South Eastern Coalfields Ltd. Vs. Jt. Cit - Court Judgment

Excerpt:

.....to note that section 147 was substituted by the direct tax laws (amendment) act, 1987 w.e.f. 1-4-1989, and as per the amended provisions of the said section the only condition precedent for invoking the jurisdiction under section 147 is that the assessing officer should have a reason to believe that income chargeable to tax has escaped assessment. it is thus clear that the requirements in the old provisions that the assessing officer should have "information in possession" before taking action to assess or reassess the income escaping assessment have been dispensed with and the only requirement for reopening the assessment within a period of four years from the end of the relevant assessment year is that the assessing officer should have a reason to believe that the income chargeable to tax has escaped assessment. the honble gujarat high court in the case of damodar h.shah v. asstt. cit (2000) 245 itr 774 (guj) had an occasion to consider a similar issue in the context of amended provisions of section 147 and it was observed by their lordships that if the reason to believe turns out to be wrong during the proceedings, it cannot be said that it did not exist at the time of.....

Judgment:

These appeals preferred by the assessee-company against the following orders of the learned Commissioner (Appeals), Raipur involve common issues and we find it convenient to dispose of the same by a consolidated order : Before we take up the various issues raised in these appeals for consideration and decision, it would be appropriate to narrate the facts of the case giving rise to these appeals. The assessee-company is a wholly-owned subsidiary of M/s. Coal India Ltd. which is a Government of India undertaking. It is engaged in the business of extracting coal from the coal fields located in M.P. It is regularly assessed to income-tax and its assessments for assessment years 1989-90 and 1990-91 were initially completed by the Deputy Commissioner, Special Range, Raipur under section 143(31) Subsequently, the same were reopened by the assessing officer for the reason recorded in writing and the reassessments under section 147/143(3) were completed making substantial additions to the income returned by the assessee-company.

The assessments for the assessment years 1994-95, 1995-96 and 1996-97 of the assessee-company were also completed making substantial additions vide orders passed by the assessing officer under section 143(3). Aggrieved by the orders of the assessing officer, the assessee company preferred appeals for all the five years before the learned Commissioner (Appeals) who dismissed the same and also assumed jurisdiction under section 251 to enhance the income of the assessee-company. Aggrieved by the same, the assessee company is in appeal before the Tribunal. At the time of hearing, the learned representatives of both the sides raised elaborate arguments with the help of well compiled paper books and written submissions placed on record and it will not be out of place to record our appreciation for the efforts made by them in this regard.

The first issue challenging the action of the learned Commissioner (Appeals) in assuming jurisdiction on the appeals preferred by the assessee-company and passing the orders after the date he ceased to hold the charge on the assessees appeals is raised by the assessee in the following appeals : At the time of hearing before us, the learned counsel, for the assessee has not pressed the above grounds. Accordingly, the same are dismissed as not pressed.

The next issue relating to the validity of assessing officers jurisdiction in making the reassessment when the reason for reopening did not survive is raised by the assessee in the following appeals : The learned counsel for the assessee submitted before us that the assessments for assessment years 1989-90 and 1990-91 were reopened by the assessing officer under section 147 and the reason for reopening the impugned assessment as stated in the notice issued under section 148 was that the appellant had failed to disclose fully and truly all the material facts necessary for the assessment issofar as it relates to the contribution to Coal Price Regulation Account (hereinafter referred to as the CPRA). He further submitted that no addition was made in the reassessment order with respect to CPRA. His contention was that once the ground for reopening the assessment did not survive, the assessing officer had no jurisdiction to continue with the reassessment proceedings. He contended that since the very basis on which jurisdiction was assumed by the assessing officer did not survive, the entire reassessment proceedings were without having valid jurisdiction and, therefore, the reassessment orders passed by the assessing officer under section 147 are liable to be quashed. In support of this contention, he relied on the decision of Honble Punjab & Haryana High Court in the case of CIT v. Atlas Cycle Co. (1989) 180 ITR 319 (P&H) and emphasized that the ratio of the said decision with equal force to the facts of the present case, wherein the main reason being contribution to CPRA did not survive and, therefore, the assessing officer had no jurisdiction to proceed with the reassessment and to make any other addition.

The learned Departmental Representative, on the other hand, submitted that the assessing officer had rightly reopened the assessment for assessment years 1989-90 and 1990-91 after recording the reasons for doing so and the said reasons were also communicated to the assessee vide his letter dated 19-11-1996. She further submitted that once the case is reopened under section 147, the full assessment was open before the assessing officer. Relying on the decision of Honble Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO (1999) 236 ITR 34 (SC), she contended that for determining whether initiation of reassessment proceedings was valid, it is only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. She further contended that it was open to the assessing officer to include other escaped items in the reassessment though such items did not form the basis of initiation. In support of this contention she cited the following decisions of various High Courts : (i) CIT v. Ahmedabad Mfg. Calico Printing Co. Ltd. (1977) 106 ITR 159 (Guj); The learned Departmental Representative also pointed out that the case of CIT v. Atlas Cycles (supra) cited by the learned counsel for the assessee deals with pie-amended provisions of sections 147 and 148. In this regard her contention was that after the amendment in section 147, existing legal provisions are such that once an assessment is reopened, any other income that has escaped assessment and comes to the notice of the assessing officer subsequently during the course of proceedings under section 147 can also be included in the reassessment. Referring to the decision of Honble Gujarat High Court in (1977) 106 ITR 159 (Guj) (supra) she contended that the Honble High Court has decided a similar issue holding that the ground on which reassessment initiated was found to be not surviving later on in the reassessment proceedings, the reassessment could still be completed in respect of other items of escapement of income found subsequently during the course of proceedings under section 147. She, therefore, contended that the assessments were rightly reopened by the assessing officer and the assessing officer did have power to exercise jurisdiction and to complete the reassessments.

We have considered the rival submissions in the light of material available on record and the various case laws cited at the Bar. It is observed that the assessments for assessment year 1989-90 and 1990-91 were reopened by the assessing officer for the reason that the deduction in respect of contribution made by the assessee to CPRA was wrongly allowed in the original assessment without the assessee filing any particulars or other details in respect of the same and there is no dispute about the fact that this was the reason given by the assessing officer for reopening. There is also no dispute about the fact that no addition in respect of contribution to CPRA was made in the reassessment completed by the assessing officer for both the years i e., assessment years 1989-90 and 1990-91. Before us, the learned counsel for the assessee has contended, relying on the decision of Honble Punjab & Haryana High Court in the case of CIT v. Atlas Cycles (supra). That when the main reason on the basis of which the assessments were reopened did not survive, the assessing officer had no jurisdiction to proceed with the reassessment and make any other additions. The learned Departmental Representative, on the other hand, has contended that there was a valid reason for reopening the assessments and once such assessments were reopened, the assessing officer had every right to bring to tax any other income that had escaped assessment. In support of this contention she has relied on various judicial pronouncements, which are enumerated above.

Before we proceed further to consider the contentions raised by the learned representatives of both the parties in the light of the facts and circumstances of the present case, it would be appropriate to summarise the legal position emanating from the various judicial pronouncements cited by both the parties : CIT v. Ahmedabad Mfg. & Calico Printing Co. Ltd. (supra) Even if the grounds on which proceedings were reopened under section 147/148 were subsequently found to be non-existent, it is still open to the assessing officer to consider other items and pass reassessment order in pursuance of notice issued under section 148.

When a notice is issued under section 34 of the Income Tax Act, 1922 based on certain item of income that has escaped income-tax, it is permissible for assessing officer to include other item of escaped income in the assessment.

Facts of the case : The assessment was reopened under section 147(b) of the Income Tax Act, The reason for reopening was that purchase tax, which was not payable for imported raw nuts, in view of amendment, was allowed in original assessment. Income Tax Officer also disallowed payment made to unrecognized group gratuity scheme. The Tribunal accepted the plea of the assessee that the assessment was sought to be reopened only to add back the purchase tax liability and when that plea did not survive, the question regarding the payment of group gratuity scheme could not have been made a subject-matter of assessment under section 147(b) of the Act. In other words, the Tribunal held that the reopening of the assessment was not valid since the sole ground on which the notice under section 147(b) of the Act was issued did not survive due to directions of the IAC not to add back purchase tax liability.

Held by Honble High Court : We are of the view that the appellate Tribunal was in error in holding that the assessing authority cannot bring to charge items of income which had escaped assessment other than or in addition to that item which led to the issue of the notice. Once a reassessment proceeding was initiated under the prevailing law, the reassessment need not be confined to that particular item of income, which alerted Income Tax Officer to reopen the assessment.

At the time of issue of the notice it is not incumbent on the Income Tax Officer to come to a finding that income has escaped assessment by reason of failure or omission of the assessee to disclose fully or truly all material facts necessary for assessment. The belief which Income Tax Officer entertains at that stage is tentative belief on the materials before him which have to be examined and scrutinized on such evidence as may be available in the proceedings for reassessment.

It is only when certain material has been used by the assessing officer for the purpose of assessment and he has acted upon that and passed the assessment order, then with the same material the assessment cannot be reopened on account of change of opinion. If some material has not been acted upon by the assessing authority and was not brought to the notice of assessing authority, it cannot be said that the assessing officer had assessed the income on that basis.

In this case, assessment was reopened on two grounds. However, both the grounds did not survive. Honble High Court accordingly held that : "the Income Tax Officer did not have the jurisdiction to proceed with the reassessment, the moment he found the two grounds mentioned in the reassessment notice incorrect or non-existent." It is pertinent to note here that all the aforesaid decisions cited by the learned representatives related to a period prior to 1-4-1989, when the conditions precedent for invoking jurisdiction under section 147, was that the benefit which the Income Tax Officer should entertain before issuing the notice ought to have been based on materials and such material constituted an important and essential part of the proceedings, the absence of which would result in nullifying the entire proceedings as without jurisdiction. Keeping in view this essential condition required to be fulfilled to vest jurisdiction in the assessing officer to proceed to reopen an assessment as per the scheme of sections 147 and 148, the Honble Supreme Court in the case of CIT v.Raman & Co. (1968) 67 ITR 11 (SC) and also in the case of Bankipur Club Ltd. v. CIT (1972) 82 ITR 831 (SC) held that when such information which is the condition precedent to the exercise of jurisdiction by the assessing officer to assess or reassess the income of the assessee did not exist, the assessing officer was incompetent to initiate reassessment proceedings and he was not empowered to make/complete the reassessment under section 147. Similar views were also expressed by the Honble Rajasthan High Court in the case of Addl. CIT v. Ganeshilal Lalchand (1985) 154 ITR 274 (Raj). In the case of CIT v. Ahmedabad Manufacturing & Calico Printing Co. Ltd. (supra) the Honble Gujarat High Court, however, found that the Income Tax Officer had information to entertain a reasonable belief that the income had escaped assessment and held that initiation of the reassessment proceedings was valid and proper. The Honble Gujarat High Court further held that when initiation of the reassessment proceedings was valid and proper, the assessing officer also had the power to include in reassessment proceedings the other items of income, which had escaped assessment. In the case of CIT v. Atlas Cycles .Industries (supra) on which heavy reliance has been placed by the learned counsel for the assessee before us, the Honble Punjab & Haryana High Court considered these contradictory views expressed by the Honble Rajasthan High Court and Honble Gujarat High Court and keeping in view the decisions of Honble Supreme Court in (1968) 67 ITR 11 (SC) and (1971) 82 ITR 83 (SC) (supra), proceeded to dissent from the view taken by the Honble Gujarat High Court and concurred with the view taken by the Honble Rajasthan High Court.

It is thus clear that even in the context of pre-amended provisions of section 147, contradictory views were expressed by the different High Courts regarding the jurisdiction of the assessing officer in reopening the assessments when the condition for reopening did not survive or found to be not in existence. It is also quite clear that all these decisions were rendered on the basis of existence or non-existence of the information in the possession of the assessing officer at the relevant time to entertain belief about escapement so as to acquire jurisdiction under section 147 read with section 148.

It is pertinent to note that section 147 was substituted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1-4-1989, and as per the amended provisions of the said section the only condition precedent for invoking the jurisdiction under section 147 is that the assessing officer should have a reason to believe that income chargeable to tax has escaped assessment. It is thus clear that the requirements in the old provisions that the assessing officer should have "information in possession" before taking action to assess or reassess the income escaping assessment have been dispensed with and the only requirement for reopening the assessment within a period of four years from the end of the relevant assessment year is that the assessing officer should have a reason to believe that the income chargeable to tax has escaped assessment. The Honble Gujarat High Court in the case of Damodar H.Shah v. Asstt. CIT (2000) 245 ITR 774 (Guj) had an occasion to consider a similar issue in the context of amended provisions of section 147 and it was observed by their Lordships that if the reason to believe turns out to be wrong during the proceedings, it cannot be said that it did not exist at the time of initiation of proceedings. Explaining further, the Honble Gujarat High Court observed that the assessing officer did have reason to believe that the income chargeable to tax had escaped assessment and since the requisite jurisdictional fact for the issuance of notice under section 147 did exist at the relevant time, there was no valid reason to thwart proceedings under section 147 at the threshold. In the case of CIT v. Sun Engineering Works (1992) 198 ITR 297 (SC) the Honble Supreme Court held that once the assessment is validly reopened by issuance of a notice under section 148, the previous underassessment stands set aside and the assessing officer has not only the jurisdiction but is also duty-bound to levy tax on the entire income which has escaped assessment during the course of original assessment. In the case of CWT v. D.R. Wadera L/H of Hansraj Wadera (2000) 18 DTC 657 (Del-HC). 2000 246 ITR 348 (Del) the Honble Delhi High Court has held that once valid proceedings are started for reassessment, the assessing officer has the jurisdiction to tax the entire wealth which had escaped assessment without making any distinction between those items in respect of which reassessment proceedings are initiated and other items which formed part of wealth but had escaped assessment. In the case of late R.B. Seth Ramratan v.CIT (1985) 156 ITR 612 (Del) the Honble Delhi High Court observed that the distinction between the jurisdiction to reopen the assessment and the reassessment being sustained on merits should be understood and proceeded to hold that the jurisdiction to reopen does not necessarily lead to the inference that there has been an escapement of income.

A resume of all the case laws discussed above relating to the pre-amended provisions of section 147 goes to show that the information was the basis for forming belief about the escapement of income as per the pre-amended provisions and the assessing officer was required to have such information in his possession to enable him to validly acquire the jurisdiction under section 147 and in the absence of the very existence of such information, the various judicial authorities proceeded to conclude that the assessing officer did not have jurisdiction to assess or reassess the income of the assessee under section 147. However, where the factum of having such information was found to be in existence at the time of reopening the assessment but in the ultimate analysis the assessing officer did not find any escapement, the reopening was considered valid by the judicial forum giving jurisdiction to the assessing officer to proceed under section After the amendments made to section 147 with effect from 1-4-1989, the condition precedent is only that the assessing officer should have reason to believe that income chargeable to tax has escaped assessment.

In the present case, the reason to entertain belief about the escapement of income by way of allowing wrong deduction on account of contribution to CPRA was very much there and the same was also communicated to the assessee by the assessing officer. Although this belief turned out to be wrong during the reassessment proceedings, we are of the view that it cannot be said that the reason to form such belief did not exist at the time of initiation of reassessment proceedings by issue of notice under section 148-Thus, the assessing officer had at the relevant time reason to believe that deduction on account of contribution to CPRA was wrongly allowed and, therefore, the issuance of notice under section 148 cannot be said to have been done without jurisdiction. In the case of Damodar H. Shah v. Asstt. CIT (supra) the Honble Gujarat High Court has held that if the assessing officer had reason to believe that the income chargeable to tax has escaped assessment, the requisite jurisdictional fact for the issuance of notice under section 148 did exist and even though the same turned out to be wrong during the reassessment proceedings, there is no valid reason to thwart the proceedings under section 147 at the threshold. As such, considering the facts of the case and the legal position emanating from the aforesaid judicial pronouncements, we are of the considered opinion that the assessing officer had validly reopened the assessments for assessment years 1989-90 and 1990-91 and, therefore, he had not only the jurisdiction but was also duty-bound to levy tax on the entire income which had escaped assessment during the course of original assessment. In that view of the matter, we uphold the impugned order of the learned Commissioner (Appeals) holding initiation of proceedings by the assessing officer under section 147 to be legal and valid.

The next issue relating to validity of reopening of assessment for assessment year 1989-90 being barred by limitation is raised by the assessee in ground No. 3 of its appeal being ITA No. 18/Nag/2001.

The learned counsel for the assessee submitted before us that the original assessment for assessment year 1989-90 was completed under section 143(3) on 31-1-1991 and the four years time-limit laid down in section 147 for the reopening the assessment had expired on 31-3-1994.

He also submitted that the notice for reopening the assessment was, however, issued by the assessing officer on 14-9-1994, and the same was served on the assessee only on 17-10-1994 Referring to the provisions of section 147, the learned counsel for the assessee pointed out that an assessment can be reopened beyond a period of four years from the end of the concerned assessment year if and only if the assessee has not filed its return of income or he has failed to disclose fully and truly all material facts necessary for his assessment for that year. He submitted that the assessing officer assumed jurisdiction for reopening the assessment proceedings on the premise that the assessee had failed to disclose truly and fully all the material facts relating to the contribution to CPRA. In this regard, he contended that the appellant had made complete disclosure about its contribution to CPRA by clearly disclosing the same separately in the profit & loss account. He also drew our attention to the profit & loss account of the relevant period placed at page Nos. 3.4 and 3.5 of his paper book to show that the contribution to CPRA was separately claimed as expenditure by the assessee in its profit & loss account. Relying on the decision of Honble Supreme Court in the case of Bankipur Club Ltd. v. CIT (supra), he contended that the disclosure by way of expenditure in the profit & loss account filed with the assessing officer along with the return of income was complete disclosure by the assessee and there was no failure or omission to disclose fully and truly and truly all the material facts necessary for assessment insofar as they relate to the assessee claim on account of contribution to CPRA. He also contended that no addition on account of contribution to CPRA was made by the assessee by withdrawing a deduction allowed on account of contribution to CPRA in the reassessment and as a matter of fact the assessing officer even did not discuss this issue in the reassessment order framed by him. He, therefore, contended that neither of the alternative conditions laid down in the proviso to section 147 was satisfied in the instant case so as to authorise the assessing officer to assume jurisdiction under section 147 beyond a period of four years from the end of the relevant assessment year. His contention, therefore, was that the initiation of reassessment proceedings was beyond the time-limit prescribed under the Act and the order passed by the assessing officer under section 147 is liable to be quashed. In support of this contention he relied on the decision of Honble Gujarat High Court in the case of Garden Silk Mills Ltd. v. Dy. CIT (1996) 222 ITR 27 (Guj), of Honble Bombay High Court in the case of IPCA Laboratories Ltd. v. Dy. CIT (2002) 25 DTC 891 (Bom-HC) (2001) 251 ITR 416 (Bom) and that of Honble Supreme Court in the case of ITO v. Mawalal Dwarkaprasad (1989) 176 ITR 529 (SC).

Departmental Representative submitted that the assessment for assessment year 1989-90 was reopened by the assessing officer because the assessee had not submitted all the required details of contribution to Coal Price Regulation Account. She pointed out that the full scheme relating to CPRA, its operation, etc., were not available before the assessing officer and, therefore, there was a failure of the assessee to disclose fully and truly all material facts necessary for the assessment. According to her, mere writing of a small note regarding the contribution to CPRA cannot be regarded as full and true disclosure on the part of the assessee and the assessing officer was fully justified in reopening the assessment as per the proviso to section 147. In support of her contention, she cited the cases of Phool Chand Bajrang Lal & Anr. v. ITO (1993) 203 ITR 456 (SC) and Shri Krishna (P) Ltd. v. ITO (1996) 221 ITR 538 (SC).

We have considered the rival submissions and also perused the relevant material on record. We have also carefully gone through the case law cited by the learned representatives of both the parties in support of their stands. In the case of Garden Silk Mills Ltd. v. Dy CIT (supra) the Honble Gujarat High Court has observed that the assessing officer was aware about the investment and fluctuations in the exchange rate from the fact that the depreciation claimed by the assessee on the enhanced cost was duly allowed by him and thus, there was no failure on the part of the assessee to disclose material facts necessary for assessment to warrant the issue of notice for reassessment beyond a period of four years. In the present case the assessee had claimed the contribution to CPRA as an expenditure separately in its profit & loss account filed with the return of income and the nature of the said contribution was also explained in the following explanatory note No. 9 forming part of assessees annual account filed before the assessing officer.

"Contribution on account of retention price to coal price regulation account : The Government of India vide its Notification No. 28012/86-CA dated 16-3-1989, has fixed Rs. 182 per M.T. as retention price for the year 1988-89. In pursuance of this Notification Rs. 20,737.50 lakhs (previous year Rs. 8,345.08 lakhs) in respect of sales for the year have become payable to the Coal Price Regulation Account. The amount has been arrived at on the basis of coal dispatches during the year from revenue mines only. The said amount subject to the confirmation of Coal India Limited, has been charged to profit & loss account." It is pertinent to note here that the assessing officer completed the assessment for assessment year 1989-90 originally on 31-1-1991, under section 143(3) on the basis of above submission made by the assessee and the claim of the assessee on account of contribution to CPRA was fully allowed. Even in the reassessment proceedings the assessing officer has not made any addition on this issue and the claim of the assessee was accepted by the assessing officer as it is without making any discussion in his order passed under section 147.

The Direct Tax Law (Amendment) Act, 1987, substituted the present section 147 in place of the earlier one with effect from 1-4-1989, which reads as under : "If the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142(1) or section 148 or to disclose fully and truly all material facts necessary for his assessment, from that assessment year.

From the perusal of the above, it is evident that as per the proviso to section 147 substituted with effect from 1-4-1989, where an assessment is made under section 143(3), the same cannot be reopened under section 147 after the expiry of four years from the end of the relevant assessment years unless there is a reason to believe that any income chargeable to tax has, escaped assessment for such assessment year by reason of the assessees failure to make a return under section 139 or in response to a notice issued under section 142(1) or 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. In the present case, the stand of the revenue is that there was a failure on the part of the assessee to disclose fully the material facts regarding its claim for deduction in respect of contribution to CPRA. In this regard, when the learned Departmental Representative was required by the Tribunal to point out any such specific failure of the assessee, she stated that the full scheme relating to the CPRA was not furnished by the assessee before the assessing officer. Referring to Explanation 1 to section 147, she has also contended that mere writing a small note regarding the contribution to CPRA was not a full and true disclosure on the part of the assessee. From the perusal of the said Explanation, it is however evident that it covers the eventuality/situation arising from the production of books or other evidence by the assessee before the assessing officer. In the present case, the relevant material facts were disclosed by the assessee-company in the return of income itself and the assessing officer was neither required nor was he expected to discover the material evidence/facts relating to the CPRA contribution from the account books or other evidence produced before him separately as envisaged in Explanation 1 to section 147. The learned Departmental Representative has also relied on the decisions of Honble Supreme Court in the case of Fulchand Bajranglal & Anr. v. ITO & Anr. (supra) and in the case of Shri Krishna (P) Ltd. Etc. v. ITO & Ors. (supra). After going through the entire text of these judgment cited by the learned Departmental Representative it is observed that the facts involved in the case of Fulchand Bajrang Lal & Anr. v. ITO & Anr (Supra) were that the Income Tax Officer had allowed deduction of interest claimed to have been paid by the assessee to the Calcutta Company. Subsequently in an enquiry made by the assessing officer, it was found that the said Calcutta Company was dummy and its business consisted entirely of name-lending. Considering these facts and circumstances of the case, the Honble Supreme Court found no fault in the action of the assessing officer to reopen the case since the assessee had failed to disclose fully and truly all the material facts necessary for assessment of that year. In the case of Shrikrishna (P) Ltd. v. ITO & Ors. (supra) the Honble Supreme Court emphasized that the obligation on the assessee to disclose the material facts is not a mere disclosure but a disclosure which should be full and true. To elaborate the concept of true and full disclosure, their Lordships reproduced the following observations recorded by its Constitution Bench in the case of Calcutta Discount Co.

Ltd. v. ITO (1961) 41 ITR 191 (SC) : "The words used are omission or failure to disclose fully and truly all material facts necessary for his assessment for that year. It postulates a duty of every assessee to disclose fully and truly all material facts necessary for assessment will differ from case to case.

In every assessment proceedings, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee or discovered by him on the basis of facts disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences and ascertain on the correct interpretation of the taxing enactment, the proper tax leviable." After referring to the aforesaid observations, the Honble Supreme Court proceeded to hold that the finality of proceeding is certainly a consideration but that avails one who has fully and truly disclosed all material facts necessary for his assessment for that year and not to others.

From the perusal of aforesaid observations of the Honble Supreme Court, it is clear that the assessee is required to place before the assessing officer all the primary facts necessary for his assessment and once that is done the assessee can be said to have discharged his obligation in this regard. In the present case, as already mentioned, the assessee had claimed the contribution to CPRA as expenditure separately in the profit & loss account enclosed with his return and had also annexed a note explaining the nature of such contribution. As a matter of fact, on the basis of this disclosure made by the assessee in its return of income, the assessing officer completed the assessment originally under section 143(3) allowing the deduction claimed by the assessee on account of contribution to CPRA. Moreover, even in the reassessment completed by the assessing officer, no addition on account of contribution to CPRA was made by the assessing officer. It is thus clear that there was no escapement of income on this count for the reason of failure on the part of the assessee to disclose truly and fully all the material facts so as to confer jurisdiction to the assessing officer to reopen the assessment by issuing notice under section 148 beyond the period of four years from the end of the relevant assessment year. As such, considering all the facts of the case and keeping in view the aforesaid judicial pronouncements, we hold that the notice issued by the assessing officer under section 148 for reopening the assessment for assessment year 1989-90 was issued by the assessing officer beyond the period prescribed in section 147 and the same being barred by limitation is liable to be quashed.

The next issue relating to the validity of enhancement jurisdiction assumed by the learned Commissioner (Appeals) is raised by the assessee in the following grounds : The learned counsel for the assessee submitted that the learned Commissioner (Appeals) enhanced the assessment made by the assessing officer with regard to the matters which in fact were not considered in the original assessment by the assessing officer at all. He contended that the first appellate authority has no power of enhancement with regard to the matters, which are not dealt with or considered by the assessing officer in the assessment. Relying on the decisions of Honble Supreme Court in the case of CIT v. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC), CIT v. Sardari Lal & Co. (2001) 251 ITR 864 (Del) (FB) and CIT v. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC), the learned counsel for the assessee contended that the learned Commissioner (Appeals) had no jurisdiction to assess a new source of income which had not been considered or processed by the assessing officer in the assessment order. He, therefore, urged that the impugned orders of the learned Commissioner (Appeals) insofar as the same relate to enhancement of assessments, be set aside.

