Moil Limited Earlier Known As Manganese ...

vs The Commissioner Of Income Tax-I Nagpur on 26

April, 2017
Moil L i m i t e d E a r l i e r Kn o w n As M a n g a n e s e ... vs The
Commissioner Of Income Tax-I Nagpur on 26 April, 2017

Author: Vasanti A. Naik

Bench: Vasanti A Naik, Swapna Joshi

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

NAGPUR BENCH AT NAGPUR

INCOME TAX APPEAL NO.67/2016

APPELLANT: MOIL Limited earlier known as

Manganese Ore India Limited,
1A, Katol Road, P.O. Box No.34,
Nagpur - 440013.

...VERSUS...

RESPONDENT : The Commissioner of Income Tax-I,

Nagpur.

Shri K.P. Dewani, Advocate for appellant

Shri Anand Parchure, Advocate for respondent

CORAM : SMT. VASANTI A NAIK, AND

MRS. SWAPNA JOSHI,
DATE : 26.04.2017

ORAL JUDGMENT (PER : SMT. VASANTI A. NAIK, J.)

The Income Tax Appeal is admitted on the following substantial question of law :-

"Whether the Commissioner of Income Tax was justified in invoking the

jurisdiction under Section 263 of the Income Tax Act to remand the
matter to the Assessing Officer in respect of allowance of Corporate
Social Responsibility claim of the appellant - assessee ?"

2. Few facts giving rise to the Income Tax Appeal are stated thus : -

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itl67.16.odt The appellant - assessee is a public sector undertaking wholly
owned by the Government of India. The assessee - Company is involved in
the business of extraction and sale of manganese ore, generation of
electricity and manufacturing and sale of EMV and ferro minerals. An E-
return was filed by the assessee - Company for the assessment year 2009-
10 on 26.9.2009 declaring the total income of nearly
Rs.1008,53,44,720/-. The notice under Section 142 (1) of the Income
Tax Act pertaining to the assessment year 2009-10 for furnishing the
details in respect of twenty items mentioned in the notice dated
20.11.2011 was served on the appellant - assessee. As in this case we are
concerned with the admissibility or otherwise of the claim of the assessee
for deduction in respect of the Corporate Social Responsibility, it would
be necessary to only refer to item no.9 in the notice under Section 142 (1)
of the Act. As per the said item, the Assessing Officer asked the assessee
to give a detailed note of expenditure for the Corporate Social
Responsibility along with the bifurcation of the expenses under different
heads. In pursuance of the said notice, a reply dated 23.12.2011 was
served by the assessee on the Assistant Commissioner of Income Tax,
Nagpur. In paragraph 8 of the reply, which runs into more than five
pages, the appellant - assessee had given the bifurcation of the expenses
under various heads towards the Corporate Social Responsibility claim.

itl67.16.odt The Assessing Officer considered the claim of the assessee for
disallowance/additions and while allowing certain claims without making a specific
reference to them in the assessment order, disallowed some claims after giving
detailed reasons for the disallowance. The Commissioner of Income Tax supposedly
invoked the jurisdiction under Section 263 of the Act after holding that the Assessing
Officer had passed the assessment order without making any enquiry regarding the
allowability of expenses claimed by the assessee under the head "Corporate Social
Responsibility" and hence, the order was erroneous and prejudicial to the interest of
the Revenue. After having held so, the Commissioner of Income Tax remanded the
matter to the Assessing Officer to redo the assessment in respect of the claim of the
appellant - assessee pertaining to the Corporate Social Responsibility. Being aggrieved
by the exercise of the jurisdiction by the Commissioner of Income Tax under Section
263 of the Act, the appellant - assessee filed an appeal before the Income Tax
Appellate Tribunal. The Income Tax Appellate Tribunal, however, by the order dated
25.2.2016 dismissed the appeal filed by the assessee while upholding the order of the
Commissioner of Income Tax invoking the jurisdiction under Section 263 of the Act
and remanding the matter to the Assessing Officer for redoing the assessment in
respect of the said claim. The orders of the Tribunal and itl67.16.odt the
Commissioner of Income Tax are challenged by the appellant - assessee in this appeal.

