9911796707
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Issues Involved:
1. Delay in filing the appeal by the revenue. 2. Allowance of depreciation on Geographical Report under Section 35E of the Income Tax Act. 3. Disallowance of additional depreciation on Geographical Report. 4. Allowance of expenditure incurred for up-gradation/construction of a link road as revenue expenditure. Detailed Analysis: 1. Delay in Filing the Appeal by the Revenue: The appeal filed by the revenue was delayed by 8 days. The Tribunal found the cause for the delay reasonable and, as conceded by the counsel for the assessee, condoned the delay and admitted the appeal. 2. Allowance of Depreciation on Geographical Report: The revenue contended that the depreciation claimed by the assessee on the Geographical Report (GR) should be disallowed under Section 35E of the Income Tax Act, which pertains to expenditure on prospecting, etc., for certain minerals. The Assessing Officer disallowed the depreciation by considering the GR as an expense covered under Section 35E, thereby reducing the depreciation claim by Rs. 66,00,000. The CIT(A) allowed the depreciation but disallowed the additional depreciation. The CIT(A) held that the GR is not a tool fundamental to the assessee's business and cannot be considered a plant. Instead, it was treated as an intangible asset under Section 32(1)(ii) of the Act. The Tribunal, upon reviewing the facts and circumstances, concluded that the GR is a fundamental document essential for assessing the feasibility of the mine, evaluating the economics of the mine, and planning mining activities. The Tribunal held that the GR constitutes an intangible asset eligible for depreciation as per Section 32(1)(ii) of the Act. However, it is not a plant under Section 43(3). 3. Disallowance of Additional Depreciation on Geographical Report: The revenue argued that the additional depreciation should not be allowed as per the second proviso to Section 32(1)(iia), which states that no depreciation shall be allowed for any machinery or plant installed in office premises. The Assessing Officer disallowed the additional depreciation, considering the GR as an office document. The Tribunal upheld the CIT(A)'s decision that the GR is an intangible asset and not a plant. Therefore, the assessee is not entitled to claim additional depreciation under Section 32(1)(iia) of the Act. The Tribunal emphasized that even if the GR were considered a plant, it would fall under the second proviso to Section 32(1)(iia), which bars additional depreciation for machinery or plant installed in office premises. 4. Allowance of Expenditure for Up-gradation/Construction of Link Road: The revenue contended that the expenditure of Rs. 3,57,45,560 incurred by the assessee for the up-gradation/construction of a link road belonging to Birbhum Zilla Parishad should be considered capital expenditure. The Assessing Officer disallowed the expenditure, considering it as giving an advantage of enduring nature. The CIT(A) allowed the expenditure as revenue expenditure, noting that the construction/up-gradation of the road facilitated the business operations of the assessee efficiently and profitably. The CIT(A) found that no asset was acquired by the assessee, and the expenditure did not expand the profit-making apparatus of the assessee. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's judgment in L.H. Sugar Factory & Oils Mills (P) Ltd. Vs. CIT, which held that expenditure on road construction around a factory for facilitating business operations is revenue expenditure. The Tribunal concluded that the expenditure incurred by the assessee for the up-gradation/construction of the link road is allowable as revenue expenditure under Section 37(1) of the Act, as it was incurred wholly and exclusively for the purpose of the business. Conclusion: - The delay in filing the appeal by the revenue was condoned. - Depreciation on the Geographical Report was allowed as an intangible asset under Section 32(1)(ii). - Additional depreciation on the Geographical Report was disallowed as it is an office document and not a plant. - Expenditure incurred for the up-gradation/construction of the link road was allowed as revenue expenditure under Section 37(1). The appeal of the revenue and the cross-objection of the assessee were both dismissed.
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