The learned Departmental Representative submitted that it is a settled law that the scope of the powers of the first appellate authority is co-terminus with that of the assessing officer and as held by Honble Supreme Court in the case of CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) he can do what the assessing officer can do and also he can direct the assessing officer to do what he has filed to do. She also cited the case of CIT v. Nirbheram Daluram (1997) 224 ITR 610 (SC) wherein it was held by the Honble Supreme Court that the powers of the first appellate authority are not confined to the matters considered by the assessing officer and, therefore, it is open to him to make addition relating to new sources of income not considered by the assessing officer. She also clarified that the decisions of Honble Supreme Court in (1962) 44 ITR 891 (supra) and (1967) 66 ITR 443 (supra) cited by the learned counsel for the assessee are distinguishable as the issues under consideration in those cases were relating to the new sources of income which were neither disclosed by the assessee in his return of income nor considered by the assessing officer in the assessment order.

After considering the rival submissions and perusing the case cited by the learned representatives of both the sides in support of their contentions, it is observed that the decisions of Honble Supreme Court in (1962) 44 ITR 891, (2001) 251 ITR 864 (Del)(FB) and (1967) 66 ITR 441 (supra) cited by the learned counsel for the assessee cannot be of any help to the assessees case because the issue for consideration before the Honble Supreme Court in those cases was whether the first appellate authority is competent to enhance the assessment taking an income which was not mentioned by the assessee in his return nor considered by the Income Tax Officer in the order appealed against the their Lordships proceeded to hold therein that the first appellate authority is not competent to enhance the assessment in appeal by discovering new source of income, which was neither mentioned in the return by the assessee nor considered by the assessing officer in the assessment. In the present case, we find that learned Commissioner (Appeals) has not made any attempt to discover any such new source of income and the enhancement made by him on different counts appears to have been made on the issues which were either appearing in the return of income or were considered by the assessing officer expressly or by necessary implication in his assessment order. It is a settled, position that the learned Commissioner (Appeals) has the power to make an order enhancing the assessment while deciding the appeal filed by the assessee if he is satisfied that the assessing officer has granted excessive relief or the assessment of income is in anyway erroneous. In the case of CIT v. Nirbheram Daluram (supra) the Honble Supreme Court has held that the powers of enhancement of first appellate authority are not just confined to the items considered by the assessing officer.

In the case of CIT v. Kanpur Coal Syndicate (supra) the Honble Supreme Court has held that the powers of first appellate authority are co-terminus with that of the assessing officer and he can do what the assessing officer can do and can also direct him to do what he has failed to do. As such, considering all the facts of the case and the legal position emanating from the aforesaid judicial pronouncements, we are of the opinion that the learned Commissioner (Appeals) has acted within his jurisdiction while making enhancement in the present case as per the powers conferred on him under section 251.

The next issue relating to the disallowance of heavy earth moving machinery (HEMM) rehabilitation expenses is raised by the assessee in the following appeals : The heavy earth moving machinery (hereinafter referred to as the HEMM) is used by the assessee-company in its business of extracting coal either by the shaft method or by the cast method. During the years under consideration, substantial expenditure, was incurred on the rehabilitation of the same, which was claimed as revenue expenditure by the assessee-company while computing its total income The assessing officer required the assessee to explain the nature of this expenditure and in the reply, it was stated by the assessee that HEMM which has covered 50 per cent of its life in terms of working hours require major repair/overhauling to keep the same operational at its optimum capacity. It was also explained by the assessee that the expenditure incurred on such repairs/overhauling is termed as rehabilitation expenditure which is treated as deferred revenue expenditure in the books of account as per the policy guidelines issued by its holding company M/s. Coal India Ltd. and the same is written off over a period of extended life of the assets which does not exceed four years including the year in which such expenditure is incurred. To ascertain the exact nature of the said expenditure the assessing officer obtained details of the same from the assessee and it was found by him from the said details that the expenditure claimed under this head includes replacement of major components and parts of the HEMM. It was also explained on behalf of the assessee before the assessing officer that the HEMM is required to be given a breakdown after its use to the extent of 50 per cent of the rated life and the same is dismantled and the rehabilitation work is carried out by he experts who are normally called from the suppliers of the said machinery. It was also explained by the assessee that during the process of such rehabilitation, whole engine assembly and transmission equipments are offloaded and dismantled after which worn out parts are replaced and necessary boring of the engine is done so that the required power of the engine is obtained once again to work at its optimum level for the balance period of life of the said machinery. After considering the submission made on behalf of the assessee, the assessing officer was of the opinion that the said expenditure incurred by the assessee on rehabilitation of HEMM is considerable in terms of quantum and rejuvenates the concerned HEMM by putting into it a new life of efficient working without which its optimum use cannot be made. It was also found by the assessing officer that such an expenditure has been treated by the assessee to be capital in nature in its books of accounts whereas for the purpose of income-tax, the same has been claimed as revenue expenditure by the assessee. He, thus, noticed that the assessee has given, different treatment to the same expenditure for the purpose of income-tax from the one given in the books of account. Therefore, considering that the said expenditure involving substantial amount has been incurred by the assessee on replacement of major components to put back new life into the HEMM and the same has been treated as capital expenditure by the assessee in its books of account, he came to the conclusion that the said expenditure is clearly of capital in nature and disallowed the claim of the assessee in respect of the same as revenue expenditure.

He, however, allowed depreciation on the same at the rates specified in the Income Tax Rules. The matter was carried before the learned Commissioner (Appeals) and the submission made before the assessing officer on this issue was reiterated by the assessee before him. It was also brought to the notice of the learned Commissioner (Appeals) by the assessee that his predecessor has decided the similar issue in favour of the assessee in assessees own case for assessment year 1991-92 allowing deduction to the assessee on account of expenditure incurred on rehabilitation of HEMM. Reliance was also placed by the assessee on the following decisions in support of its case :CIT v. Gujarat Mineral Devp. Corpn.

The learned Commissioner (Appeals), however, found that the assessee-company itself has treated the expenditure in question in its books of account as deferred revenue expenditure, i.e., capital expenditure whereas the same has been claimed as revenue expenditure for the income-tax purpose. Relying on the decision of Honble Supreme Court in the case of State Bank of Travancore v. CIT (1986) 158 ITR 102 (SC) and that of Honble Calcutta High Court in the case of CIT v. UCO Bank (1993) 200 ITR 68 (Cal) the learned Commissioner (Appeals) observed that if a particular method of accounting is followed by the assessee in its books of account maintained as per Company Law, the same has to be followed for the purposes of income-tax. He, therefore, was of the opinion that the impugned expenditure having been treated as capital expenditure for income-tax purposes also. He also observed that the repairs have been effected by the assessee to the machinery after it had come to a standstill and relying on the decision of Honble Madras High Court in the case of CIT v. Sri Rama Sugar Mills Ltd. (1952) 21 ITR 191 (Mad) as well as the other judicial pronouncements mentioned in para 4.3(b) of his order, proceeded to hold that the expenditure incurred on rehabilitation of HEMM was of capital nature.

He, therefore, upheld the action of the assessing officer on this issue. Aggrieved by the same, the assessee is in appeal before us.

The learned counsel for the assessee submitted that there was a confusion in the mind of the learned Commissioner (Appeals) about the treatment given by the assessee to the impugned expenditure in the books of account. He submitted that the assessee had not treated the said expenditure as capital in its books of account but the same was treated as deferred revenue expenditure. Referring to the definition of "deferred revenue expenditure" given in the guidance note on "Terms used in financial statement" published by ICAI as well as the one issued by ICMA, the learned counsel for the assessee contended that the deferred revenue expenditure in fact is of revenue nature and the same is certainly distinct from capital expenditure. He also drew our attention to Schedule II and Schedule 24 to the assessees audited annual accounts placed in his paper book at page No. 4.7 and 4-8 to point out that the assessee has treated the said expenditure as deferred revenue expenditure in its books of account. He, therefore, contended that the main basis for disallowance given by the learned Commissioner (Appeals) does not survive as the assessee had not treated the said expenditure as capital expenditure in its books of account. As regards the nature of the said expenditure, the learned counsel for the assessee explained that by incurring such expenditure only the efficiency of the asset improved and no new life was added to the machinery. His contention, therefore, was that the said expenditure was primarily of revenue nature and assessee had rightly claimed deduction on this count. He further contended that the replacement of worn out parts neither brought into existence any new machinery nor did it add new life to the asset. According to him, it merely facilitated working of the machinery at the efficient level and irrespective of the quantum of such expenditure it has to be allowed as revenue expenditure. He submitted that as a result of the rehabilitation work undertaken by the assessee, no new machine has emerged or came into existence and merely the whole machine was dismantled and the worn out parts were replaced.

Relying on the decision of Honble Supreme Court in the case of Empire Jute Co. Ltd. (supra) he emphasized that the test of enduring benefit is neither certain nor conclusive to determine the nature of the concerned expenditure and the same cannot be applied blindly or mechanically with regard to the particular facts and circumstances of the case. In this regard his contention was that the accounting treatment given by the assessee to the said expenditure as "deferred revenue expenditure" did not detract the companys claim that the said expenditure is a revenue expenditure. Further, relying on the decision of Honble Gujarat High Court in the case of CIT v. Gujarat Mineral Development Corpn. (supra) and that of Honble Supreme Court in the case of Kedarnath Jute Mfg. (supra) he submitted that the treatment of expenses in the books of account does not command the allowability of the same under the Income Tax Act He also clarified that the HEMM rehabilitation expenses were incurred by the assessee when the machinery was still in operating condition and there was no reason for the learned Commissioner (Appeals) to assume that the same had come to a standstill He, therefore, contended that the reliance placed by the learned Commissioner (Appeals) on the decision of Honble Madras High Court in the case of Sri Rama Sugar Mills Ltd. was misplaced. He also made an attempt to distinguish the citations (1993) 200 ITR 68 (Cal) and (1986) 158 ITR 102 (supra) relied upon by the learned Commissioner (Appeals) stating that the assessee has not given a different treatment to the HEMM rehabilitation expenses in the books of account. He pointed out that a similar issue has been decided in assessees own case for assessment years 1991-92 and 1993-94 by the predecessor of the learned Commissioner (Appeals) who passed the impugned orders and even though this aspect was brought to the notice of the learned Commissioner (Appeals) no reason has been given by him while taking a contrary view on this issue especially when facts are identical in all the relevant years. He, therefore, contended that the learned Commissioner (Appeals) was not justified in upholding the action of the assessing officer and treating the expenditure incurred by the assessee on rehabilitation of HEMM as of capital nature and urged that the same be allowed as revenue expenditure as claimed by the assessee.

The learned Departmental Representative submitted that the assessee has adopted the accounting policy as governed by the holding company, i.e., Coal India Limited. She contended that it may be good for the purpose of accounting. However, the actual allowability of such expenditure has to be seen as per the provisions of the Income Tax Act under which only the current repairs are allowable as revenue expenditure. Relying on the judgment of Honble Calcutta High Court in the case of Humanyun Properties Ltd. v. CIT (1962) 44 ITR 73 (Cal) she pointed out that the current repairs are those repairs, which are needed periodically and from that angle accumulation of repairs does not ordinarily satisfy the test of current repairs. She also contended that the renovation of machinery with the intention to increase its value and efficiency does not constitute current repairs. Reliance was also placed by her on the decision of Honble Rajasthan High Court in the case of CIT v. Zorashtra & Co. (1982) 133 ITR 559 (Raj) wherein it has been held that expenditure on extensive repairs cannot be treated as current repairs.

She further contended that the deferred revenue expenditure cannot be treated as current repairs. She further contended that the deferred revenue expenditure cannot be treated as current repairs In this regard, she submitted that the term "deferred revenue expenditure" has not been defined in the Income Tax Act. According to her, the definition of the said term quoted by the learned counsel for the assessee from the guidance note issued by ICAI, however, states that the deferred revenue expenditure is an expenditure in respect of which payment has been made or a liability has been incurred but the same is carried forward on the presumption that it will be of a benefit over the subsequent period/years also. Further, referring to the definition of the said term given by the ICMA, she pointed out that it connotes the expenditure incurred during the accounting period but not fully charged against the income in that year and the balance is carried forward and charged in the non-stop subsequent period. According to her, this definition goes to indicate that the deferred revenue expenditure incurred by the assessee was not the current revenue expenditure but was of the capital nature having enduring benefits.

She, therefore, contended that the said expenditure clearly falls within the four corners of the definition given by ICAI as well as ICMA quoted by the learned counsel for the assessee himself and, therefore, the claim of the assessee-company on account of the expenditure on rehabilitation of HEMM being deferred revenue expenditure cannot be allowed as revenue expenditure. She also submitted that the rehabilitation work is to be done by dismantling the entire machine and only the experts in that field can do such work. Her contention in this regard was that the nature of such heavy and specialised repairs or overhauling work resulted in giving a new life to HEMM and, therefore, the authorities below were right in holding the same as capital expenditure considering the facts and circumstances of the instant case as well as the treatment given by the assessee-company to such expenditure in its books of account.

We have considered the rival submissions in the light of material available on record and the decisions cited at the Bar. It is observed that the expenditure on rehabilitation of HEMM was treated by the authorities below as capital expenditure mainly for the reason that the assessee had treated the same as deferred revenue expenditure in its books of account and according to the revenue authorities the said expenditure incurred on major repairs to HEMM resulted into putting a new life in the said machinery. So far as the treatment given by the assessee-company in its books of account in respect of the said expenditure is concerned, it is pertinent to ascertain as to whether such expenditure has been treated by the assessee as capital expenditure in its books of account. In this regard, we find that the assessee has treated the said expenditure as deferred revenue expenditure considering the advantage of enduring nature accrued to it which was going to last for the remaining period of rated life of the relevant machinery not exceeding a period of four years. The authorities below, however, considered this treatment given by the assessee to resemble with the capital expenditure specifically considering that it indicated the accrual of advantage to the assessee of enduring nature. Before we consider the relevance of the test of enduring benefits for ascertaining the nature of expenditure, it would be appropriate to find out the meaning and nature of the term deferred revenue expenditure. The institute of Chartered Accountants of India in its guidance-note issued on the "terms used in financial statements" has defined the term "deferred revenue expenditure" as the expenditure for which payment has been made or liability has been incurred in a particular year, but which is carried forward on the presumption that it will be benefitted over a subsequent period or periods. The Institute of Cost and Management Accountant has defined the said term in its publication as an expenditure incurred during an accounting period but not fully charged against income in that period, the balance being carried forward and charged in the next or a subsequent period.

From the perusal of these definitions, it is abundantly clear that there is nothing to indicate that the concerned expenditure has to be of capital nature for the purpose of treating the same as deferred revenue expenditure. On the contrary, although the said expenditure results into a benefit which accrues to the assessee over a period exceeding the accounting year, such benefit does not accrue to the assessee in the capital field but the same accrues only in the revenue field. As a matter of fact, the very purpose of categorizing certain expenditure differently under the head "deferred revenue expenditure" for the purpose of drawing financial statements appears to be that the said expenditure even though is of revenue nature results into benefit of enduring nature to the assessee and the same, therefore, deserves a different treatment in terms of preparation of the annual accounts to determine inter alia, the profit of a particular period/year as the benefit thereof accrues over a period exceeding the accounting year in which the same are incurred. It is thus clear that when any expenditure is treated as a "deferred revenue expenditure", it presupposes that the concerned expenditure, creating benefit in the revenue field, is a revenue expenditure but considering its enduring benefits as well as the fact that it does not result in the creation of any new asset or advantage of enduring nature in the capital field, the same is required to be treated distinctly from capital expenditure. It is thus clear that the authorities below misconstrued the term deferred revenue expenditure as capital expenditure on the basis of accounting treatment given by the assessee in its books of account and proceeded to draw an adverse inference without considering the nature of the impugned expenditure as its allowability of the same under the provisions of the Income Tax Act.

It is observed that the learned Commissioner (Appeals) placed reliance on the decision of Honble Supreme Court in the case of State Bank of Travancore v. CIT (supra) and that of Honble Calcutta High Court in the case of CIT v. UCC Bank (supra) in coming to the conclusion that the particular method of accounting followed by the assessee in its books of account has to be followed for the purpose of income-tax also and he cannot adopt two different methods, one for its own purpose and the other for income-tax. In the present case, as already observed, the assessee-company having treated the impugned expenditure as deferred revenue expenditure and not as capital expenditure, the method adopted by the assessee in its books of account cannot be regarded as different in principle from the one adopted for income-tax purpose.

As regards the relevance of enduring benefits for ascertaining the nature of expenditure is concerned, we find that this issue has already been considered by the Honble Supreme Court in the case of Empire Jute Co. Ltd. v. CIT (supra) wherein Their Lordships have observed as under : "There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, nonetheless, be on revenue account and test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessees trading operation or enabling the management and conduct of the assessees business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future." From the perusal of the aforesaid observations of the Honble Apex Court it is evident that the lest of enduring benefit alone is not conclusive for treating any expenditure as capital expenditure and it is relevant to find out or ascertain as to whether such expenditure results into an advantage of enduring nature to the assessee in the capital field or revenue field so as to decide the exact nature of the said expenditure and allowability of the same under the Income Tax Act.

As regards the relevance of accounting method followed by the assessee.

we have already observed that the treatment given by the assessee to the impugned expenditure as deferred revenue expenditure cannot be considered as different from the one followed for the purpose of computing the total income under the Income Tax Act. In any case, as held by Honble Supreme Court in the case of Kedarnath Jute Mfg. Co.

Ltd. v. CIT (supra), the allowability of a particular deduction depends on the provisions of law relating thereto and not on the basis of entries made in the books of account, which are not decisive or conclusive in this regard. In the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (1997) 227 ITR 172 (SC) the Honble Supreme Court has observed that the question whether a certain deduction from the income is permissible in law or not has to be decided according to the principles of law and not in accordance with the accountancy practice.

To appreciate the nature of the expenditure incurred by the assessee-company on rehabilitation of HEMM and to decide the question about the allowability of the same under the Income Tax Act, it is pertinent to consider the facts involved in the present case in the light of relevant judicial pronouncements. It is observed that the HEMM is regularly used by the assessee-company for the purpose of its business of extracting coal from the coal mines. When a unit of HEMM covers more than 50 per cent of its rated life, the same is undertaken for overhauling and repairs. During the process of such rehabilitation the whole engine assembly and transmission equipment are offloaded and dismantled. The worn out parts are also replaced and necessary boring of the engines is done so that the required power of the engine is obtained once again to facilitate working at its optimum level for the balance life of the machinery. It is thus clear that the said expenditure does not result into increase in the life of the assets but it merely facilitates its optimum use for the balance period of its life. It is also clear that no new asset comes into existence by incurring such expenditure nor any new advantage accrues to the assessee in the capital field. It merely facilitates the assessee to continue with its operation at optimum level and such rehabilitation is normally done after use of the concerned machine for more than 50 per cent of its rated life when the machine is in working condition. It is pertinent to note here that there is nothing on record to suggest or indicate that such rehabilitation is carried out after the machine comes to a standstill. As a matter of fact, by carrying out such rehabilitation work, the machinery is brought to the original form in terms of capacity and efficiency and the revenue has not made out a case to show that by incurring the expenditure in question, either the machinery is structurally altered or there is any improvement in its capacity, purpose or other features. On the other hand, the assessee has claimed to have incurred this expenditure on rehabilitation of HEMM and the expression "rehabilitation" used by the assessee itself connotes that the machinery is restored to the normal life or effectiveness. The details of expenditure given by the assessee as well as mentioned in the orders of the authorities below clearly show that the same was incurred by the assessee-company to preserve and maintain an already existing asset and by spending the amount on rehabilitation work, neither any new asset came into existence nor any different or added advantage accrued to the assessee.

The expenditure on current repairs is admissible under section 31 and the expression "current repairs" used in the said section normally connotes the expenditure incurred to bring back the asset to normal condition for use. In the case of CIT v. Mahalaxmi Textile Mills Ltd. (1967) 66 ITR 710 (SC) the Honble Supreme Court has held that the amount spent on repairs made to the plant and replacement of the old parts needed as a result of the stress and stains of production over a long period is admissible under section 10(2)(v) of the 1922 Act which is similar to section 31 of the 1961 Act. In the case of CIT v.Mahalaxmi Textile Mills Ltd. (1967) 66 ITR 256 (Mad) the Honble Madras High Court observed that replacement of worn out parts does not by itself bring the new asset into existence and held that expenditure incurred on such replacement was deductible. In the case of Rhodesia Railways Ltd. v. CIT Collector, Bechuanaland (1933) 1 ITR 227 (PC), their Lordships of Privy Council observed that the fact that the wear although continues, is not, and cannot be, made good annually, does not render the work of renewal, when it comes to be effected, necessarily a capital charge. Explaining further, their Lordships observed that when such expenditure does not result in the creation of any new asset and it has been incurred to maintain the appellants existing line in a state to earn revenue, the same has to be allowed as a revenue expenditure. In the case of CIT v. Cooperative Sugars Ltd. (1999) 235 ITR 343 (Ker), the Honble Kerala High Court allowed substantial expenditure incurred under the head "machinery maintenance" observing that though the expenditure was incurred on substantial replacement, the fact remained that the concerned sugar plant was there and the same existed in the original form even after such replacement. The Honble Bombay High Court also had an occasion to consider a similar issue in the case of CIT v. Chowgule & Co. (P) Ltd. (1995) 214 ITR 523 (Bom) wherein their Lordships summarised the position that emerges for grant of deduction under section 31 as follows : (ii) "Current repairs" means repairs undertaken in the normal course of user for the purpose of preservation, maintenance or proper utilization or for restoring it to its original condition.

(iii) "Current repairs" do not mean only petty repairs or repairs necessitated by wear and tear during the particular year.

(iv) Such repairs should not bring into existence nor obtain a new or different advantage.

(v) Neither the quantum of expenditure nor the fact that on the process of repairs, there was substantial replacement of the parts of machine or ship, is decisive of the true nature of the expenditure.

(vi) The original cost of the asset is not at all relevant for ascertainment of the true nature of the expenditure on repairs.

(vii) The replacement cost of the asset may, however, at times be used as indicator of the character of the expenditure. If the expenditure on repairs added to the written down value or disposal value exceeds the replacement cost of the asset, a presumption is possible that it is not a revenue expenditure but expenditure of capital nature. Such presumption, of course, would be rebuttable.

(viii) The expression "current" preceding repairs appears to have been used by the legislature with a view to restricting the allowance to expenditure incurred for preservation and maintenance thereof in its current state in contradiction to that incurred on any improvement or on addition thereto." It is observed that the learned Commissioner (Appeals) has placed reliance on the decision of Honble Madras High Court in the case of CIT v. Sri Rama Sugar Mills Ltd. (supra) in support of his decision to treat the expenditure on rehabilitation of HEMM as capital expenditure.

A perusal of the said decision, however, reveals that the repairs in that case were effected by the assessee to a machinery which had come to a standstill and considering that the "current repairs" contemplates expenditure incurred on repairs of the machinery in running condition, their Lordships of the Honble Madras High Court rejected the claim of the assessee to treat the same as revenue expenditure. Before us, reliance was placed by the learned Departmental Representative on the case of Himalayan Properties Ltd. (supra) wherein the Honble Calcutta High Court has observed that renovation of machinery with the intention to increase its value and efficiency will not constitute current repairs. In the present case, there appears to be no such intention to increase the value and efficiency of the machinery behind carrying out the rehabilitation work and it is only for the purpose of preserving and maintaining the said machinery, the rehabilitation work was carried out by the assessee-company.

It is thus clear that the expenditure on rehabilitation of HEMM was incurred by the assessee to preserve and maintain the already existing machinery operational at its optimum capacity during the balance period of its rated life and the said rehabilitation work neither resulted in bringing any new asset into existence nor any different or added advantage in the capital field accrued to the assessee. As such, considering all the facts of the case and the legal position emanating from the various judicial pronouncements discussed above, we are of the considered opinion that the expenditure incurred by the assessee on rehabilitation of HEMM was revenue expenditure in the nature of "current repairs" allowable under section 31 and the learned Commissioner (Appeals), therefore, was not justified in confirming the action of the assessing officer treating the same as capital expenditure. In that view of the matter, we reverse the impugned orders of the learned Commissioner (Appeals) on this issue and direct the assessing officer to allow the deduction in respect of the same.

The next issue relating to the disallowance of expenditure claimed by the assessee on account of contribution to Coal Price Regulation Account (CPRA) is raised by the assessee in the following appeals : During the appellate proceedings before him, the learned Commissioner (Appeals) issued notice under section 251(2) proposing enhancement of income, inter alia, by way of disallowance of expenditure on account of contribution to CPRA. In the said notice, the learned Commissioner (Appeals) alleged that the assessee has not furnished the particulars of expenditure claimed on account of contribution to CPRA in order to establish that the same constitutes an ascertained liability. He, therefore, called upon the assessee-company to explain as to why the same should not be disallowed and added back to the income of the assessee for the years under consideration. In reply, it was submitted on behalf of the assessee that this contribution has been made to Coal India Ltd. which is a nominated authority for managing the CPRA as per section 4B(2) of the Colliery Control order (hereinafter referred to as the CCO) introduced with effect from 30-3-1982. It was also submitted on behalf of the assessee that since this contribution to CPRA is made as per the statutory provisions, the same should be allowed as a statutory liability. Reliance was placed by the assessee on the decision of Honble Supreme Court in the case of Poona Electric Supply Co. Ltd. v. CIT (1965) 57 ITR 521 (SC) in support and the decision of Tribunal in assessees own case as well as the Central Board of Direct Taxes letter dated 27-12-1986, were also brought to the notice of the learned Commissioner (Appeals) to support its case on this issue. The learned Commissioner (Appeals), however, found from the perusal of sections 4A, 4B, 7 and 8 of the Colliery Control order (CCO) that the assessee has to make payment to the CPRA when the retention price is lower than the corresponding sale price and as and when the retention price is higher than the corresponding sale price, the assessee is entitled to receive the difference of the retention price and the corresponding sale price from the money standing to the credit of CPRA.The learned Commissioner (Appeals) also observed that the said Act nowhere mentions any thing about the appropriation of the amount standing to the credit of CPRA by the CIL on behalf of the Central Government and in fact the CIL was entitled to draw any fund from CPRA on behalf of its subsidiary as per sections 7 and 8 of the said Act.

