IN INCOME TAX APPELLATE TRIBUNAL, BENCH KOLKATA Before Shri P.M. Jagtap, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member I.T.A. No.1758/KOL/2013 A.Y: 2009-10 D.C.I.T., Cir-6, Kolkata Vs. M/s. Integrated Coal Mining Ltd, PAN: AAACI 5584L (Appellant) (Respondent) I.T.A. No.1804/KOL/2013 A.Y: 2009-10 M/s. Integrated Coal Vs. D.C.I.T., Cir-6, Kolkata Mining Ltd (Appellant) (Respondent) Appearances by: Shri Sachidnanda Srivastava, CIT, Sr. D.R for Revenue Shri J.P.Khaitan, Sr. Advocate, Ld.AR for Assessee Date of concluding hearing : 11-07- 2016 Date of pronouncing order : 16 -09-2016 O R D E R Shri S.S. Viswanethra Ravi, JM :- These two appeals by Revenue and Assessee are directed against common order dated 28-03-2013 passed by ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 1 Commissioner of Income Tax (Appeals)-VI, Kolkata for assessment year 2009-10. 2. With consent of both parties, both appeals were heard together since one of grounds in these two cross appeals is similar and are disposed of by this common order for sake of convenience. ITA No. 1804/Kol/2013 A.Y 2009-10-by Assessee 3. First we shall take up Assessee s appeal in ITA No. 1804/Kol/2013 for A.Y 2009-10. 4. In this appeal, Assessee has raised following effective grounds:- 1 . (a) That on facts and in circumstances of case , learned CIT (Appeals) erred in upholding action o f As ses sing O f fi cer in invoking Rule 8D to In come- tax Rules , 1962 for arriving t amount disallowable u/s . 14A o f Income- tax ct , 1961 ( 'A ct') . 1(b) That learned CIT (Appeal s) erred in con fi rming action of A s ses sing O f ficer in disallowing additional amount of INR 92 ,78 ,481 by applying provisions of section 14A o f Act read with Rule 8D to In come- tax Rules , 1962 . 1(c) That learned CIT (Appeals) erred in observing that As ses sing O f ficer has calculated disallowance as per Rule 8D since appellant is unable to establish correctness of claim in respect of expenditure incurred in earning income which does not form part of taxable income . 1(d) Tha t finding recorded by learned CIT (Appeal s) in appellate order while con fi rming action o f A s ses sing Officer in making impugned further disallowance of expenditure amounting to INR 92 ,78 ,481 u/ s .14A o f read with Rule 8D o f Income- tax Rules , 1962 is based merely on
con jec ture, su rmi se and presumption s . ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 3 1(e) Tha t learned CIT (Appeal s) erred in dismissing additional ground o f appeal taken be fore him by appellantion issue o f disallowance u/ s .14A o f Act in limine . 2(a) Tha t on fa ct s and in ci rcumstan ces o f ca se, learned CIT (Appeals) erred in upholding action o f As ses sing O f fi cer in di sallowing sum o f R s . 8 ,14 ,000 rep resen ting amoun t debi ted to i t s Pro fi t & los s A/c . by appellan t towa rd s provision for leave en ca shmen t based on actua rial valua tion , by invoking p rovisions o f sec tion 43B o f A ct . 2(b) Tha t lea rned CIT (Appeal s) erred in upholding a ction o f As ses sing O f fi cer in di sallowing impugned sum o f INR 8 ,14 ,000 disrega rding binding deci sion o f Hon'ble High Cour t o f ju ri sdic tion .
2(c) Tha t lea rned CIT (Appeals) erred in holding tha t Hon'ble Sup reme Cou rt ha s stayed decision rendered o f Hon'ble High Cour t o f ju ri sdiction rendered in ca se o f Exide Indu st ries Ltd . V s . UOl reported in 292 ITR 470 (Cal) . 3(a) Tha t on fa ct s and in ci rcumstan ces o f ca se, learned CIT (Appeals) erred in con fi rming disallowance o f Rural Employmen t Ces s (RE Ces s) o f INR 31 ,53 ,02 ,826 and Primary Educa tion Cess (PE Ces s) o f INR 7 ,88 ,25 ,718 agg rega ting in all to INR 39 ,41 ,28 ,544 . 3(b) Tha t lea rned C IT (Appeals) erred in no t following his predeces sor' s order for a s sessmen t yea r 2003-04 ( first yea r) on same i ssue which ha s been ccep ted by Depa rtmen t . 3(c) Tha t lea rned CIT (Appeals) failed to app recia te tha t both RE Ces s and PE Cess having no t sta tu torily ccrued du ring finan cial yea r under con sidera tion , are ou t side ambi t o f sec tion 43B o f A ct . 3(d) Tha t lea rned CIT (Appeal s) erred in ob serving tha t RE Ces s and PE Cess aggrega ting to INR 39 ,41 ,28 ,544 collec ted re nothing bu t t rading receip ts o f appellan t and taxable in previou s yea r under con sidera tion . 4(a) Tha t on fa ct s and in ci rcumstan ces o f ca se, learned C IT (Appeals) erred in di rec ting As ses sing O f ficer tore- compu te figures o f collec tion up to yea r end o f
as sessmen t yea rs 2008-09 and 2009-10 and then ou t of total collection allow paymen ts made up to 30t h Sep tember as deduction . ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 4(b) Tha t lea rned CIT (Appeal s) exceeded hi s juri sdi ction indirecting A s ses sing O f fi cer to e f fectively b ring to tax in theyea r under appeal , collec tion s o f RE & PE Cess made by appellan t in ea rlier yea rs . 4(c) Tha t lea rned CIT (Appeal s) while di recting A s ses sing O f fi cer s above , has erred in e f fec tively seeking to reverse/ nulli fy appella te order pa ssed by lea rned CIT (Appeals) for AY 2003-04 on i ssue o f disallowance o f RE & PE Ces s . Facts of case are that Assessee is company and is engaged in business of mining of coal and filed its return of income on 26-09-2009 by declaring total income at Rs.15,77,22,068/-. Under scrutiny notices u/s. 143(2) and u/s. 142(1) were issued, in response to which, Manager (Finance) of Assessee appeared before AO. 6. Ground no s-1(a) to 1(d) raised above is regarding disallowance u/s. 14A. assessee claimed that it earned exempt income aggregating to Rs.55,89,232 in its return of income and offered aggregate sum of Rs.94,312 as disallowable u/s. 14A in pursuance of Tax Audit Report. AO did not accept same and made computation as per Rule 8D to IT Rules, 1962 as under:- Op en i n g val u e o f In v est m en t s 920 ,88 7, 174 Cl os in g va lu e o f In v e st m en t s 1,1 67 ,84 0,9 19 T ot al 2,0 88 ,72 8,0 93 v e rag e v alu e ( B) 1,0 44 ,36 4,0 47 Op en i n g val u e o f as s et s 1,4 98 ,82 0,7 57 Cl os in g va lu e o f ss et s 1,6 38 ,17 8,7 49 T ot al 3,1 36 ,99 9,5 06 v e rag e V lu e o f s s et s ( C) 1,5 68 ,49 9,7 53 ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 4 In t e r est (A ) 6 ,23 4, 224 1. X B/ C 4 ,15 0, 973 2. % of vg v alu e o f in v e st m en t 5, 221 ,8 20 T ot al 9, 372 ,7 93 7. AO determined total amount at Rs.93,72,793 as inadmissible and disallowed amount of Rs.92,78,481 (Rs.93,72,793 Rs. 94,312) u/s. 14A r/w Rule 8D of Rules. 