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.
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
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
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
(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
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
"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
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
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
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
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
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".
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.
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
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
