9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (11) TMI 733 - AT - Income TaxDisallowance of depreciation on lease hold land claimed u/s 32(1)(ii) - Rights and liabilities of a holder of prospecting licence or mining lease - A.R. submitted that the assessee has entered into a Mining Agreement with the Government of Maharashtra vide Mining Agreement ( Mining Agreement ) for a period of 30 years - HELD THAT - Mining Lease being right to undertake mining activity and the acquisition of surface rights thereon falls with the purview of the term business or commercial right . The lease granted to the assessee is nothing but a license under the Mines and Minerals (Development Regulation) Act, 1957 to undertake mining of coal. Without the mining lease, no person can undertake any mining activity. Further, the license/lease holder is also required to acquire the surface rights of the area falling within the mining area. This right to mine and the surface right falls within the definition of intangible assets as defined in Section 32(1)(ii) and Explanation 3 to Section 32(1(ii). The term Business and Commercial Rights has been dealt by the Hon ble Delhi High Court in the case of CIT vs Hindustan Coca Cola Beverages (P.) Ltd. 2011 (1) TMI 30 - DELHI HIGH COURT In the case of ONGC Videsh Ltd. Vs. Deputy Commissioner of Income-tax 2009 (10) TMI 76 - ITAT DELHI-F wherein the Coordinate Bench of Delhi Tribunal considered similar issue that the Commercial rights of exploration of minerals, oil, by entering into production sharing agreement with Russian Government fall under the expression any other business or commercial rights on similar nature , same being akin to licenses as stipulated in section 32(1)(ii) of the Act and therefore, they are in the nature of intangible assets, eligible for depreciation at the prescribed rate. We are of the opinion that the amount expended by the assessee to acquire the right of mining the coal, therefore, to be considered as Capital Expenditure and the assessee is entitled for depreciation. In view of this, we direct the AO to treat this as Capital Expenditure , which is in enduring nature and grant applicable rate of depreciation on it as appliable to commercial rights of similar nature. Disallowance claimed u/s 35E - HELD THAT - If the assessee claims any depreciation on this expenditure incurred for excavation of coal prior to commencement of production by capitalizing the same, the assessee is not entitled for deduction u/s 35E - On the other hand, if the assessee has not claimed any depreciation on this expenditure, the claim of assessee u/s 35E of the Act is to be granted. Accordingly, the issue is remitted to AO for fresh consideration. AO has to decide the issue after giving opportunity of hearing to the assessee. Disallowance being depreciation on intangible assets claimed u/s 32(1)(ii) - HELD THAT - The amount pertains to depreciation claim on the acquiring of additional/new land/mining rights during the period under consideration, the AO has disallowed the assessee's claim for the same reasons as elucidated in respect of the claim at his para-4, with regard to the same issue of depreciation on lease-hold rights, which has been disallowed - CIT(A) confirmed the disallowance of depreciation on the same reasons adduced in ground No.1 of this order and disallowed the depreciation claim held to be inadmissible. The assessee's grounds of appeal are therefore disallowed by the CIT(A). Disallowance being the interest on TDS made by the assessee u/s 37 - After hearing both the parties, we are of the opinion that this issue is squarely covered by earlier decision in the case of CIT Vs. Oriental Insurance Company Ltd. 2008 (10) TMI 230 - KARNATAKA HIGH COURT held that the levy of interest for delay payment of TDS is not in the nature of penalty but it is a compensatory in nature and the same is allowable u/s 37 of the Act. Accordingly, this issue is decided in favour of the assessee.
Issues Involved:
1. Disallowance of depreciation on leasehold land claimed under Section 32(1)(ii) of the Income-tax Act, 1961. 2. Non-adjudication of the ground regarding the allowability of carry forward loss. 3. Sustaining disallowance claimed under Section 35E of the Act. 4. Non-granting of depreciation on intangible assets claimed under Section 32(1)(ii) of the Act. 5. Disallowance of interest on TDS under Section 37 of the Act. 6. Additional ground regarding deduction under Section 37 of the Act for investment in land purchased/allotted for mining of coal. Detailed Analysis: 1. Disallowance of Depreciation on Leasehold Land: The primary issue was the disallowance of depreciation claimed by the assessee on leasehold land under Section 32(1)(ii). The assessee argued that the land was acquired for mining purposes, and the surface rights were to be transferred to the government post the mining lease period. The Tribunal found that the surface rights, though purchased, were ultimately to be transferred to the government, making the purchase part of the cost of obtaining a mining license. The Tribunal held that the right to mine and the surface right fall within the definition of intangible assets under Section 32(1)(ii) and Explanation 3 to Section 32(1)(ii). The Tribunal allowed the depreciation claim, distinguishing it from royalty payments and emphasizing the peculiarities of the mining industry. 2. Non-adjudication of Carry Forward Loss: The assessee raised a ground regarding the non-adjudication of the allowability of carry forward loss for AY 2010-11. The Tribunal directed the AO to reconsider the issue and grant the loss claimed by the assessee in accordance with the law, ensuring an opportunity for the assessee to be heard. 3. Sustaining Disallowance Claimed Under Section 35E: The AO disallowed certain expenses claimed under Section 35E, arguing they were capital in nature and eligible for depreciation under Section 32. The Tribunal remitted the issue back to the AO to verify if the assessee claimed any depreciation on these expenses. If no depreciation was claimed, the deduction under Section 35E should be allowed. 4. Non-granting of Depreciation on Intangible Assets: The AO disallowed depreciation on assets acquired during the year, treating them as land and not intangible assets. The Tribunal allowed the depreciation claim, consistent with its findings on leasehold land, and emphasized that there should be no double claim of depreciation. 5. Disallowance of Interest on TDS: The AO disallowed interest on delayed payment of TDS, treating it as a penalty. The Tribunal, citing various judgments, held that the interest on delayed TDS payment is compensatory and not penal, making it deductible under Section 37 of the Act. 6. Additional Ground for Deduction Under Section 37: The additional ground raised by the assessee was for the deduction under Section 37 for investment in land for mining purposes. The Tribunal found this ground infructuous given its decision to allow depreciation on leasehold land, making the additional ground unnecessary. Conclusion: The Tribunal allowed the appeals partly for statistical purposes, directing the AO to reconsider specific issues and granting depreciation on leasehold land and interest on delayed TDS payment. The additional ground was dismissed as infructuous.
|