8. Assessee challenged disallowance made by AO and CIT-A held that impugned amount of Rs.92,78,481/- cannot be added while computing income u/s. 115JB and that disallowance calculated as per Rule 8D amounting to Rs.92,78,481/- liable to be added in normal computation of income and finding of which is reproduced as under: 36 . R e sp e ct fu ll y , fo ll o win g t h e d e ci si on o f t h e H on b l e In c o m e Ta x p p ell at e T rib u n al , B en c h B , K olk at in t h e ca s e o f M/ s . P re o t o r ia En cla v e Lt d ., K o l k at v . D C IT , Ci r cl e - 5, K olk at , it i s h e ld t h at n o ad d i t i on t o t h e b oo k p ro fit c b e mad e on c c ou n t ca lcu l at ed e xp en d it u r e s p e r t h e p r o vi si on s o f su b - s e c. ( 2 ) & ( 3) of s ec t i on 14A o f R s .92 ,7 8, 481/ - e x t ra e xp en d i t u r e in cu rr e d t o e rn ex e mp t i n c om e wh il e c omp u t i n g in c om e u / s. 11 5J B o f t h e ct . Th i s g r ou n d o f p p ea l is all ow ed . Th i s g r ou n d o f ap p eal i s ll ow e d h old in g th at t h e e xc e s s d i sa ll ow c e cal cu l at ed b y t h e s s es sin g O f fi c e r n d p rt ly u p h el d in p p e al at n m ou n t o f R s .9 2, 78, 481 / - can n ot b e ad d e d w h ile c om p u t in g in c om e u / s . 11 5J B . T h is g r ou n d p p eal 1 ( d) is cc o r d in g l y all o w ed . 37. Th e r ef o r e , it i s h e ld t h at d i s all ow c e c alcu lat ed s p e r R u l e 8D am ou n t in g t o R s. 92 ,78 ,48 1/ - will b e ad d ed ba ck in t h e n o r mal c om p u t t ion o f in c om e . Th e r e fo r e , t h e g rou n d s o f ap p eal 1( ) , 1( b) ,1( c) d ad d it i on al g r ou n d o f p p ea l ar e d is mi ss e d r ela t in g t o c om p u t at i on s p e r n o r mal p r ofi t s p e r p rt D o f Ch ap t e r I V o f t h e In c om e Ta x ct , 19 61 nd g r o u n d o f ap p ea l 1( d) i s all ow e d . ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 5 9. Assesee before us by this appeal challenging finding of CIT- in confirming addition made by AO on account of disallowance U/S 14A r/w Rule 8D of Rules. Ld.AR submits that loans availed last year were paid in year under consideration and referred to page no-3 of Paper book and further, to show that there was no unsecured loans as it shown to have stated as NIL in page no-1 of paper book. Further, argued that interest paid on loan relating to for A.Y 2008-09 and referred to page no-2 of paper book. Ld.AR relied on order of C Bench of Kolkata Tribunal in assessee s own case for A.Y. 2008-09. Ld. DR relied on orders of authorities below. 10. Heard rival submissions and perused material evidence available on record. We find that Co-ordinate Bench supra dealt issue in assessee s own case for A.Y 2008-09 wherein it held that AO did not record satisfaction regarding correctness of claim of assessee and without there being satisfaction, AO is not entitled to compute disallowance to be made under U/S 14A r/w Rule 8D of Rules and further observed that in order to attract Sec14A and Rule 8D thereto AO must examine accounts of Assessee to arrive at satisfaction with cogent reasons. Further, we find that in para s-3.1 and 3.2 of order supra that computation under Rule 8D is applicable under normal provisions of Act and not for book profit u/s 115JB of Act, but, however, we find that CIT-A also held that no addition can be made on account of calculated expenditure as per provisions of sub-sec. (2) & (3) of section 14A to extent of Rs.92,78,481/- as extra expenditure incurred to earn exempt income while computing income u/s. 115JB of Act and held that said disallowance made under book profit is to be added under normal computation of income. relevant portion of Co-ordinate Bench order supra is reproduced herein below for sake of clarity: ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 6 2.6. We have heard rival submissions and perused materials available on record including various case laws relied upon by both sides. We find from facts of instant case that Learned AO has not examined accounts of assessee and there is no satisfaction recorded by Learned AO about correctness of claim of assessee and without same , he invoked Rule 8D of IT Rules. While rejecting claim of assessee with regard to expenditure in relation to exempt income, Learned AO has to indicate cogent reasons for same. We find that Learned AO had straight away embarked upon computing disallowance under Rule 8D(2) of Rules. We find that case laws relied upon by Learned AR on decision of Jurisdictional High Court are directly on this point and in favour of assessee. CIT vs Ashish Jhunjhunwala in G.A.No. 2990 of 2013 in ITAT No. 157 of 2013 dated 8.1.2014 rendered by Calcutta High Court " While rejecting claim of assessee with regard to expenditure or no expenditure, as case may be, in relation to exempted income, AO has to indicate cogent reasons for same. From facts of present case, it is noticed that AO has not considered claim of assessee and straight away embarked upon computing disallowance under Rule 8D of Rules on presuming average value of investment at % of total value. In view of above and respectfully following coordinate bench decision in case