Bombay High Court: In an appeal under Section 260A of the Income Tax Act, 1961 (‘Act’) preferred by the Principal Commissioner of Income Tax against the order passed by the Income Tax Appellate Tribunal in favor of Tata Steel Ltd., a Division Bench comprising of K.R. Shriram and Dr. Neela Gokhale, JJ. upheld the impugned order while reiterating that the contribution made towards the Compensatory Afforestation Fund (‘CAF’) would be revenue expenditure and not capital in nature.
Tata Steel, engaged in the business of manufacturing iron and steel products, had filed the return of income for the assessment year 2006-2007, declaring the total income as Rs. 44,22,82,61,971/-. The return of income was processed under Section 143(1) of the Act and after a later assessment, the income was determined as Rs. 4489.32 crores.
The Commissioner of Income Tax (‘CIT’) exercised powers under Section 263 of the Act and issued a notice to set aside the original assessment order on three issues with a direction to the Assessing Officer (‘AO’) to pass a fresh assessment order.
The present appeal deals with only one of the three issues regarding the allowability of Tata Steel’s contribution to the Compensatory Afforestation Fund (‘CAF’) amounting to Rs. 212.52 crores.
The AO passed an order under Section 143(3) read with Section 263 of the Act wherein he disallowed the contribution made by Tata Steel to the CAF. Aggrieved by this, an appeal was preferred to the CIT (Appeals), who dismissed the same. Tata Steels filed two appeals before the Income Tax Appellate Tribunal (ITAT), one impugned the order passed by the CIT and another impugned the order passed by the CIT (Appeals).
The ITAT allowed both appeals and stated on the issue of CAF that, an identical issue had been decided in favor of the Assessee by various benches of ITAT. While reiterating the order passed in The Commissioner of Income Tax v. Ramgad Minerals & Minings Pvt. Ltd.1, it was held that the CIT was not justified in invoking the provisions of Section 263 of the Act. This order of ITAT is impugned in this appeal.
The Court, after considering the facts and circumstances of this case, said that the only issue and substantial question of law which arises in this appeal is “whether Assessee was entitled to treat the contribution of Rs. 212.52 crores to CAF as capital in nature or as revenue expenditure as claimed by Assessee”.
While referring to the case of The Commissioner of Income Tax v. Prafulla R. Hede2, the Court held that the issue is no more res-integra since the Goa Bench of this Court had already accepted that contribution to CAF will be revenue expenditure and not capital in nature, and even the Special Leave Petition that was filed by the Revenue against the case mentioned above had been dismissed. Thus, while dismissing the appeal, the Court held that no substantial question of law arose in this matter.
[Principal Commissioner of Income Tax v. Tata Steel Ltd., 2024 SCC OnLine Bom 1148]
Advocates who appeared in this case :
For Appellant — Advocate Suresh Kumar
For Respondent — Advocate Nishant Thakkar, Advocate Jasmin Amalsadvala, Advocate Bhavesh Bhatia
1. ITA No. 5021 of 2009 dated 6th January 2012.
2. Tax Appeal No. 15 of 2012 dated 6th February 2012
