
the disallowance was directed to be deleted.
ITAT 230 of 2017
10. The second ground relates to the IICM contribution. The CITA
while considering the said issue held that it was not ascertainable as
to how and under what circumstances such big amounts have been
debited as IICM contribution in the profit and loss account, and it is
not ascertainable as to whether claim of such expenses was incidental
to the business activities carried on by the assessee or not as per
relevant provisions of section 40 A (9) and therefore the expenditure
was not allowable. The tribunal considered the submissions of the
assessee who had pointed out that the Indian Institute of Coal
Management (IICM) is a society registered under the Societies
Registration Act, it is known as a Centre of Excellence having state of
art facilities for providing continuing education and training
requirements of different corporate bodies in general and companies
in coal sector in particular. Further they contended that the
executives at different levels of Coal India Limited and its subsidiaries
including the appellant company are sent to IICM for participating in
management and technical development programmes, workshops and
seminars conducted with a view to improve their skills and expertise.
The assessee further stated that their executives are also sent for
intensive training. The IICM raised the bill on Coal India Limited, the
holding company, which distributes the total expenditure to all its
subsidiaries at Rs. 50 per ton of coal produced and the amount of
expenditure so apportioned to the appellant company is accounted on
the basis of advice received from Coal India Limited. It was further
contended that the amount paid by the assessee company to Coal
ITAT 230 of 2017
India Limited is shown under the head Miscellaneous Expenses. The
assessee further contended that though these details were furnished
to the Assessing Officer and the CITA, however they have stated that
there was a note in the tax audit report in Form No. 3CD that
contribution to IICM is the sum paid by the assessee as an employer
which was not allowable under section 40 A (9). The assessee pointed
out that the said observation/findings of the Assessing Officer and
CITA is factually incorrect and the tax auditor has not reported that
the said sum has to be disallowed under section 40 A (9) of the Act.
Further, the Assessing Officer and the CITA failed to take note of the
vital facts that IICM is not a firm/trust/association/company set up
for the general welfare of the employees. Further, the amount paid by
holding company to IICM and subsequent payment made by the
assessee company represent fee for participation in training
programmes, organised by IICM. Further the contribution made by
the assessee company towards training has direct nexus with the
nature of business of the assessee and therefore allowable as
expenditure wholly and exclusively for the purpose of business of the
assessee. The tribunal examined the factual position as well as the
documents which were placed by the assessee and held that the said
sum paid to IICM was crystalised as liability of the assessee during
the relevant previous year and the sum in question is revenue
expenditure incurred for training of the employees/executives and the
sum is not hit by the provisions of Section 40 A (9) of the Act.
ITAT 230 of 2017
Therefore, the contention advanced by the assessee was accepted and
the deduction was directed to be allowed.
11. The next issue is with regard to the addition on account of
closing stock of coal. The CITA confirmed the order of the Assessing
Officer on the ground that the assessee failed to produce any evidence
to prove their contention that there is no saleable value or realizable
value of the closing stock of coal. The assessee while challenging the
finding contended that on the basis of technical evaluation of coal
mixed with Matti the assessee company has valued such stock at NIL,
since it is of the view that such coal is not saleable in the open
market. The tribunal held that the assessee is justified in taking a
decision whether coal mixed with Matti can be sold in the open
market or whether it would fetch any price, if sold in the open market
and the Income Tax Authorities cannot decide as to whether such coal
can be sold in the open market or can be used for other purposes.
Therefore, the tribunal held that the value of the coal as determined
by the Assessing Officer does not have any basis and accordingly
accepted the contention advanced by the assessee. Furthermore, the
tribunal pointed out that the technical evaluation based on which the
coal mixed with Matti etc. has been valued at NIL by the assessee has
not been challenged as incorrect by the revenue authorities. Further it
was pointed out that in the event of the coal being mixed with Matti,
and any sum realized by the assessee on such sale the same would be
offered to tax by the assessee under section 28 of the Act or the same
sum brought to tax by the revenue under section 41 (1) of the Act.
ITAT 230 of 2017
12. We have perused the findings recorded by the tribunal on the
other issues as well. The tribunal has proceeded to deal with the
issues one after another. As noted above while dealing with each of
the issue the tribunal has given the gist of the findings of the CITA
who concurred with the Assessing Officer thereafter took note of the
submissions of the assessee and decided the same for its correctness.
While dealing so the tribunal considered the factual position in its
entirety and granted relief to the assessee wherever admissible and
permissible. Therefore, we are fully satisfied that the case before us is
entirely factual and the materials which were available on record were
re-examined by the tribunal and relief has been granted to the
assessee. The revenue cannot dispute the position of law that the
tribunal is the last fact finding authority and this court exercising
jurisdiction under section 260 A of the Act is not expected to re-
examine the facts and record a different conclusion merely because it
may be of the view that different conclusion would be appropriate. The
jurisdiction under section 260 A of the Act is to ascertain as to
whether any substantial question of law arises for consideration in the
appeal and if it is so arises, then decide and answer the substantial
questions of law one way or the other. As all the issues are entirely
factual and we being satisfied that the tribunal has re-examined the
facts and rendered the findings on the above issues after re-examining
the records, we are not here to upset such factual findings under
section 260 A of the Act.
ITAT 230 of 2017
13. Though the expression "substantial questions of law" is not
defined in the Act, the tests laid down by the Constitution Bench of
the Hon'ble Supreme Court in Sir Chunilal V. Mehta and Sons Ltd.
Versus Century Spinning and Manufacturing Co. Ltd. AIR 1962
SC1314, for determining whether a question raised in a case is a
"substantial questions of law" or not could be applied. On going
through the entire facts placed before us, we find that none of the five
tests laid down therein stand satisfied in the case on hand. Thus we
concluded, that there are no "substantial questions of law" arising in
this appeal.
14. For all the above reasons we find that there is no question of
law much less substantial question of law arising for consideration in
this appeal. Accordingly, the appeal fails and it is dismissed.
Connected miscellaneous petitions, if any are dismissed. No costs.
(T.S. SIVAGNANAM, J.)
I agree.
(HIRANMAY BHATTACHARYYA, J.)
(P.A- SACHIN)