He, therefore, came to the conclusion that the amount paid to the CPRA was the sum to be received back by the assessee as and when the situation changes and the assessee-company thus retained its right to receive back this sum standing to the credit of the CPRA. Keeping in view this position, the learned Commissioner (Appeals) proceeded to hold that the contribution made to CPRA cannot be considered as an expenditure of the assessee-company and consequently enhanced its income by disallowing the same Aggrieved by the same, the assessee is in appeal before us.

The learned counsel for the assessee submitted that the primary business of the assessee-company, which is a Government of India undertaking, is to extract and sell coal. He submitted that coal is an essential commodity and is covered by the Essential Commodities Act, 1955. He submitted that in exercise of the powers conferred on it by the Defence of India Rules, the Central Government has passed the Coal Colliery Control Order, 1945, which regulates all dealings in coal.

Referring to clause 4, 4A and 4B of the said order, the learned counsel for the assessee submitted that the selling price governs the price at which the assessee-company is obliged to sell coal to its customers and thus the same governs the relationship between the assessee-company and its customers. He also submitted that the retention price, on the other hand, governs the relationship between the assessee-company and the government and the assessee-company is empowered in law only to retain from the selling price that portion which has been notified by the government. According to him, the excess selling price over the retention price does not belong to the assessee but belongs to the government. He submitted that during the years under consideration, the notified selling price of the coal in the assessees case was higher than the notified retention price, and therefore, the assessee was obliged to hand over such excess amount to the government. He also invited our attention to the copy of the scheme drafted by the government placed at page Nos. 6.32 to 6.36 placed in his paper book and explained the procedure for maintenance and operation of CPRA as well as the manner and method of making the contribution. Referring to para No. 8 of the said document, he pointed out that the Coal India Limited has the authority to appropriate the funds to disburse the same to those collieries, which are entitled to receive moneys from the CPRAU on account of their selling price being less than the retention price. He submitted that under the said scheme, the CIL was obliged to maintain a set of commercial books of accounts for the purpose of audit and the special unit. created by CIL as an agent of Government of India for effective administration and operations of CPRA was also subject to a review by a joint committee of director (finance) of subsidiaries headed by director (finance), Commissioner. He further submitted that the final powers have been expressly given to Chairman, CIL to resolve any dispute in the implementation of the said scheme and he had a discretion to consult the Department of Coal, Government of India in such matters whenever necessary. He contended that this specific procedure laid down in the scheme clearly depicts that the contribution made by the assessee to CPRA was a statutory liability created by a statute viz., Essential Commodities Act, Defence India Rules, CCO read with the scheme. He also submitted that the assessee company was entitled only for the retention price and any excess amount realised over the retention price was to be statutorily handed over to CPRA. His contention, therefore, was that the said excess amount was diverted to the Central Government in the form of contribution to CPRA by an overriding title and as held by Honble Supreme Court in the case of CIT v. Shitaldas Tirathdas (1961) 41 ITR 367 (SC), the same never assumed a character of trading receipt in the hands of the assessee-company. He also contended that even if such excess amount is treated as trading receipt of the assessee for the sake of argument, there was a statutory obligation embedded in the receipt itself to pay over the same to a duly constituted statutory authority and deduction on account of the same ought to have been allowed in computing the income of the assessee-company.

The learned counsel for the assessee submitted that the learned Commissioner (Appeals) disallowed the contribution to CPRA on the basis of authority given to Coal India Ltd. to draw any fund due from CPRA on behalf of its subsidiary concluding wrongly that the assessee had a right to receive back this amount standing to the credit of the CPRA.In this regard his contention was that the learned Commissioner (Appeals) read such authority given to Coal India Ltd. in isolation without considering the context in which the same was given to it. He contended that such powers were granted to CIL merely as a part of procedural aspect and the same did no, under any circumstances entitled the CIL or its subsidiaries to exercise lien over the contributions made to CPRA. He also submitted that the sums from CPRA accrued to the member companies on selling their products below retention price and only after such accrual that the money became due to them. He also submitted that the contributions to CPRA, on the other hand, became payable by the companies on their selling above the retention price and in such circumstances the contribution paid by the company went once for all. He, therefore, contended that what the member company received or was likely to receive subsequently had no linkage to the quantum of payment made in the earlier years and thus the same in no case could be considered as refund of contributions. Referring to a copy of letter dated 3-10-2002, placed at page Nos. 6.37 and 6.38 of his paper book, the learned counsel for the assessee submitted that the Ministry of Coal has subsequently lifted the price control in respect of the coal from 1-4-1996, and as a result of the same the assessee-company has neither paid any contribution to CPRA from financial year 1996-97 onwards nor has received any amount from CPRA so far.

The learned counsel for the assessee submitted that the question of allowability of expenditure on account of contribution to CPRA was examined by the Central Board of Direct Taxes and an instruction dated 27-12-1985, was also issued by it to the Ministry of Steel, Mines and Coal communicating that the contribution to CPRA is a deductible revenue expenditure. He also submitted that this view expressed by the Central Board of Direct Taxes was also brought to the notice of the learned Commissioner (Appeals), but he did not take cognizance of the same, which in fact was binding on him especially while exercising the powers of enhancement under section 251. He submitted that the decision of the Tribunal dated 4-11-1991, in the case of Western Coalfield Ltd. for assessment year 1983-84 on a similar issue was also cited before the learned Commissioner (Appeals), but the same was brushed aside by him without giving any cogent reason for distinguishing the same. He also pointed out that the department has not preferred a reference application against the said order of the Tribunal. Reliance was also placed by him on the decision of Honble Supreme Court in the case of Poona Electric Supply Co. v. CIT (supra) to contend that the excess amount payable to the government by the assessee in the form of contribution to CPRA cannot be considered as income of the assessee. He also submitted that the proceedings initiated under section 263 by the Commissioner in assessees own case for assessment year 1992-93 on a similar issue has been dropped on the basis of the aforesaid letter issued by the Central Board of Direct Taxes. He further submitted that the addition made on the similar issue by the assessing officer in assessees own case for assessment year 1993-94 has been deleted by the learned Commissioner (Appeals)-I, Raipur vide his order dated 14-10-1996. In view of this detailed submission made before us on this issue, the learned counsel for the assessee contended that the learned Commissioner (Appeals) was not justified in disallowing the expenditure claimed by the assessee on account of contribution to CPRA and urged that his impugned order on this issue be set aside.

The learned Departmental Representative, on the other hand, submitted that nowhere in the relevant order it has been clearly mentioned that the amount paid by the assessee-company towards contribution to CPRA was to be appropriated by the Coal India Ltd. on behalf of the Central Government. She submitted that, on the contrary, the scheme for the maintenance and operation of CPRA makes it abundantly clear that the CIL being a nominated authority for maintenance and operation of CPRA, was entitled to draw any fund therefrom only on behalf of its subsidiary. She contended that the amount paid to CPRA was, therefore, to be received back by the assessee when the retention price becomes higher than the corresponding sale price. Relying on the decision of Honble Supreme Court in the case of Indian Molasses Co. v. CIT (1959) 37 ITR 66 (SC), she contended that the "expenditure" primarily donates the idea of "spending" or "paying out" and, therefore, the same refers to something which is gone from assessees hands irretrievably. As regards the assessees emphasis on the Central Board of Direct Taxes letter dated 27-12-1985, she submitted that the said letter nowhere states to allow contribution made to CPRA as revenue expenditure and in any case the same being not a circular or instruction cannot be applied to all the collieries including the assessee-company universally. She also submitted that the case of Poona Electric Supply Co. v. CIT (supra) relied upon by the learned counsel for the assessee is distinguishable on facts because the excess amount collected by the assessee in that case was to be distributed in the form of rebate to the customers whereas in the instant case, it is only the assessee who was going to be benefitted by receiving back the amounts contributed to CPRA. She, therefore, contended that the contribution to CPRA cannot be considered as expenditure in computing the income of the assessee and the learned Commissioner (Appeals) was right in disallowing the same by invoking the enhancement power conferred on him under section 251.

We have considered the rival submissions and also perused the relevant material on record. We have also gone through the Colliery Control order issued by the Central Government in 1945 and the scheme formulated for the maintenance and operation of the Coal Price Regulation Account. It is observed that the learned Commissioner (Appeals) disallowed the deduction on account of contribution to CPRA mainly because he was of the opinion that the Coal India Ltd. being entitled to withdraw any fund from CPRA only on behalf of its subsidiaries, the assessee had a right to receive back the amount standing to the credit of CPRA in the case of change in situation, i.e., the retention price becoming higher than the corresponding sale price. On this basis, he came to a conclusion that the amount contributed by the assessee to CPRA did not go irretrievably from the assessees hand and relying on the decision of Honble Supreme Court in the case of Indian Molasses Co. (P) Ltd. v. CIT (supra) he declined to treat the same as expenditure in computing the income of the assessee.

To arrive at this conclusion, he also derived support from the fact that nothing was specifically prescribed in the relevant Act authorizing the CIL to appropriate the amount standing to the credit of CPRA on behalf of the Central Government. In this context, it is relevant to find out the exact nature and purpose of maintaining the CPRA and the procedure laid down by the Central Government for operation of the same. It is observed that the scheme of CPRA has been laid down in clause 4B of the Colliery Control Order, 1945 and the said clause as it appears in the copy of the said order placed in assessees paper book at page No. 6.16 to 6.24 is extracted below : "4-B(1). The Central Government may specify any person or authority including a government company who shall maintain an account to be called the Coal Price Regulation Account.

(2) Where the retention price of any class, grade or size of coal or coke fixed under clause 4-A for any colliery owner is lower than the corresponding sale price fixed under clause 4 for such class, grade or size of coal or coke such colliery owner shall, as soon as, may be, after each sale, and in any case not later than such period, as may be specified in this behalf by the Central Government, pay into the Coal Price Regulation Account, an amount equivalent to the difference between retention price and the sale price in respect of each tone of coal or coke sold by him.

(3) Where the retention price of any class, grade or size of coal or coke fixed under clause 4-A for any colliery owner is higher than the corresponding sale price fixed under clause 4 for such class, grade or size of coal or coke, such colliery owner shall be paid from the money standing to the credit of the Coal Price Regulation Account an amount equivalent to the difference between the retention price and the sale price in respect of each tonne of coal or coke sold by him.

(4) The expenses for administration, if any, of the Coal Price Regulation Account shall be paid from the money standing to the credit of the said account. " The "retention price" envisaged in the above clause is defined in clause 2(5A) as the price fixed by the Central Government in respect of each colliery owner per tonne oil each grade or size of coal and coke produced and sold by such owner. Further, the government is also authorized having regard to all the relevant factors, including the geological and mining condition of and the mining technology employed in the collieries by the colliery owners as well as the estimated cost of production of coal and coke produced by such colliery owner to fix by notification in the official gazette the retention price in respect of each class, grade or size of coal and coke produced and sold by such colliery owner. Accordingly, notifications were issued by the Central Government from time to time fixing the retention price and the copies of such notifications issued during the relevant period are placed in assessees paper book at page Nos. 6.25 to 6.31.

From a perusal of clause No. 4B of the CCO reproduced above, it is evident that any colliery owner charging/collecting higher sale price than the retention price fixed by the Central Government was required to pay into the CPRA an amount equivalent to the difference between the retention price and the sale price in respect of each tonne of coal or coke sold by him as per sub-clause (2) of the said clause. On the other hand, the colliery owner charging/collecting lower sale price than the retention price fixed by the Central Government was entitled for a payment from the money standing to the credit of CPRA of an amount equivalent to difference between the retention price and the sale price in respect of each tonne of coal or coke sold by him as per sub-clause (3) of the said clause. It is thus clear that the colliery owner in the eventuality specified in sub-clause (3) of clause 4-B was entitled to receive the amount from consolidated CPRA fund even in the absence of having made any contribution to CPRA earlier. As a matter of fact, the said account was maintained as a consolidated fund with no separate accounts of each colliery and the colliery owner in the circumstances covered in sub-clause (3) was being paid from the money standing to the credit of the consolidated amount without having any reference whatsoever to the credit standing in its own name. On the other hand, the colliery owner in the circumstances specified in sub-clause (2) of clause 4-B was required to pay the necessary contribution to the credit of the consolidated fund in CPRA which was never credited to its individual account and it had no right whatsoever to claim the refund/repayment of the said amount unless and until he comes across the situation mentioned in sub-clause (3). It is pertinent to note here that if the eventuality specified in sub-clause (3) does not arise at all in the case of a colliery, it was not entitled for the withdrawal of any amount from CPRA despite having made substantial contribution earlier. It is thus clear that the liability to pay into the CPRA was distinct and separate from the entitlement to receive money from the CPRA inasmuch as these two events/incidents were mutually exclusive and the mere fact that contribution had already been made to CPRA did not give rise to an entitlement to receive the said amount already contributed. Obvious as it is, the amount paid to the CPRA went irrevocably and irretrievably from the hands of the assessee and this being so, we find it difficult to concur with the view taken by the learned Commissioner (Appeals) relying on the decision of Honble Supreme Court in the case of Indian Molasses Co. Ltd. v. CIT (supra) that the said outgoing cannot be considered as expenditure.

The other reason given by the learned Commissioner (Appeals) to disallow the impugned amount is that the CIL was not authorized to appropriate the amount standing to the credit of CPRA on behalf of the Central Government and in fact it was entitled to draw any fund from CPRA only on behalf of its subsidiaries. In this regard, it is observed that the Central Government very much had a control over the administration of CPRA and as a matter of fact the maintenance and operation of the said account was governed by the scheme formulated by Central Government itself. As regards the observation of the learned Commissioner (Appeals) that the CIL who was appointed to administer the CPRA was authorised to draw any fund from the CPRA only on behalf of the subsidiaries and the assessee-company being a subsidiary of CIL, had retained its right to receive contribution amount back to CPRA. To appreciate the exact factual position in this regard, a useful reference may be made to the scheme formulated by the Central Government for the maintenance and operation of the CPRA and especially clauses 7 and 8 of the said scheme which are extracted below from the relevant document placed in assessees paper book at pages 6.33 to 6.35 : "Immediately after submission of the statement referred to in para 6, in any case within 60 days of the close of the month to which it pertains, the companies who will be required to contribute to the account will remit the amount as per the statement referred to in para 6 by a demand draft or cheque payable at Calcutta drawn in favour of CPRAU CIL. The Coal India may pay the amount due to CPRAU on behalf of the subsidiary.

On realization of the amount due from the company, CPRAU will arrange payment to the companies which it is due, in any case within 90 days from the close of the month to which the payment is due as per the statement referred to in Para 6. This would be subject to the availability of credit to the required extent in the CPRA, The Coal India may draw any fund due from the CPRAU on behalf of the subsidiary." From the perusal of the aforesaid clauses, it is apparent that the CIL who was entrusted with the responsibility of opening and maintaining of CPRA was given the authority to collect and deposit the proceeds received from the collieries in pursuance of clause 4-B(2) of the Colliery Control Order, 1945, and it was also authorized to draw any fund due from the CPRA on behalf of the subsidiary who was entitled to receive money from CPRA in terms of clause 4-B(3) of the said order. It is thus clear that the authority to receive and deposit the amount in CPRA on behalf of subsidiary as well as to withdraw any fund from the said account on behalf of the subsidiary was given to CIL by the Central Government of India in pursuance of the said scheme just to facilitate the operation of the said account in accordance with the provisions of the Colliery Control Order, 1945. It appears that the learned Commissioner (Appeals), however, could not fully appreciate the specific procedure prescribed in the scheme and proceeded to draw an adverse and incorrect inference reading clause Nos. 7 and 8 of the scheme in isolation ignoring entirely the fact that the said scheme was formulated by the Central Government in pursuance of the Colliery Control order to achieve the objectives and purpose specified therein.

It is worthwhile to note here that a similar issue came up for consideration before this Bench in the case of Western Coalfields Ltd. and vide its order dated 4-11-1991 (copy placed in assessees paper book at page No. 6.46 to 6.65), the Tribunal upheld the order of the learned Commissioner (Appeals) allowing deduction on account of contribution paid to CPRA. Moreover, in assessees own case for assessment year 1992-93, the proceedings initiated under section 263 by the Commissioner, Jabalpur (M.P.), were subsequently dropped keeping in view the letter dated 27-12-1985, issued by the Central Board of Direct Taxes (supra) treating the contribution to CPRA as revenue expenditure allowable under the Income Tax Act. Furthermore, the learned Commissioner (Appeals)-I, Raipur, vide his order dated 14-10-1996, also deleted the addition made by the assessing officer on a similar issue in assessees case for assessment year 1993-94 and although the reassessment proceedings had been initiated under section 148 for assessment years 1989-90 and 1990-91 on the basis of this issue, no additions in respect of the same were made by the assessing officer while completing the reassessment under section 147. As such, considering all the facts and circumstances of the case and in view of the reasons given hereinabove, we are of the considered opinion that the contribution paid by the assessee-company to CPRA was a statutory liability incidental to its business and the deduction in respect of the same was allowable in computing its total income. In that view of the matter, we set aside the impugned orders of the learned Commissioner (Appeals) on this issue and direct the assessing officer to allow the said deduction to the assessee.

Before we part with this issue, we may as well consider the other contention raised by the learned counsel for the assessee before us relying on the decision of Honble Supreme Court in the case of CIT v.Shitaldas Tirathdas (supra), that the difference between the selling price and the retention price was collected by the assessee-company merely as an agent of Central Government and the said difference, in truth, having never reached the assessee-company, it was a case of diversion of income by an overriding title. In this regard, we may observe that the assessee-company, as discussed above, was under an obligation to pay the said excess amount to CPRA in accordance with the specific provisions contained in the relevant statute. However, the mere existence of such obligation to pay the said amount is not enough for the application of the rule of diversion of income by an overriding title. The true test for applicability of the said rule is whether such obligation is in the nature of a charge on the source, i.e., the profit-earning apparatus itself and only in such cases where the source of earning income is charged with an overriding title, the same can be considered as diversion of income by overriding title. The true test for the application of the rule of diversion of income by an overriding title has been explained by the Supreme Court in CIT v. Shitaldas Tirathdas (supra) cited by the learned counsel for the assessee as follows : "In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income.

Obligations, no doubt, there are in every case, but it is the nature of the obligation, which is the decisive fact. There is a difference between an amount, which a person is obliged to apply out of his income and an amount, which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible, but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequences, in law, does not follow. It is the first kind of payment, which can truly be excused, and not the second. The second payment is merely an obligation to pay another a portion of ones own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable." In the present case, it is observed that such excess amount was received by the assessee-company as a part of sale proceeds from its customers which constituted its trading income at the point when it reached or accrued to the assessee and only after it reached to the assessee, the same was paid over to CPRA as per the requirement to discharge the statutory liability. In the case of CIT v. Imperial Chemical Industries (India) (P) Ltd. (1969) 74 ITR 17 (SC), the Honble Supreme Court has held that an obligation to apply income which has accrued or arised or has been received, amounts merely to the application of income. In the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (supra), the Honble Supreme Court has observed that the tax is attracted at the point when the income is earned and the taxability of income is not dependent upon its destination or manner of its utilization. As such, considering the facts of the case and keeping in view the aforesaid decisions of Honble Supreme Court, we are of the opinion that the payment of contribution by the assessee-company to CPRA does not amount to diversion of income by overriding title and the same was merely an application of the income earned by the assessee.

The next issue relating to the disallowance of provision made by the assessee on account of deterioration of closing stock, rehandling charges and slow moving items, etc., has been raised by the assessee in the following grounds : At the time of hearing before us, the learned counsel for the assessee submitted that this issue in fact was set aside by the learned Commissioner (Appeals) to the assessing officer for reconsideration and the same having been already decided in favour of the assessee by the assessing officer in the set aside proceedings, the assessee is not interested in pressing the above grounds. Accordingly, these grounds raised by the assessee are dismissed as not pressed.

The next issue relating to action of the assessing officer in treating the amount collected from employees towards pension fund and interest due thereon as income of the assessee and the action of the learned Commissioner (Appeals) in sustaining the same is raised in the following appeals : Under the head other liabilities and provisions in the balance sheet, the assessee-company had shown, inter alia, a liability on account of pension fund. It was noticed by the assessing officer that addition on account of this liability has been made in the assessees case for assessment year 1991-92 for the detailed reasons given in the order of assessment dated 30-3-1994, which were as follows : The nature of the same was enquired into and it was explained by the authorised representative vide order sheet entry dated 30-3-1994. that the pension fund has been created by the company by way of the deduction from the gross emoluments of the employees at the rate of 2 per cent in terms of the agreement with National Wage Board and CIL, the holding company of the assessee. The purpose of the same was given to be setting up of a scheme for that purpose.

However, no copy of agreement or for that matter the minutes of the meeting giving out the modalities of the said scheme placed on record.

But it has been informed that no scheme has yet been set up till date and this deduction in the name of pension fund is continued to be collected as aforesaid. Under such circumstances the fate of such money, which is in the hands of the company and is used by it is quite uncertain. Since no scheme for pension has yet been formulated and otherwise also for the present it is not known whether in advance of the scheme the money would be refunded to the respective employees with or without interest. It is quite likely that out of the huge strength of employees, a substantial number might have left the organization and deduction made from their emoluments is therefore, not capable of freely dispatching to the concerned employees even in the event of such remittances. The sum so collected has been given to be for two years, i.e., for financial years 1989-90 and 1990-91 and further two financial years have passed viz., 1991-92 and 1992-93 and still no step in the direction of setting up of the scheme have been stated to have been taken, goes to show that the funds so collected continues to be remained with the company for its gainful utilization, the manner it prefers based on its policy in this regard. This being the position, I see no reason as to why this collection in the hands of the company free from all liabilities at the moment should not constitute an income so far as the levy of income-tax as per Income Tax Act, 1961, is concerned. The simple definition of income as enshrined in the Act renders it the character of income and assessable as such. Since the amount of Rs. 8,27,58, 108 even though has been given under residuary head of other liabilities in the manner stated above but the nature of liability for want of any express understanding about refundability can safely been said to be the liability to none, and therefore, assessable as such. " Keeping in view the aforesaid reasons given in assessment year 1991-92 and also considering that the status of the fund has continued to be the same in the years under consideration, the assessing officer proceeded to treat the said amount collected towards pension fund as income of the assessee and also disallowed the assessees claim for deduction on account of interest payable thereon. The matter was carried before the learned Commissioner (Appeals) who found that a similar issue has already been decided by the Commissioner (Appeals), Raipur, by his order, dated 29-12-1995, for assessment year 1991-92 in the case of the assessee and for the following reasons given in the said order, he confirmed the disallowance made by the assessing officer on this count : "There is merit in the submission on behalf of the appellant that the employees voluntarily contributed 2 per cent of their salary in pursuance of the National Coal Wage Agreement. The appellant company held the amount in trust as a deposit. Since no fund was created there was no question of crediting the accounts of the employees in the fund by the due date. A chart was also filed to show that in various financial years from 1991-92 to 1994-95 refunds from the collections so made from the employees were given to employees who had left the organization. However, the fact remains that the provisions of section 2(24)(x) are applicable and in view of the express provisions of the said section mentioned above in detail the appellant would not be entitled to relief. The addition of Rs. 4,50,00,000 is thus confirmed." The learned counsel for the assessee submitted before us that the amount collected from employees towards pension funds from financial year 1989-90 was treated as income of the assessee-company under section 2(24)(x) since the same could not be deposited in the pension fund, which was pending finalisation, by the Government of India. In this regard, he contended that a significant and turning event has taken place in the financial year 1997-98 when the Coal Mines Pension Scheme, 1998, was formulated vide Notification No. G.S.R. 123E, dated 5-3-1998, in exercise of the power conferred under 3E of the Coal Mines Provident Fund and Miscellaneous Provision Act, 1948. He submitted that the said scheme came into force from 31-3-1998, vide Notification No.S.O. 233(E) dated 20-3-1998. He drew our attention to the copy of the said scheme placed in his paper book at page No. 12.5 to 12.16 especially to clause No. 7(3) contained therein to show that the amount of initial contributions collected by the assessee-company up to 31-3-1998, was payable to the fund within a period of 120 days from the setting up of the fund, i.e., before 29-7-1998. According to him, the due date for payment of contribution to the pension fund which had already been collected but not remitted to the pension fund was specified as 29-7-1998, i.e., 120 days from 31-3-1998, under the scheme itself. Referring to a statement showing year-wise details of pension fund and interest thereon placed in his paper book a page No. 12.17, he pointed out that the entire amount collected during the years under consideration and interest thereon shown under the head other liabilities was paid by the assessee-company to the said fund prior to 29-7-1998, itself. He contended that all these relevant fresh facts were made available before the learned Commissioner (Appeals) at the time of hearing before him, but he did not take the same into consideration and proceeded to follow the decision of his predecessor given in his order dated 12-12-1995, for assessment year 1991-92 when the aforesaid details were not available before him.

As regards the addition made on this issue under section (24)(x), he submitted that the deeming provisions defining income under that section purports to bring within the definition of expression "income" the contribution made by employees of the assessee to a provident fund, superannuation fund or fund set up under Employees State Insurance Act or in other fund for the welfare of such employees. His contention was that the pension fund as set out above was created only on 31-3-1998, and as such the same in fact was not in existence in law up to financial year 1996-97. He, therefore, contended that the contribution collected in these years from workers were only in the nature of trust receipts. According to him, since formalities for creating pension fund took over 7 years, it was not practicable for the assessee to expect the poor workers to contribute the arrears of 7 years in one lump sum in the year in which the pension fund was formally created. He contended that the assessee, therefore, resorted to collect the amounts from each employee in order to spread over their burden and kept such collections to the credit of each employee. He also contended that the employees who retired during the intervening period, i.e., from the date of collection up to the date of formal setting up of the fund, were paid the amount collected from them towards pension fund together with interest thereon. He contended that a fiction has been created under section 2(24)(x) to treat certain amounts as income and such legal fiction according to accepted principles of jurisprudence has to be carried to its logical conclusion. In this regard, his contention was that the collection from the workers cannot be treated as a sum received by the assessee from his employees as contribution to a fund for welfare of such employees in the absence of any formal pension fund and, therefore, the same cannot be classified as income under section 2(24)(x). He submitted that till the time the pension fund scheme came into force and implemented, the assessee-company collected the contributions from its employees and the same was retained in the capacity of a custodian of the said funds. According to him, the disallowance on this count was even not warranted under the provisions of section 43B as the amount collected towards the pension fund was paid along with interest within the statutory date prescribed under the pension scheme.

