ACIT Vs Eastern Coalfields Ltd. (ITAT Kolkata)
It is noted that the assessee is a Public Sector Undertaking and its accounts are audited by the CAG. It has been brought to our notice that the expenditure were made after approval of the competent authority and expenditure is towards the contribution to school and development of infrastructure for the welfare of the employees and workmen of the company. It is brought to our notice that in assesse’s own case no such disallowance on CSR expenditure was made in the earlier and subsequent years. It was also brought to our notice that this expenditure is also necessary in view of the National Coal Wage Agreement between the management and the employees’ Union. It was clarified by the Ld. AR that the CSR expenses incurred by the assessee is not covered by the amendment in section 37(1) of the Act and the Explanation 2 to section 37(1) comes into play w.e.f. 01.04.2015 and is not retrospective in operations. It was brought to our notice that the coordinate bench of this Tribunal Nagpur Bench in the case of assessee’s sister concern Southern Coalfields Vs. JCIT reported in 260 ITR (AT) 1 had an occasion to adjudicate similar issue and at pages 83-85 has directed to allow such expenditure as revenue expenditure. We note that the expenditure was incurred by the assessee company to comply with the contractual obligation as per National Coal Wage Agreement which is joint by-partite committee for the coal industry dated 15.07.2005 in para 10.8 wherein it was agreed by the assessee to carry out welfare activities. We note that the assessee expended CSR expenses of Rs.9.11 cr. However, the AO has disallowed 50% of the expenditure and made an addition of Rs.4,55,50,000/- being 50% of the expenses on account of CSR. The AO has disallowed the claim on the ground that the assessee did not file ledger copy of the expenses booked under the CSR. According to the AO, in the absence of date wise expenses with detail narration, the expenses remained unverifiable and as such resorted to estimated disallowance of 50% of such expenses. According to the Ld. AR, the books of the assessee are audited by different auditors as well as the CAG. It was pointed out by the assessee that contributions made with the proper approval of the competent authority to develop proper educational infrastructure not only for the children of the workmen of the company but also for the benefit of public at large. This expenditure are made partly as staff welfare expenditure and partly as social cause as per its commitment to the society in the form of CSR activities which the assessee is duty bound to oblige as per the Companies Act, 1956. We note that the assessee is a Public Sector Undertaking and since its operational base are located in remote areas, the assessee company is under obligation to incur expenses on education, sports and recreation activities for welfare of the employees as well as to the local persons residing nearby the company. It was also pointed out that this expenditure is also for maintenance of good health on the part of the employees as well as for the general development of the locality and for facilities for medical etc. which in turn contributes to the growth of the assessee’s business. We note that the expenditure claimed by the assessee is also necessary in view of the National Coal Wage Agreement entered into between the management and employees’ union and also as per the Companies Act, 1956 as well as Companies Act, 2013. We note that the amendment in section 37(1) of the Act has been introduced w.e.f. 1st April, 2015 and does not apply on the facts of the case and the disabling provision as stated in Explanation 2 to section 37(1) refers only to such corporate social responsibility expenditure as u/s. 135 of the Companies Act, 2013 and as such it cannot have any application for the period not covered by the statutory provision which itself came into existence in the year 2013. And any way this disabling provision cannot be held to be retrospective in operation.
FULL TEXT OF THE ITAT JUDGEMENT
These are cross appeals of the revenue and assessee respectively against the separate orders of the Ld. CIT(A)-Asansol dated 02.01.2019 for AYs. 2009-10 and 2012-13 respectively. Since issues are interconnected and arises out of the same order of Ld. CIT(A) and also heard together, we dispose of all these four appeals by this consolidated order for the sake of convenience.
2. Ground nos. 1 and 2 of the assessee’s appeals are dismissed as not pressed.
3. Ground no. 3 of the revenue’s appeal for AY 2009-10 is against the action of the Ld. CIT(A) in deleting the addition of Rs.22,43,24,000/- which was added by the AO taking into consideration the difference between opening and closing value of non-vendible coal of Rs.22,43,24,000/-.
