IN THE ITAT JAIPUR BENCH ‘B’
Deputy Commissioner of Income-tax, Circle-6, Jaipur
v/s.
Rajasthan State Mines & Minerals Ltd.
IT APPEAL NO. 975 (JP.) OF 2011
C.O. NO. 3 (JP.) of 2012
[ASSESSMENT YEAR 2008-09]
MARCH 15, 2012
ORDER
Sanjay Arora, Accountant Member
This is an Appeal by the Revenue and Cross objection by the Assessee, directed against the order by the Commissioner of Income-tax (Appeals)-II Jaipur (‘CIT(A)’ for short) dated 10-08-2011 for the assessment year (A.Y.) 2008-09, partly allowing by the assessee’s appeal contesting its assessment vide order u/s. 143(3) of the Income-tax Act, 1961 (‘the Act’ for short) dated 22-12-2010. We shall take up the Revenue’s appeal first, whereby it raised two grounds.
Revenue’s Appeal: ITA No.975/JP/2011
2. At the very outset, it was submitted by the ld. AR, the assessee’s counsel, that both the grounds of the Revenue’s appeal are covered in favour of the assessee by the decision by the Tribunal in assessee’s own case for the AY 2006-07 (in ITA Nos. 740/JP/2009 & 783/JP/2009 dated 31-03-2010/ Paper-Book pages 3 to 12). The ld. DR was questioned on this by the Bench, and who conceded thereto, even as he would submit that the Revenue places reliance on the assessment order under reference. Taking us through the relevant part of the tribunal’s order, the ld. AR continued, the Revenue’s first ground stands covered against it per para 13 of the order in Revenue’s appeal for AY 2006-07 (in ITA No. 783/JP/2009), wherein, following its earlier decision, as in the case of the assessment years 2003-04 and 2004-05, the tribunal allowed the compensation paid to the land owners for using their land for extraction of Gypsum; mining being part of the assessee’s trade, as revenue expenditure on the basis that it is only a part of the cost of the extraction of Gypsum, and did not give rise to any asset or advantage of enduring nature, as against the Revenue’s contention of it being a capital expenditure. Further, the nature of loss in the hands of the payee would be of little consequence in determining the nature of the expenditure in the hands of the payer/person incurring the expenditure. The tribunal has reproduced the relevant part (para 9) of its order for the assessment year 2003-04 (in ITA No. 466/JP/2006 dated 26-06-2009), and the observations wherein also find reproduction in the impugned order. Under the circumstances, we find that the issue is squarely covered in favour of the assessee, i.e., that the impugned expenditure is revenue in nature, as being claimed by the assessee. Accordingly, we find no reason to interfere with the impugned order holding so. We decide accordingly.
3. The Revenue’s second ground is in respect of contribution of Rs. 10.00 lacs by the assessee to a Fund established at the instance of the State Government with the object of providing a safety net for the workers likely to be affected by the restructuring of the State Public Sector Enterprises. The same stood disallowed by the Assessing Officer (AO) on the basis that the same is only an application of income and not a case of diversion of income by overriding title. The ld. AR drew our attention to para 15 of the order by the tribunal in the assessee’s own case in Revenue’s appeal for AY 2006-07 (supra), whereby the disallowance for like amount (Rs. 10.00 lacs) was deleted by the tribunal on the basis that the said fund had been set up solely for the purpose of welfare and benefit of the employees, drawing support from its earlier decision in the case of Rajasthan State Seeds Corpn. Ltd. [IT Appeal No. 233 (JP) of 2009 dated 22-5-2009], wherein the issue was decided by placing reliance on the decision by hon’ble jurisdictional high court, as in the case of Addl. CIT v. Rajasthan Spg. & Wvg. Mills Ltd. [2004] 274 ITR 465 , CIT v. Shri Rajasthan Syntax Ltd. [IT Appeal No. 186 of 2008, dated 12-1-2009], and by distinguishing the decision in the case of CIT v. Jodhpur Co-operative Marketing Society [2004] 275 ITR 372 , wherein the amount was set apart for the shareholders of the society, while in the case on hand, it was provided for the benefit of the employees. The relevant para of the said order stands reproduced as a part of para 15 of the tribunal’s order. Though there is nothing on record to link the quantum of the expenditure with the purpose for which the impugned payment is made; it being trite that the word ‘wholly’ occurring in sec. 37(1) refers to quantum, in view of the consistent stand by the tribunal, particularly for a preceding year in the assessee’s own case, the Revenue’s second ground is covered against it and in favour of the assessee. Accordingly, we confirm the impugned order, deleting the disallowance by placing reliance on the decision by the tribunal in assessee’s own case for an earlier year. We decide accordingly.
Assessee’s C.O.: 03/JP/2012
4. The brief facts are that the assessee’s accounts reveal a debit to the profit and loss account in the sum of Rs. 445.20 lacs under the account head ‘Donation’, of which Rs. 444.00 lacs was by way of donation to the Chief Minister’s Relief Fund, eligible for deduction u/s. 80G @ 100%, duly claimed per the return of income. No claim for balance expenditure of Rs. 1.20 lacs was made. On being questioned for verification of the claim u/s. 80G, the assessee per its reply, while justifying its claim u/s. 80G, also requested for grant of deduction u/s. 37(1) in respect of the unclaimed balance expenditure of Rs. 1.20 lacs. The AO disallowed the assessee’s claim on the legal ground of being untenable, having not been preferred per the original or the revised return, but by way of a letter, relying on the decision by the hon’ble apex court in the case of Goetz (India) Ltd. v. CIT [2006] 284 ITR 323 . Even on merits, he was of the view that expenditure is in the nature of donation, being only for cultural activities and not ‘business promotion expenses’, as claimed. In appeal, the ld. CIT(A) opined in favour of the assessee on the legal ground in view of the decision by the tribunal (Mumbai Bench) in the case of Oglivy & Mather (P.) Ltd. v. Addl. CIT [IT Appeal No. 925 (Mum.) of 2009, dated 30-12-2010]; the tribunal holding that even as clarified by the hon’ble apex court in the case of Goetze (India) Ltd. (supra), the said decision does not effect the power of the appellate authority as the appellate tribunal as clarified in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC). Reliance was also placed in the case of CIT v. Ramco International [2011] 332 ITR 306 . On merits, however, he found that the assessee’s case was covered against it, placing reliance on the decisions in the case of Voltas Ltd. v. CIT [1994] 207 ITR 47 ; Standard Mills Co. Ltd. v. CIT [1994] 209 ITR 85 ; and Jaswant Trading Co. v. CIT [1995] 212 ITR 24.
5. Before us, the ld. AR would submit that no doubt the expenditure on each of three contributions made by the assessee were for cultural events, so however, the same qualified the test of expenditure, placing reliance on the decision in the case of Sri Venkata Satyanarayana Rice Mill Contractors Co. v. CIT [1997] 223 ITR 101/[1996] 89 Taxman 92 (SC); CIT v. Vazir Sultan Tobacco Co. Ltd. [1988] 169 ITR 139/[1987] 35 Taxman 294 (AP); Asstt. CIT v. Ranbaxy Laboratories [2012] 20 taxmann.com 334 (Delhi). Similar contribution/s by the assessee came up for adjudication in the assessee’s own case by the tribunal for the assessment year 2006-07 (in ITA No. 740/JP/2009 dated 31-03-2010) wherein vide para 9 of its order, the tribunal allowed the assessee’s claim for Rs. 14,650/- made in respect of contribution for organizing two days workshops on Human Rights for Police Officers and Rs. 10,000/- for organizing a competition by the Wild Life Development Samiti, which celebrated the Wild Life Week in the firs week of October every year by organizing such competition amongst school students. Such events enable the company to maintain good relations with the District Administration. The assessee’s claim was allowed placing reliance on the decision in the case of CIT v. Madras Refinery Ltd. [2004] 266 ITR 170/138 Taxman 261 (Mad.), and CIT v. Velumanickam Lodge [2009] 317 ITR 338 (Mad.).
5.1 The ld. DR, on the other hand, placed reliance on the orders by the authorities below, i.e., to the extent favourable to the Revenue, stating the same to be in accordance with law.
6. We have heard the parties, and perused the material on record.
6.1 The primary facts of the case are undisputed; the impugned payments being for and toward the following (ref. written submissions by the assessee):