Referring to the principle of abrogated decision given in Salmonds Book on Jurisprudence that a decision ceases to be a binding if a statute or statutory rules inconsistent with it is subsequently enacted, he emphasized that a significant event of creation of pension fund in the financial year 1997-98 in the present case had abrogated the decision given by the learned Commissioner (Appeals) in assessment year 1991-92 and the learned Commissioner (Appeals) was not justified in following the same while deciding a similar issue vide his impugned orders. To summarise his arguments on this issue, the learned counsel for the assessee contended that in the absence of any formal pension fund, the collections from workers cannot be said to be contributions to a welfare fund so as to attract the provisions of under section 2(24)(x).

His contention was also that the entire amount collected towards pension fund having been paid by the assessee-company finally within the due date prescribed in the relevant scheme, the provisions of section 36(1)(va) stood satisfied and, therefore, deduction under that section, in the alternative, ought to have been allowed against the amount so collected towards pension fund when the same was treated as income of the assessee under section 2(24(x).

The learned Departmental Representative, on the other hand, submitted that the assessees plea that the collection of contribution was in the nature of trust receipt cannot be accepted because a mere assertion by the assessee does not create a trust. She contended that no formalities for creation of trust were observed by the assessee and though the pension fund created subsequently was optional, the assessee did not file any details regarding the employees opting for the scheme, the contribution of the employer and the payment of such contribution. She contended that the subsequent action on the part of the assessee to deposit the said amount in pension fund is not relevant for the purpose of allowing deduction in respect of the same for the years under consideration and the authorities below were right in disallowing the claim of assessee for deduction on this count. She also contended that the assessees alternative plea that no disallowance is warranted even under section 43B as the amount collected from employees was finally deposited with the pension fund within the prescribed period is also not relevant in the context of years under consideration because the pension fund was not in existence at the relevant time and the question of its payment within due date does not arises at all.

We have considered the rival submissions and also perused the relevant material on record. It is observed that the assessee-company collected by way of deduction from the salary of the employees a contribution at the rate of 2 per cent of the gross emoluments towards pension fund in terms of the agreement with National Wage Board and CIL, the holding company of the assessee. The purpose of the same was stated to be for setting up a scheme of pension fund. The assessee-company continued to collect such contribution from financial year 1989-90 to 1997-98 but the fund was finally and formally set up only on 31-3-1998. In the absence of the formal fund, the assessee retained the amount of contribution collected from the workers towards the said fund with it.

The revenue authorities treated this amount appearing under the head "other liabilities" as income of the assessee under the provisions of section 2(24)(x) and made the addition to the total income of the assessee in respect of the same. Before us, the learned counsel for the assessee has contended that as the pension fund was not formally set up at the relevant time, the collection from the workers could not be treated as a sum received by the assessee from his employees as a contribution to a fund for welfare of such employees so as to attract the provisions of section 2(24)(x). In this regard, it is worthwhile to refer to the provisions of the said section which are reproduced below : "any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set under the provisions of the Employees State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees." From the perusal of the aforesaid section, it is evident that the said section does not cover within its ambit only the formal or approved funds. As a matter of fact, the expression "any other fund for the welfare of such employees" used in the said section abundantly makes it clear that the provisions are inclusive and do not contemplate only the formal or approved funds. We, therefore, find no merits in the contention of the learned counsel for the assessee and hold that there was no infirmity in the action of the authorities below in treating the amount received by the assessee-company from it employees towards pension funds as its income in terms of the provisions of section 2(24)(x).

However, we are also of the view that, at the same time, the said amount ought to have been considered as an allowable item by them as per the provisions of clause (va) of section 36(1) if the amount so collected by the assessee-company had been paid to the credit of the said fund within the due date specified in the relevant statute. In this regard, it is observed that the pension fund was formally set up under the scheme known as "Coal Mines Pension Scheme, 1998" formulated by the Central Government vide Notification dated 30-3-1998. As per section 3(c) of the said scheme, the pension fund consisted of, inter alia, an amount equivalent to 2 per cent of salary of the employees from the 1-4-1989, or the date of joining, whichever is later, up to the 31-3-1996, and 2 per cent of the notional salary of the employees from 1-4-1996, or the date of joining whichever is later, which was to be transferred by the employer from the salary of the respective employees. As regards the payment of the said amount mentioned in section 3(c), it was provided in section 7(3) of the said scheme that the said amount which had already been deducted in part or in full but not remitted to the authorized officer on or before the appointed day, shall be remitted to the authorized officer within a period of 120 days from the appointed day and an interest of 12 per cent per annum accrued on such amount as on the approved day shall have also to be remitted by the employer to the authorized officer. As per the clause 1(2) of the said scheme, the said scheme was to come into force from such date as the Central Government may by Notification in the Official Gazette appoint and vide Notification No. S.O. 233(E), dated 20-3-1998, the Central Government appointed the 31-3-1998, as the date on which the said scheme came into force. It is thus clear that the due date by which the assessee-company was required to credit the amount received from its employees towards contribution to pension fund was 29-7-1998, i.e., 120 days from the date of setting up of the fund, i.e., 31-3-1998, as provided in the said scheme itself. As per the provisions of clause (va) of section 36(1), the deduction in respect of any amount received by the assessee from any of his employees to which the provisions of sub-clause (x) of section 2(24) apply is admissible if such sum is credited by the assessee to the employees account in the relevant fund on or before the due date specified under the relevant Act, rule or Notification issued under the relevant scheme or under any standing order, award, contract of service or otherwise. In the present case, as already mentioned, such due date was 29-7-1998, for payment of contribution collected by the assessee-company from its employees during the years under consideration and as the assessee had paid the entire amount collected from its employees together with interest thereon to the credit of the said fund prior to 29-7-1998, we are of the opinion that the assessee should get the benefit of deduction under section 36(1)(va).

It is true that the fund was not formally set up at the relevant time and in the absence of the same, the due date as envisaged in section 36(1)(va) was also not known either to the assessee or to the concerned revenue authorities in order to allow the deduction under that section at the relevant time. However, this factual position emerging on the setting up of formal pension fund in the year 1998 was specifically brought to the notice of the learned Commissioner (Appeals) but he proceeded to follow the order of his predecessor in assessees own case for assessment year 1991-92 without giving undue consideration to this relevant aspect brought to his notice on behalf of the assessee. As a matter of fact, the position regarding the setting up of the formal fund as well as the due date specified therein was not before the learned Commissioner (Appeals) while passing the appellate order in assessees case for assessment year 1991-92 and the successor learned Commissioner (Appeals) was not justified in following the decision of his predecessor on this issue which had become inapplicable to the assessees, case for the years under consideration due to the material change in the relevant facts of the case.

The learned counsel for the assessee has contended before us that the decision of the learned Commissioner (Appeals) for assessment year 1991-92 on which reliance was placed by the learned Commissioner (Appeals) while deciding this issue for the years under consideration had become abrogated and lost its binding nature. In this regard, we may observe that the principle of abrogated decision is applicable only where a decision ceases to be binding by the process of law itself with contrary enactment brought into the relevant statute having the effect of nullifying the said decision. In the present case, there was merely a significant change in the material and relevant facts concerning the issue rendering the earlier decision given by the learned Commissioner (Appeals) in assessment year 1991-92 inapplicable to the years under consideration.

It is true that the said significant change came into existence only after a lapse of a period of about 9 years and in the absence of the same, the revenue authorities have no option but to continue to treat the amount, collected by the assessee-company towards contribution to pension fund as income under section 2(24)(x). However, at this juncture, when the facts have become clear and are available on record, one should attempt to have a practical approach to the matter and to look at the issue in the context of the intention of the legislature in enacting the relevant provisions of law. The intention of enacting the provisions of clause (va) of section 36(1) as given in clause 12,1 of the Explanatory Note on the provisions of the Finance Act, 1987, are extracted below : "12.1. The existing provisions provide for a deduction in respect of any payment by way of contribution to a provident fund of superannuation fund or any other fund for welfare of employees in the year in which the liability is actually discharged (section 43B). The effect of the amendment brought about by the Finance Act, 1987, is that no deduction will be allowed in the assessment of the employer(s) unless such contribution is paid to the fund on or before the due date.

Due date means the date by which an employer is required to credit the contribution to the employees account in the relevant fund under the provisions of any law or term of contract of service or otherwise." In the present case the assessee had collected contributions from the employees with the bona fide intention of spreading over the employees burden towards the payment of such contribution and the amount so collected was retained by the assessee-company separately and interest thereon was also duly provided on yearly basis. The bona fide intention of the assessee-company also becomes clear from the fact that the employees who retired during the intervening period, i.e., from the date of collection of the contribution to the date of formal setting up of the fund, were paid their dues on account of amount contributed together with interest thereon. The facts of the present case also make it clear that it was not possible for the assessee-company, in the absence of existence of a formal fund, to pay the amount of contribution so collected and since the pension fund was to be set up by the Central Government, this act was also beyond the control of the assessee-company. It is a general rule, which admits of ample practical illustration, that Impotentia excusat legem, where the law creates a duty or charge and the party is disabled to perform it, without any default in him, and has no remedy over there the law will in general excuse him and though impossibility of performance is in general no excuse for not performing an obligation which a party has expressly undertaken by contract, yet when the obligation is one employed by law, impossibility of performance is a good excuse. The same principle has been explained in Craies on Statute Law (6th Edn. p. 268) as follows : "Under certain circumstances compliance with the provisions of statute which prescribes how something is to be done will be excused. Thus in accordance with the maxim of laws the lex non cogit ad impossivilia, if it appears that the performance of the formalities prescribed by a statute has been rendered impossible by circumstances over which the persons interested had no control, like the act of the God or the Kings enemies, these circumstances will be taken as valid excuse." Keeping in view the above legal position as well as taking a circumspect view of the matter on hand, we are of the opinion that the provisions of section 2(24)(x) read with section 36(1)(va) should be interpreted liberally keeping in view the principle of equity as well as the legislative intention behind enacting such prohibitory provisions. In that view of the matter as well as for the reasons given hereinabove, we hold that when the amount collected by the assessee-company from its employees towards the pension fund was treated as income under section 2(24)(x), the assessee having actually made the payment of the said amount to the credit of the said fund within the due date, should be given the benefit of deduction of the said amount under clause (va) of section 36(1). We, therefore, direct the assessing officer to allow the deduction in respect of the same under section 36(1)(va).

In view of the foregoing discussion made and observations given by us on the issue of pension fund and taking into consideration the fact that the amount collected by the assessee-company from its employees on account of contribution towards pension fund was retained in the business till it finally paid into the pension fund along with the interest due thereon as per the scheme formulated by the government, we find no justification in the assessing officers action in disallowing the deduction on account of the said interest payable by the assessee-company on the pension fund amount. The impugned order of the learned Commissioner (Appeals) upholding the said action of the assessing officer is, therefore, reversed and the assessing officer is directed to allow the deduction to the assessee on this count.

The next issue relating to the disallowance of expenditure incurred by the assessee on account of payment made to State Government and for rehabilitation of people for use of land for the purpose of mining is raised by the assessee in the following appeals : During the relevant previous years, the assessee-company spent substantial amount on account of payment to the State Government and for rehabilitation of villages in the course of obtaining use of land for its business purposes. This amount was capitalized by the assessee in its books of account under the head "leasehold land", but for the purpose of computing income under the Income Tax Act, the same was claimed as revenue expenditure. When the assessee-company was called upon by the assessing officer to explain the position, it was submitted on behalf of the assessee-company that the said expenditure has been incurred towards amount payable to State Government and for rehabilitation of people in the course of obtaining use of land for mining purposes for limited period. The nature of the said expenditure was explained as akin to fees for use of land for mining and the amount paid for relocation of the residents occupying/owning the land was stated to be for getting the said land for the purpose of mining.

Reliance was also placed on the decision of Honble Supreme Court in the case of Empire Jute Co. Ltd. v. CIT (supra) to contend that the said amount paid for enabling mining activities is revenue in nature since no asset of enduring benefit was brought into existence. Reliance was also placed on the decision of Honble Supreme Court in the case of Alembic Chemical Works Co. Ltd. v. CIT (1989) 177 ITR 377 (SC) while contending that the rehabilitation expenditure having been incurred in the course of expansion of existing business is revenue in nature. The assessing officer, however, found both these decisions cited by the assessee-company before him to be distinguishable on facts for the reason given in para No. 5(b) of his order for assessment year 1994-95.

The assessing officer also found that the decision of Honble Supreme Court in the case of R.B. Seth Moolchand Suganchand v. CIT (1972) 86 ITR 647 (SC) is squarely applicable to the facts of the assessees case and following the same, he treated the said expenditure incurred by the assessee on rehabilitation as capital in nature. Accordingly, he disallowed the deduction claimed by the assessee on this count. For this conclusion, he also derived support from the decision of Honble Mysore High Court in the case of N. Peer Sahib v. CIT (1964) 54 ITR 681 (Mys) of Honble Supreme Court in the case of Assam Bengal Cement Co.

Ltd. v. CIT (1955) 27 ITR 34 (SC) and of jurisdictional High Court of Madhya Pradesh in the case of CIT v. Project Automobiles (1987) 167 ITR 781 (MP) and of Honble Calcutta High Court in the case of Chloride India Ltd. v. CIT (1981) 130 ITR 61 (Cal). The matter was carried before the learned Commissioner (Appeals) who upheld the order of the assessing officer relying on the decision of Honble Supreme Court in the case of State Bank of Travancore v. CIT (supra) which was also followed by the Honble Calcutta High Court in the case of CIT v. UCO Bank (supra) while holding that the assessee cannot be permitted to follow different method for income-tax purposes from the one followed in his books of account. The learned Commissioner (Appeals), therefore, held that the assessee-company having capitalized the said expenditure in its books of account, cannot treat and claim the same as revenue expenditure for income-tax purposes. He also relied on the decision of Honble Supreme Court in (1972) 86 ITR 647 (SC) (supra) referred to by the assessing officer in his order and confirmed the disallowance made by the assessing officer on this count.

The learned counsel for the assessee submitted before us that the expenditure was incurred by the assessee-company for obtaining use of land for a limited period and it did not become the owner of the land by spending the said amount. He submitted that the land was acquired on lease for a period not exceeding 30 years and the assessee enjoyed only the exraction rights in respect of the said land as set out in the model form of lease deed furnished at page Nos. 14.8 to 14.16 of his paper book. He further submitted that with a view to enable the assessee-company to build office complex, health centers for employees, etc., payment was made to the State Government for obtaining the surface right for the balance period of lease with regard to the leasehold land. He further submitted that to enjoy the surface right so acquired in respect of the leasehold land for the unexpired period of the lease, the assessee-company incurred expenditure to rehabilitate the villages existing on the said land and for this purpose, new villages were set up in order to relocate the occupants. He submitted that the assessee-company has not acquired any ownership rights in respect of the villages newly set up and, therefore, no new asset of enduring nature belonging to the assessee has come into existence as a result of such expenditure. He submitted that these amounts were spent by the assessee for enabling the extraction of coal and the same being the end product of the assessees business, the expenditure incurred for obtaining the coal should be allowed as revenue expenditure. He submitted that the assessing officer was of the opinion that the said expenditure has been incurred by the assessee for enlarging its profit-making apparatus which in fact was incurred by the assessee just to enable it to carry on the mining activity for a limited period of time. He submitted that the expenditure in question is in the nature of a charge for using the land rather than exploitation of the same and, therefore, the assessing officer was not justified in treating the same as capital expenditure.

As regards the reliance placed by the department on the decision of Honble Supreme Court in the case of Assam Bengal Cement Co. (supra), he contended that the expenditure in that case was incurred by the assessee to ward off competition whereas in the present case the expenditure has been incurred for use of land as well as to rehabilitate the villagers. He also tried to distinguish the case of N.Peer Sahib v. CIT (supra) relied upon by the assessing officer stating that the expenditure in that case was incurred at the beginning of the mining operation whereas in the present case the same has been incurred during the currency of the lease period. He further submitted that the other decisions relied upon by the assessing officer are also distinguishable on facts and drew our attention to page No. 14.3 of his paper book to print out the distinguishable features. As regards the decision of Honble Supreme Court in the case of R.B. Seth Moolchand Suganchand v. CIT (supra) on which heavy reliance was placed by the authorities below, the learned counsel for the assessee contended that the said decision has been distinguished by the Honble Apex Court in the case of Bikaner Gypsum Ltd. v. CIT (1991) 187 ITR 39 (SC) wherein it was held that the expenditure incurred to relocate a railway line under the terms of the lease is a revenue expenditure. He also placed strong reliance on the decision of Honble Madhya Pradesh High Court in the case of R.J. Trivedi (HUF) v. CIT (1987) 166 ITR 856 (MP) wherein it was held by the Honble Jurisdictional High Court that the expenditure incurred for removing obstruction in the course of mining operation is a revenue expenditure. He contended that the expenditure incurred for rehabilitating the people in the present case is akin to removal of obstruction in the course of mining operation and, therefore, the decision of Honble Madhya Pradesh High Court in the case of R.J. Trivedi (supra) is directly applicable, Relying on the decision of Honble Supreme Court in the case of Kedarnath Jute Manufacturing Co.

Ltd. v. CIT (supra) and Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (supra), the learned counsel for the assessee contended that the entries in the books of account made by the assessee are not conclusive to decide the nature of expenditure for the purpose of Income Tax Act.

He submitted that the impugned expenditure was incurred by the assessee to facilitate its mining operations and although the advantage procured as a result of the same was of enduring nature, the same being in the revenue field, the same ought to have been allowed by the revenue authorities while computing the income of the assessee. In support of this contention, he placed reliance on the decision of Honble Kerala High Court in the case of Plantation Corporation of Kerala v. Commr. of Agrl. (1994) 205 ITR 364 (Ker) and that of Honble Supreme Court in the case of Empire Jute Co. v. CIT (supra). Reliance was also placed by him on the decision of Honble Supreme Court in the case of CIT v. Auto Service (P) Ltd. (1998) 233 ITR 468 (SC) to contend that the expenditure incurred by the assessee was only to obtain the business advantage and there being no ownership right acquired by the assessee in the resultant asset, the expenditure was allowable as a revenue expenditure. He, therefore, urged that the disallowance made by the revenue on this count treating the expenditure as capital expenditure may be deleted.

The learned Departmental Representative, on the other hand, submitted that the surface rights were obtained by the assessee for the purpose of building office premises and the same were not directly connected with the mining activities of the assessee-company. She submitted that the said rights were acquired by the assessee-company for considerably long period and thus the assessee had clearly acquired the enduring benefits from the same. She submitted that the duration of lease in the present case is the same to that in same. She submitted that the duration of lease in the present case is the same to that in the case of CIT v. Project Automobiles (supra) wherein it was held that the premium paid for obtaining the lease rights in the land is capital in nature. She submitted that the decisions in the cases of Chloride India Ltd. and CIT v. Lucky Bharat Garage (1988) 174 ITR 526 (MP) are also applicable to the facts of the present case as the lease rights acquired in the present case are definitely for a long period and the right to possession is also obtained by making payment for rehabilitation of the occupants. She contended that the case of Bikaner Gypsums Ltd. (supra) relied upon by the learned counsel for the assessee is clearly distinguishable on facts since the expenditure in that case was incurred to relocate a railway line whereas in the present case the assessee-company has acquired surface rights as well as right to possession in respect of the same from the occupants for the purpose of construction of utility buildings. She contended that similarly in the case of R.J. Trivedi (supra) relied upon by the assessee, expenditure was incurred for removing the obstruction in the course of mining operation, which is not the fact in the present case.

She further contended that the case of Gotan Lime Syndicate v. CIT (1966) 59 ITR 718 (SC) is also out of context as the expenditure incurred by the assessee in that case was related to the raw material whereas in the present case the expenditure has been incurred to acquire the surface rights. She submitted that the assessee in the present case has acquired the surface rights and right to possession under a lease in respect of a land and, therefore, the decision of Honble Supreme Court in the case of Madras Auto Services (P) Ltd. (supra) involving the advantage of lower or concessional rate cannot be extended to the instant case. She contended that in the case Empire Jute Co. Ltd. (supra) the advantage was acquired merely for facilitating the assessees trading operations leaving the fixed capital untouched and, therefore, the same is also distinguishable from the present case wherein the surface rights have been acquired for the purpose of construction of utility building. She, therefore, submitted that all the cases relied upon by the assessee are distinguishable and considering that the expenditure in the present case was incurred by the assessee for acquiring the surface rights in the land for long-term, the authorities below were right in treating the same as capital expenditure.

We have considered the rival submissions and also perused the relevant material on record. We have also deliberated upon the precedents relied upon by the learned representatives of both the sides in support of their plea. It is observed that the expenditure incurred by the assessee-company for acquiring surface rights in the leasehold land and for rehabilitation of the people occupying such land was treated by the assessing officer as capital expenditure as against the assessees claim of revenue expenditure mainly for the reason that as a result of the said expenditure, the assessee acquired enduring advantage in the form of interest in property for long period and that the assessee-company itself capitalized the said expenditure under the head "leasehold land" in its books of account. As regards the accounting treatment given by the assessee to the said expenditure in its books of account, we have already observed in para No. 7.8 of this order, relying on the decisions of Honble Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. (supra) and Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra), that an allowability of a particular deduction depends on the provisions of law relating thereto and not on the basis of entries made in the books of account, which are not decisive or conclusive in this regard.

As regards the nature of expenditure, it is necessary to look into the nature of payment as well as the nature of asset acquired by the assessee to ascertain as to whether a particular expenditure is capital or revenue in nature. The aim and object of the expenditure as well as the resultant advantage are the relevant determining factors to characterize the concerned expenditure whether it is capital or revenue in nature. In the case of Bikaner Gypsums Ltd. v. CIT (supra), the Honble Apex Court observed that a question whether a particular expenditure incurred by the assessee is of a capital or revenue nature is a vexed question and it is very difficult to lay down exhaustive test for distinguishing the capital expenditure from revenue expenditure and each decision in this regard has to be founded on its own facts and circumstances. It is thus pertinent to cull out the facts relevant to the issue under consideration in the present case. In this regard, it is observed that the assessee-company acquired certain land on lease from the State Government for a period not exceeding 30 years under the Mines and Minerals (Regulation and Development) Act, 1957, on the terms and conditions as set out in the model form of mining lease.

As per the said model form of mining lease (copy placed in assessees paper book at p. 14.8 to 14.16), the assessee acquired certain liberties, powers and privileges to be exercised and enjoyed in respect of the leasehold land for a period not exceeding 30 years as specified in Part II of the said model form. As per clause 2 of the Part III of the said lease agreement, the assessee was under an obligation to obtain a permission from the appropriate authority for using the leasehold land for surface operations from time to time on payment of surface rent as specified in clause 4 of Part V of the said lease agreement. Accordingly, the assessee acquired the surface rights from the government in terms of the said lease agreement for using the said land for its surface operations for the balance period of lease which itself was a long-term period. The purpose for acquiring the said surface rights in the leasehold land as mentioned by the assessee-company itself was for the purpose of constructing the utility buildings such as office complex, health centers for workers, etc.

After acquiring such surface rights in respect of the leasehold land, the assessee-company acquired the right to possession of the said land from the villagers who were occupying the said land. For this purpose, the assessee-company spent certain amount for relocating and rehabilitating the said villagers. The contention of the learned counsel for the assessee before us was that this entire expenditure was incurred by the assessee for the use of land for a limited period and as no asset of enduring benefit came into existence, the entire expenditure has to be allowed as revenue expenditure. In support of this contention, he has relied on various authorities and has also made an attempt to distinguish the precedents relied upon by the revenue. In this regard, it is worthwhile to review the various decisions cited by the learned representatives of both the sides in the light of facts and circumstances of the present case so as to ascertain whether the expenditure in question can be treated as capital or revenue.

Before us, the learned counsel for the assessee has relied on the decision of Honble Supreme Court in the case of R.J. Trivedi (supra) wherein the expenditure was incurred by the assessee on fault-stone cutting operation in order to remove the obstruction in the course of mining operation and considering that it was not possible for the assessee to carry on the mining operation without removing the said obstruction, the Honble Apex Court found the said expenditure incurred by the assessee was to facilitate mining activities and, therefore, treated the same as revenue in nature. In the present, case there was no such obstruction in carrying on the mining operation of the assessee and the expenditure was incurred by the assessee to relocate and rehabilitate the villages in order to acquire a right to possession in the leasehold land to facilitate the enjoyment of surface rights in respect of the leasehold land. We are, therefore, of the opinion that the present case is distinguishable on facts from the case of R.J.Trivedi (supra) and, therefore the said decision cannot help the assessees case. Reliance was also placed by the learned counsel for the assessee on the decision of Honble Supreme Court in the case of Gotan Lime Syndicate v. CIT (supra) wherein the payment of royalty was made by the assessee in relation to the raw material, i.e., limestone to be obtained from mines taken on lease and the same was not referable to the acquisition of the mining lease. Considering these facts, the Honble Apex Court found the said expenditure incurred in relation to the raw material, which was going to be excavated or extracted by the assessee, and accordingly treated the same as revenue expenditure. The facts in the present case, however, are different inasmuch as the impugned expenditure has been incurred by the assessee-company to acquire the surface rights as well as the right to possession in respect of the leasehold land for enduring benefits and the same being not in the revenue field, the decision in the case of Gotan Lime Syndicate has no application to the facts of the present case. As regards the reliance placed by the learned counsel for the assessee on the decision of Honble Supreme Court in the case of Madras Auto Service (P) Ltd. (supra), it is observed that the assessee in that case had made substantial savings in monthly rent for the entire lease period by spending the amount on construction of a new building on the land taken on long lease and as the said expenditure resulted in a saving of rent which was a revenue expenditure, the Honble Apex Court allowed the said expenditure as revenue expenditure. Similarly, in the case of CIT v.Associated Cement Companies Ltd. (1988) 172 ITR 257 (SC), the assessee by bearing the cost of laying pipelines as per the agreement entered into with the government/municipality, was not needed to pay municipal taxes for 15 years and considering that the assessee in the absence of the said arrangement would have to pay the taxes every year to the debit of revenue account, the said expenditure was allowed as revenue expenditure by the Honble Supreme Court. In the present case as already observed, the expenditure was incurred by the assessee for acquiring any enduring benefits in the capital field and therefore the same is distinguishable from the case of Madras Auto Service (P) Ltd. as well as that of Associated Cement Companies Ltd. Further in the case of Empire Jute Co. Ltd. v. CIT (supra) the Honble Supreme Court observed that if the advantage merely consists of facilitating the assessees trading operation or enabling the management and conduct of the assessees business more efficiently or more profitably while leaving fixed capital untouched, the expenditure would be of revenue nature even though the advantage may endure for a indefinite future. In the present case, the assessee has acquired an interest in the immovable property in the form of surface rights and right to possession in respect of leasehold land and the same being not merely to facilitate the assessees business operation but being in the nature of acquisition of substantive right in the immovable property for enduring advantage, the ratio laid down by the Honble Apex Court in the case of Empire Jute Co. Ltd. cannot be said to have any application in the assessees case.

Similarly, the case of Plantation Corporation of Kerala v. Commr. Agrl.

IT (supra) is also distinguishable on the similar line.

The learned counsel for the assessee has also contended before us that the assessee-company did not acquire any right or interest in respect of relocated villages which were built up and handed over to the villagers and ultimately became the property of the said villagers. In this regard, we may observe that the said expenditure on rehabilitation and relocation of the villages was incurred by the assessee-company to acquire the right to possession in the leasehold land in respect of surface rights obtained by it and the very purpose of incurring the said expenditure was to acquire such rights in the said immovable property. This being so, it cannot be said that the said expenditure did not result in the acquisition of enduring benefits in the capital asset, the rights or interest in the relocated villages notwithstanding.

In the case of Assam Bengal Cement Co. Ltd. v. CIT (supra) relied upon by the revenue, the Honble Apex Court observed that the aim and object of the expenditure would determine the character of expenditure whether it is a capital or revenue and the source or the manner of payment would then be of no consequence. In the present case, the expenditure was incurred by the assessee-company with aim and object to acquire the surface rights as well as the right to possession in respect of the leasehold land for a long period and, therefore, the nature of such expenditure was certainly of capital nature. The revenue has also relied on the decision of Honble Mysore High Court in the case of N.Peer Sahib v. CIT (supra) in respect of which the learned counsel for the assessee has contended that the lease amounts having been paid to the surface owners by the assessee therein for extracting iron coal at the beginning of the mining operation, it was considered as capital in nature whereas in the present case the assessee has made the relevant payments during the currency of the lease period. After carefully perusing the said decision of Honble Mysore High Court, it however, appears that the payment made to the Pattedars who were occupying rights over the land which had been acquired by the assessee from the government was found to be of the same character as the payments to the government for acquiring the mining lease and keeping in view this character of the payment, the Honble Mysore High Court held the same to be a capital expenditure. In the case of Chloride India Ltd. v. CIT (supra) relied upon by the revenue, the assessee had paid the money for buying out tile tenancy right and, therefore, it was held by the Honble Calcutta High Court that the amount so paid for acquiring the possession which was a benefit of enduring nature, is a capital expenditure. In the present case also, the assessee has acquired the right to possession from the villagers/occupants in respect of the leasehold land by rehabilitating and relocating the said villagers and, therefore, the decision in the case of Chloride India Ltd. v. CIT (supra) is clearly applicable to the facts of the present case.

Similarly the case of CIT v. Lucky Bharat Garage (supra) relied upon by the revenue also renders support to the revenues case that the said expenditure was capital in nature. Heavy reliance has been placed by the revenue to support its stand on the decision of Honble Supreme Court in the case of R.B. Seth Moolchand Suganchand v. CIT (supra) wherein the Honble Supreme Court held that the amount spent for obtaining a right of an enduring character which in the case of mining leases is to acquire rights over a land for winning the mineral is of a capital nature. Before us the learned counsel for the assessee has contended that the said decision in the case of R.B. Seth Moolchand Suganchand (supra) has been distinguished by the Honble Apex Court in its subsequent decision in the case of Bikaner Gypsums Ltd. v. CIT (supra). A perusal of the subsequent judgment of the Honble Apex Court, however, reveals that the facts involved in the case of R.B. Seth Moolchand Suganchand (supra) were found to be totally different from the facts involved in the case of Bikaner Gypsums Ltd. inasmuch as in the latter case the expenditure was incurred by the assessee for the removal of a restriction which was obstructing his business operation of mining within a particular area. We have already observed that the existence of village was not obstructing the mining operations of the assessee-company and the expenditure in question was incurred to acquire the right to possession in respect of the leasehold land to facilitate the enjoyment of surface rights. Moreover, as the said acquisition resulted into accrual of enduring benefits to the assessee-company for the balance period of lease, the same has to be treated as capital expenditure, as held by the Honble Supreme Court in the case of Assam Bengal Cement Co. Ltd. v. CIT (supra). As such, considering all the facts of the case and legal position enumerating from the judicial pronouncements discussed hereinabove, we are of the considered opinion that the impugned expenditure incurred by the assessee for acquiring surface rights as well as the right to possession in respect of leasehold land for enduring period was a capital expenditure and the learned Commissioner (Appeals) was fully justified in upholding the action of the assessing officer in treating the same as capital expenditure and thereby disallowing the deduction claimed by the assessee in respect of the same.

The next issue relating to the disallowance of payments made under section 40A(3) amounting to Rs. 13,20,261 raised by the assessee in ground No. 3 of ITA No. 20/Nag/2001 for assessment year 1994-95 has not been pressed by the learned counsel for the assessee before us.

Accordingly, this ground is dismissed as not pressed.

The next issue relating to disallowance of grants paid to schools under section 40A(9) is raised by the assessee in ground No. 4 of ITA No.20/Nag/2001 for assessment year 1994-95.

After considering the rival submissions and perusing the relevant material on record, it is observed that an expenditure of Rs. 79,30,755 was incurred by the assessee-company for providing educational facilities as a part of welfare activities for the workers and their families residing in the remote villages where the mining activities of the assessee-company were in operation. In this regard, the learned counsel for the assessee had submitted before us that it was obligatory on the part of the assessee-company to provide educational facilities for the children of the workers as per the National Coal Wage Agreement and as per para 8.8.2 of such agreement which was in force at the relevant time, the assessee-company was obliged to pay the grants to the schools managed by the private committees in the coalfields to enable the said schools to run better and provide improved educational facilities for the children of the workers. It is also observed that a similar issue came up for consideration before the Tribunal in assessees own case for assessment year 1988-89 wherein the order passed by the assessing officer allowing deduction on this count was found to be erroneous and prejudicial to the interests of the revenue and the Commissioner, Jabalpur assuming jurisdiction under section 263 set aside the said order on this issue to be made afresh and when the order passed by the Commissioner, Jabalpur under section 263 was assailed in the appeal preferred before this Bench, the Tribunal set aside the said order of the Commissioner and upheld the action of the assessing officer by observing as under.

"The coalfields are located in various backward areas and large staff has to be posted. They have to be provided with various educational facilities. Under section 40A(9) it is not necessary that the assessee as an employer should be allowed deduction in respect of any sum paid by it towards set up or formation of fund, trust, company, assessing officer, etc., for the purposes as described under section 36(1)(iv) or (v). In such areas there are institutions already in existence and the assessee as an employer pays contributions to such institutions for the purposes of running the same as the employees of the assessee gets preference over the others in matters of admission. The assessee-company is a government company and as discussed above is audited not only by the Chartered Accountants but also by the Auditor and Comptroller General of India. Section 40A(9) also does not talk about contribution to the institution run by the assessee. It may be made to any institution which provides certain facilities to the employees." It is observed that the aforesaid decision was also followed by the Tribunal in assessees own case for assessment year 1987-88 while deleting the disallowance made by the revenue on this count in its consolidated order dated 20-9-1996 in ITA Nos. 740 to 742/Nag/95. The learned Commissioner (Appeals), however, declined to follow the same observing that the important aspect of absence of direct nexus as well as intimate connection of the said expenditure to the business of the assessee was not examined by the Tribunal and proceeded to confirm the disallowance made by the assessing officer on this count. In this regard, it is observed that a similar issue involving identical facts came up for consideration before the Honble Kerala High Court in the case of CIT v. Travancore Cochin Chemicals Ltd. (2000) 16 DTC 264 (Ker-HC):(2000) 243 ITR 284 (Ker) and we find that the finding decision rendered by Their Lordships in that case is squarely applicable to the present case.

"The expenditure met by the assessee for the school was wholly and exclusively for the welfare of its employees as their children were studying in that school and also for carrying on the business of the assessee-company more efficiently by having a contended labour force.

It was neither a donation covered under section 40A(9) nor capital in nature. Hence, the Tribunal was fully justified in allowing the expenditure towards contribution for the running of the school, as an expenditure for the smooth functioning of the business of the assessee and also an expenditure wholly and exclusively for the welfare of the employees of the assessee and thus allowable under section 37(1) as well as section 40A(10)." The learned Departmental Representative has contended before us that only the contribution made towards the recognised provident fund, approved gratuity fund or superannuation fund is an allowable expenditure, but the expenditure incurred on payments made to various schools and clubs is not deductible under the specific provisions of section 40A(9). In this context, we find that a useful reference may be made to the following observations of the Hyderabad Bench of Tribunal recorded in the case of Rassi. Cement Ltd. v. ITO (1993) 45 ITD 233 (Hyd-Trib) : "The object and intention of the legislature introducing section 40A(9) was only to discourage contribution to any trust which do not benefit the employees in any manner. In the instant case, reading of the trust deed would clearly reveal that the beneficiaries of the trust are the assessees employees. Hence, having regard to the legislature intention in introducing the said section and the fact that the contribution constituted employees welfare measures as well as with such contribution made pursuant to an agreement with the employees is a requirement under the Industrial Dispute Act violation of which would result in penalty to the defaulter, an assessee is entitled for the allowance of the relief asked for." As a matter of fact, the impugned expenditure on account of contribution to various schools was not incurred by the assessee-company voluntarily but the same was incurred to discharge its obligation in terms of a National Coal Wage Agreement entered with the employees and as the said agreement was enforceable in law under the Indian Contract Act as well as the Industrial Dispute Act, the assessee-company was under a statutory obligation to incur the said expenditure. As such, considering all the facts of the case and keeping in view the aforesaid decisions including the decision of this Bench in assessees own case, we hold that the expenditure incurred by the assessee-company on account of grants made to various schools was an admissible business expenditure and the learned Commissioner (Appeals) was not justified in confirming the disallowance made by the assessing officer on this count. His impugned order on this issue is, therefore, reversed and the assessing officer is directed to allow the said expenditure.

The next issue relating to the alternative plea of the assessee regarding the addition of interest on pension fund not relating to the concerned year is raised in ground No. 7 of ITA No. 20/Nag/2001 for assessment year 1994-95.

After considering the rival submissions and perusing the relevant material on record, it is observed that the entire amount of Rs. 569.87 lakhs shown as payable on account of interest on pension fund under the current liabilities in the relevant balance sheet was disallowed by the assessing officer and addition to that extent was made to the total income of the assessee. Before us, the learned counsel for the assessee has contended that the amount of Rs. 569.87 lacs appearing in the balance sheet in fact constituted the outstanding amount accumulated up to 31-3-1994, and actually a sum of Rs. 214.57 lakhs only was related to the previous year relevant to assessment year 1994-95. He has also contended that the said sum of Rs. 214.57 lakhs being related to the assessment year 1994-95 was actually debited in the profit & loss account in Schedule 12 and the assessee-company having claimed the deduction only to that extent in computing its income for assessment year 1994-95, the disallowance if at all warranted should have been made only to that extent. In this connection, we may observe that the main issue relating to the allowability of such interest as expenditure has already been decided by us in favour of the assessee in para 10.15 of this order whereby the entire interest payable on the pension fund stands allowed. Consequently, this ground relating to the alternating plea of the assessee on the same issue has become infructious and the same is dismissed accordingly.

The next issue relating to the disallowance of depreciation on power support long equipment (hereinafter referred to as the PSLE) is raised by the assessee in the following appeals : The assessee-company had purchased special equipment called PSLE at a total cost of Rs. 3007.12 lakhs during the previous year relevant to assessment year 1990-91. The said equipment was commissioned in the assessment year 1990-91 itself and depreciation claimed on the same by the assessee-company was also allowed by the department. Similarly, the depreciation claimed in assessment years 1991-92 and 1992-93 claimed by the assessee was also allowed by the department. Meanwhile in the previous year relevant to assessment year 1991-92, the said equipment suffered damage and could not be used by the assessee-company thereafter. No depreciation on the said equipment was claimed by the assessee in assessment year 1993-94 and even in its return for assessment year 1994-95 the assessee did not claim any depreciation on the said equipment. However, during the assessment proceedings, the assessee preferred a claim of depreciation on the said equipment by filing a revised chart of depreciation. It was submitted on behalf of the assessee before the assessing officer that as per the concept of "block of asset", the individual item of machinery loses its identity and its use in a later year is not relevant for the purpose of allowing depreciation on the same. The assessing officer, however, found no merits in this contention of the assessee as according to him the identity of the individual item of block of asset has not been done away in view of the definition of "written down value" given in clause (c) of section 43(6). He, therefore, refused to entertain the claim of the assessee for depreciation on PSLE. In the first appeal filed before him, the learned Commissioner (Appeals) upheld the action of the assessing officer on this issue considering that one of the conditions of "user" has not been satisfied by the assessee to be entitled to claim the depreciation.

The learned counsel for the assessee submitted that the learned Commissioner (Appeals) could not appreciate submission made on behalf of the assessee that once an asset is merged into the block of assets, it loses its identity and the question of its actual use in the later year does not survive so as to disallow the claim of depreciation on the same. Referring to the working of depreciation illustrated on page No. 18.2 of his paper book, he explained that even when a particular machinery is sold at less than its written down value, its balance WDV continues to be depreciated till the relevant block of assets exists.

Relying on the decision of Honble Bombay High Court in the case of CIT v. G.N. Agrawal(1996) 217 ITR 250 (Bom) and that of Jabalpur Bench of Tribunal in the case of Packwell Printers v. Asstt. CIT (1996) 59 ITD 340 (Jab-Trib) he contended that the individual assets loses its identity as per the concept of block of assets introduced in the Act with effect from 1-4-1988, and the purpose of allowing depreciation, the test of "user" has to be applied upon the block as a whole and not upon an individual asset. He, therefore, urged that the claim of the assessee for depreciation on PSLE deserves to be allowed.

The learned Departmental Representative, on the other hand, relied on the orders of the authorities below on this issue and further submitted that the decision of Honble Bombay High Court in the case of G.N.Agarwal (supra) and that of Jabalpur Bench of Tribunal in the case of Packwell Printers (supra) cited by the learned counsel for the assessee are distinguishable on facts. According to her, rule 5(1) of the Income Tax Rules, 1962, is relevant in this regard which does not refer to the use of any asset comprised in a block but refers to the block of assets as a whole, which is used for the purpose of the business of the assessee during the relevant previous year. She contended that the basic requirement of use of all the assets falling under the relevant block for the purpose of claiming depreciation is still there even after the introduction of the concept of block of assets, as provided in section 32(1) read with section 43(6)(c). Her contention, therefore, was that the PSLE having not used by the assessee during the relevant previous years, the authorities below were fully justified in disallowing the depreciation claimed by the assessee on the said equipment.

We have considered the rival submissions and also perused the relevant material on record. It is observed that the PSL, equipment was purchased and put to use by the assessee during the previous year relevant to assessment year 1990-91 and depreciation on the same as claimed by the assessee was also allowed by the assessing officer for assessment years 1990-91 to 1992-93. Although the assessee did not claim any depreciation on the said equipment for assessment year 1993-94 under a mistaken belief that no depreciation can be claimed thereon because of non-use of the same for the use for the purpose of business, it claimed the depreciation or assessment year 1994-95 during the assessment proceedings before the assessing officer by filing a revised schedule of depreciation. The basis of this claim made by the assessee-company was that as per the new scheme of block of assets introduced with effect from1-4-1988, once the asset is merged into the block of asset, it loses its identity and the question of actual use of a particular asset in the later years, is not relevant for allowing depreciation in respect of the same. The revenues stand in this regard is that as per the meaning of "written down value" give in section 43(6)(c) with reference to the block of asset and in view of rule 5(1) of the, Income Tax Rules, 1962, the identity of a particular asset has not been done away with and for the purpose of depreciation allowance, the use of such asset during the relevant previous year has to be established. It is, therefore, pertinent to refer to, the provisions of section 43(6)(c) as well as the rule 5(1) which are reproduced below : (i) in respect of any previous year relevant to the assessment year commencing on the 1-4-1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted (A) by the increase by the actual cost of any asset falling within that block acquired during the previous year.

(B) by the reduction of the moneys payable in respect of any asset falling within, that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased., (ii) in respect of any previous year relevant to the assessment year commencing on or after the 1-4-1989, the written down value of that block of assets in the immediately preceding previous year as reduced by the depreciation actually allowed in respect of that block of assets in relation to the said preceding previous year and as further adjusted by the increase or the reduction referred to in item (i).

Rule 5(1) : Subject to the provisions of sub-rule (2), the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets shall be calculated at the percentages specified in the second column of the Table in Appendix I to these rules on the written down value of such block of assets as are used for the purposes of the business or profession of the assessee at any time during the previous year.

From the perusal of the aforesaid provisions, it is evident that a reference has been made particularly to the block of assets as such and there is nothing in the said provisions to interpret that the use of individual asset is a requirement of law for claiming the depreciation.

As a matter of fact, the new scheme of block of assets has been introduced in the statute from 1-4-1988, to simplify the position regarding depreciation allowance and in the case of Nathani Steel Ltd. v. Dy. CIT (1996) 56 TTJ (Bom-Trib) 240 the Bombay Bench of Tribunal has summarized the effects of the said new scheme after reviewing the relevant amendments brought out in the Act as under : "The effect of all these amendments is that in case of a running concern, which has expanded or installed new plant and machinery, there is no need of separate computation of depreciation allowance as also separate computation in case of sale or demolition of such assets. The individual working of the machinery also is not necessitated as the new asset falling within the block gets added to the written down value.

The effect of all these is that under the new system, even when all the assets of the block are sold, if the block has positive balance (the moneys payable being less than the written down value), depreciation continues to be allowable even if the asset is no more in existence.

Similarly, if only some assets forming part of a block are sold and if the sale proceeds of these assets wipe out the entire value of the block, no depreciation would be available even though some assets of the block continue to be used for business purpose. Therefore, the new scheme as introduced does not require use of individual assets for the grant of depreciation.

The legislature also has fully taken into account the possibility of some assets enjoying depreciation without really being put into use. In such a case, when such asset is sold, then the moneys payable in respect of the assets sold exceeding the actual cost would not be taxable as short-term gains and not as long-term gains as under the old law.

Therefore, there is no likelihood of the assessee using the new scheme as means to avoidance of tax. The new scheme is self-contained and there can be no loss to the revenue in the ultimate analysis. " The Ahmedabad Bench of Tribunal also had an occasion to consider this change of system for the purpose of allowing depreciation and after critically examining the relevant amendments made in the Act in the light of the purpose and intention of making such amendment as clarified in the Central Board of Direct Taxes Circular No. 469, dated 23-9-1986 the Tribunal observed that the legislature has prescribed mode of allowing depreciation in respect of block asset and henceforth a calculation of depreciation will be in a lump sum for the entire block of depreciable assets. The Tribunal also observed that the theory of new asset which prevailed before 1-4-1988, cannot be considered after the new provisions of block assets came into force and if a particular machinery forming part of block asset is not used during the year, still depreciation is to be allowed on the same for the relevant year. The Tribunal further proceeded to hold that if one single asset out of the entire block has been discarded or not put to use by the assessee for business consideration, on that ground alone partial depreciation cannot be disallowed.

In the present case, the PSL equipment was purchased and put to use by the assessee in the previous year relevant to assessment year 1990-91 and the same had entered the block assets in that year itself. This being the position, the same had lost its individual identity and for the purpose of allowing depreciation on the same, the requirement of law was to establish the use of the concerned block of asset as such and not the use of the said equipment individually. As such, considering all the facts of the case and keeping in view the scheme of block of assets effective from 1-4-1988, as elaborately explained in the aforesaid decisions of the Tribunal, we are of the opinion that the assessee-company was entitled to claim the depreciation allowance on PSL equipment for the year under consideration. In. that view of the matter, we find no justification in the impugned orders of the learned Commissioner (Appeals) upholding the action of the assessing officer in not allowing the assessees claim for depreciation on the said equipment. We, therefore, reverse the same on this issue and direct the assessing officer to allow the claim of the assessee on this count.

The next issue relating to the enhancement of income by the learned Commissioner (Appeals) on account of provision made by the assessee-company for interim relief of Rs. 3,328.49 lakhs payable to its employees is raised in ground Nos. 15 and 16 of ITA No. 20/Nag/2001 for assessment year 1994-95.

In its books of account, the assessee-company had made a provision for interim relief payable to its employees covered by the National Coal Wage Agreement for the period 1-7-1991 to 31-3-1994 to the extent of Rs. 3,266 lakhs and payable to employees covered by executive rules for the period 1-1-1992 to 31-3-1994, to the extent of Rs. 62.49 lakhs.

During the course of appellate proceedings, the learned Commissioner (Appeals) found from the perusal of the records that the amount so provided are mere provisions for which no liability in fact had accrued during the previous year relevant to the assessment year 1994-95.

According to him, nothing was brought on record before him to establish that the said liability had accrued on or before 31-3-1994, and as the assessee was following mercantile system of accounting, he found no basis for claiming the expenditure in respect of the said liability in assessment year 1994-95 which had not accrued during the relevant previous year. He, therefore, enhanced the income of the assessee by disallowing the claim made on this count relying on the decision of Honble Supreme Court in the case of CIT v. Swadeshi Cotton Mills (1964) 53 ITR 134 (SC) wherein it was held that even under the mercantile system, a mere claim by the assessee is not sufficient to establish the accrual of income as the profit must become actually due and likewise a liability must definitely arise.

The learned counsel for the assessee submitted that M/s. Coal India Ltd., the holding company initiated the assessee-company vide its letter dated 11-2-1994, that an amicable settlement between the representing trade unions and the management has been arrived at to pay Rs. 100 per month of interim relief to the employees governed by the National Coal Wage Agreement with effect from 1-7-1991. He also submitted that after the end of the relevant previous year but before the closing and finalisation of accounts, M/s. CIL vide its memorandum dated 3-5-1994, further intimated to the assessee that the executives of the company, pending sanction of the executive pay scale are also eligible to draw interim relief of Rs. 100 per month with effect from 1-1-1992, which was further revised to Rs. 225 per month with effect from 1-7-1992, vide its memorandum dated 28-7-1994. He submitted that the accounts of the assessee-company for the year ended 31-3-1994, were finalised on 30-7-1994, and since the above instructions of M/s. CIL, the holding company, were available before the finalisation of the accounts, the assessee-company was well aware of its financial liability prior to closing of its account. He, therefore, contended that the effect for the same was given in the books of account for the assessment year 1994-95 as per the Accounting Standard (AS) 4 prescribed by the Institute of Chartered Accountants of India according to which the adjustments in respect of events occurring after the balance sheet date affecting materially the determination of the amounts relating to conditions existing at the balance sheet date ought to have been provided for. He contended that looking to the materiality of the amount payable on account of interim relief to employees, the correct profit could not have been determined without charging the said amount to the profit & loss account. He also contended that even as per the accounting standard issued by the Central Board of Direct Taxes, the, assessee was required to follow such accounting policies so as to represent a true and fair view of the matter. According to him, the prudence requires that the provision should be made for all known liabilities even though the same cannot be determined with certainty and represents only a best estimate in the light of available information. He submitted that in the instant case it was possible for the assessee-company to ascertain with substantial accuracy the amount payable to the employees on account of interim relief and, therefore, the same was an allowable expenditure during the previous year relevant to assessment year 1994-95. He also submitted that the said liability, which arose under the MOU, was a definite and ascertained liability constituting expenditure to earn income for the year and the same being a charge against the said income, the assessee was entitled for deduction in respect of the same.

He submitted that a similar issue arose in the assessees own case of assessment year 1988-89 wherein an amount of Rs. 364.28 lakhs was provided by the assessee-company for fringe benefits payable to the employees on interim relief as per the direction of the holding company as well as on the advise of the Comptroller and Auditor General of India and the disallowance made by the assessing officer and confirmed by the learned Commissioner (Appeals) on that count was deleted by the Tribunal holding that the said amount represents liability accruing during the year under consideration. He also pointed out that the reference application filed by the department against the said order of the Tribunal stands rejected. Reliance was also placed by him on the decision of Honble Bombay High Court in the case of CIT v. United Motors India Ltd. (1990) 181 ITR 347 (Bom) wherein the assessee had made a provision for additional liability on account of change in service conditions of its workmen pending negotiations with the trading union and although the agreement with the trade union was finalized much after the end of the year, the provision so made by the assessee for liability on account of the amount estimated as payable to the workmen pending negotiations was allowed by the Honble High Court. The learned counsel for the assessee, therefore, contended that as the assessee-company very much aware of the pending liability at the time of finalisation of its account, the provision made in respect of the same was clearly allowable as held by the Honble Bombay High Court in the case of United Motors India Ltd. (supra).

The learned counsel for the assessee submitted that the claim of the assessee was disallowed by the learned Commissioner (Appeals) for the reason that the MOU with the employees union was arrived at after the balance sheet date and hence there was no liability cast on the assessee-company to make such payment during the relevant previous year. In this regard, he contended that the liability in fact had crystallized before the finalisation of accounts and the same being evident from the letters received from CIL, the liability was correctly and completely ascertained and quantified prior to the date of finalisation of accounts. He also cited the decision of Honble Bombay High Court in the case of CIT v. Mahindra Ugine & Steel Co. Ltd. (2001) 21 DTC 725 (Bom-HC) (2001) 250 ITR 84 (Bom) and that of Honble Supreme Court in the case of Bharat Earth Movers v. CIT (2000) 17 DTC 59 (SC) : (2000) 245 ITR 428 (SC) in support of his contention that once the liability for an expenditure is determinable with substantial accuracy, the same should be allowed irrespective of the fact that it is quantified at a subsequent date. He also contended that the said liability had definitely arisen during the relevant year and, therefore, the deduction in respect of the same was allowable to the assessee following mercantile system of accounting even as per the decision of Honble Apex Court in the case of CIT v. Swadeshi Cotton (supra) relied upon by the learned Commissioner (Appeals). He, therefore, contended that as the liability in respect of interim relief had arisen during the relevant year, the disallowance made by the learned Commissioner (Appeals) was not warranted and urged that the same may be deleted following the decision of this Bench in assessees own case of assessment year 1988-89.

