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TMI Blog2014 (8) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in place of agreed price - unless it has been shown that the transaction in question was a sham one or unless the value shown was not the value in the books of account or unless it was not the value in the books of account or unless it was not bona fide transaction, it is not open to the taxing authorities to disregard the figures of the transactions shown in the books of account and disallow a part of price paid to partners in respect of purchases made by them – thus, the order of the CIT(A) is upheld – Decided against Revenue. Afforestation Expenses – Capital in nature or not – Held that:- The assessee has paid the 'compensation' for use of forest area for mining - Forest area/land used by assessee is a capital asset and anything paid for acquiring a capital asset is capital expenditure and not a revenue expenditure - the assessee has not acquired any capital asset but assessee has paid the amount of compensation for carrying out mining activities and the assessee has paid compensation as charges for degrading the forest land and the expenditure is incurred wholly and exclusively for the purpose of mining business and same has been treated as revenue expenditure by CIT(A) – ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that as per the description on the invoices, the assessee has sold Iron Ore Fines/Lumpy to the said Ramcanta Velingkar Minerals having around 54-54% iron content. The assessee was asked to provide the grade-wise list of purchase and sales data which is reproduce in Assessment Order as under: PURCHASE DATA: PURCHASE OF ORE-MINING DIVISION: S. No. Name of the party (SELLER) Quantity(MT) Grade Unit Rate (Rs./MT) Total Cost (Rs.) 1 Mr. M.S. Rege 20,871.300 47.60 480 10,41,985 2 Mr. M.S. Rege 17,062.400 47.90 480 8,51,755 3 Mr. M.S. Rege 3011 48.30 510 1,59,703 4 Mr. M.S. Rege 22,537.500 47.80 480 11,25,072 5 Mr. M.S. Rege 3,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12492450 1523250 3 Mr. Ramacanta Velingkar Minerals 100% EOU S.O. 14, First Floor, Navelcar Trade Centre, Panaji-Goa 403001 19,067.000 1,003.000 53.20 53.80 450 450 8580150 451350 4 Mr. Ramacanta Velingkar Minerals 100% EOU S.O. 14, First Floor, Navelcar Trade Centre, Panaji-Goa 403001 5,000.000 53.90 450 2250000 5 Mr. Ramacanta Velingkar Minerals 100% EOU S.O. 14, First Floor, Navelcar Trade Centre, Panaji-Goa 403001. 54,780.000 52.70 150 8217000 6 Atchuta V.S. Velingka (Sacorda mine) Veling. Mardol, Goa 403404. 30,000.000 53.10 300 9000000 7 Atchuta V.S. Velingka (Sacorda mine) Veling. Mardol, Goa 403404 12,969.400 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 7. Vasudeva A.S. Velingkar 10 8. Dattararaj Velingkar 10 9. Gaurav P.S. Velingkar 7.5 M/s Ramacanta Velingkar Mineral Buyer S. No. Partner's name Profit sharing ratio(%) 1. Sh. Vasudeva A.S. Velingkar 20 2. Sh. Dattaraj R.S. Velingkar 20 3. Gaurav P.S. Velingkar 20 4. Diptip N.S. Velingkar 20 5. Avinas N.S. Velingkar 20 To bring on record the missing details regarding the physical features of the ore purchases, all the purchases invoices were asked for. From the purchase invoices the following clear picture emerged with respect to the purchases made from associated/related firm/closely connected party. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in for the price fluctuations, other delivery conditions etc, are far below the market rates for those grades, estimated based on certain sample of similar sales-purchases invoices for the period. The rates estimated based on industry information and similar purchase-sales transactions are presented below: S. No. Grade (Fe%) Description Estimated Rate (Rs./MT) 1. 52% Iron ore fines 800/- 2. 53% Iron ore fines 900/- 3. 54% Iron ore fines 1000/- 4. 54% Iron ore lumpy 900/- 5. 52% ROM Ore 300/- The assessee has mentioned that the basis on which the estimates were made was not provided. The detailed tabulation, based on which the prices of the different types of ore were estimated, was provided to the assessee on 27.12.2010. In the fourth paragraph, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that ROM was wrongly mentioned as Iron ore fines lumps . The following points are also to be noted in this matter: The grade of the iron ore sold by M/s. Velingkar Brothers was not quoted in any of the invoices. The assessee did not produce any records to prove that the invoices were wrong.The above errors do not pertain to just one single invoice; it is applicable to all the sale invoices to the sister/connected concerns. Strangely, while the material was sold by the firm MIS. Velingkar Brothers (as verified from the P/L account of the seller firm), in six out of seven invoices rather than the name of the seller-firm, only the name of the partner i.e. Mr. Ramacanta V.S. Velingkar, is quoted. Only in one of the invoices, dated 21.02.2008, the name of the seller-firm was mentioned on it. To sum up, in almost all the invoices- the name of the seller party or grade of the ore or the description - the three most important factors have all been quoted wrongly or not quoted at all. In all the invoices, the name of the buyer, the quantity, amount etc were typed correctly. The assessee was not able to explain why there was mistake only in the description of the ore. Going by all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Mr. Ramacanta V.S. Velingkar* 5,000 Iron ore fines, 53.9 450 22,50,000 900 45,00,000 7. Mr. Velingkar Brothers* 54,789, ROM Fines, 52.7 150 82,17,000 300 1,64,34,000 Consequently, the jurisdictional A.O. of the buyer-firm, M/s. Ramacanta Velingkar Minerals, had informed about the recomputed purchase rates, and informed to make appropriate adjustments while assessing the income of the seller-firm. Hence the difference of amount of sales ₹ 4,95,15,700/- is being added back to the total income. 