3. Shri Dewani, the learned Counsel for the appellant submitted that the Commissioner
of Income Tax was not justified in exercising the jurisdiction under Section 263 of the
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Act by holding that the Assessing Officer had not made any enquiry regarding the
allowability of the expenses towards the Corporate Social Responsibility claim. It is
submitted by taking this Court through the notice issued by the Assistant
Commissioner of Income Tax under Section 142 (1) of the Act and specially item no.9
therein as also the reply filed by the appellant-assessee to the said item that the
Assessing Officer was satisfied about the explanation tendered by the assessee and
hence, the Assessing Officer

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had allowed the claim in respect of Corporate Social Responsibility. It is submitted
that during the previous assessment years similar claims made by the assessee were
allowed by the Assessing Officer and there was no interference with the assessment
orders during the previous years. It is submitted that similar claim was granted in
respect of Corporate Social Responsibility during the previous years and the
Commissioner of Income Tax has wrongly invoked the jurisdiction under Section 263
of the Act though the Assessing Officer had applied his mind to the explanation
tendered by the assessee and while allowing the said claim had refused to itl67.16.odt
allow the others after recording reasons for doing so. The learned Counsel took this
Court though the judgments of the Bombay High Court in the case of Commissioner of
Income Tax...Versus...Fine Jewellery (India) Ltd., reported in (2015) 372 ITR 303
(Bom.) and Commissioner of Income Tax...Versus...Nirav Modi, reported in (2016) 138
DTR 81 (Bom.) to submit that if a query is raised during the assessment proceedings
and if the assessee responds to the said query, merely because the said aspect is not
dealt with in the assessment order, would not lead to a conclusion that the Assessing
Officer had not applied his mind to the response of the assessee. It is stated that while
holding so, the Bombay High Court has relied on an earlier judgment of the Bombay
High Court in the case of Idea Cellular Ltd....Versus...Deputy Commissioner of Income
Tax and others, reported in (2008) 301 ITR 407 (Bom.). It is submitted that the
assessee - Company is a Government of India undertaking and the Government has a
control over the expenses of the undertaking of the assessee. It is submitted that some
incentives like placing the Company in the category of mini Navratna or Navratna are
granted if Corporate Social Expenses are made to the extent of at least 2% to 3% of
the total income. It is submitted that it is absolutely necessary for the Companies like
the assessee - Company to expend towards Corporate Social Responsibility. It is
submitted that in the circumstances of the case, itl67.16.odt the Commissioner of
Income Tax could not have invoked the jurisdiction under Section 263 of the Act
merely because the Assessing Officer has not formally recorded in the order of
assessment that the claim made by the assessee towards the Corporate Social
Responsibility is allowed.

4. Shri Parchure, the learned Counsel for the Revenue has supported the order of the
Commissioner of Income Tax as also the Income Tax Appellate Tribunal. It is
submitted by taking this Court through the assessment order that the Assessing
Officer has specifically dealt with certain items like pay revision, forest land diversion
expenses, cenvet credit, R and D expenses, depreciation on leasehold land etc. in the
assessment order but the Assessing Officer has not stated a word in the assessment
order pertaining to the allowance of the claim towards the Corporate Social
Responsibility. It is submitted that after going through the assessment order, the
Commissioner of Income Tax had found that the Assessing Officer had not made any
enquiry regarding the allowability of expenses under the head "Corporate Social
Responsibility". It is submitted that in the circumstances of the case, specially when
the assessment order is silent in regard to the allowability of the claim towards the
Corporate Social Responsibility, the Commissioner of Income Tax has rightly exercised
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the jurisdiction under Section 263 of the Act.

itl67.16.odt

5. On a perusal of the orders passed by the Authorities, it appears that before the
assessment order was passed, a notice was served on the assessee under Section
142 (1) of the Act and 20 queries

