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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 ..... ut stowing operation for export business and such expenditure is not incurred for the purpose of bringing into existence any such assets or advantage but for running the business with a view to earn profits. The assessee was to bid when the Port Trust authority allowed it stock with condition of export of 1 lakh tones per annum. No capital assets can be transferred with condition and stipulation which rather indicate that the assessee must export lest be deprived of the plot in the Port Trust. The expenditure was necessarily for the smooth business of the assessee and not for creation of an asset or enduring benefit. In favour of assessee Disallowance u/s 40A(3) – Cash payment exceeding Rs. 20000 – Held that:- As the details as inscribed by the AO which are not individual vouchers for incurring a particular expenditure but are a group head. Delete the addition. In favour of assessee - I.T.A.No. 310/CTK/2012 - - - Dated:- 20-7-2012 - Shri K.K.Gupta and Shri K.S.S.Prasad Rao, JJ. For the Appellant: Shri G.N.Naik/R.Kar, ARs For the Respondent: Smt. Paramita Tripathy, CIT-DR ORDER Shri K.K.Gupta, Accountant Member. The assessee has filed this appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above, the grounds reaming for consideration are ground Nos.2,3 and 5, which we propose to deal ground-wise below. 4. Ground No.2 relates to confirmation of the addition of Rs. 5,36,77,794 under different heads such as, over burden removal charges, Drilling, Blasting and Explosive, Shifting and Leveling charges, query development charges and mining survey. 4.1. The brief facts as have been brought on record are that the assessee filed its return on 27.9.2008 declaring income of Rs. 5.3 Crores which was subjected to scrutiny under the provisions of Section 143(3). The assessee is in the business of mining ores. It claimed expenditures of Rs. 5,36,77,794 under different heads referred to above. In the scrutiny assessment u/s.143(3), the Assessing Officer disallowed the said expenditures holding that those expenses were incurred by the assessee for the purpose of exploring of iron ore and thus are covered by Section 35E and as such, the provisions of Section 37(1) being it a residuary provision is not available. Even otherwise, these expenses being capital in nature, the same is not allowable as revenue expenditure. He placed reliance on the decisions in case of Muthaiah Che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , shifting and leveling charges, query development charges and mining survey wholly and exclusively for the purpose of business and therefore the authorities below erred in holding the overburden removal charges and expenditures incurred on account of drilling, blasting and explosive, shifting and leveling charges, quary development charges and mining survey totaling to Rs.5,36,77,794 as capital in nature and the same may kindly be allowed as revenue expenditure. In support of the above submissions the learned AR of the assessee furnished a Paper Book containing inter alia the copy of application for renewal of Mining Lease Deeds as Annexure-1-series in the PB. Further the learned AR of the assessee submitted that the assessee has started commercial production since last several years and this fact is also evident from page-2 of the assessment order wherein the learned Assessing Officer has inter-alia observed that Thus, commercial production is evident to have started prior to this assessment year; and therefore, question of allowability U/s.35E of any Capital Expenditure incurred during the previous year 2007-08 i.e. for the assessment year 2008-09 does not arise. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, which may be regarded as an integral part of the profit-earning process and not for acquisition of an asset or a right of permanent character. He further submitted that the removal of overburden and the mining of ore are both continuous process and was being carried on simultaneously from year to year. The assessee has incurred the above expenditures which expenditures are wholly and exclusively for the purpose of business, no asset or even any enduring benefit was acquired by it. He placed reliance on the decisions in the case of Bikaner Gypsums Ltd. Vs- CIT(1990)187 ITR 39(SC), CIT Vs- J.A.Trivedi Bros. (1979) 117 ITR 983(BOM), CIT Vs- Katras Jharia Coal Co. Ltd.(1979)118 ITR 6 (CAL), CIT -Vs- Amalgamated Jambad Syriidicate Pvt. Ltd. (1979) 117 ITR 698 (CAL.) and Neyveli Lignite Corporation Ltd., V. ACIT (2009) 120 TTJ (Chennai) 1096. He further submitted that under similar facts and circumstances the ITAT, Cuttack Bench in ITA No.008./CTK/2012 and 09/CTK/2012 for the AY 2008-09 have allowed the claim of overburden removal charges as revenue in nature. 4.4. The learned CIT-DR, on the other hand, supported the impugned order of the learned CIT(A). Relying on the decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in Section 35E of the I.T.Act clearly shows that expenditure which is covered by the provisions of Section 35E is only the expenditure which relates to exclusively on any operations relating to prospecting for any mineral. That means only expenditure which is covered is the one which is incurred on the operations for prospecting of any mineral. The word operation relating to prospecting , as defined in Section 35E(5) means any operation undertaken for the purposes of exploring, locating or proving deposits of any mineral, and includes any such operation which proves to be infructuous or abortive. In the instant case on hand, considering the expenditure incurred on activities as noticed earlier it can hardly be said that there were any pre-development activities in relation to prospecting any minerals apart from mining of iron ore. The expenditure in question on account removal of overburden is a continuous operation which is carried on simultaneously with the production of Iron Ore and as such, we are of the considered view that the provision of Section 35E is not applicable to the instant case. We find support from the decision of ITAT, Chennai Bench in the case of Ney ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the claim of the assessee is not justified. We, therefore, set aside the impugned orders of the authorities below in this regard and direct deletion of the said disallowance/addition by allowing the appeal of the assessee. 4.6. Facts and circumstances being identical, being consistent with the view taken in the aforesaid case, we are of the considered view the addition of Rs. 5,36,77,794 made on this score is directed to be deleted. 5. GroundNo.3 relates to confirmation of the addition on account of plot bidding charges of Rs. 1,25,00,000. 5.1. The Assessing Officer observed in paragraph 19.2 of his order that the payment in one time lump sum amount of Rs. 1,25,00,000 being for acquiring a plot inside the Paradeep Port for indefinite period so long the condition of exporting of 1 lakh tone per year is fulfilled is in the nature of capital expenditure and is disallowable. On appeal, the learned CIT(A) confirmed the same. 5.2. The learned AR of the assessee contended that the authorities below have failed to understand that the land in question does not belong to the assessee. The owner of the land is Paradeep Port Trust. Therefore, the ownership always lies with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ownership of the Plot is with Paradeep Port and the assessee is nothing but a tenant. For acquiring a plot in the Paradeep Port, payment of bidding, rental charges and minimum guarantee all these are procedures and conditions for the tenant (assessee). The assessee has incurred this expenditure for carrying out stowing operation for export business and such expenditure is not incurred for the purpose of bringing into existence any such assets or advantage but for running the business with a view to earn profits. The assessee was on waiting list when earlier he managed to conduct his business without stocking for loading in the ship for exports. The assessee was to bid when the Port Trust authority allowed it stock with condition of export of 1 lakh tones per annum. No capital assets can be transferred with condition and stipulation which rather indicate that the assessee must export lest be deprived of the plot in the Port Trust. The expenditure was necessarily for the smooth business of the assessee and not for creation of an asset or enduring benefit. The same is to be allowed as revenue expenditure and therefore, the addition of Rs. 1,25,00,000 made on this score is hereby dire ..... 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