of J.K. Investors (Bombay) Ltd., supra, we uphold order of CIT (A)". CIT vs R.E.I. Agro Ltd in GA 3022 of 2013 in ITAT 161 of 2013 dated 23.12.2013 rendered by Calcutta High Court Assessing Officer also disallowed expenditure under section 14A of Income Tax Act, 1961 without first recording that he was not satisfied with correctness of claim as regards claim that no expenditure was made by assessee. Challenging order of tribunal, present appeal has been filed. We have heard Mr.Bhowmik and are of opinion that no point of law has been raised. Therefore, this appeal is dismissed . aforesaid two decisions of Jurisdictional High Court are binding on this tribunal and hence case laws addressed by Learned CITA in his order are not considered in this order. We also find that one of decisions relied upon by Learned CITA is that of Jurisdictional High Court in case of Dhanuka & Sons (supra)). We find that facts in case of Dhanuka & Sons are totally different from facts of instant case and moreover, when there are two conflicting decisions of same court or different courts on same issue, then decision favourable to assessee has to be followed. Reliance in this regard is ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 7 placed on decision of Hon ble Apex Court in case of Vegetable Products reported in 88 ITR 172 (SC). Hence we hold that action of Learned AO in directly embarking on Rule 8D(2) of Rules is not appreciated and hence no disallowance u/s 14A of Act could be made in facts of instant case. 2.6.1. We also find that assessee has got sufficient own funds to make these investments and Learned AO had not brought any nexus between borrowed funds vis vis investments made by assessee. Without doing same, he cannot directly presume that investments were made out of borrowed funds. If action of Learned AO and Learned CITA are to be upheld, then no assessee could make any investments when there is interest bearing loan to be repaid. fact of making investments has to be viewed from point of commercial expediency and from point of view of businessman and not from view point of revenue. It is well settled that businessman knows his interest best. We place reliance on decision of Hon ble Bombay High Court in case of CIT vs Reliance Utilities & Power Ltd ( 313 ITR 340 ) (Bom) in support of our view that if own funds are available with assesee and if same are more than investments made by assessee, then it has to be presumed that investments were made out of own funds and not out of borrowed funds. Hence we hold that no disallowance u/s 14A of Act could be made in these circumstances. 2.6.2. We also find that investments made in subsidiaries by assessee are only strategic investments and were made with primary object to acquire controlling interest in group concerns and not for earning any income out of that investment. Reliance in this regard is placed on decision of co-ordinate bench of this tribunal in case of DCIT vs Selvel Advertising P Ltd reported in (2015) 58 taxmann.com 196 (Kolkata Trib.). We hold that even on this count, no disallowance u/s 14A of Act could be made by Learned AO. 2.6.3. We also find that investments that did not yield any dividend income needs to be excluded from computation of disallowance , if any, u/s 14A of Act read with Rule 8D of Rules as basic intention behind introduction of section 14A itself is only to disallow expenditure incurred for earning income which does not form part of total income. When there is no income which is claimed as exempt, then there is no scope for provisions of section 14A to operate. In instant case, assessee derived dividend income which is exempt only from CESC Ltd and from UTI Mutual Fund (which was purchased and sold during year itself). Hence even assuming if disallowance is to be made u/s 14A read with Rule 8D, investments which did not yield any dividend income during year has to be excluded. We agree with arguments of Learned AR in this regard. Reliance in this regard is placed on following decisions:- Alliance Infrastructure Projects Pvt Ltd vs DCIT in ITA No. 220 & 1043 (BNG.)/2013 for Asst Years 2009-10 & 2010-11 dated 12.9.2014 (Bangalore Tribunal) CIT vs Corrtech Energy Pvt Ltd reported in 352 ITR 97 (Guj) CIT vs Shivam Motors in ITA No. 88 of 2014 dated 5.5.2014 rendered by Allahabad High Court ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 8 CIT vs Lakhani Marketing in ITA No. 970 of 2008 rendered by Punjab & Haryana High Court CIT vs Delite Enterprises in ITA No. 110 of 2009 rendered by Bombay High Court decision of special bench of Tribunal in case of Cheminvest Ltd vs CIT reported in 121 ITD 318 had held that disallowance u/s 14A could be made even in year in which no exempt income was earned or received by assessee. But this decision has been overruled by Bangalore Tribunal , Gujarat High Court and Allahabad High Court as stated supra. Moreover we also find that special bench decision in Cheminvest Ltd vs CIT has been overruled by recent decision of Delhi High Court in Cheminvest Ltd case itself and hence it is no longer good law. Hence we hold in favour of assessee alternative argument of Learned AR that only investments yielding dividend income during year should be considered for disallowance u/s 14A of Act. Respectfully following aforesaid judicial precedents, we have no hesitation in directing Learned AO to delete addition made u/s 14A of Act. Accordingly, ground nos. 1 (a) to (c ) raised by assessee are allowed. 3. next ground to be decided in this appeal is that whether disallowance u/s 14A of Act could be made to book profits computed u/s 115JB of Act. assessee has raised following ground before us :- 1(d) That finding recorded by learned CIT(Appeals) in appellate order while confirming action of Assessing Officer in making impugned further disallowance of expenditure amounting to INR 44,91,468 u/s.14A of read with Rule 8D of Income-tax Rules, 1962 is based merely on conjecture, surmise and presumptions. 3.1. Learned AR argued that Rule 8D is meant only for computation of income under normal provisions of Act and not for book profit u/s 115JB of Act. Learned DR argued that disallowance u/s 14A of Act would automatically fall in clause (f) of Explanation to section 115JB of Act and hence needs to be added back for computation of book profits u/s 115JB of Act. 3.2. We have heard rival submissions. We find lot of force in argument of Learned AR that computation of disallowance under Rule 8D can be used only for computation of income under normal provisions of Act and not for book profits u/s 115JB of Act. Unless item is debited in profit and loss account, same cannot be subject matter of addition to book profits under clause (f) of Explanation to section 115JB of Act. disallowance made u/s 14A of Act read with Rule 8D is only artificial disallowance and obviously same is not debited in profit and loss account and same cannot be imported into clause (f) of Explanation to Section 115JB of Act. 11. In present case, CIT-A held that computation of disallowance u/sec 14A r/w Rule 8D of Rules under book profit is not ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 9 permissible and disallowance as made by AO will be added to income computed under normal provisions of Act. It is evident from page no-3 of Paper book that loans availed last year were paid in year under consideration and further, there was no unsecured loans as it clear from page no-1 of paper book goes to show as NIL. Regarding interest paid on loan was relating to A.Y 2008-09 as it was established through page no-2 of paper book. We find that assessee has got sufficient own funds to make investments and AO had not brought any nexus between borrowed funds vis vis investments made by assessee. assessee claimed in its return of income that it earned exempt income aggregating to Rs.55,89,232 and offered aggregate sum of Rs.94,312/- as disallowable u/s. 14A. AO has to indicate cogent reasons for rejection of claim of assessee with regard to expenditure in relation to exempt income. We find from facts of instant case that AO has not examined accounts of assessee and there is no satisfaction recorded by AO about correctness of claim of assessee and without same, AO invoked Rule 8D of IT Rules. In view of same, finding of CIT-A disallowance as made by AO will be added to income computed under normal provisions of Act is not justified and addition made thereon is deleted and Ground no s-1(a) to 1(d) raised by Assessee are allowed. 12. brief facts of issue in Ground no s. 2(a) to 2(c) are that assessee debited sum of Rs. 8,14,000/- in its profit and loss account towards provision for leave encashment based on actuarial valuation. AO allowed to extent of Rs.2,31,000/- as it shown to have paid towards leave encashment and disallowed Rs.5,83,000/-. On first appeal, CIT-A confirmed action of Learned AO. Aggrieved, assessee is in appeal before us by aforementioned grounds 2(a) to 2(c). ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 10 13. Ld. AR submits that Revenue had preferred Special Leave Petition (SLP) before Hon ble Supreme Court against Judgement of Hon ble High Court of Calcutta. He, further submits that issue in hand may be remanded to AO in view of order dt: 8.5.2009 by Hon ble Apex Court in SLP in CC 12060 / 2008. Ld. DR concedes that order of Hon ble Supreme Court is binding on Respondent Revenue and accordingly, sought to remand issue to AO. 14. Heard rival submissions and perused material available on record. We find that Co-ordinate Bench supra remanded issue to AO in assessee s own case for AY.2008-09, relevant of portion of discussion is reproduced herein below: 4.2. Learned AR relied on decision of Jurisdictional High Court in case of Exide Industries Ltd vs Union of India reported in 292 ITR 470 (Cal) wherein provisions of section 43B (f) of Act has been struct down as arbitrary. However he fairly conceded that Hon ble Apex Court though had stayed operation of judgement of Calcutta High Court initially but later, it had directed assesses to comply with provisions of section 43B(f) of Act and pay taxes thereon but parallely claim deduction for leave encashment on provision basis, as interim measure till disposal of civil appeal by apex court. In response to this, Learned DR vehemently supported order of lower authorities. 4.3. We have heard rival submissions and we find case laws quoted by Learned AR. We find that it is relevant to get into operative portion of decision of Calcutta High Court in case of Exide Industries Ltd vs Union of India reported in 292 ITR 470 . It was held as below:- 11. In this regard observation of apex Court in case of Bharat Earth Movers (supra) is quoted below: law is settled: if business liability has definitely arisen in accounting year, deduction should be allowed although liability may have to be quantified and discharged at future date. What should be certain is incurring of liability. It should also be capable of being estimated with reasonable certainty though actual quantification may not be possible. If these requirements are satisfied liability is not contingent one. liability is in praesenti though it will be discharged at future date. It does not make any difference if future date on which liability shall have to be discharged is not certain.... ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 11 Applying abovesaid settled principles to facts of case at hand we are satisfied that provision made by appellant company for meeting liability incurred by it under leave encashment scheme proportionate with entitlement earned by employees of company, inclusive of officers and staff, subject to ceiling on accumulation as applicable on relevant date, is entitled to deduction out of gross receipts for accounting year during which provision is made for liability. liability is not contingent liability. High Court was not right in taking view to contrary. 