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TMI Blog2012 (3) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... evant to the issue are that the assessee is carrying on business of mining operation by obtaining lease of iron ore mines from Government of Orissa. During the Assessment Year under consideration, the assessee claimed expenses on account of picking and dressing charges of Rs.40,63,315 incurred for cutting of overburden to reach the layer of iron ore and overburden Removal charges of Rs.39,80,990 incurred for transporting of overburden. The Assessing Officer analyzed the various stages of the mining activities by observing that in mining, the ore deposit is embedded in soil beneath the heavy overburden. The overburden consists of hard stone on the top and subsequently overburden in the form of soft stone, earth and morum. The ore can be expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A), it was contended by the assessee that the word "prospecting" means efforts or possibility of finding minerals in some particulars are. There is no relation of overburden cutting and removal expenses with the expenses relating to prospecting as it is a post-prospective activity which is revenue nature. Reliance was placed on the decision in the case of Neyveli Lignite Corporation Ltd., v. Asst.Commissioner of Income-tax [120 TTJ 1096 and Amalagamated Jambad Syndicate Pvt. Ltd. V. CIT, West Bengal III (117 ITR 698). It was also submitted that the assessee owns open cast iron mine which has been identified long back and mining operation started from the year 1960 and basically no pre-development activity in relation to such mines apart f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g licence granted on 25.08.1992, which is placed at page is placed in page-21 of the Paper Book. He submitted that after prospecting and submitting mining plan, mining lease was granted to the assessee 1 April 1997 for a term of 30 years. He has furnished the copy of mining lease agreement, which is placed at pages-25 to 27 of the Paper Book. Basing on these two documents, the learned AR of the assessee that the assessee carried out prospecting activities of Iron Ore from 25.08.1992 and commercial production commenced from 1 April 1997. Therefore, the assessee is carrying on commercial production of Iron Ore for more than 11 years continuously. In view of the above, he contended that when the mining lease is continuing and the operation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the authorities below erred in holding the overburden removal charges of Rs.39,80,990 as capital nature and thus disallowed the claim of the assessee. He, therefore, prayed to set aside the impugned orders of the lower authorities and to allow the claim of the assessee. 6. Smt.Paramita Tripathy, learned DR, on the other hand, supported the impugned order of the learned CIT(A). Relying on the decisions, as relied on by the learned CIT(A), she contended that the expenditure incurred for sinking new pits is of capital nature and therefore, the disallowance as confirmed by the learned CIT(A) is justified, which needs no intereference. 7. Heard both the parties and carefully perused the material available on record. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Neyveli Lignite Corporation Ltd., v. ACIT (2009) 120 TTJ (Chennai) 1096, relied on by the assessee. We also find support from the decision In the case of CIT v. Amalgamated Jambad Suyndicate Pvt. Ltd., (1979) 117 ITR 698 (CAL), wherein, Hon'ble Calcutta High Curt , by applying the decision in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 above, we are of the considered view that the removal of overburden is being a continuous process while extracting the ores, by no stretch of imagination it can be said that the expenditure has been incurred for prospecting the mineral or for sinking new pits as considered by the Assessing Officer and the learned CIT(A) respectively. Therefore, the addition of Rs.39,80,990 on account of overburden removal charges made disallowing the claim of the assessee is not justified. We, therefore, set aside the impugned orders of the authorities below in this regard and direct deleti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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