2.2. The matter carried to CIT (A) and CIT(A) has deleted the addition by observing as under: 4.3 I have gone through the assessment order, submission of the appellant and facts available on record. I have, already decided the appeal in the case of the sister concern M/s. Ramacanta Velingkar Minerals and on facts, I have held that no under invoicing or under pricing has been done by the appellant of its sales made to sister concern. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lumpy to the said M/s Ramcanta Velingkar Minerals having around 53-54% of Iron content sold to his sister concerned. The assessee has made arrangements with its sister concern which is getting benefit of exemption u/s 10B by selling the iron ore at a price far below the market rates for those grades and hence assessee's income needs to be increased and adjusted to that effect. The AO has carried out independent search as to market rates of the raw material as per the description in the invoices. As regards, iron ore lumpy (around 54% grade) the estimate was worked out at ₹ 900 by averaging the purchase cost information obtained from various parties ranging from ₹ 525/MT to ₹ 1395/MT. The cost of ROM of 53% low grade ROM was arrived at ₹ 300 and the AO has invoked the provisions of section 10B(7) r.w.s 80IA (10) and recomputed the profit, therefore, CIT(A) is not justified in deleting the addition. 2.4. The learned AR submitted before us that the assessee is a mine owner who sold 'Run of Mine' (ROM) ore of ₹ 4,99,54,500 to its sister firm M/s Ramacanta Velingkar Minerals. The said Ramacanta Velingkar Minerals (RVM) owns a 100% Export Orie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts and circumstances of the case, we find in the case of sister concern M/s. Ramacanta Velingkar Minerals and on facts, we have held that no under invoicing or under pricing has been done by the assessee of its sales made to sister concern. The Assessing Officer has decided the sale price of R.O.M with that a processed ore, while working out the purchase price of the sister concern. But the evidence shows that the assessee has not purchased any iron ore from his sister concern below market price. We find that the Assessing Officer has compared the price of sale which was accrued or extracted from the mines on 'as is where is basis'. The said ROM included many impurities such mud, silica, sulfur, stones boulders, etc. The Assessing Officer has applied the rates of processed fine ore with ROM and wrongly concluded the rates were not properly charged. The price of Rom varies between ₹ 360 to ₹ 575for per tonne whereas the assessee has charged ₹ 450 tonne which shows that assessee has sold the ore at the market rate. Therefore, we are of the view that CIT(A) is justified in his action. In the case of CIT(A) Vs. Calcutta Discount 91 ITR 8 (SC) the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order, submission of the appellant, facts of the case and various judicial pronouncements relied upon. The A.O. has not doubted the genuineness of the payment. This is also an undisputed fact that the payment has been made to the Govt. Forest Department on a letter of demand from them, which was necessary for continuance of business of mining by the assessee. Non-payment would have made the assessee liable for cancellation of mining lease and business of the assessee would have stopped. This is also a fact that by paying in cess to the forest department, the assessee has not acquired any capital asset, i.e. tangible or any long- term rights. In all the judicial pronouncements relied upon by the A.O. some or the other tangible capital asset came into existence, which is not the fact in the instant case. In its support, the assessee placed reliance on the judgement of jurisdictional ITAT, Panaji in the case of Dr. Prafulla R. Hede V/s CIT in ITA No.135/PNJ/2011. In this case Dr. Prafulla R. Hede claimed revenue expenditure of ₹ 2,14,26,295/- on account of payment of NPV and afforestation charges. The A.O. had allowed the claim of expenses of the assessee. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. 6. In view of this judgment question (D) does not give rise to a substantial question of law. From this above decision of Hon'ble Bombay High Court, we are of the view that Commissioner of Income Tax is justified in holding the payment on net present value as afforestation charges in respect of the mining lessees already obtained has been decided and is treated as revenue expenditure. Therefore, we respectfully following the same, dismiss the departments appeal. In the result, appeal filed by the revenue is dismissed. C.O. No. 13/PNJ/2014, for the A.Y. 2008-09 4. In C.O., the assessee has claimed that the he has made contribution ₹ 15 lacs towards construction of bridge at Usgaon Goa had debited sum of ₹ 15 lacs towards contribution to Goa Infrastructure Development for construction of Usgao Bridge. The Assessing Officer was of the view that the expenditure incurred by the assessee company by way of contribution for construction of bridge is in the capital field and therefore, it is a nature of capital expenditure. The assessee's company is not directly relatable to the bridge business, therefore, it is not a business expenditure. Since, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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