The learned Departmental Representative submitted that the decision of the learned Commissioner (Appeals) in disallowing the claim of the assessee for deduction on account of provision made for interim relief payable to the employees is based on the Honble Supreme Court in the case of Swadeshi Cotton (supra) wherein it has been held by their Lordships that it is only when the claim to profit bonus, if made, is settled amicably or by industrial adjudication that a liability can be said to have incurred by the employer who follows the mercantile system. She submitted that the ratio of the said judgment squarely applies to the present case as the impugned liability had not definitely arisen before the end of the relevant previous year. She contended that the accounting standard referred to by the learned counsel for the assessee cannot be applied in the income-tax proceedings and the issue has to be decided on the basis of the settled position keeping in view the relevant judicial pronouncements. She submitted that the decision keeping in view the relevant judicial pronouncements. She submitted that the decision of Tribunal in assessees own case for assessment year 1988-89 was rendered in entirely different facts and circumstances and, therefore, the issue involved in the present appeal cannot be said to be covered by the said decision.

She contended that the decisions at (1990) 181 ITR 347 (supra) and (2001) 250 ITR 84 (Bom) (supra) cited by the learned counsel for the assessee are also distinguishable on facts since the liability in those cases had crystallised before the end of the relevant previous year whereas in the present case, the liability has crystallised only after the end of the previous year. In support of the revenues case, she cited the case of Indian Molasses Co. Ltd. v. CIT (1959) 37 ITR 66 (SC) wherein the Honble Supreme Court has held that the expenditure which is deductible for income-tax purposes is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not an allowable expenditure. Reliance was also placed by her on the decision of Honble Rajasthan High Court in the case of Rajasthan State Mines & Minerals Ltd. v. CIT (1994) 208 ITR 1010 (Raj), wherein it is held that the income-tax law makes a distinction between an actual liability in praesenti and a liability de futuro which for the time being is only contingent. Former is deductible but not the later. The learned Departmental Representative contended that in the present case there was no actual liability in praesenti during the relevant previous year and as the same was crystallised only after the end of the relevant previous year, the learned Commissioner (Appeals) was fully justified in disallowing the claim of the assessee on this count for assessment year 1994-95.

We have considered the rival submissions in the light of material available on record and the decisions cited at the Bar. It is observed that there is no dispute about the very existence of the liability payable by the assessee-company towards expenditure on account of interim relief payable to its employees or the quantum of such liability, but the only dispute is regarding the year in which the same can be considered accrued for the purpose of allowing deduction in respect of the same under the Income Tax Act. Before we express our opinion on this issue in dispute, it is worthwhile to take a review of the various judicial pronouncements cited before us by the learned representatives of both the sides.

In the case of CIT v. United Motors India Ltd. (supra) the Honble Bombay High Court has observed that a provision made in respect of the impending liability that arose on account of the revision in the service conditions of its workman in the manner of a prudent businessman who knew that the service conditions would have to be better, the liability was rightly recognized as having accrued. In the case of CIT v. Mahindra Ugine & Steel Co. Ltd. (supra) it was held by the Honble Bombay High Court that the Tribunal having found on facts that conciliation proceedings were held after protracted negotiations in respect of fresh charter of demands of workers and that the assessee had agreed to pay a lump sum amount at a particular rate to the workers, it rightly allowed deduction of the provision for anticipated expenditure which was made on a reasonable basis. In the case of Bharat Earth Movers v. CIT (supra) the Honble Supreme Court has held that if a business liability has definitely arisen in the accounting year, deduction is allowable although the liability may have to be quantified and discharged at a future date in the case of CIT v. Swadeshi Cotton (supra), it was held by the Honble Supreme Court that only when the claim of profit bonus, if made, is settled amicably or by industrial adjudication that a liability is incurred by the employer who follows the mercantile system. In the case of Indian Molases Co. Ltd. v. CIT (supra), the Honble Supreme Court has held that expenditure which is deductible for income-tax purposes is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not an allowable expenditure. In the case of Rajasthan State Mines & Minerals Ltd. v.CIT (supra), the Honble Rajasthan High Court has held that income-tax law makes a distinction between an actual liability in praesenti and liability de futuro which for the time being is only contingent. Former is deductible but not the later.

Further, we find that the following case laws on the point in issue are also worth consideration. In Swadeshi Cotton Mill Co. Ltd. v. CIT (1980) 125 ITR 33 (All), the Honble Allahabad High Court held that if the liability was based on contractual obligation, it arose only when it was ascertained in the case of an assessee following mercantile system of accounting. In the case of Laxmidevi Sugar Mills v. CIT (1993) 200 ITR 603 (SC), the Honble Supreme Court held that liability to pay bonus arising under a government notification issued after the closing of a relevant accounting year cannot be allowed as deduction merely because the assessee has made a provision for meeting such a contingent liability. In the case of News Print & Paper Mills Ltd. v.CIT (1978) 114 ITR 172 (MP) the Honble Madhya Pradesh High Court has held that the assessee could claim a liability towards an allowable expenditure in the assessment year when it crystallised into an ascertainable liability and become enforceable.

From the analysis of the aforesaid decisions, the principles which emerge can be summarized as under : (1) It is only the actual liability which is existing in the relevant assessment year can be considered as an expenditure and the expenditure which is deductible for income-tax purposes is one which is towards a liability actually existing at the time.

(2) A liability which is dependent on fulfilment of a condition which may result in a reduction or in extinction of the liability cannot be allowed as a deduction.

(3) The liability which has fastened on to the assessee during the relevant previous year can be considered as the liability in praesenti and as such deductible for income-tax purposes.

(4) The liability which can be deducted for the income-tax purpose should have been ascertained during the relevant previous year which means that the same has become certain with no possibility of extinction or substantial variation.

(5) The liability can be recognized as have accrued in the manner of a prudent businessman on the basis of specific knowledge which can lead to the estimation of such liability with a reasonable certainty. It should be possible for the assessee to anticipate the liability on a reasonable basis.

(6) If a business liability has definitely arisen and become ascertainable in the accounting year, a deduction is allowable even though the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability and capability of estimating the same with a reasonable certainty though the actual quantification may not be possible.

In the light of the above underlying principles emerging from the various judicial pronouncements, we now proceed to consider the issue in dispute raised before us in the present case. It is observed that the provision of Rs. 3,266 lakhs made by the assessee-company in respect of interim relief payable to the employees governed by National Coal Wage Agreement was based on a letter bearing No. CIL.

C-5B-M-CA/587 issued by the holding company, i.e., Coal India Ltd. on I-2-1994, a date falling in the previous year relevant to assessment year 1994-95. By this letter, the Coal India Ltd., which was carrying on the negotiations with the representing trade unions intimated the assessee-company that amicable settlement between the parties has been arrived at according to which Rs. 100 per month of interim relief to the employees governed by the National Coal Wage Agreement is payable with effect from 1-7-1991. It is thus clear that the negotiations between the concerned parties had reached a stage in the accounting year itself and it was possible for the assessee-company to anticipate the liability payable to the workers on account of interim relief for the period from 1-7-1991 to 31-3-1994. That being the position, we are of the view that the liability to that extent had definitely arisen in the accounting year and the deduction was admissible to the assessee in respect of the said liability.

So far as the provision of Rs. 62.49 lakhs made in respect of employees covered by executive rules for the period from 1-1-1992, to 31-3-1994 on account of interim relief is concerned, the position however, appears to be entirely different inasmuch as the negotiations with the concerned union reached that stage only after the end of the relevant accounting year which is evident from the fact that the letter intimating such settlement was forwarded by Coal India Ltd. only on 3-5-1994. Moreover, the further upward revision in the monthly interim relief amount agreed upon by the concerned parties was also intimated by CIL vide its letter dated 28-7-1994. It is thus clear that during the relevant accounting year, it was not possible for the assessee-company to anticipate the liability to pay interim relief to this class of employees and the liability on this account, therefore, cannot be said to have definitely arisen in the relevant previous year.

Before us, the learned counsel for the assessee has contended, relying on the decisions of Honble Bombay High Court in the case of M/s. United Motors India Ltd. (supra) and M/s. Mahindra Ugine & Steel Co. Ltd. (supra) that the company was aware of this liability and as a prudent businessman a provision was rightly made in respect of the same during the previous year relevant to assessment year 1994-95. In this regard, we may observe that the amount of interim relief was agreed upon between the concerned parties only after the end of the relevant accounting year and the liability in respect of the same was also provided by the assessee on the basis of a letter which was received from CIL only after the end of the relevant accounting year. Although the assessee-company provided for this liability on the basis of event occurring after the balance sheet date but after the finalisation of accounts in accordance with Accounting Standard (AS) 4 issued by the Institute of Chartered Accountants of India, it is a settled position of law that such accounting treatment given by the assessee-company is not decisive or conclusive to determine a question of admissibility of a particular deduction for the purpose of income-tax and the same has to be decided in accordance with the relevant provisions of the Act and not in accordance with the accounting practice. It is observed that although the amount of Rs. 3,266 lakhs payable in respect of the employees governed by NCWA was agreed as per the settlement reached between the concerned parties in the relevant accounting year itself, the learned Commissioner (Appeals) confirmed the disallowance made by the assessing officer on this count merely because the final MOU to this effect was signed by the concerned parties only after the end of the relevant accounting year. Keeping in view the proposition laid down in the various judicial pronouncements discussed above and considering the fact that the interim relief amount was agreed upon between the parties as per the settlement reached during the concerned accounting year itself, we are of the opinion that the conclusion drawn by the learned Commissioner (Appeals) on this issue was not well founded and as already observed, the assessee-company was entitled for deduction in respect of the said liability ascertained and fastened during the previous year relevant to assessment year 1994-95. As such, considering all the facts of the case and keeping in view the legal position emerging from the various judicial pronouncements discussed above, we hold that a deduction in respect of provision made for interim relief payable to the employees governed by NCWA to the extent of Rs. 3,266 lakhs was allowable to the assessee in assessment year 1994-95, but the same payable to the employees governed by executive rules to the extent of Rs. 62.49 lakhs was not allowable in the said year. We order accordingly.

The next issue relating to the enhancement of income by the learned Commissioner (Appeals) by way of disallowance of interest paid to holding company, i.e., Coal India Ltd. is raised by the assessee in the following appeals : After considering the rival submissions and perusing the relevant material on record, it is observed that the learned Commissioner (Appeals) in the course of the appellate proceedings before him, found that the assessee-company has claimed expenditure on account on interest payable to Coal India Ltd. to the tune of Rs. 13,283.45 lakhs and Rs. 10,964.47 lakhs for assessment years 1994-95 and 1995-96, respectively, on the amount standing to the credit of CIL at the end of the corresponding accounting at Rs. 15,278.81 and Rs. 10,964.47 lakhs only. He, therefore, called upon the assessee to explain this huge amount of interest debited in profit & loss account which was disproportionate to the principal amount outstanding as per the relevant balance sheet. In reply, it was submitted on behalf of the assessee, inter alia, that a similar issue in the case of M/s. Western Coalfields Ltd., another subsidiary company of M/s. CIL has already been decided by the Nagpur Bench of Tribunal vide its order dated 4-11-1991, in ITA No. 164/Nag/86 allowing the deduction on account of interest payable to Coal India Ltd. It was also emphasized that the said decision is binding on the learned Commissioner (Appeals) and following the same, the entire interest payable to CIL deserves to be allowed. Debit notes received from CIL were also filed before the learned Commissioner (Appeals) showing the amount as "being the distribution of proportionate share of interest" payable by the assessee-company. The learned Commissioner (Appeals), however, was of the opinion that the balance payable by the assessee-company to CIL as per relevant balance sheets being only to the extent of Rs. 15,270.81 lakhs and Rs. 10,964.47 lakhs and there being nothing on record brought by the assessee to show any additional borrowing from CIL for the purpose of business, interest at the rate 15 per cent per month attributable to the said amount which works out to Rs. 2,291.42 lakhs and Rs. 1,654 lakhs only for assessment years 1994-95 and 1995-96 alone could be allowed to the assessee-company as business expenditure. He, therefore, allowed the same to that extent and disallowed the balance amount of Rs. 10,992.83 lakhs and Rs. 9,021 lakhs for assessment years 1994-95 and 1995-96, respectively, considering that the factum of borrowing and utilization of the same for the purpose of business to that extent has not been established by the assessee-company as specifically required by section 36(1)(iii) In support of this conclusion, he placed reliance on the decision of Honble Supreme Court in the case of CIT v. Calcutta Agency (1951) 19 ITR 191 (SC) and in the case of Madhavprasad Jatia v. CIT (1979) 118 ITR 200 (SC).

As regards the decision of this Bench in the case of Western Coalfields Ltd. (supra) cited by the learned counsel for the assessee before him, it is observed that the learned Commissioner (Appeals) has not made any attempt to distinguish the same nor has he even made any discussion thereon in his impugned order. Before us, the learned counsel for the assessee has again relied on the same and has also filed a copy of the said order in his paper book at page Nos. A.4 to A.23, From the perusal of the same, it however, appears that neither the factum or quantum of amount advanced by CIL to the assessee-company therein nor the utilization of the same for the business purpose was in dispute in that case and the interest was disallowed mainly because the exact nature of amount advanced by the CIL could not be proved by the assessee-company before the authorities below. The Tribunal, however, found that the treatment given by the assessee-company to half of the advanced amount being loan for the purpose of charging interest to be justifiable considering that the debt equity ratio of 1 : 1 has been finally approved. The Tribunal therefore, proceeded allow the claim of the assessee-company for deduction of the said interest, the present case, the basis of disallowance, as mentioned above, appears to altogether different and, therefore, we are of the view that the reliance placed by the learned counsel for the assessee on the aforesaid decision of the Tribunal is misplaced.

The learned counsel for the assessee has contended before us that the amount charged by CIL, being a business expenditure incurred wholly an exclusively for the purpose of its business, is allowable under section 37(1). He has also contended that the interest amount having been already offered for tax by the holding company, i.e., CIL, any notional disallowance in the hands of the assessee-company on this issue would result in double taxation. In this regard, it is observed that the deduction on account of interest expenditure is specifically admissible under clause (iii) of section 36(1) which provides that the same should be paid in respect of capital borrowed for the purpose of business.

Thus the deduction on account of interest expenditure is allowable particularly in accordance with the provisions of section 36(1)(iii) whereas section 37(1) contains general provisions, which deal with the allowability of business expenditure not being expenditure in the nature, described in sections 30 to 36. The rule of construction/interpretation, as expressed in the maxim "Generalia specialibus non derogant" and further explained the book "Craies on Statute Law" 5th Edn. p. 205 is that whenever there is a particular enactment and a general enactment in the same statute, and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply. In the case of CIT v. Calcutta Agency (supra) relied upon by the learned Commissioner (Appeals), the Honble Supreme Court has held that when a claim is made for deduction, the onus lies on the assessee to prove that all the conditions for allowing such a deduction are satisfied. The learned Commissioner (Appeals) has relied on the case of Madhavprasad Jaita v. CIT (supra) wherein the Honble Apex Court has held that for allowance of a claim for deduction of interest, it is necessary that the capital must have been borrowed by the assessee and the same must have been borrowed for the purpose of business. Keeping in view this position propounded by the Honble Apex Court and taking into consideration the aforesaid rule of construction, we are inclined to concur with the view of the learned Commissioner (Appeals) that conditions precedent as prescribed in section 36(1)(iii) should be satisfied by the assessee to claim deduction on account of interest from the business income.

In this regard, the learned counsel for the assessee has filed before us the following documents in order to establish that the aforesaid conditions precedent for claiming deduction under section 36(1)(iii) have been complied by the assessee-company.

(1) Statement received from CIL showing total investment made in its subsidiary companies including the assessee-company for allocation of interest.

(2) Statement received from CIL showing allocation of interest between the subsidiary companies.

(4) Statement received from CIL showing total interest paid and recovered from subsidiary companies.

(5) Annual accounts of M/s. Coal India Ltd. showing receipt of such interest income.

The learned Departmental Representative has contended before us that the above documents have been filed by the assessee for the first time before the Tribunal and the same were not furnished before the learned Commissioner (Appeals). In this regard, we find that this evidence goes to the root of the matter and the assessee appears to have not filed the same before the learned Commissioner (Appeals) in view of its heavy reliance on the legal submission. Moreover, we find that the learned Commissioner (Appeals) has taken the outstanding balance in the account of CIL appearing at the end of the relevant accounting years as the total borrowings by the assessee whereas in the statement received from CIL which is now filed before us, details of investment made by CIL in the assessee-company are given periodically and the interest amount also appears to have calculated on the basis of such deployment of funds periodically. As such considering all the facts of the case, we deem it just and proper to remand this matter back to the learned Commissioner (Appeals) for deciding the same afresh in the light of the above fresh evidence which goes to the root. Needless to observe that the learned Commissioner (Appeals) will give sufficient opportunity to the assessee-company of being heard in the matter.

The next issue relating to the disallowance of community development expenditure is raised by the assessee in the following appeals : In the computation of its total income, the assessee-company claimed expenditure incurred on community development relating to road widening, street lighting, improving drinking water facilities and other welfare measures primarily for its employees. It was claimed that by incurring this expenditure, the employees of the company are benefitted at large and the company also discharged its social obligation to the community in and around its area of operation.

Considering that the said expenditure has been incurred by the assessee-company mainly to fulfil its social obligation, the assessing officer was of the opinion that the same could not be treated as wholly and exclusively incurred for the purpose of its business. He, therefore, disallowed the same. The matter was carried before the learned Commissioner (Appeals) and it was contended on behalf of the assessee before him that the said expenditure has been incurred with a view to provide facility to its own workers in the form of better roads, better street lighting, better drinking water supply scheme, etc., and the same, therefore, is an allowable expenditure under section 37. Reliance was also placed by the assessee on the decision of Honble Supreme Court in the case of Empire Jute Mills Ltd. v. CIT (supra). The learned Commissioner (Appeals), however, was of the opinion that there being no direct and immediate nexus between the said expenditure by the assessee-company and its business, the disallowance made by the assessing officer on this count deserves to be upheld keeping in view the decision of Honble Supreme Court in the case of CIT v. Amalgamations (P) Ltd. (1997) 226 ITR 188 (SC).

The learned counsel for the assessee submitted before us that the community development expenditure was incurred by the assessee-company to provide the basic facilities for the area situated in and around the area of operation of the assessee-company and as 90 per cent of the population residing in the said area was companys own workers, the said expenditure resulted into providing the basic facilities mainly to its own workers. He submitted that in the absence of such facilities, it would have been difficult for the company to find suitable employees to work with them and to that extent, it would have been difficult for the assessee to carry on its business activities He, therefore, contended that the said expenditure was considered necessary for the welfare of its workers by the assessee-company and in that sense the said expenditure enhanced the productivity of the assessee-company. He submitted that in the case of CIT v. Amalgamations (P) Ltd. (supra) relied upon by the learned Commissioner (Appeals), the assessee was the holding company which paid remuneration to the directors on behalf of the subsidiary company and considering that there was no nexus of the said payment with the business of the assessee, the Honble Supreme Court upheld the disallowance of the said expenditure. His contention was that the facts of the present case are clearly distinguishable from that case inasmuch as the expenditure has been incurred by the assessee-company in the present case clearly for providing facilities to its own workers from the point of business expediency. According to him, the department has tried to stretch the decision of Honble Supreme Court in the case of Amalgamations (P) Ltd. (supra) too for which in face has no application in the present case. He submitted that the assessing officer has disallowed this expenditure mainly on the basis of assessees submission that the same was incurred to discharge a social obligation. He contended that the assessing officer, however, overlooked the important fact that such obligation was being discharged by the assessee-company for the purpose of community which was mainly comprising of its own workers and their families. He, therefore, contended that the said expenditure was incurred by the assessee mainly for the welfare of its employees and the same being in the nature of business expenditure, was an allowable expenditure. In support of his contention, he cited CIT v. Premier Cotton Spinning Mills Ltd. (1997) 223 ITR 440 (Ker), Empire Jute Co. Ltd. v. CIT (supra), Sarabhai M.Chemicals (P) Ltd. v. CIT (1981) 127 ITR 74 (Guj), CIT v. Rupsa Rice Mills (1976) 104 ITR 249 (Ori), CIT v. T.V. Sundaram (1992) 196 ITR 276 (Mad) CIT v. Panbari Tea Co. Ltd. (1985) 151 ITR 726 (P&H) and CIT v.Madras Auto Services (P) Ltd. (1998) 233 ITR 468 (SC).

The learned Departmental Representative, on the other hand, submitted that the impugned expenditure was incurred by the assessee-company for the benefits of public at large and not for the benefit of its employees alone. According to her, such an expenditure may be regarded as philanthropic or humanitarian, but not the business expenditure for the purpose of income-tax as there is no nexus between the business of the assessee and the concerned expenditure. Referring to the various decisions cited by the learned counsel for the assessee, she pointed out that in most of these cases, the expenditure was incurred by the assessee exclusively for the welfare of its employees whereas in the present case the expenditure has been incurred by the assessee-company for public at large. She, therefore, contended that these cases cited by the learned counsel for the assessee are distinguishable on facts and considering that the expenditure in question had no nexus with the business of the assessee-company, the learned Commissioner (Appeals) was fully justified in confirming the disallowance made by the assessing officer on this count. She also contended that the case of CIT v. Amalgamation (P) Ltd. (supra) is directly relevant to the point in issue and the learned Commissioner (Appeals) has rightly relied on the same for confirming this disallowance.

We have considered the rival submissions and also perused the relevant material on record. We have also gone through the various case laws cited by the learned representatives of both the sides. It is observed that the expenditure incurred by the assessee-company for providing basic amenities like road widening, street lighting, better drinking water facilities, etc., for the residential areas in and around the companys area of operations in which mainly the workers of the assessee-company were residing, was disallowed by the assessing officer considering that the same has been incurred by the assessee to discharge its social obligation towards the community as a whole and there is no nexus between such expenditure and the business of the assessee-company. In this regard, we find that the assessing officer, however, ignored a very relevant and material fact that the population residing in the area which was benefitted by the provision of such basic amenities mainly comprised of the workers of the assessee-company and their families. He also appears to have overlooked the fact that such basic amenities could not have been provided to the assessees employees in isolation as the said expenditure in any case had to be incurred for the entire area as a whole. Before us, the learned counsel for the assessee has contended that over 90 per cent of the population residing in that area constituted assessees own workers and their families and it appears from the record that this fact has not been disputed by the revenue at any stage. Moreover, in the absence of such facilities in that area, it would not have been possible for the assessee-company to get the proper work force for its operation without which it was not possible to carry on its business effectively and efficiently. The labour by itself is an important input for any type of business, more particularly for the business of the assessee-company of mining operation and, therefore, the expenditure incurred mainly for the welfare of the labour force has to be treated as incurred wholly and exclusively for the purpose of its business.

It is observed that the learned Commissioner (Appeals) has confirmed the disallowance made by the assessing officer on this count for lack of nexus between the said expenditure and the business of the assessee, relying heavily on the decision of Honble Supreme Court in the case of CIT v. Amalgamations (P) Ltd. (supra). A perusal of the said judgment, however, reveals that the expenditure in that case was incurred by the assessee-company on payment of managerial remuneration to the directors of the subsidiary companies and considering that the assessee-company was entitled only to the dividend from the subsidiary company as and when declared even without incurring such expenditure, the Honble Apex Court held that such expenditure cannot be said to have a direct and immediate connection with the business of the assessee-company and proceeded to disallow the same. In the present case, the assessee-company has incurred the expenditure mainly for the purpose of welfare of its employees and in our opinion the same cannot be equated with the expenditure in question before the Honble Supreme Court in the case of Amalgamations (P) Ltd. (supra) which was incurred entirely in the different circumstances mentioned above.

On the other hand, in the case of CIT v. Premier Cotton Spinning Mills Ltd. (supra), the expenditure was incurred by the assessee on the construction of roads, digging of wells and laying pipelines for housing scheme formulated for its employees and considering the nature of such expenditure being for the welfare of its employees, the Honble Kerala High Court held the same to be an expenditure incurred wholly and exclusively for the purpose of assessees business. Although the said expenditure was incurred by the assessee in that case for the housing scheme formulated exclusively for its employees, in our opinion, the ratio of the said decision can very well be applied to be present case wherein a similar expenditure has been incurred by the assessee-company mainly for the benefits of its own employees as discussed above. Moreover, it is observed that the facts involved in the case of CIT v. Rupsa Rice Mills (supra) cited by the learned counsel for the assessee are almost similar to the facts of the present case inasmuch as the assessee running a rice mill therein incurred an expenditure for contribution to a primary health center building located near its mill and despite the fact that the said primary health center was meant for the benefits of public at large, the Honble Orissa High Court allowed the said expenditure as a business expenditure considering that the same was going to result in providing treatment to the ailing workmen of the assessee also and the assessee was under an obligation to provide such benefits. In the present case, although there is nothing on record to show that such an obligation was there on the assessee-company, the incurring of such expenditure was very much warranted from the point of view of business expediency, as already mentioned. In the case of Samghmeshwar Coffee Estate Ltd. v. State of Karnataka (1986) 160 ITR 203 (Karn), the expenditure incurred by the assessee towards salary paid to the teachers of the school was held undoubtedly to be in the interest of the children of its employees and the same, being a welfare measure was allowed as business expenditure.

In the, case of ITAT v. B. Hill & Co. (P) Ltd., (1983) 142 ITR 185 (All), the expenditure incurred on donations made to the schools with a view to provide educational facilities to the labourers and their children was considered to be for the purpose of facilitating the smooth running of assessees business and, therefore, was held to be an admissible business expenditure by considerations of commercial expediency. As such considering all the facts of the case and the legal position emanating from the aforesaid judicial pronouncements, we are of the considered opinion that the community development expenditure incurred by the assessee-company mainly for the welfare of its employees was an expenditure incurred wholly and exclusively for the purpose of its business by considerations of commercial expediency and the learned Commissioner (Appeals) was not justified in confirming the disallowance of the same made by the assessing officer. We, therefore, reverse his impugned order on this issue and direct the assessing officer to allow this expenditure.