4. At the outset, the Ld. AR of the assessee submitted that the assessee is a Public Sector Undertaking and on this issue the Ld. CIT(A) has given relief to the assessee by relying on the Tribunal’s order in assessee’s own case for AYs. 2003-04 to 2005-06. We note that the Ld. CIT(A) has given relief to the assessee by taking note of the decision of this Tribunal in assessee’s own case for AY 2003-04 to 2005-06 in ITA No. 462 to 469/Kol/2019 dated 27.10.2016 which is seen placed at pages 8 and 9 para 12 to 14 of the Tribunal’s order wherein we note that this issue is covered in favour of the assessee. We note that the Ld. CIT(A) at page 6 has decided this issue as under:
“The value of this 472 M. T. of non-vendible col was shown as closing stock in hand in the balance sheet of the previous year i.e. during the AY 2008-09. However, for the current year i.e. 2009-10 the value of this non-vendible coal was not shown in the opening stock as well as in the closing stock as its value was considered was nil. For the previous AY 200809, the ITAT Kolkata bench vide ITA No. 2266/Kol/2014 dated 09.02.2018 took the value of the 472 M. T of coal as nil. As the ITAT has taken the value of this non-vendible coal as nil, the value of opening and closing stock will be nil for the AY 2009-10. Hence, there is no increase in the cost of this stock. Hence, the addition is deleted and the appeal is allowed.”
5. Since the revenue has not been able to show that there is any change in facts or law, we are bound by the decision of the Tribunal on this issue and respectfully following the same we confirm the order of Ld. CIT(A), this ground of appeal of revenue is dismissed.
6. Ground no. 4 of the revenue & ground no. 3 of the assessee for AY 2009-10 are against the action of the Ld. CIT(A) in allowing 80% of the additional depreciation claimed u/s. 32(1)(iia) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). At the outset, the Ld. Counsel for the assessee submitted that the AO did not allow the full claim of additional depreciation u/s. 32(1)(iia) of the Act of Rs.26,46,80,400/- and allowed only 50% thereof at Rs.13,23,40,200/-. Aggrieved, both the revenue and the assessee preferred appeals before the Ld. CIT(A) who has discussed this issue at page 6 para 4 and allowed 80% of the claim of additional depreciation. Aggrieved by the action of the Ld. CIT(A), both the revenue as well as assessee is before us. Before us, the Ld. DR submitted that on this issue assessee failed to give full details and break up before the AO and he also objected to the action of the Ld. CIT(A) allowing 80% of the claim of additional depreciation. Assessee is also in appeal before us against the action of the Ld. CIT(A) in not allowing the full claim of additional depreciation.
7. During the hearing the Ld. AR drew our attention to the fact that on the very same issue the Tribunal has set aside this issue for verification by passing the consolidated order in ITA No. 1010/Kol/2015, ITA No. 1015/Kol/2018 and ITA No. 916 & 999/Kol/2017 for AY 2009-10 which is found placed at pages 5 to 17 of the paper book. Further, it was brought to our notice that while giving effect to the Tribunal’s order in assessee’s own case, the ACIT, Circle-2, Asansol vide his order passed u/s. 143(3)/254 of the Act dated 27.12.2019 for AY 2009-10 after verification as directed by the Tribunal has allowed 100% of the claim of additional depreciation. The Ld. AR drew our attention to the copy of the AO’s order found placed at pages 18 to 29 of the paper book. It was also brought to our notice that for AY 2008-09, the ACIT in his giving effect order dated 27.12.2019 after verification has allowed full claim of depreciation and AO’s order is found placed at paged 32 to 33. In the light of the aforesaid facts which are not disputed and since the AO has allowed the claim of the assessee for 100% additional depreciation after verification for earlier years, in the normal course, we could have allowed it. However, since the main grievance of the revenue is that the assessee failed to justify the admissibility of additional depreciation by producing the break up of assets and also taking note of the action of the Tribunal in assessee’s own case for AYs 2008-09 and 2009-10 we set aside the issue back to the AO with a direction for fresh adjudication after considering the details of plant and machinery used by the assessee for the purpose of extraction of coal. We note that the assessee has claimed to have produced the audited financial statement which gave all the required particulars before the authorities below. Since we are remanding the issue back to the AO, we direct the assessee to once again produce all the details as required by the AO in support of its claim for deduction of additional depreciation. It is to be kept in mind by the AO that the assessee is a Public Sector Undertaking and its accounts are audited by the Comptroller of Auditor General of India (CAG) and such audited statements have its own strength and has survived the scrutiny of the premier constitutional body. Needless to say that additional depreciation needs to be granted on such plant and machinery if it has been used for production of coal. With the aforesaid observation, this ground of assessee’s appeal and revenue’s appeal are allowed for statistical purposes.
8. Ground no. 5 of the revenue for AY 2009-10 is against the action of the Ld. CIT(A) in deleting the addition made by the AO on stowing subsidy difference of Rs.98.79 lacs. We note that the AO has made the addition by noting as under:
“5. Addition of less showing of stowing subsidy. It is seen from the available records that during the relevant assessment year the amount of stowing subsidy was considered less in computing total income. The amount of stowing subsidy during the relevant assessment year worked out as under:
