MOIL Limited earlier known as  Manganese Ore India Limited v. The Commissioner of Income-tax-­I, Nagpur
[Citation -2017-LL-0426-111]

Citation 2017-LL-0426-111
Appellant Name MOIL Limited earlier known as  Manganese Ore India Limited
Respondent Name The Commissioner of Income-tax-­I, Nagpur
Court HIGH COURT OF BOMBAY AT NAGPUR
Relevant Act Income-tax
Date of Order 26/04/2017
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags erroneous and prejudicial to interest of revenue
Bot Summary: Shri K.P. Dewani, Advocate for appellant Shri Anand Parchure, Advocate for respondent CORAM : SMT. VASANTI A NAIK, AND MRS. SWAPNA JOSHI, JJ. DATE : 26.04.2017 ORAL JUDGMENT The Income Tax Appeal is admitted on the following substantial question of law : Whether the Commissioner of Income Tax was justified in invoking the jurisdiction under Section 263 of the Income Tax Act to remand the matter to the Assessing Officer in respect of allowance of Corporate Social Responsibility claim of the appellant assessee 2. 16.odt 3 The Assessing Officer considered the claim of the assessee for disallowance/additions and while allowing certain claims without making a specific reference to them in the assessment order, disallowed some claims after giving detailed reasons for the disallowance. The Commissioner of Income Tax supposedly invoked the jurisdiction under Section 263 of the Act after holding that the Assessing Officer had passed the assessment order without making any enquiry regarding the allowability of expenses claimed by the assessee under the head Corporate Social Responsibility and hence, the order was erroneous and prejudicial to the interest of the Revenue. The Income Tax Appellate Tribunal by the order dated 25.2.2016 dismissed the appeal filed by the assessee while upholding the order of the Commissioner of Income Tax invoking the jurisdiction under Section 263 of the Act and remanding the matter to the Assessing Officer for redoing the assessment in respect of the said claim. The learned Counsel took this Court though the judgments of the Bombay High Court in the case of Commissioner of Income Tax Versus Fine Jewellery Ltd., reported in 372 ITR 303 and Commissioner of Income Tax Versus Nirav Modi, reported in 138 DTR 81 to submit that if a query is raised during the assessment proceedings and if the assessee responds to the said query, merely because the said aspect is not dealt with in the assessment order, would not lead to a conclusion that the Assessing Officer had not applied his mind to the response of the assessee. The claims for deductions were made by the assessee at least under 20 heads and queries were made in the notice under Section 142 of the Act to the assessee in respect of nearly all of them. In the instant case, we find that the Assessing Officer has applied his mind to the claims made by the assessee and wherever the claims were disallowable they have been discussed in that assessment order and there is no discussion or reference in respect of the claims that were allowed.


itl67.16.odt 1 IN HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH AT NAGPUR INCOME TAX APPEAL NO.67/2016 APPELLANT: MOIL Limited earlier known as Manganese Ore India Limited, 1A, Katol Road, P.O. Box No.34, Nagpur 440013. VERSUS RESPONDENT : Commissioner of Income Tax I, Nagpur. Shri K.P. Dewani, Advocate for appellant Shri Anand Parchure, Advocate for respondent CORAM : SMT. VASANTI NAIK, AND MRS. SWAPNA JOSHI, JJ. DATE : 26.04.2017 ORAL JUDGMENT (PER : SMT. VASANTI A. NAIK, J.) Income Tax Appeal is admitted on following substantial question of law : Whether Commissioner of Income Tax was justified in invoking jurisdiction under Section 263 of Income Tax Act to remand matter to Assessing Officer in respect of allowance of Corporate Social Responsibility claim of appellant assessee ? 2. Few facts giving rise to Income Tax Appeal are stated thus : ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: itl67.16.odt 2 appellant assessee is public sector undertaking wholly owned by Government of India. assessee Company is involved in business of extraction and sale of manganese ore, generation of electricity and manufacturing and sale of EMV and ferro minerals. E return was filed by assessee Company for assessment year 2009 10 on 26.9.2009 declaring total income of nearly Rs.1008,53,44,720/ . notice under Section 142 (1) of Income Tax Act pertaining to assessment year 2009 10 for furnishing details in respect of twenty items mentioned in notice dated 20.11.2011 was served on appellant assessee. As in this case we are concerned with admissibility or otherwise of claim of assessee for deduction in respect of Corporate Social Responsibility, it would be necessary to only refer to item no.9 in notice under Section 142 (1) of Act. As per said item, Assessing Officer asked assessee to give detailed note of expenditure for Corporate Social Responsibility along with bifurcation of expenses under different heads. In pursuance of said notice, reply dated 23.12.2011 was served by assessee on Assistant Commissioner of Income Tax, Nagpur. In paragraph 8 of reply, which runs into more than five pages, appellant assessee had given bifurcation of expenses under various heads towards Corporate Social Responsibility claim. ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: itl67.16.odt 3 Assessing Officer considered claim of assessee for disallowance/additions and while allowing certain claims without making specific reference to them in assessment order, disallowed some claims after giving detailed reasons for disallowance. Commissioner of Income Tax supposedly invoked jurisdiction under Section 263 of Act after holding that Assessing Officer had passed assessment order without making any enquiry regarding allowability of expenses claimed by assessee under head Corporate Social Responsibility and hence, order was erroneous and prejudicial to interest of Revenue. After having held so, Commissioner of Income Tax remanded matter to Assessing Officer to redo assessment in respect of claim of appellant assessee pertaining to Corporate Social Responsibility. Being aggrieved by exercise of jurisdiction by Commissioner of Income Tax under Section 263 of Act, appellant assessee filed appeal before Income Tax Appellate Tribunal. Income Tax Appellate Tribunal, however, by order dated 25.2.2016 dismissed appeal filed by assessee while upholding order of Commissioner of Income Tax invoking jurisdiction under Section 263 of Act and remanding matter to Assessing Officer for redoing assessment in respect of said claim. orders of Tribunal and ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: itl67.16.odt 4 Commissioner of Income Tax are challenged by appellant assessee in this appeal. 3. Shri Dewani, learned Counsel for appellant submitted that Commissioner of Income Tax was not justified in exercising jurisdiction under Section 263 of Act by holding that Assessing Officer had not made any enquiry regarding allowability of expenses towards Corporate Social Responsibility claim. It is submitted by taking this Court through notice issued by Assistant Commissioner of Income Tax under Section 142 (1) of Act and specially item no.9 therein as also reply filed by appellant assessee to said item that Assessing Officer was satisfied about explanation tendered by assessee and hence, Assessing Officer had allowed claim in respect of Corporate Social Responsibility. It is submitted that during previous assessment years similar claims made by assessee were allowed by Assessing Officer and there was no interference with assessment orders during previous years. It is submitted that similar claim was granted in respect of Corporate Social Responsibility during previous years and Commissioner of Income Tax has wrongly invoked jurisdiction under Section 263 of Act though Assessing Officer had applied his mind to explanation tendered by assessee and while allowing said claim had refused to ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: itl67.16.odt 5 allow others after recording reasons for doing so. learned Counsel took this Court though judgments of Bombay High Court in case of Commissioner of Income Tax Versus Fine Jewellery (India) Ltd., reported in (2015) 372 ITR 303 (Bom.) and Commissioner of Income Tax Versus Nirav Modi, reported in (2016) 138 DTR 81 (Bom.) to submit that if query is raised during assessment proceedings and if assessee responds to said query, merely because said aspect is not dealt with in assessment order, would not lead to conclusion that Assessing Officer had not applied his mind to response of assessee. It is stated that while holding so, Bombay High Court has relied on earlier judgment of Bombay High Court in case of Idea Cellular Ltd .Versus Deputy Commissioner of Income Tax and others, reported in (2008) 301 ITR 407 (Bom.). It is submitted that assessee Company is Government of India undertaking and Government has control over expenses of undertaking of assessee. It is submitted that some incentives like placing Company in category of mini Navratna or Navratna are granted if Corporate Social Expenses are made to extent of at least 2% to 3% of total income. It is submitted that it is absolutely necessary for Companies like assessee Company to expend towards Corporate Social Responsibility. It is submitted that in circumstances of case, ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: itl67.16.odt 6 Commissioner of Income Tax could not have invoked jurisdiction under Section 263 of Act merely because Assessing Officer has not formally recorded in order of assessment that claim made by assessee towards Corporate Social Responsibility is allowed. 4. Shri Parchure, learned Counsel for Revenue has supported order of Commissioner of Income Tax as also Income Tax Appellate Tribunal. It is submitted by taking this Court through assessment order that Assessing Officer has specifically dealt with certain items like pay revision, forest land diversion expenses, cenvet credit, R and D expenses, depreciation on leasehold land etc. in assessment order but Assessing Officer has not stated word in assessment order pertaining to allowance of claim towards Corporate Social Responsibility. It is submitted that after going through assessment order, Commissioner of Income Tax had found that Assessing Officer had not made any enquiry regarding allowability of expenses under head Corporate Social Responsibility . It is submitted that in circumstances of case, specially when assessment order is silent in regard to allowability of claim towards Corporate Social Responsibility, Commissioner of Income Tax has rightly exercised jurisdiction under Section 263 of Act. ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: itl67.16.odt 7 5. On perusal of orders passed by Authorities, it appears that before assessment order was passed, notice was served on assessee under Section 142 (1) of Act and 20 queries pertaining to different heads were made therein. ninth query in notice under Section 142 (1) of Act pertains to expenditure for Corporate Social Responsibility. By said query, assessee was directed to give detailed note of expenditure for Corporate Social Responsibility along with bifurcation of expenses under different heads. exhaustive reply was submitted by assessee to notice under Section 142 (1) of Act. In paragraph 8 of reply, assessee gave detailed note pertaining to expenditure for Corporate Social Responsibility under different heads that runs into several pages. heads under which expenses were made towards Corporate Social Responsibility were specifically mentioned as health, environment, sports, education etc. and for each of different heads, particulars were given in respect of every minor or major expenses. detailed note on expenditure on Corporate Social Responsibility claim was given in paragraph 8 which runs into more than five pages. It is not disputed that appellant assessee is Government of India undertaking and Government has control over expenses of undertaking. It is pertinent to note that during previous assessment years, similar claims ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: itl67.16.odt 8 were made by assessee Company and assessment orders allowing claims have attained finality. We have minutely perused assessment order. claims for deductions were made by assessee at least under 20 heads and queries were made in notice under Section 142 (1) of Act to assessee in respect of nearly all of them. We, however, find from assessment order that Assessing Officer has dealt with nearly nine claims of deductions. These claims have been specifically mentioned in assessment order and they have been discussed therein because Assessing Officer appears to have disallowed those claims either partially or totally. In respect of claim for Corporate Social Responsibility and some other claims that were allowed by Assessing Officer, Assessing Officer has not made specific reference in assessment order. It is apparent from assessment order that Assessing Officer has expressed in detail about claims that were disallowable. Where claims were allowable, as we find from reading of assessment order, Assessing Officer has not referred to those claims. Corporate Social Responsibility claim is one of them. It is apparent from notice under Section 142 (1) of Act that specific query in regard to claim pertaining to Corporate Social Responsibility was made and detailed note after giving bifurcation of expenses under different heads was sought. We have ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: itl67.16.odt 9 perused response in respect of this query which is exhaustive. We find that assessee has given details, as are sought under query no.9 in notice under Section 142 (1) of Act. If that is so, judgments, reported in (2015) 372 ITR 303 (Bom.) and (2016) 138 DTR 81 (Bom.) and on which learned Counsel for assessee has placed great reliance would come into play. It is held in judgments referred to herein above by relying on judgment in case of Idea Cellular Ltd. (Supra) that if query is raised during assessment proceedings and query is responded to by assessee, mere fact that query is not dealt with in assessment order would not lead to conclusion that no mind has been applied to it. In case of Fine Jewellery (India) Ltd. (Supra) this Court found that from nature of expenditure as explained by assessee in that case Assessing Officer took possible view and therefore, it was not case where provisions of Section 263 of Act could have been resorted to. Considering explanation of assessee in this case, we are also of view that Assessing Officer had taken possible view. In case of Nirav Modi (Supra) this Court held that Tribunal was justified in that case in cancelling order under Section 263 of Act as assessee had responded to query made to it during assessment proceedings and merely because assessment order did not mention same, it would not lead to conclusion that ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: itl67.16.odt 10 Assessing Officer had not applied his mind to case. In instant case, we find that Assessing Officer has applied his mind to claims made by assessee and wherever claims were disallowable they have been discussed in that assessment order and there is no discussion or reference in respect of claims that were allowed. In view of law laid down in judgments in case of Fine Jewellery (India) Ltd. (Supra) and Nirav Modi (Supra) it would be necessary to hold that in circumstances of case, it cannot be said that merely because Assessing Officer had not specifically mentioned about claim in respect of Corporate Social Responsibility, Assessing Officer had passed assessment order without making any enquiry in respect of allowability of claim of Corporate Social Responsibility. In our view, provisions of Section 263 of Act could not have been invoked by Commissioner of Income Tax in circumstances of this case. Tribunal was not justified in holding that query under Section 142 (1) of Act was very general in nature and reply of assessee was also very general in nature. In our considered view, query pertaining to Corporate Social Responsibility was exhaustively answered and appellant assessee had provided data pertaining to expenditure under each head of claim in respect of Corporate Social Responsibility, in detail. Tribunal was not justified in holding that ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: itl67.16.odt 11 reply/explanation of assessee was not elaborate enough to decide whether expenditure claim was admissible under provisions of Income Tax Act. Assessing Officer is not expected to raise more queries, if Assessing Officer is satisfied about admissibility of claim on basis of material and details supplied. In facts and circumstances of case, we answer question of law in negative and against Revenue. 6. For reasons aforesaid, Income Tax Appeal is allowed. orders passed by Commissioner of Income Tax and Income Tax Appellate Tribunal are quashed and set aside. No order as to costs. JUDGE JUDGE Wadkar ::: Uploaded on - 03/05/2017 ::: Downloaded on - 04/05/2017 10:16:34 ::: MOILLimitedearlierknownas ManganeseOreIndiaLimited v. TheCommissionerofIncome-tax-I, Nagpur
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