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pertaining to different heads were made therein. The ninth query in the notice under
Section 142 (1) of the Act pertains to the expenditure for the Corporate Social
Responsibility. By the said query, the assessee was directed to give a detailed note of
expenditure for the Corporate Social Responsibility along with bifurcation of the
expenses under different heads. An exhaustive reply was submitted by the assessee to
the notice under Section 142 (1) of the Act. In paragraph 8 of the reply, the assessee
gave the detailed note pertaining to the expenditure for the Corporate Social
Responsibility under different heads that runs into several pages. The heads under
which the expenses were made towards the Corporate Social Responsibility were
specifically mentioned as health, environment, sports, education etc. and for each of
the different heads, particulars were given in respect of every minor or major
expenses. A detailed note on the expenditure on the Corporate Social Responsibility
claim was given in paragraph 8 which runs into more than five pages. It is not
disputed that the appellant - assessee is a Government of India undertaking and the
Government has a control over the expenses of the undertaking. It is pertinent to note
that during the previous assessment years, similar claims itl67.16.odt were made by
the assessee - Company and the assessment orders allowing the claims have attained
finality. We have minutely perused the assessment order. The claims for deductions
were made by the assessee at least under 20 heads and queries were made in the
notice under Section 142 (1) of the Act to the assessee in respect of nearly all of them.
We, however, find from the assessment order that the Assessing Officer has dealt with
nearly nine claims of deductions. These claims have been specifically mentioned in the
assessment order and they have been discussed therein because the Assessing Officer
appears to have disallowed those claims either partially or totally. In respect of the
claim for the Corporate Social Responsibility and some other claims that were allowed
by the Assessing Officer, the Assessing Officer has not made a specific reference in the
assessment order. It is apparent from the assessment order that the Assessing Officer
has expressed in detail about the claims that were disallowable. Where the claims
were allowable, as we find from the reading of the assessment order, the Assessing
Officer has not referred to those claims. The Corporate Social Responsibility claim is
one of them. It is apparent from the notice under Section 142 (1) of the Act that a
specific query in regard to the claim pertaining to the Corporate Social
Responsibility was made and a detailed note after giving bifurcation of the expenses
under different heads was sought. We have itl67.16.odt perused the response in
respect of this query which is exhaustive. We find that the assessee has given the
details, as are sought under query no.9 in the notice under Section 142 (1) of the Act.
If that is so, the judgments, reported in (2015) 372 ITR 303 (Bom.) and (2016) 138
DTR 81 (Bom.) and on which the learned Counsel for the assessee has placed great
reliance would come into play. It is held in the judgments referred to herein above by
relying on the judgment in the case of Idea Cellular Ltd. (Supra) that if a query is
raised during the assessment proceedings and the query is responded to by the
assessee, the mere fact that the query is not dealt with in the assessment order would
not lead to a conclusion that no mind has been applied to it. In the case of Fine
Jewellery (India) Ltd. (Supra) this Court found that from the nature of the expenditure

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as explained by the assessee in that case the Assessing Officer took a possible view
and therefore, it was not a case where the provisions of Section 263 of the Act could
have been resorted to. Considering the explanation of the assessee in this case, we are
also of the view that the Assessing Officer had taken a possible view. In the case of
Nirav Modi (Supra) this Court held that the Tribunal was justified in that case in
cancelling the order under Section 263 of the Act as the assessee had responded to
the query made to it during the assessment proceedings and merely because the
assessment order did not mention the same, it

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would not lead to a conclusion that the itl67.16.odt Assessing Officer had not applied
his mind to the case. In the instant case, we find that the Assessing Officer has applied
his mind to the claims made by the assessee and wherever the claims were
disallowable they have been discussed in that assessment order and there is no
discussion or reference in respect of the claims that were allowed. In view of the law
laid down in the judgments in the case of Fine Jewellery (India) Ltd. (Supra) and Nirav
Modi (Supra) it would be necessary to hold that in the circumstances of the case, it
cannot be said that merely because the Assessing Officer had not specifically
mentioned about the claim in respect of the Corporate Social Responsibility, the
Assessing Officer had passed the assessment order without making any enquiry in
respect of the allowability of the claim of Corporate Social Responsibility. In our view,
the provisions of Section 263 of the Act could not have been invoked by the
Commissioner of Income Tax in the circumstances of this case. The Tribunal was not
justified in holding that the query under Section 142 (1) of the Act was very general in
nature and the reply of the assessee was also very general in nature. In our
considered view, the query pertaining to Corporate Social Responsibility was
exhaustively answered and the appellant - assessee had provided the data pertaining
to the expenditure under each head of the claim in respect of Corporate Social
Responsibility, in detail. The Tribunal was not justified in holding that the itl67.16.odt
reply/explanation of the assessee was not elaborate enough to decide whether the
expenditure claim was admissible under the provisions of the Income Tax Act. The
Assessing Officer is not expected to raise more queries, if the Assessing Officer is
satisfied about the admissibility of claim on the basis of the material and the details
supplied. In the facts and circumstances of the case, we answer the question of law in
the negative and against the Revenue.

6. For the reasons aforesaid, the Income Tax Appeal is allowed. The orders
passed by the Commissioner of Income Tax and the Income Tax Appellate Tribunal
are quashed and set aside. No order as to costs.

JUDGE JUD

Wadkar

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