The next issue relating to the disallowance of loss claimed by the assessee on account of irrecoverable business advances amounting to Rs. 1,958.07 lakhs is raised by the assessee in ground No. 6 of ITA No.21/Nag/2001 for assessment year 1995-96.

After considering the rival submissions and perusing the relevant material on record, it is observed that the claim of the assessee for bad debts amounting to Rs. 1,958.07 lakhs has been disallowed by the assessing officer and confirmed by the learned Commissioner (Appeals) for assessment year 1995-96 for two reasons. Firstly, the case of the revenue is that the assessee could not furnish any evidence to show that the amount of such debts has been taken into account in computing the income of the assessee in the earlier years. Secondly, as per the revenue, the assessee could not prove that the said debts in fact had become bad in the previous year relevant to assessment year 1995-96 and the relevant broad meeting deciding to write off these bad debts was held on 24-7-1995, i.e., during the previous year relevant to assessment year 1996-97. As regards the first reason given by the revenue, it is observed that the assessing officer himself has allowed this deduction on account of bad debts in assessees case for assessment year 1996-97 vide his order dated 15th/31-3-1999, considering that the Board meeting was held in the previous year relevant to that year. It, therefore, follows by implication that the first reason given by the revenue while making the disallowance for assessment year 1995-96 does not survive as this deduction stands allowed by the assessing officer himself in assessment year 1996-97. As regards the other reason, it is observed that although the provision for writing off these bad debts was made by the assessee-company in its books of account relevant to assessment year 1995-96, the assessing officer allowed this deduction in the subsequent year, i.e., assessment year 1996-97 on the basis that the relevant Board meeting taking a decision to write off these bad debts was held on 24-7-1995, and thus the fact of these debts becoming bad was established only in the previous year relevant to assessment year 1996-97. In this regard, we may observe that the position regarding deduction on account of bad debts has undergone a substantial change after the amendment made in the provisions of section 36(1)(vii) with effect from assessment year 1989-90. The object and purpose of this amendment made in 1987 have been explained by the CWT in its Circular No. 551 dated 23-1-1990 (1990) 183 ITR (St) 37 and we find it relevant to reproduce para No. 6.6 and 6.7 of the said circular hereunder : "6.6. Amendments to sections 36(1)(vii) and 36(2) to rationalize provisions regarding allowability of bad debts .The old provisions of clause (vii) of sub-section (1) read with sub-section (2) of the section laid down conditions necessary for allowability of bad debt. It was provided that the debt must be established to have become bad in the previous year. This led to enormous litigation on the question of allowability of bad debt in a particular year, because the bad debt was not necessarily allowed by the assessing officer in the year in which the same had been written off on the ground that the debt was not established to have become bad in that year. In order to eliminate the disputes in the matter of determining the year in which a bad debt can be allowed and also to rationalize the provisions, the Amending Act, 1987, has amended clause (vii) of section (1) and clause (i) of sub-section (2) of the section to provide that the claim for the bad debt will be allowed in the year in which such a bad debt has been written off as irrecoverable in the accounts of the assessee.

6.7. Clauses (iii) and (iv) of sub-section (2) of the section provided for allowing deduction for a bad debt in an earlier or later previous year, if the Income Tax Officer (now assessing officer) was satisfied that the debt did not become bad in the year in which it was written off by the assessee. These clauses have become redundant, as the bad debts are now being straightaway allowed in the year of write off. The Amending Act, 1987, has, therefore, amended these clauses to withdraw them after the assessment year 1988-89. " It is also observed that a similar issue came up for consideration before the Calcutta Bench of Tribunal in kalawati Debi Harak Lal v. CIT (1964) 53 ITR 313 (Cal) and after taking into consideration the object and ambit of the amendments made in 1987 as explained in the aforesaid circular as well as the combined effect of such amendment made to section 36(1)(vii) and section 36(2)(iii) and (iv), the Tribunal held that from the assessment year 1989-90, deduction on account of bad debt has to be allowed in the year in which it is written off by the assessee and there is no other option available to the assessing officer. A similar view has also been expressed by the Chennai Bench of Tribunal in the case of New Deal Finance & Investment Ltd. v. Dy. CIT (2000) 74 ITD 469 (Chennai) wherein it is held that after the amendment of section 36(1)(vii) with effect from 1-4-1989, if debt has been written off as irrecoverable in the accounts of the assessee for the previous year, it will suffice for claiming it as a bad debt and the assessee can never be called upon to prove that the said debt has become bad. In the present case, the relevant debts have been written off by the, assessee as bad in the books of account relevant to assessment year 1995-96 and this fact is not in dispute. As such, considering all the facts of the case and respectfully following the aforesaid decision of the Tribunal, we hold that the assessee was entitled for the deduction on account of bad debts for the assessment year 1995-96 and not in assessment year 1996-97 as allowed by the revenue. We order accordingly.

The next issue relating to the disallowance of Rs. 27,58 lakhs on account of additional expenditure on power and fuel is raised by the assessee in ground No. 7 of ITA No. 21/Nag/2001 for assessment year 1995-96.

After considering the rival submissions and perusing the relevant material on record, it is observed that the disallowance has been made by the revenue on this count for the reason that the relevant liability according to them arose during the year relevant to assessment year 1996-97 and not in assessment year 1995-96 as claimed by the assessee.

This issue relating to the period of accrual of liability and corresponding deduction in respect of the same has already been discussed by us in detail in para No. 16.7 and 16.8 of this order and the principles emerging from analyzing the various judicial pronouncements have also been enumerated by us in para No. 16.9. As regards the liability arising due to enhancement in tariff of power and fuel involved in the instant issue is concerned, it is observed that this liability was provided by the assessee on the basis of a bill received from the Madhya Pradesh Electricity Board, dated 27-6-1995. It is thus clear that the said bill, on the basis of which the liability in fact had been ascertained and fastened on the assessee, was received by the assessee in the accounting year relevant to assessment year 1996-97. Obvious as it is, there was no material or basis available with the assessee during the accounting year relevant to assessment year 1995-96 to prove that such a liability had actually arisen during that year. It, therefore, follows that the said liability in fact arose for the first time during the accounting year relevant to assessment year 1996-97 when the bill from electricity board for this enhanced liability was received by the assessee.

The contention of the learned counsel for the assessee in this regard is that the bill dated 27-6-1995, was received by the assessee-company prior to the date of finalization of accounts relevant to assessment year 1995-96 and as per the Accounting Standard 4 dealing with "contingencies and events occurring after the balance sheet date", it had rightly provided for this liability and claimed deduction in respect of the same. It is true that the assessee was right in providing for such liability in accordance with the Accounting Standard 4 issued by the Institute of Chartered Accountants of India in terms of accounting policy/treatment to draw its financial statement, but so far as the question of allowability of deduction under the income-tax is concerned, the same needs to be decided in accordance with the provisions of the Act as well as the legal position propounded in the various judicial pronouncements and not on the basis of accounting policies adopted by the assessee. We have, already discussed a similar issue in the light of the various case laws cited by the learned representatives of both the sides in para No. 16.7 to 16.9 of this order before arriving at a conclusion that a liability which clearly exists and definitely arises in the accounting year can alone be allowed as deduction in computing the total income for income-tax purposes. As regards the liability on account of enhancement in power and fuel expenditure is concerned, the same had arisen only on the receipt of the concerned bill from the Electricity Board on 27-6-1995, and as the said date was falling in the accounting year relevant to assessment year 1996-97, we are of the view that the assessee was not entitled to claim deduction in respect of the same for assessment year 1995-96 merely because it arose before the date of finalisation of its accounts for that year. As such, considering all the facts of the case and the foregoing discussion about the legal proposition, we find no infirmity in the impugned order of the learned Commissioner (Appeals) confirming the disallowance made by the assessing officer on this count.

The next issue relating to the disallowance of Rs. 23.84 lacs under section 43B is raised by the assessee in para No. 8 of ITA No.21/Nag/2001 for assessment year 1995-96 After considering the rival submissions and perusing the relevant material on record, it is observed that against the liability on account of provident fund for the month of March, 1995, amounting to Rs. 8,88,83,757, the assessee-company was found to have paid Rs. 8,65,00,000 on 26-4-1995. The assessing officer, therefore, simply added back the balance amount of Rs. 23,83,757 under section 43B.Before the learned Commissioner (Appeals), it was submitted on behalf of the assessee-company that excess payment of P.F. contribution for the month of February, 1995, was made by it and after adjustment of the said excess amount, the balance amount in lump sum was paid on account of liability for the month of March, 1995. The learned Commissioner (Appeals), however, confirmed the disallowance made by the assessing officer without making any discussion on the submission made by the assessee.

Before us, the learned counsel for the assessee has given the details of payment made towards contribution to P.F. for the month of February, 1995, as follows : From the above details given by the learned counsel for the assessee with the facts and figures, it is evident that an excess amount of Rs. 44,54,248 was paid by the assessee on 28-3-1995, itself and as this surplus amount was available to the credit of the assessee, the same was duly adjusted against the liability for the month of March, 1995, while making the payment of P.F contribution for that month on 26-4-1995. It is thus amply clear that the entire amount of contribution to P.F. for the month of March, 1995, was paid before the due date of 30-4-1995, and this being the position, we are of the opinion that the disallowance made by the assessing officer on this count under section 43B and confirmed by the learned Commissioner (Appeals) was not warranted. We, therefore, direct the assessing officer to delete the same.

The next issue relating to the disallowance of Rs. 110.86 lakhs under section 43B is raised by the assessee in ground No. 9 of ITA No.21/Nag/2001 for assessment year 1995-96.

After considering the rival submissions and perusing the relevant material on record, it is observed that the disallowance of Rs. 110.86 lakhs was made by the assessing officer as he found that the assessee-company has actually paid a sum of Rs. 160.35 lakhs only against the overall statutory dues of Rs. 271.21 lacs debited in the profit & loss account. This disallowance also appears to have been made by the assessing officer without giving any opportunity to the assessee to explain his stand as there contains no discussion whatsoever about the assessees submission or assessing officers findings regarding the same in his order. When the matter was carried before the learned Commissioner (Appeals), the assessee-company made a detailed written submission a copy of which is placed in assessees paper book at p. Nos.

26.2 to 26.12. A perusal of the same reveals that a detailed submission showing details about the nature of each liability as well as the payments made against the same was furnished by the assessee before the learned Commissioner (Appeals). It also appears that the statements showing details of payments made with respective mode of payment were also annexed to the said submission. The learned Commissioner (Appeals), however, appears to have not fully appreciated the said submission and proceeded to decide the issue against the assessee in a summary manner stating that no documentary evidence has been adduced by the assessee to prove that the payments were made within the given time-limit. In our opinion, the learned Commissioner (Appeals) is fact ought to have sent this issue back to the assessing officer for verifying these factual details furnished before him on behalf of the assessee and accordingly should have directed him to decide the issue afresh in the light of the findings of such verification. In that view of the matter, we find it just and proper to restore back this issue to the file of the assessing officer for deciding the same afresh after giving an opportunity of being heard to the assessee in this regard.

The next issue relating to the disallowance of business expenditure of Rs. 6,213 lakhs arising out of memorandum of understanding on National Coal Wage Agreement is raised by the assessee in ground No. 10 of ITA No. 21/Nag/2001 for assessment year 1995-96.

In the profit & loss account a deduction of Rs. 6,213 lakhs on account of expenditure arising out of memorandum of understanding on National Coal Wage Agreement was claimed by the assessee. When the assessing officer required the assessee-company to explain its claim for this deduction, a letter dated 23-3-1998, offering the following explanation was filed by the assessee before the assessing officer.

"The wage structure and other conditions of service including the fringe benefits of the employees in the coal industry are covered under the recommendations of the Central Wage Capital for the coal mining industries and are accepted by the Government of India in the form of National Coal Wage Agreement. Such National Coal Wage Agreement remains in tenure up to the date specified in such agreement.

Upon expiry of the period of National Coal Wage Agreement IV on 30-6-1991 Joint Bipartite Committee for the Coal Industry (JBCCI-V) was to be, constituted. However, the same could not be constituted particularly in view of the fact that the Honble High Court of Judicature Calcutta had granted an interim stay order vide GR No.16108(W) of 1992, restraining the constituting of such committee. The interim stay order was later on vacated by the Honble High Court of Judicature, Calcutta on 10-11-1994, and on 11-11-1994. JBCCI-V was duly constituted consisting of the representatives of the management and unions/workers.

The character of demand submitted by the different unions were integrated and after prolonged negotiations the representing management and union arrived at a memorandum of understanding (hereinafter referred to as the MOU) on 28th and 29-4-1995 (copy enclosed). Based on this MOU the financial impact of the company after setting off interim relief paid as per the directions of Government of India worked out to be of Rs. 6,213 lakhs which has been exhibited in the profit & loss account.

It is to submit before your goodself that the assessee-company for the year ended 31-3-1995, finalised its accounts in September, 1995, as is evident from the date of signature in the balance-sheet and profit & loss account in the printed accounts submitted along with the computation of income. As the MOU was signed in the month of April, 1995, the company was well aware of its financial liability during the period of closing of accounts and gave effect of the same in the books of account for the year ended 31-3-1995.

The liability which arose under this MOU is a definite and ascertained liability constituting expenditure to earn income for the year and is a charge there against. The assessee-company craves leave to rely on a direct decision of the Bombay High Court in the case of CIT v. United Motors (India) Ltd. (1990) 181 ITR 347 (Bom). In this case the assessee-company had made a provision for additional liability on account of change in service condition of its workmen pending negotiations with the trade union. The trade union agreement was finalized much after the end of the year and provision was made by the assessee for liability on account of amount estimated as payable to the workmen pending negotiations. Deduction for the provision was denied by the assessing officer on the ground that the agreement was entered into at a later date. The High Court allowed the liability. It can well be appreciated that in the present case, the appellant company knew of the impending liability and it was finalizing the accounts for the year ended 31-3-1995, and as a prudent businessman it had rightly recognized the liability which having accrued was required to be provided for.

The learned Commissioner (Appeals), Raipur, in the companys own case for the assessment year 1989-90 allowed such deduction provided in the accounts based on MOU also, the learned Commissioner (Appeals), Nagpur, in the case of Western Coal Field Ltd. another subsidiary to the Coal India Ltd. has categorically held that where appellant-company became aware of a liability after the year and but before the accounts were finalized such liability was entitled for deduction for having rightly recognized such liability.

Based on the above submission, we request your goodself to allow us the deduction of Rs. 6213 lakhs provided in the accounts as impact of MOU on NCWAV." The assessing officer, however, found that the decision of learned Commissioner (Appeals), Raipur, in assessees own case for assessment year 1989-90 has been challenged by the department by filing an appeal before the Tribunal. He also found that there are other aspects which militate against the assessees claim for deduction on this count.

According to him, the liability is allowable only in the year of accrual provided it is an ascertained liability and since the relevant MOU itself was arrived at on 28th and 29-4-1995, in the assessees case, i.e., after the close of the relevant accounting year, there was no definite and ascertained liability fastened on the assessee during the accounting period relevant to assessment year 1995-96. He, therefore, came to the conclusion that the relevant liability had not definitely arisen in the relevant accounting year and considering that the deduction is admissible only in respect of an ascertained liability, proceeded to hold that the expenditure in respect of the liability arising out of MOU which was not available with the assessee prior to the close of the relevant accounting period cannot be allowed in computation of income for assessment year 1995-96. For arriving at this conclusion, he derived support from the following case laws : Aggrieved by the order of the assessing officer, the assessee-company carried this matter before the learned Commissioner (Appeals) who was of the opinion that the impugned liability, being the outcome of the MOU which was arrived at after the close of the relevant previous year, could not be considered as ascertained and crystallized during the previous year relevant to assessment year 1995-96. Therefore, relying on the decision of Honble Calcutta High Court in the case of CIT v.East India Hotels Ltd. (1994) 207 ITR 881 (Cal) and that of Honble Supreme Court (1964) 53 ITR 134 (supra) he confirmed the disallowance made by the assessing officer on this issue.

The learned counsel for the assessee submitted before us that the negotiations were going on for a long period of finalise the revised terms and conditions of the wage agreement and certain decisions in respect of the same were already taken in the meeting of Joint Bipartite Committee of Coal Industry held on 9th and 10-1-1995.

Referring to the copies of the record notes regarding the discussions and decisions taken in the said meetings placed in his paper book at page Nos. 27.5 to 27.11, he pointed out that certain issues having financial implications were already agreed upon and finally the same were culminated into and formalized by executing the MOU on 28th and 29-4-1995. He contended that although the said agreement was signed after the end of the relevant year, it was very much available to the assessee-company before the finalisation of its accounts for the year under consideration in the month of September, 1995. He pointed out that a detailed submission on a similar issue has already been made by him while raising arguments on ground Nos. 15 and 16 raised in the appeal for assessment year 1994-95 in the light of Accounting Standard 4 as well as various judicial precedents and urged that the same may be taken into consideration while deciding this issue. He also contended that the case laws relied upon by the revenue authorities on this issue are distinguishable and as the impugned liability in the present case had crystallized before the finalisation of accounts for the relevant previous year, the assessee was entitled for deduction in respect of the same. He further contended that this issue is squarely covered in favour of the assessee by the order of this Bench in assessees own case for assessment year 1988-89 wherein a similar provision made for fringe benefits at the rate of 20 per cent of interim relief payable to non-executives of the company much after the close of the previous year has been allowed by the Tribunal. He also brought it to our notice that the reference application filed by the department against the said order of the Tribunal has been rejected by this Bench and thus the matter has already achieved a finality. He, therefore, contended that the disallowance made by the assessing officer and confirmed by the Commissioner (Appeals) on this issue was not warranted and urged that the same may be deleted.

The learned Departmental Representative, on the other hand, mainly relied on the orders of the authorities below on this issue and further submitted that nobody from the assessee-company was participating in the meetings of Joint Bipartite Committee on Coal Industry held on 9th and 10-1-1995, at the headquarter of Coal India Ltd. located in Calcutta. According to her, the details of the said meeting in fact were obtained by the assessee-company only in the year 1999, which is evident from the document placed in assessees paper book at page No.27.5. Her contention, therefore, was that the assessee-company came to know about this liability arising out of Coal Wage Agreement-V only when the MOU was signed on 28th and 29-4-1999, i.e., after the end of the relevant previous year.

We have considered the rival submissions and also perused the relevant material on record. It is observed that a similar issue relating to ascertainment of the exact period of accrual of liability and deduction in respect of the same in a corresponding assessment year has already been dealt with by us in the preceding para Nos. 16.7 and 16.8 of this order and after analysing the various judicial pronouncements on this issue, we have enumerated the emerging principles underlying this issue. In the light of the said discussion, when we appraise of the factual position relating to the issue under consideration, we find that although the negotiations for finalizing the wage structure and other service conditions were going on all along during the relevant previous year and certain terms and conditions having financial implications were also agreed upon in the meeting of JBCC-V held on 9th and 10-1-1995, the entire understanding in this regard as a whole was reached formally and finally on 28th and 29-4-1995, when the MOU was signed by both the parties. As a matter of fact, the provision of Rs. 6,213 lakhs on account of expenditure arising out of the said MOU was made by the assessee-company on the basis of the said MOU itself which having been signed on 28th and 29-4-1995, became available to the assessee only after the end of the relevant previous year.

Before us, the learned counsel for the assessee has strongly relied on the decision of Honble Bombay High Court in the case of CIT v. United Motors (India) Ltd. (1990) 181 ITR 347 (Bom). In that case, the Board of Directors of the assessee-company had taken a review of the revised wage terms which were under negotiations with the employees union in the relevant accounting year and on the basis of the status of such negotiations, a provision for the corresponding liability was decided to be made in that accounting year itself. Considering these facts, the Honble Bombay High Court observed that the event giving rise to the said liability occurred in the relevant previous year itself and it was, therefore, held by Their Lordships that the said liability having arisen during the relevant previous year, is deductible during the relevant year. The facts of the present case, however, appear to be different from that case inasmuch as the impugned liability has been provided by the assessee-company on the basis of the MOU reached only after the end of the relevant previous year. We, therefore, find it difficult to agree with the contentions of the learned counsel for the assessee that the same had definitely arisen and became an ascertained liability during the relevant previous year. It is also pertinent to note here that although certain terms and conditions regarding the wage structure were agreed upon between the parties in the form of interim relief in the meeting held on 9th and 10-1-1995, no attempt was made by the assessee-company to quantify the financial implications of the same in order to provide for the corresponding liability in the relevant previous year itself. On the contrary, a consolidated provision of Rs. 6,213 lakhs was made finally on the basis of MOU signed on 28th and 29-4-1995.

Before us, the learned counsel for the assessee has also contended that although the MOU was signed after the end of relevant previous year, the assessee came to know about the liability arising therefrom much before the finalisation of its accounts in September, 1995, and as per the Accounting Standard No. 4, the assessee-company rightly provided for the impugned liability in the accounts relevant to assessment year 1995-96. He has also contended that a similar issue which arose in assessment year 1988-89 in assessees own case has been decided by this Bench vide its order dated 27-3-1995. A perusal of the said order (copy placed at page Nos. 19.15 to 19.17 of assessees paper book), however, reveals that the issue of computation of the book profit within the meaning of section 115J(1) was under consideration before the Tribunal in that case and keeping in view the provisions of Part II and Part III of Schedule VI to the Companies Act, 1956, the Tribunal held that the liability provided for the fringe benefits cannot be added back in computing the book profit within the meaning of section 115J(1) read with Explanation thereto. In the present case, the issue before us relates to the computation of total income as per the provisions of Income Tax Act and the same being governed by the provisions of the Act itself, we are of the opinion that the conclusion drawn by the Tribunal in assessment year 1988-89 while deciding the issue in the context of computing the book profit within the meaning of section 115J(1) which is governed by the Companies Act, 1956, cannot be applied to the facts of the present case. As regards the accounting policy/treatment followed by the assessee, we have already observed in the preceding paras of this order that although the impugned liability was rightly provided for by the assessee in its financial accounts on the basis of event occurring after the end of the relevant accounting period but before the finalisation of the concerned accounts as per Accounting Standard (AS-4) issued by the Institute of Chartered Accountants of India, such treatment is not conclusive for deciding the issue relating to a deduction under the Income Tax Act which has to be allowed as per the relevant provisions contained in the Act itself as well as the position propounded by the various judicial forum. As regards the period of accrual of liability, we have already observed, after taking into consideration all the facts and circumstances of the case, that the impugned liability had arisen and became an ascertained liability during the previous year relevant to assessment year 1996-97 when the MOU was finally signed by the concerned parties and this being the position, we find no infirmity in the impugned order of the learned Commissioner (Appeals) in upholding the action of the assessing officer in not allowing the deduction in respect of the same for the assessment year 1995-96. The same is, therefore, upheld on this issue.

The next issue relating to the incorrect set off of brought forward losses is raised by the assessee in the following appeals : After considering the rival submissions and perusing the relevant material on record, it is observed that the issue raised by the assessee relating to the incorrect set off of losses and unabsorbed allowances of the earlier years allowed by the assessing officer against the income of assessment years 1995-96 and 1996-97 was found to be having no merits by the learned Commissioner (Appeals) mainly because the correct working of such claim had not been furnished by the assessee-company before him. Before us, the learned counsel for the assessee has submitted that the correct working of the unabsorbed allowances and brought forward losses was furnished before the learned Commissioner (Appeals). He has also filed a copy of the same in his paper book at page No. 28.2 and from the perusal of the same it appears that the only grievance of the assessee is in respect of set off of loss on account of prospecting and boring relief relating to assessment year 1987-88. As this issue is entirely factual which can be ascertained from the assessment record available with the assessing officer, we deem it just and proper to remit this issue to the assessing officer with a direction that the relevant details be verified from the record and accordingly the issue be decided in accordance with the provisions of law after giving sufficient opportunity of being heard to the assessee.

The next issue relating to the imposition of interest under section 234B amounting to Rs. 4,525.30 lakhs is raised by the assessee in ground No. 14 of ITA No. 21/Nag/2001 for assessment year 1995-96.

After considering the rival submissions and perusing the relevant material on record, it is observed that the learned Commissioner (Appeals) has upheld the action of the assessing officer in imposing interest under section 234B considering that a direction was given in the assessment order itself by the assessing officer for charging interest as per law and amount of such interest was also specified in the demand notice issued under section 156 which formed part of the assessment order. In this regard, the learned counsel for the assessee has relied on the decision of Honble Patna High Court in the case of Udai Mistan Bhandar and Complex v. CIT (1996) 222 ITR 44 (Pat) and has particularly referred to the following observations of Their Lordships contained in the said order : "From the bare reading of section 156 it is clear that notice of demand claiming interest can be issued only when there is an order in the assessment levying interest. To use the expression charge interest if any or charge interest as per rules cannot be read to mean that the assessing officer has passed the orders charge interest under all the aforesaid sections the order to charge interest has to be specific and clear, as for that matter an order to charge any tax penalty or fine.

A notice of demand is somewhat like a decree in a civil suit, which must follow the order. When a judgment does not specify any amount to be charged under any particular section, the decree cannot contain any such amount. Similarly when the assessment order is silent if any interest is leviable, the notice of demand under section 156 of the Act cannot go beyond the assessment order and the assessee cannot be served with any such notice demanding interest." Further he has also cited the decision of Honble Supreme Court in the case of CIT v. Ranchi Club Ltd. (2001) 19 DTC 248 (SC):(2001) 247 ITR 209 (SC) affirming the decision of Honble Patna High Court and pointed out that the said decision of the Honble Apex Court has been explained by the Honble Patna High Court in the case of Smt. Tej Kumari v. CIT (2001) 19 DTC 482 (Pat-HC) (FB): (2001) 247 ITR 210 (Pat)(FB) as follows : "In the said case it has been held that interest to be charged has to be indicated in the assessment order. The order to charge interest has to be specific and clear, as for that matter, any order to charge any tax, penalty or fine : because the assessee must be made to know that the assessing officer, after applying his mind, has ordered the charging of interest as well the section under which it is to be charged. If the assessment order is silent on whether interest is to be levied, the notice of demand under section 156 cannot go beyond the assessment order and the assessee cannot be served with any such notice demanding interest. " From the perusal of the above observations of the Honble Patna High Court, it is evident that the basis given by the learned Commissioner (Appeals) while confirming the levy of interest under section 234B in the instant case does not survive and this being so, we direct the assessing officer to cancel the levy of interest under section 234B following the aforesaid decisions of Honble Patna High Court and also that of Honble Supreme Court.

