1978 (9) TMI 37 - HC - Income Tax

Summary

Issues involved:
The deduction of expenses for removal of overburden in mines claimed by the assessee as revenue expenditure.

Judgment Details:

The assessee, a colliery company, claimed deduction of expenses for removal of overburden in its mines for the assessment year 1964-65. The Income Tax Officer (ITO) disallowed the claim as capital expenditure. The assessee appealed, contending that the removal of overburden was necessary for reaching the coal seam and did not result in enduring benefit. The Appellate Assistant Commissioner (AAC) accepted this contention. The revenue appealed to the Tribunal, which upheld the AAC's decision, stating that the expenditure was part of the normal process in raising coal.

The Tribunal referred the question of whether the expenses were revenue or capital expenditure to the High Court. The revenue argued that the expenses should be considered capital expenditure based on certain legal precedents. The assessee's counsel argued that the earlier decision in a similar case favored the assessee and the new cases cited were not applicable to the current situation. The AAC and Tribunal's findings that the removal of overburden was necessary and did not bring enduring benefit were not challenged.

The High Court analyzed the legal precedents cited by both parties. It distinguished the facts of those cases from the current case, emphasizing that the expenses in the present case were incurred in the process of winning coal and did not result in enduring benefit. The Court held that the findings of the AAC and Tribunal, based on admitted statements of the assessee, were conclusive. Referring to a Supreme Court decision supporting revenue expenditure for necessary operations in coal extraction, the Court ruled in favor of the assessee.

In conclusion, the High Court answered the question in the affirmative and in favor of the assessee, citing the necessity of stowing operations in coal extraction as supported by a Supreme Court decision. Costs were not awarded. Judge Bimal Chandra Basak concurred with the decision.