13. appeal succeeds and is allowed. Section 43B(f) is struck down being arbitrary, unconscionable and de hors apex Court decision in case of Bharat Earth Movers (supra) . It is observed that revenue had preferred Special Leave Petition (SLP) before Hon ble Supreme Court against judgement of Hon ble Calcutta High Court. Hon ble Apex Court in SLP proceedings in CC 12060 / 2008 dated 8.9.2008 had held as under:- petition was called on for hearing today. Upon hearing counsel court made following Order. Issue Notice. In meantime, there shall be stay of impugned judgement, until further orders. Later Hon ble Supreme Court in CC 22889 / 2008 dated 8.5.2009 had held as under:- petition was called on for hearing today. Upon hearing counsel court made following Order Delay condoned. Leave granted. Pending hearing and final disposal of Civil appeal, Department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as outstanding interest demand as of date is concerned, it would be open to department to recover that amount in case Civil Appeal of department is allowed. We further make it clear that assessee would, during pendency of this Civil Appeal , pay tax as if Section 43B(f) is on statute book but at same time it would be entitled to make claim in its returns. In aforesaid circumstances, we deem it fit and appropriate , in interest of justice and fair play, to set aside this issue to file of Learned AO to pass orders based on outcome of main appeal on merits by Hon ble Supreme Court as stated supra. Accordingly, ground no. 2(a) raised by assessee is allowed for statistical purposes. ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 12 15. In view of above, we remit issue to file of AO to decide same taking into consideration outcome of main case in SLP (civil) 22889/2008 of Hon ble Supreme Court. Therefore, grounds raised in 2(a) to 2(c) by assessee are allowed for statistical purpose. 16. brief facts of issue in Ground no s-3(a) to 3(d) are that assessee is engaged in business of mining and extraction of coal. mines of assessee are located within State of West Bengal. Government of West Bengal levies and collects two cess namely Rural Employment Cess ( RE Cess ) and Primary Education Cess ( PE Cess ) from enterprises engaged in mining and extraction of coal within State of West Bengal. assessee is bound to pay Rural Employment Cess and Primary Education Cess on production of coal of each year payable in succeeding year. said cess is collected by assessee in sale bills raised by assessee on customers and assessee treated same as advance from customers in liability side of balance sheet. When said cess is paid in subsequent year, concerned liability account is debited by assessee and entire transactions are not routed through profit and loss account of assessee. assessee has been consistently following this practice over years commencing from Asst Year 2003-04 onwards. detailed note in this regard was also mentioned in notes to tax audit report stating reasons for not statutorily accruing this receipt in asst year under appeal. AO however observed that these receipts in form of cess collected out of sale invoices are nothing but trading receipts and hence if same are not paid within due date of filing return of income, then same are liable for disallowance u/s 43B of Act. AO considered amounts of Rs.17,58,44,394/- which was paid during period 01-10-2008 to 31-03-2009 and Rs.15,84,65,895/- paid during 01-04-2009 to 26-09-2009 for year under consideration. AO did not consider Rs.17,26,15,364/- for allowance as it was paid during period of 01-04-2008 to 30-09-2008 relevant to AY.2008-09. AO ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 13 accordingly disallowed Rs. 31,53,02,826/- towards RE Cess and Rs. 7,88,25,718/- towards PE Cess. 17. On first appeal, CIT-A directed AO to substitute actual figures up to A.Y 2008-09 and A.Y 2009-10 and disallowance may be calculated on basis for figures taken in A.Y2008-09 by taking into consideration total collection upto 31-03-2009 and payment upto date of filing of Return of income i.e 26-09-2009. 18. Aggrieved, assessee is in appeal before us by aforementioned grounds. 19. Ld. AR argued that cess was collected from customers in year under consideration and same was paid to Government next year as per West Bengal Rural Employment and Production Act, 1976 and West Bengal Primary Education Act, 1973. Ld.AR submitted that said amounts are not coming into Profit and loss account and took us to relevant pages at 62 of paper book. Further, submitted that this practice of payment was being followed from A.Y 2003-04 onwards. Ld.AR drew our attention to finding of Coordinate Bench to para-5.3 at page no-64 of paper book. Ld. DR conceded that issue is covered by in assessee s own case in A.Y 2008-09. 20. Heard submissions and perused material available on record. As rightly pointed by Ld.AR and as conceded by Ld. DR, Co-ordinate Bench of Kolkata Tribunal in assessee s own case held that that cess collected from customers in sale invoices shall not be chargeable to tax in year of collection. relevant portion of which is reproduced herein below: 5.3. We find that Learned CITA also had reproduced relevant provisions of West Bengal Rural Employment and Production Act, 1976 and West Bengal Primary Education Act, 1973 which states that cess would be collected by person engaged in production of coal from customers and same would become payable in succeeding year only. Hence concept of accrual of liability to pay cess had not ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 14 arose during asst year under appeal. In other words, cess does not become payable in asst year under appeal. Now let us go into provisions of section 43B of Act which is reproduced herein below:- [ Certain deductions to be only on actual payment] 43B Notwithstanding anything contained in any other provision of this Act, deduction other- wise allowable under this Act in respect of- [(a)] any sum payable by assessee by way of tax, duty, cess or fee, by whatever name called, under any law for time being in force, or] (b) to [(f) *** *** *** *** *** *** *** *** shall be allowed (irrespective of previous year in which liability to pay such sum was incurred by assessee according to method of accounting regularly employed by him) only in computing income referred to in section 28 of that previous year in which such sum is actually paid by him: [Provided that nothing contained in this section shall apply in relation to any sum, which is actually paid by assessee on or before due date applicable in his case for furnishing return of income under sub- section (1) of section 139 in respect of previous year in which liability to pay such sum was incurred as aforesaid and evidence of such payment is furnished by assessee along with such return. [Explanation 2.- For purposes of clause (a), as in force at all material times," any sum payable" means sum for which assessee incurred liability in previous year even though such sum might not have been payable within that year under relevant law.] From aforesaid provisions, it could be seen that what is contemplated in section 43B(a) read with Explanation 2 is tax, duty or cess should become payable under relevant Act. expression payable under relevant Act in context of impugned issue means cess payable by assessee under provisions of West Bengal Rural Employment and Production Act, 1976 and West Bengal Primary Education Act, 1973. Hence in these facts and circumstances, version of Learned CITA that other acts shall not override provisions of Income Tax Act is not at all relevant. We hold that cess collected from customers out of sale price in facts and circumstances of instant case cannot be construed as trading receipts chargeable to tax as same are collected in advance for payment to exchequer in succeeding year under relevant Act. Hence we cannot import different meaning of accrual of liability for payment of cess into this relevant Act when more so provisions of section 43B of Act itself specifically states that amounts payable under relevant law shall be ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 15 allowed as deduction only on payment basis. Hence in these facts and circumstances, decision of Hon ble Apex Court in case of Chowringhee Sales Bureau Pvt Ltd vs CIT reported in 87 ITR 542(SC) is not applicable to facts of assessee. 5.3.1. We also find that Asst Year 2003-04 was first year of operation for assessee wherein similar addition made by Learned AO was deleted by Learned CITA and revenue had not preferred any appeal against same before this tribunal. Similarly in Asst Year 2006-07, no disallowance under this head was made by Learned AO eventhough assessment was completed u/s 143(3) of Act. These are only two scrutiny assessments done by Learned AO on assessee prior to assessment years under appeal. Hence we find lot of force in arguments of Learned AR that principle of consistency should not be given go by on ground that principle of res judicata does not apply to income tax proceedings. Reliance in this regard was made on decision of Hon ble Apex Court in case of Radhasoami Satsang vs CIT reported in 193 ITR 321 (SC), wherein it was held that : As we are aware of fact that, strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being unit, what is decided in one year may not apply in following year but where fundamental aspect permeating through different assessment years has been found as fact one way or other and parties have allowed that position to be sustained by not challenging order, it would not be at all appropriate to allow position to be changed in subsequent year. We find that assessee has been consistently following this practice of treating cess collected as liability and same are debited as and when said cess is paid in immediately succeeding assessment year and in case if same is not paid in succeeding year, same is disallowed u/s 43B of Act. This practice of assessee is evident from following chart :- ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 16 5.3.2. We hold that reliance placed by Learned AR on decision of Hon ble Apex Court in case of CIT vs Excel Industries Ltd and CIT vs Mafatlal Industries P Ltd reported in 358 ITR 295 (SC) wherein their Lordships had held as follows:- ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 17 Secondly as noted by tribunal, consistent view has been taken in favour of assesssee on questions raised, starting with assessment year 1992-93 , that benefits under advance licences or under duty entitlement pass book do not represent real income of assessee. Consequently, there is no reason for us to take different view unless there are very convincing reasons, none of which have been pointed out by learned counsel for revenue. It appears from record that in several assessment years, revenue accepted order of tribunal in favour of assessee and did not pursue matter any further but in respect of some assessment years matter was taken up in appeal before Bombay High Court but without any success. That being so, revenue cannot be allowed to flip-flop on issue and it ought let matter rest rather than spend taxpayers money in purusing litigation for sake of it. 5.3.3. We are also reminded of observations of Hon ble Justice P.N. Bhagwati while rendering judgement in case of Distributors (Baroda) P Ltd vs Union of India & Ors reported in 155 ITR 120 (SC) larger bench decision as below:- To perpetuate error is no heroism. To rectify same is compulsion of judicial conscience. In facts of instant case, assessee had commenced its operations from Asst Year 2003-04 and in very first year, this issue was taken up for disallowance and same was deleted by Learned CITA and revenue chose not to file appeal before this tribunal. next scrutiny assessment was made for Asst Year 2006-07 wherein no addition on this account was made. This goes to prove that revenue had already accepted to contentions of assessee on impugned issue and satisfied that cess collected from customers have been duly remitted in succeeding year in accordance with provisions of West Bengal Rural Employment and Production Act, 1976 and West Bengal Primary Education Act, 1973 and was also satisfied with manner of treatment of same by assessee for tax purposes. Having done so, there is no good reason for revenue to shift its stand in assessment year under appeal. To this extent, decisions of Hon ble Apex Court and observation made by apex court (supra) are relevant to facts of instant case. In view of aforesaid facts and circumstances and in view of judicial precedents relied upon hereinabove, we hold that cess collected from customers in sale invoices shall not be chargeable to tax in year of collection and accordingly, grounds raised by assessee in this regard are allowed. 21. In view of finding of Co-ordinate Bench in ITA 1146/Kol/2012 in assessee s own case for A.Y 2008-09, we hold that cess collected from customers under sale invoices shall not be chargeable ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 18 to tax in year of collection. Thus, Ground no s-3(a) to 3(d) are allowed. 22. Appeal of Assessee is partly allowed ITA No.1758/Kol/2013 A.Y 2009-10 by Revenue 23. In this appeal, revenue has raised following grounds:- 1. Wh et h e r on t h e f ac t s d ci r cu ms t c e s o f t h e ca s e, ld . CI T(A ) e r r ed in law in d el et in g d is all o wan c e of R s .92 ,7 8, 481/ - u / s . 14A o f t h e I T c t in co mp u t at i on of b o ok p r o fit u / s. 115 J B . 2. Wh et h e r on t h e f ac t s d ci r cu ms t c e s o f t h e ca s e, ld . CI T (A ) e r r ed in v i o lat in g t h e p r ovi si on s o f S e ct i on 115 J B o f t h e IT ct b y d el e t in g t h e d i sal l ow c e u / s . 14A . 3. Wh et h e r on t h e fa ct s n d ci r cu m st c es of t h e c as e , ld . CI T(A ) e r r ed in l aw in h old in g t h at ad d it i on al d ep r e ci at ion o f r s. 1, 30 ,49 3/ - sh ou l d b e al lo w ed b y t r e at in g t h e c oa l min i n g as p r od u ct io n o f c oa l. 24. Regarding Ground nos -1 & 2 of Revenue s appeal are in respect of deleting disallowance of Rs.92,78,481/- made by AO computing such income u/s. 14A r/w Rule 8D of Rules under book profit u/s.115JB of Act. 25. Since we decided identical issue involving Ground no s-1(a) to 1(d) of assessee s appeal in favour of Assessee and against Revenue by following order of Coordinate Bench of Kolkata Tribunal supra in assessee s own case for A.Y. 2008-09 wherein it held disallowance u/sec 14A r/w Rule 8D computed under book profit is not permissible, in view of same we adopt same ratio to ground no s. 1 & 2 raised ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 19 by revenue. Therefore, grounds 1 and 2, accordingly, are dismissed. 26. Ground no-3 of Revenue s appeal regarding additional depreciation. During year, assessee has claimed additional depreciation of Rs.1,30,493 on pumps & valves which were acquired on 02.07.2008 and 25.11.2008. contention of assessee vide letter dated 13.12.2011 was that mining involves production of coal and is excisable goods. AO was of view that Assessee is neither engaged in manufacturing of coal nor producing anything or article and is not eligible for any additional depreciation. Accordingly, amount of additional depreciation of Rs.1,30,493/- was disallowed. 27. In first appeal before CIT-A assessee submitted that it entitled to claim additional depreciation i.e sum equal to 20% of actual cost of machinery u/s. 32(1)(iia) of Act that in case of new machinery or plant acquire or installed after 31 s t day of March 2005 and relied on decision of Hon ble High Court of Calcutta in case of CIT Vs. Atwa & Co. Reported in 254 ITR 592(Cal), wherein it held mining extraction or mining of coal to be regarded as production of article or thing. assessee also referred to order of CIT-A in assessee s own case for AY 2008-09 wherein he held mining or extraction of coal is process of production and allowed additional depreciation on this issue. Considering same CIT-A deleted impugned addition made u/s. 32(1)(iia) of Act. ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 20 28. Before us Ld. DR conceded that said issue in hand is covered by order of Co-ordinate Bench ( supra) in assessee s own case for A.Y 2008-09. Ld.AR submits that finding of Tribunal is in favour of assessee by relying on decision of Hon ble Jurisdictional High Court of Calcutta in case of supra is placed at page 69 of paper book. 29. Heard rival submissions and perused material available on record including details available in paper book. We find that Co-ordinate Bench of this Tribunal in assessee s own case supra allowed claim of assessee and held that mining of coal is process involving production of coal and provisions of section 32(1)(iia) of Act is applicable to present issue in facts and circumstances of case. relevant portion of which is reproduced herein below for sake of clarity. 6.1. brief facts of this issue is that assessee claimed additional depreciation of Rs. 75,400/- on survey instrument which was acquired on 8.12.2007. According to Learned AO , assessee is enaged in mining of coal and not in manufacturing or producing any thing or article. Hence he felt that assessee is not eligible for additional depreciation. On first appeal, Learned CITA held that coal mining would fall under phrase production of any article or thing by placing reliance on decision of Jurisdictional High Court in case of CIT vs G.S.Atwal & Co reported in 254 ITR 592 (Cal) . Aggrieved, revenue is in appeal before us on following ground:- 1. That on facts and circumstances of case, ld.CIT(A) erred in law in holding that additional depreciation of rs.75,400/- should be allowed on basis that coal mining is production of cost. 6.2. Learned AR relied on order of Learned CITA. In response to this, Learned DR argued that coal mining does not bring into effect any new product as even after mining, end product is only coal and hence no transformation happens in said process. He further placed reliance on definition of manufacture in section 2(29BA) of Act which defines as follows:- [29BA) manufacture with its grammatical variations, means change in non-living physical object or article or thing- ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 21 (a) Resulting in transformation of object or article or thing into new and distinct object or article or thing having different name, character and use; or (b) Bringing into existence of new and distinct object or article or thing with different chemical composition or integral structure;. 6.3. We have heard rival submissions and we find that only issue is whether assessee engaged in coal mining could be construed as production of coal and if so, assessee is entitled for additional depreciation. We find that this issue is squarely covered by decision of Jurisdictional High Court in case of CIT vs G.S.Atwal & Co reported in 254 ITR 592 (Cal) wherein it was held as below:- 13. Following old and long standing decision given by Chakravarti C.J in 1959, which was later approved by Supreme Court, Division Bench opined that winning of coal is no doubt production. At paragraph 12 of judgment it said that after winning coal something that was not there comes up, and it is, therefore, production of coal. Division Bench followed its own decision in later case of Khalsa Bros v. CIT [1996] 217 ITR 185. Mr. Bajoria also relied on interesting case of CIT v. Shann Finance (P) Ltd [1998] 231 ITR 308 where Supreme Court opined that financier owning machinery might still be entitled to investment allowance even if machinery is actually used by its lessee for purpose of production. Going on language of sub-sections (1) and (2) of said section, Supreme Court found, on accurate assessment of language ( we say this with greatest respect), that language does not disentitle financier from investment allowance in above circumstances. 14. Even considering later Supreme Court decision given by Mr. Agarwalla, we are still of opinion that view taken by our Division Bench as to winning of coal being production is, with due respect, perfectly sound and consistent with common sense. We have absolutely no reason to differ from reasoning given in Mercantile Construction Co. s case (supra) and we respectfully adopt same. 15. point that assessee is still not industrial undertaking even though it might be engaged in production of coal is, in our opinion, also be decided against revenue. Under definition of industrial undertaking given under section 33B of Act. Explanation, mining activity would bring assessee within definition of industrial undertaking. But we need not import definition of another section to present one, although ordinarily definition given in one section in Act can be used for purposes of another section unless context indicates otherwise. 16. so far as assessee is concerned, undertaking it certainly is. We have found no facts from which we can opine that assessee is not industrial undertaking. Ordinarily speaking if manufacturing activity or article producing activity is carried on, undertaking carrying on such activity is to be classed as industrial one. It might be small scale or large scale, that doe not matter much. Even if undertaking is manufacturing or producing articles, but is still not be classed as industrial one for this, clear indications have to be given as to why this difference should be made in case of undertaking in ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 22 question, so that it stands out from general category. We were not shown any such particular difference excepting that assessee was also said to carry on transport business. 17. It suffices in this regard to mention that on principle of Shan Finance (P) Ltd s case (supra), if assessee owns machinery for which investment allowance is claimed, and such machinery is used for production then section applies, it does not matter if use for production is made by lessee or only in one industrial part of assessee s business undertaking. Accordingly, transport business of assessee does not tilt question one way or other. 30. In view of aforementioned discussion and respectfully following decision of Hon ble Calcutta High Court in case of supra, we find no infirmity in order of CIT-A in this regard. Accordingly, we hold that mining of coal involves production of any article or thing as provided in section 32(1)(iia) of Act. Thus, ground no.3 raised by revenue is dismissed. 31. In result, appeal of Assessee in ITA No. 1804/Kol/2013 for A.Y 2009-10 is partly allowed and appeal of Revenue in ITA No. 1758/Kol/2013 for A.Y 2009- 10 is dismissed. Order Pronounced in Open Court on 16 t h September 2016. Sd/- Sd/- P.M. JAGTAP S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:16/09/2016 ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 23 Copy of order forwarded to:- 1. Appellant/Department: DCIT,Cir-6, Room No.17, 6th Floor,Aaykar Bhawan, P-7 Chowringhee Square, Kol-69. 2. Respondent/Assessee: M/s. Integrated Coal Mining Ltd 6 Church Lane, Kol-1. 3. CIT 4. CIT(A) 5. Departmental Representative 6. Guard File True Copy By order Assistant Registrar PRADIP SPS Income Tax Appellate Tribunal Kolkata benches, Kolkata ITA Nos. 1758 & 1804/Kol/13 M/s. Integrated Coal Mining Ltd 24 D.C.I.T., Cir-6, Kolkata v. M/s. Integrated Coal Mining Ltd