The next issue relating to the enhancement of income by the learned Commissioner (Appeals) by disallowing deduction on account of contribution to CPRA at Rs. 37,862 lakhs instead of an actual expenditure of Rs. 37,162.26 lakhs debited by the assessee-company to the profit & loss account is raised by the assessee in ground No. 22 of ITA No. 21/Nag/2001 for assessment year 1995-96.

After considering the rival submissions and perusing the relevant material on record, it is observed that the claim of the assessee for deduction on account of contribution to CPRA has already been allowed by us in full vide para No. 8.10 of this order. Resultantly, this alternative ground raised by the assessee has become infructuous.

Accordingly, the same is dismissed.

The next issue relating to the alternative claim of depreciation on the rehabilitation expenses of HEMM treated as capital expenditure is raised by the assessee in ground No. 3 of ITA No. 22/Nag/2001 for assessment year 1996-97. In this regard, we have already allowed deduction in respect of the said expenditure holding the same to be of revenue nature in para No. 7.12 of this order and consequently this ground relating to the alternative claim of the assessee for depreciation on such expenditure has become infructuous. Accordingly the same is dismissed.

The next issue relating to the disallowance of depreciation on assets used in a guest-house and expenditure incurred on current repairs of guest-house is raised by the assessee in ground Nos. 7 and 8 of ITA No.22/Nag/2001 for assessment year 1996-97.

After considering the rival submissions and perusing the relevant material on record, it is observed that the assessee-company claimed a deduction of Rs. 7.38 lakhs for expenditure on account of repairs to guest-house and Rs. 1370 lakhs on account of depreciation on the assets used in the guest-house, This claim of the assessee, however, was not allowed by the assessing officer in view of the specific and express provisions of section 37(4) and the learned Commissioner (Appeals) also confirmed the disallowance made by the assessing officer considering that the provisions of section 37(4) introduced by the Finance Act, 1970 with effect from 28-2-1970, specifically and expressly prohibits allowance of any expenditure on the maintenance of a guest-house incurred after 28-2-1970, and also prohibits any depreciation allowance in respect of any building used as guest-house or any assets used in such guest-house. Before us the learned representatives of both the parties have cited various decisions of the different High Courts as well as that of the Tribunal in support of their stand, Insofar as the expenditure on account of repairs to guest-house is concerned, the learned counsel for the assessee has submitted before us that the same is allowable under the specific provisions of section 30 and, therefore, deduction in respect of the same cannot be disallowed under the provisions of section 37(4) which covers only the expenditure allowable under sub-section (1) of section 37 as held by Honble Bombay High Court in the case of CIT v. Chase Bright Steel Ltd. (1989) 177 ITR 124 (Bom). The learned Departmental Representative, on the other hand, has contended that the said case relates to the period prior to the insertion of section 37(4) and pointed out that the same High Court in the case of CIT v. Ocean Carriers (P) Ltd. (1995) 211 ITR 357 (Bom) has taken a different view on this issue considering that sub-section (4) of section 37 inserted by the Finance Act, 1970, prohibits totally any allowance in respect of any expenditure on the maintenance of a guest-house incurred after 28-2-1970, and also prohibits any depreciation allowance in respect of any building used as a guest-house. She also cited the following decisions in support of the revenues case : As per section 37(4)(i) of the Act no allowance shall be made in respect of any expenditure incurred by an assessee on maintenance of any residential accommodation in the nature of a guest-house after 28-2-1970. As regards the expenditure incurred for maintenance of the residential accommodation in the nature of a guest-house for assessment year 1971-72 and 1972-73 the controversy is squarely covered by our judgment in CIT v. Ocean Carriers (P) Ltd. (supra) and in view thereof, the question is answered in the affirmative and in favour of the revenue for assessment years 1971-72 and 1972-73.

A reading of sub-section (4) of section 37, as more clarified by sub-section (5), would clearly show that any accommodation by whatever name called, maintained, hired, reserved or arranged by the assessee for providing boarding or lodging to any person on tour or visit to the place at which such accommodation is situated, will be treated as accommodation in the nature of a guest-house and that no allowance shall be made in respect of any expenditure incurred by the assessee after 28-2-1970, on the maintenance of any such guest-house. It cannot be contended that inspite of the above provisions specifically relating to guesthouse, the assessee can still put forward a claim under the general provisions of section 30.

Learned counsel for the assessee relied on the decisions in CIT v.Chase Bright Steel Ltd. (supra) and CIT v. Ahmedabad Mtg. & Calico Printing Co. Ltd. (1992) 197 ITR 538 (Guj) in support of its contention. On examining these decisions, we find the first decision which is rendered by the Bombay High Court, considered a case prior to the introduction of sub-section (4) and (5) of section 37. The second decision which was rendered by the High Court of Gujarat, just followed the Bombay High Courts decision even though, by that time, sub-section (4) of section 37 had been introduced. We are not inclined to follow the above decisions in the present case.

From the perusal of the aforesaid observations, it can be reasonably gathered that after the insertion of sub-section (4) and sub-section (5) of section 37 by the Finance Act, 1970, any expenditure on the maintenance of a guest-house incurred after 28-2-1970, as also depreciation in respect of any building use as a guest-house or any assets used in such guest-house has been made expressly inadmissible.

However, the Honble Bombay High Court in the case of Century Spinning & Manufacturing Co. Ltd. v. CIT (1991) 139 ITR 600 (Bom) dealing with the newly inserted section 37(4) held that the non obstante clause in the said section was non obstante vis-a-vis sub-section (1) and sub-section (3) of section 37 only and held that this being so, if the expenditure or allowance was allowable under other sections of the Income Tax Act, the same could not be withdrawn or denied to the assessee because of the prohibitory provisions in section 37(4), It is thus evident that there is no consensus view of various High Courts on this issue and it also shows that the provisions of section 37(4) give rise to two different interpretations which are reasonably possible. It is observed that this controversy also arose before the Bombay Bench of the Tribunal in the case of Mahindra and Mahindra Ltd. v. Dy. CIT (1997) 61 ITR 129 (Mumba-Trib)(TM) wherein on difference of opinion between the two Members on a similar issue, the matter was referred to Third Member who, after taking into consideration the provisions of section 37(1), 37(3), 37(4) as well as sections 30 to 36, observed that the provisions of section 37(3) and 37(4) override the provisions of section 37(1) and opined that such overriding has to be restricted to such item of expenditure that are exclusively dealt with by that section and not the other item of expenditure which are exclusively covered by sections 30 to 36. It was also observed by the learned Third Member in that case that the interpretation of the relevant provision shows that the issue is quite ambiguous and is not capable of clear interpretation. The Tribunal in the said case also deliberated upon the two different views expressed by the Division Benches of Honble Bombay High Court which was the jurisdictional High Court and even though the rule of precedent warranted following of the latter judgment which was in favour of the revenue, found itself with no alternative but to choose the view that was favourable to the assessee resorting to the Supreme Court decision in the case of CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) considering that there was no Full Bench decision of the Honble Bombay High Court overruling the decision of Division Bench and that the relevant provisions were also not free from doubts.

In the present case, we find ourselves in a better position than the Bombay Bench of Tribunal, to adopt the view which is favourable to the assessee on this issue as no decision of the Honble Madhya Pradesh High Court, which is a jurisdictional High Court in this case, on this issue has been brought to our notice. As such, considering all the facts of the case and keeping in view the decision of the Honble Supreme Court in the case of CIT v. Vegetable Products Ltd. (supra), we follow the view expressed by the Honble Bombay High Court in the case of Century Spinning and Manufacturing Co. Ltd. (supra) and direct the assessing officer to allow the expenditure incurred by the assessee on repairs to the guest-house after verifying that the same satisfies the requirement of section 30.

Insofar as the depreciation on assets used in a guest-house is concerned, we find no reason why the analogy given by the Honble Bombay High Court the case of Century Spinning and Manufacturing Co. Ltd. v.CIT cannot be, applied to this expenditure also which is allowable under section 32. As a matter of fact, in the case of Wolkem India Ltd. v. Dy. CIT (1999) 65 TTJ (Jp-Trib) 59, the Jaipur Bench of Tribunal held that disallowance under section 37(4) cannot be made in respect of depreciation on assets used in guest-house including the guest-house building, furniture, etc., as the same is covered by the specific provision of section 32. In the case of Mahindra and Mahindra Ltd. v.Dy. CIT (supra), the Bombay Bench of Tribunal however, disallowed such depreciation considering the specific language used in section 37(4) and following the decision of Honble Bombay High Court in the case of Ocean Carriers (P) Ltd. (supra) wherein it was held that sub-section (4) of section 37 prohibits any depreciation allowance in respect of any building used as guest-house. It is, however, observed that the Honble Bombay High Court itself, in the case of Century Spg. & Mfg. Co.

Ltd v. CIT (supra) held that the assessee was entitled to depreciation in respect of its property used as guest-house under section 32 and this allowance could not be withdrawn or denied to the assessee because of the prohibitory provisions contained in section 37(4). Although the Honble Gujarat High Court in the case of CIT v. Gaekwar Mills Ltd. (1991) 193 ITR 734 (Guj) and Honble Madras High Court in the case of T.V. Sundaram Iyengar & Sons Ltd. v. CIT (2000) 244 ITR 133 (Mad) have taken a different view while deciding this issue against the assessee, judicial propriety requires us to follow the view taken by the Honble Bombay High Court in the case of Centuary Spg. & Mfg. Co. Ltd. which is in favour of the assessee and respectfully following the same we hold that the depreciation on the assets used in the guest-house allowable to the assessee-company under section 32 and its claim for the same could not be denied under section 37(4). The impugned order of the learned Commissioner (Appeals) on this issue is, therefore, reversed and the assessing officer is directed to allow the claim of the assessee on this count.

The next issue relating to the disallowance of provision made for deterioration of coal stock is raised by the assessee in ground Nos. 9 and 10 of ITA No. 22/Nag/2001 for assessment year 1996-97.

The stock of coal is valued by the assessee-company after providing for deterioration in its value due to fire, abnormal stacking, etc. Up to assessment year 1995-96, such provision was made at the rate of 1.5 per cent of the value of entire production of the concerned year and the same was deducted from the value of closing stock. During the year under consideration, the assessee-company, however, changed this system and instead of making such provision at the rate of 1.5 per cent of the value of the production, the same was provided at the rate of 10 per cent of the value of closing stock. The assessing officer noticed that the auditors of the company in their report had commented that the basis of creation of such provision for deterioration was not satisfiactorily explained and justified by the management. The explanation offered by the assessee-company before him in this regard that the said change was effected by it as per the policy framed by its holding company, i.e., Coal India Ltd. and the reasons given in justification of the same were found to be unsatisfactory by the assessing officer. In the opinion of the assessing officer, by making such provision, the assessee had provided for the contingency which was not justifiable in law. He, accordingly worked out the monetary effect of the change in valuation method and made addition to that extent to the total income of the assessee. The matter was carried before the learned Commissioner (Appeals) who upheld the action of the assessing officer on this count considering that the basis for creation of provisions towards deterioration in the value of coal stock could not be satisfactorily explained and justified by the assessee.

The. Learned counsel for the assessee submitted before us that the change in the method of valuation was brought about by the assessee-company as per the policy framed by Coal India Ltd. He submitted that in the 156th meeting of the Board of Directors of Coal India Ltd. held on 29-5-1996, the proposal for change in method of provision for deterioration in stock was considered and after detailed deliberation on the same, the approval was accorded to amend the existing accounting policy regarding the provision for deterioration in stock of coal. He, therefore, contended that the said change was effected by the assessee as per the policy framed by its holding company and the same being bona fide, it ought to have accepted by the revenue authorities. Explaining the reasons for making the provisions for deterioration in the value of coal stock, he submitted that the coal like all other chemicals, loses its quality and weight when exposed to nature for prolong period and because of its chemical characteristics, its quality as well as weight gets spoiled due to spontaneous heating. He submitted that a similar provision made for deterioration of stock value of coal has been allowed by this Bench in the case of M/s. Western Coal Fields Ltd. for assessment years 1978-79 to 1984-85 in ITA Nos. 163 to 167/Nag/86 and submitted that the assessee-company has followed the changed method of providing for deterioration of stock in the subsequent years also and the same has also been accepted by the assessing officer. He, therefore, contended that the change in the method for valuing the stock being bona fide and the same having been followed by the assessee-company consistently in the subsequent years, there was no reason for the authorities below for not accepting the said change and in making disallowance on this count.

In support of this contention, he cited the cases of Snow White Food Products Co. Ltd. v. CIT (1982) 141 ITR 861 (Cal), Jaipur Taj Enterprises Ltd. v. ITO (1992) 42 ITJ (Del) 200, CIT v. Hoolungoore Tea Co. (1991) 192 ITR 126 (Cal), Sidheshwari Cotton Mills Ltd. v. CIT (1979) 117 ITR 953 (Cal) and CIT v. Travancore Cochin Chemicals Ltd. (Supra) The learned Departmental Representative submitted that the creation of provision for deterioration in the stock of coal could not be satisfactorily explained and justified by the management to the auditors also and considering the specific comments made by them in their report on this issue, the authorities below were fully justified in rejecting the assessees claim on this count. She submitted that the said provision was made by the assessee for contingent reasons and considering that no such instance of fire or any loss has been pointed out by the assessee, there is no reason to disturb the stand taken by the revenue on this issue. She also made an attempt to distinguish the cases cited by the learned counsel for the assessee stating that the change in method adopted by the assessee in those cases was found to be consistently followed in the subsequent years also whereas in the present case, the assessee has again changed its method immediately in the assessment year 1997-98.

In his rejoinder, the learned counsel for the assessee clarified that there has been no change in the method either in the assessment year 1997-98 or even in the subsequent years and the method as changed in the year under consideration is being followed by the assessee-company consistently in the subsequent year also.

We have considered the rival submissions and also perused the relevant material on record. It is observed that the provision for deterioration in the value of stock of coal was being made by the assessee-company in the years preceding to the year under consideration also and the same was also accepted by the department in the past. It is also observed that the method of valuation of closing stock by itself was not changed by the assessee in the year under consideration in principle and merely the basis of providing for deterioration in the stock value was changed inasmuch as instead of making such provision at the rate of 1.5 per cent of the value of the production of the concerned year, the assessee-company started making such provision at the rate of 10 per cent of the value of the closing stock. It is observed that the proposal for change in the policy of making provision for deterioration in the value of closing stock was placed before the Board of Directors of holding company, i.e., M/s. Coal India Ltd., in its meeting held on 29-5-1996, and its formal approval as extracted from the minutes of the said meeting (copy placed on page c. 2 of assessees paper book filed on 30-1-2002) is given below : "The Board considered the proposal and on detailed deliberation accorded its approval to amend the existing accounting policy regarding provision for deterioration in stock of coal due to fire and longer period stocking be made to 10 per cent of the value of the closing stock instead of 1.5 per cent of the value of production followed at present. This modification/change in the accounting policy will be effective from the accounting year 1995-96." From the perusal of the aforesaid approval, it is evident that the modification/change in the accounting policy relating to the making of a provision for deterioration is stock value was duly considered and deliberated upon by the Board of Directors of Coal India Ltd. and the said change was not only made applicable to the assessee-company but also to the other subsidiaries of Coal India Ltd. In these circumstances, the assessing officer in fact, had no reason to dispute such bona fide change made by the assessee-company as per the resolution passed by the Board of Directors of its holding company. As a matter of fact, the policy of making such provision in the earlier years was also being followed by the assessee-company as well as the other subsidiaries of M/s. Coal India Ltd. and the same was even accepted by the Tribunal, inter alia, in the case of M/s. Western Coal Fields Ltd. for assessment years 1978-79 to 1984-85 vide its order dated 20-5-1992 (supra). In the year under consideration, as already observed, the change was effected by the assessee-company only in the rate and basis for working out this provision and considering that the matter of providing for such deterioration in the value of closing stock in principle was accepted by the revenue in the earlier years, the assessing officer had no reason to challenge & dispute the entire provision as a whole on the ground that the same provides for contingencies. In any case, the explanation offered by the assessee like loss in quality and quantity clue to spontaneous heating, exposure to weather, etc., to justify the said provision appears to be quite satisfactory considering the chemical characteristics of the coal and after taking a circumspect view of the matter, we find the provision made by the assessee-company for deterioration, etc., while valuing the stock of coal to be quite fair and reasonable.

In the case of Snow White Food Products Co. Ltd. v. CIT (supra) the Honble Calcutta High Court has held that where it is found that the assessee has changed his regular method by another recognized method and has followed the latter method regularly, it is not open to the revenue authorities to go into the question of bona fide of the introduction and continuation of the change. In the case of CIT v.Hoolungoore Tea Co. (supra) cited by the learned counsel for the assessee, the Honble Calcutta High Court upheld the order of the Tribunal accepting the change in method on the ground that the change was also consistently followed by the assessee in the subsequent years.

The other decisions in (1992) 42 TTJ (Del) 200, (1979) 117 ITR 953 (Cal) and (2000) 243 ITR 284 (supra) also support the assessees case.

Before us, the learned Departmental Representative has tried to distinguish these decisions stating that the assessee in the present case has not followed the new method in the subsequent year and the same has been changed immediately in assessment year 1996-97. When the learned counsel for the assessee pointed out that this submission made by the learned Departmental Representative is factually incorrect, the learned Departmental Representative was directed by the Bench to ascertain the correct factual position from the record available with the department. In reply, she has admitted vide letter dated 14-2-2002, that the method adopted by the assessee-company in the year under consideration has been followed consistently in the succeeding years also and the change in the method, as submitted by her at the time of hearing, was reported by the assessing officer due to some misunderstanding of factual position. It is thus clear that the change in the method has been consistently followed by the assessee-company in the subsequent years also and as the same has also been held to be bona fide by us, we find no justification in the impugned order of the learned Commissioner (Appeals) upholding the action of the assessing officer in rejecting the same and consequently in making the disallowance, We, therefore, delete the same.

The next issue relating to the alternate claim of the assessee for allowance of contribution from employees towards pension fund and interest thereon in the year of payment is raised in ground No. 13 of ITA No. 22/Nag/2001 for assessment year 1996-97.

At the time of hearing before us, the learned counsel for the assessee has submitted that if the main issue relating to the deduction on this count in the years of accrual as claimed by the assessee is decided in favour of the assessee, this ground may be treated as not pressed by the assessee. Accordingly in view of our decision on the main issue rendered in the preceding paras of this order, this ground is treated as not pressed by the assessee and the same is dismissed as not pressed.

The next issue relating to the disallowance of assessees contribution to coal mines provident fund amounting to Rs. 474.14 lakhs is raised in ground Nos. 14 and 15 of ITA No. 22/Nag/2001 for assessment year 1996-97.

After considering the rival submissions and perusing the relevant material on record, it is observed that a provision for the contribution payable by the assessee-company in respect of provident fund arising out of revision of salaries and wages was made in the books of account and deduction on account of the same was also claimed in computing the income for assessment year 1996-97. During the assessment proceedings, it was noticed by the assessing officer that the arrears of salaries and wages were payable by the assessee-company as per the agreement only in the month of January, 1997, and, therefore, an obligation on the company to pay the provident fund relating to the said arrears cast on the assessee only in the financial year 1996-97 relevant to assessment year 1997-98. It was also noticed by him that the said arrears of salary and wages have been disbursed by the assessee-company in the month of January, 1997, and the provident fund dues in respect of the same has also been paid after the due date.

He, therefore, disallowed the deduction claimed by the assessee on this count. When the matter was carried by the assessee-company before the learned Commissioner (Appeals) in appeal, he confirmed the disallowance made by the assessing officer observing that there was no liability cast upon the assessee as on 31-3-1996, to make payment of P.F dues since the arrears of wages and salary were payable only in the month of January, 1997, Before us, the learned counsel for the assessee has submitted that the liability on account of contribution to provident fund on arrears of wages was actually accrued on 31-5-1996, although the same was payable in the month of February, 1997. He contended that what accrued on 31-3-1996, a quantum liability assuming nomenclature of companies contribution of P.F., but the same was incorrectly classified as contribution to provident fund. After considering the facts of the case including the fact that nothing has been brought on record to establish that the liability towards P.F. contribution accrued during the previous year relevant to assessment year 1996-97, we find it difficult to agree with the contention of the learned counsel for the assessee. As a matter of fact, the finding given by the assessing officer that the said liability accrued only in the month of January, 1997, when the arrears of wages and salary were actually paid has neither been disputed nor controverted by the learned counsel for the assessee before us and this being so, we find no reason to disturb the orders of the authorities below holding that the impugned liability so accrued during the previous year relevant to assessment year 1997-98 was not deductible in assessment year 1996-97 as claimed by the assessee. We, therefore, uphold the impugned order of the learned Commissioner (Appeals) confirming the disallowance made by the assessing officer on this count.

As regards the assessees alternative plea for allowing the said deduction in the assessment year 1997-98, we have already observed that the impugned liability on account of contribution to provident fund accrued during the previous year relevant to assessment year 1997-98.

Further, we may also observe that the assessee, having made the payment against the same in the relevant financial year, was entitled to claim deduction of the said amount in assessment year 1997-98 in accordance with the view taken consistently by this Bench on this issue. However, we cannot go any further in the matter relating to assessment year 1997-98 as the same is not under consideration before us in the present appeals.

The next issue relating to the incorrect imposition of interest under section 234C amounting to section 174.55 lakhs is raised in ground No.17 of ITA No. 22/Nag/2001 for assessment year 1996-97.

For the assessment year 1996-97, the assessee-company filed its return of income originally on 30-11-1996, declaring a total income of Rs. 56,58,79,610. The said return was revised on 18-11-1997, declaring a total income of Rs. 53,55,44,550. Subsequently the assessment for assessment year 1995-96 was completed by the assessing officer under section 143(3) disallowing certain expenditure for the reason that the same relates to the assessment year 1996-97. The said order was served on the assess ee-company only on 28-4-1999, i.e., after the last date for filing the revised return of income. The assessee-company, therefore, filed a revised computation of income before the assessing officer showing a total income at Nil after claiming deduction on account of expenditure disallowed by the assessing officer in assessment year 1,995-96 being related to assessment year 1996-97. The assessing officer, however, levied the interest under section 234C amounting to Rs. 174.55 lakhs on the basis of returned income declared in the revised return filed on 18-11-1997. In the appeal filed against the order of the assessing officer for assessment year 1996-97, the assessee challenged the levy of interest under section 234C stating that the tax payable as per the revised computation of income filed with the assessing officer was Nil and the assessee having paid the advance tax of Rs. 1 crore, no interest under section 234C was leviable. The learned Commissioner (Appeals), however, did not find the contention raised on behalf of the assessee before him in this regard to be acceptable observing that the levy of interest under section 234C is mandatory.

The learned counsel for the assessee submitted that the expenses claimed in the revised computation sheet filed before the assessing officer could not be claimed as deduction by filing a revised return because the due date for revising the return had already expired. He contended that the assessee, however, filed a revised computation of income on 19-1-1999, before the assessing officer showing a Nil income and since the assessee-company had paid an amount of Rs. 1 crore as advance tax for the year under consideration, interest under section 234C which is levied on the shortfall of tax payable on the returned income and the amount of advance tax paid, was not leviable in the case of the assessee He also contended that the submission made on behalf of the assessee-company before the Commissioner (Appeals) on this issue was not properly appreciated by him and he proceeded to decide this issue without giving any specific finding on the assessees submission.

He, therefore, urged that the impugned order of the learned Commissioner (Appeals) on this issue may be set aside and the assessing officer be directed to delete the interest charged under section 234C.The learned Departmental Representative, on the other hand, contended that the assessees submission on this issue is not acceptable because as per the last valid return filed by the assessee on 18-11-1997, the income of the assessee-company was declared at Rs. 53,55,44,550. She also contended that filing of a revised computation sheet later cannot be a valid and legal return and, therefore, the assessing officer was right in levying interest under section 234C on the basis of income returned by the assessee-company in the last valid return, in accordance with the specific provision of the said section. According to her, the impugned order of the learned Commissioner (Appeals) confirming the levy of interest by the assessing officer under section 234C, therefore, deserves to be upheld.We have considered the rival submissions and also perused the relevant material on record, It is observed that interest for deferment of advance tax is payable under section 234C by the assessee who is liable to pay advance tax under section 208 but has failed to pay or has deferred the payment of such tax due on the returned income. The expression "tax due on the returned income" is defined in the Explanation to the said section as the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the first day of April immediately following the financial year in which the advance tax is payable.

Obvious as it is, the returned income referred to in section 234C means the total income declared in the return of income furnished by the assessee validly for the relevant assessment year. In the present case the assessee-company filed, the revised return on 18-11-1997, and the same having been filed validly, the assessing officer treated the income declared therein as the returned income for the purpose of computing interest chargeable under section 234C. Before us the learned counsel for the assessee has contended that the assessment for immediately preceding year, i.e., assessment year 1995-96 was completed by assessing officer disallowing certain deductions claimed by the assessee in that year as the same, according to him, were related to assessment year 1996-97. He has contended that by the time the said order was served on the assessee, the due date for filing the revised return had already expired and, therefore, the assessee could not file the revised return claiming deductions which had not been allowed by the assessing officer for the reason that the same related to assessment year 1996-97. The assessee, therefore, filed a revised computation of income before the assessing officer showing Nil income and the plea of the assessee is that the same be construed as the "returned income" for the purpose of levying of interest under section 234C. After considering the facts of the case and keeping in view very clear, unambiguous and specific provisions contained in section 234C, we find it difficult to accept this plea of the assessee. It is trite law that a taxing statute has to be strictly construed. In a taxing statute, one has to look merely at what is clearly said. There is not room for any intendment. Nothing is to be read in and nothing is to be implied. In the case of State of Bombay v. Automobile and Agricultural Industries Corpn. (1961) 12 STC 122, the Honble Supreme Court has observed that courts in interpreting a taxing statute will not be justified in adding words thereto so as to make out some presumed object of the legislature. As such considering the facts of the present case in the light of this settled position of law and keeping in view the clear and specific provisions contained in section 234C, we are of the considered opinion that the income shown by the assessee in the "revised computation of income" filed before the assessing officer after the time-limit prescribed in section 139(5) cannot be treated as returned income of the assessee for the purpose of levy of interest under section 234C. In that view of the matter ,we find no infirmity in the impugned order of the learned Commissioner (Appeals) upholding the action of the assessing officer in levying interest under section 234C with reference to tax due on the income declared by the assessee in the revised return. The same is, therefore, uphold on this issue.

In the result, all these preferred by the assessee are partly allowed as indicated above.