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TMI Blog2012 (12) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... and Explosive Rs. 73,19,373 (3) Shifting and Leveling Charges Rs. 37,55,055 (4) Query Development Charges Rs.1,65,69,555 (5) Mining Survey Rs. 59,652 Rs.5.36,77,794 3. For that the learned CIT(A) is not correct in law to uphold the addition of Plot Bidding charges of Rs.1,25,00,000 made by the learned Assessing Officer to the returned income of the appellant on the facts and in the circumstances of the case. 4. For that the learned CIT(A) is not justified to uphold the addition under the head charity and donation of Rs.1,40,290 made by the learned Assessing Officer to the returned income of the appellant on the facts and in the circumstances of the case. 5. For that the learned CIT(A) is erred in fact as well as in law to uphold the addition of Rs.84,64,588 U/s.40A(3) of the I.T.Act, 1961 made by the learned Assessing Officer to the returned income of the appellant on the facts and in the circumstances of the case. 6. For that the learned CIT(A) is not justified to uphold the addition of Rs.2,99,360 made by the learned Assessing Officer under the head Income from House Property to the returned income of the appellant on the facts and in the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Iron Ore & Manganese continuously since more than 25 years and it is submitted that when the mining lease is continuing and the operation is going on for last 25 years the question of prospecting as contained in Section 35E of the IT Act, 1961 does not arise. He submitted that as per the mining regulation any person can apply for mining lease by making a request to the Govt. After considering his application, Govt. issues prospecting license in general for 2 years to explore the availability of Ore in that particular area and the estimated quantity of mineral contained in that area. If the prospecting is successfully done then the applicant prepares mining plans and submits the same to the Govt. for grant of mining lease and after completion of other statutory formalities the mining lease is granted for a specific period. It is relevant to mention here that after obtaining mining license, forest clearance etc. the applicant can only start its business of mining without which nobody can start commercial production. Since the assessee is doing commercial production of Iron and Manganese ore for more than 25 years therefore, by no stretch of imagination, any expenditure incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by the authorities below in the impugned Assessment Year is total non-application of mind, wrong interpretation of provisions of Section 35E which has no application to the present case. In support, he furnished a chart showing details of claims made by the assessee for the previous two AYs i.e., 2006-07 and 2007-08 and for the impugned Assessment Year under appeal and also that for the subsequent Assessment Year 2009-10 in PB as Annexure-2- series along with the copies of audit reports and audited financial account for these AYs in the PB as Annexure 3/A to 3/D and also the assessment orders passed for the previous assessment years 2005-06 and 2007-08 (PB Annexure-4-series). 4.3. The learned AR of the assessee contended that where the assessee has an existing right to carry on a business, any expenditure made by it during the course of business for the purpose of removal of any restriction or obstruction or disability would be on revenue account, provided the expenditure does not result in any capital asset. Payments made for removal of restriction, obstruction or disability may result in acquiring benefits to the business, but that by itself would not acquire any capital as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he held the expenditures incurred by the assessee are of capital nature by relying certain judicial pronouncements and thus holding he directed the Assessing Officer to amortization of qualifying expenditure as per Section 35E(1) for disallowance instead of disallowing the full expenditure of Rs. 5,36,77,794. On very much similar facts and circumstances, in the case of Jitendra Nath Patnaik v. JCIT in ITA No.09/CTK/2012 pronounced on 14.3.2012 (copy placed on record) this Bench of ITAT after analyzing the provisions contained in Section 35E of the I.T.Act, has held that the expenditure incurred in removal of overburden was of revenue nature and hence, the assessee was entitled to claim deduction. The relevant paragraphs 7,8 and 9 of the said order are quoted hereunder. "7. Heard both the parties and carefully perused the material available on record. The Assessing Officer has held the expenditure in question as incurred in operation relating to Prospecting Mines within the ambit of definition of Section 35E of the I.T.Act,1961. "Operation relating to prospecting" has been defined in Section 35E(5) means any operation undertaken for the purposes of exploring, locating or proving de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on the surface of a particular area, if removed could enable the company only to reach the coal under that and not any further. If any further surface had to be exposed, further overburden had to be removed. If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. On the other hand, if such an expenditure is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce profits it is a revenue expenditure. Hence the expenditure incurred in removal of overburden was of revenue nature and hence the assessee was entitled to claim deduction. 8. While sustaining the disallowance in question, the learned CIT(A) has referred to the various decisions holding that the expenditure incurred for sinking new pits is of capital nature, which decisions, in our considered view, are not all applicable to the facts of the instant case since removal of the overburden, as in the instant case on hand, is not similar to the sinking new pits. 9. In view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Port Trust for carrying out stowing operation for export business of the assessee while the business of the assessee is going on since past several years and the said expenditure is not incurred for the purpose of bringing into existence any such asset or advantage but for running the business with a view to produce the profits. He contended that it would be immaterial whether the payment was made once and for all or periodically. The aim and object of the expenditure would determine the character of the expenditure. The above payment has been incurred for facilitating the assessee's trading operation on more profitably and therefore the same would be on revenue account. In support thereof, he placed reliance on the decision of Hon'ble Supreme Court in case of Assam Bengal Cement Co. Ltd. V. CIT(1955) 27 ITR 34 (S.C.) and Empire Jute Co. Ltd., v. CIT(1980) 124 ITR 1(SC). He prayed for deletion of the addition of Rs. 1,25,00,000 made on this score. 5.3. The learned CIT-DR supported the impugned orders of the authorities below and contended that on facts and circumstances, the expenditure in question being capital in nature, the authorities below are justified in disallowing the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer which are not individual vouchers for incurring a particular expenditure but are a group head in which those expenditures are incurred which the learned CIT-DR has insisted was on the same day being transportation charges or repair of tyres etc., clearly violates the provisions of Section 40A(3). The learned CIT(A) on the other hand confirmed the same by holding a view that the assessee was requested to show cause as to why the provisions of Section 40A(3) would not apply against which it was submitted by the assessee that the handmade vouchers indicated the claim by the individual recipients at the moment of incurring expenditure for the purpose of accounting were to be dealt with insofar as the group heads could not be considered expenditure for more than Rs. 20,000 being a particular item of expenditure. The learned CIT(A) held that no reasonable inference can be drawn from such hand-made vouchers was an afterthought of the assessee appellant before him. We are not satisfied with this observation of the learned CIT(A) insofar as the effort of the Assessing Officer has been to invoke the provisions of Section 40A(3) by identifying item of expenditure exce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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