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Issues Involved:
1. Addition of Rs. 6,69,028. 2. Addition of Rs. 6 crores. Issue-wise Detailed Analysis: 1. Addition of Rs. 6,69,028: The appeal raised the issue of an addition of Rs. 6,69,028. However, during the hearing, no arguments were advanced on this ground. It was noted that the issue was not pressed before the CIT(A) as the Assessing Officer's order had been subsequently rectified under section 154 of the I.T. Act, 1961. Consequently, this ground was dismissed as not being present before the Tribunal. 2. Addition of Rs. 6 crores: The core issue involved the addition of Rs. 6 crores paid by the assessee, a Government of Rajasthan undertaking, to the State Government. The assessee was involved in mining operations and had prepared a Definitive Feasibility Report (DFR) for the Jhamar Kotda Integrated Project (JIP). The State Government decided to execute the project through the assessee on several terms, including an annual payment of Rs. 6 crores. Background: The State Government authorized the assessee to execute the JIP and granted permission to continue rock phosphate exploitation until a formal lease was executed. The assessee applied for a mining lease under the Mines and Minerals (Regulation and Development) Act, 1957, but the application was still pending. Meanwhile, the State Government granted working permission to the assessee, with a condition to pay special lease money of Rs. 7.5 crores for the first year and Rs. 6 crores per annum thereafter. Assessment and CIT(A) Decision: For the assessment year 1990-91, the assessee claimed a deduction of Rs. 6 crores as revenue expenditure. The DC (Assessment) disallowed the deduction, treating it as capital expenditure, relying on the Supreme Court decision in R.B. Seth Moolchand Suganchand V. CIT [1972] 86 ITR 647. The CIT(A) upheld the DC's decision, distinguishing the Supreme Court decision in M.A. Jabbar v. CIT [1968] 68 ITR 493 and holding that the expenditure was capital in nature. Tribunal's Analysis: The Tribunal analyzed whether the payment was for a lease or a license. It noted that the regulation of mines and minerals is under the Central Government's control, and mining leases must comply with the Mines and Minerals (Regulation and Development) Act, 1957, and the Mineral Concession Rules, 1960. The Tribunal found that no formal lease deed was executed between the parties, and the relationship was that of a licensor and licensee. Nature of Expenditure: The Tribunal held that the payment of Rs. 6 crores was in consideration of concessions and privileges granted by the State Government and was not for acquiring any enduring right over the land. The payment was recurring and did not create any asset or advantage of enduring benefit. The Tribunal concluded that the expenditure was revenue in nature, as it was for obtaining stock-in-trade (rock phosphate) and not for acquiring a capital asset. Conclusion: The Tribunal directed the Assessing Officer to allow the sum of Rs. 6 crores as business expenditure to the assessee, treating it as revenue expenditure. Result: The appeal was partly allowed.
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