9911796707
TMI Blog2014 (8) TMI 1112X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure incurred in defending certain Writ Petitions filed by M/s JSW Steels Ltd and M/s Sathavahana Ispat Ltd., through which they sought quashing of Government Notifications granting mining lease to the assessee. AO put the assessee on notice that he intended to disallow the claim of legal expenditure. According to him, it was capital in nature. Reply of the assessee was that the legal expenses claimed by it did not relate to grant of leasing of mining rights. According to the assessee the expenditure incurred was only to protect the lease which was already given to it by the Government. It was only defending the claim made by third parties and did not in any way cure, complete or perfect the mining lease. The assessee pointed out that lease was given to it by the Department of Mines and Geology in the year 2006. Reliance was placed by the assessee on the decision of the Hon'ble Apex Court in the case of Dalmia Jain & Co., Ltd., Vs CIT 81 ITR 754(SC). Assessee also brought to the notice of the AO the relief and prayers made by the parties in their writs. As per the assessee it was only to resist the proceedings that it incurred legal expenditure. Reliance was also placed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on CIT Vs Maheshwari Devi Jute Mills Ltd., 57 ITR 36(SC). Learned CIT(A) thus, allowed the claim of the assessee. 7. Now before us, learned DR strongly assailing the order of the learned CIT(A) submitted that assessee was perfecting its title and protecting its source of business when it was defending the Writ Petitions filed before the Hon'ble High Court. The legal expenditure was for protecting and curing the mining lease. Hence the outgo had to be treated as capital expenditure. According to learned DR, the CIT(A)therefore, fell in error in deleting the disallowance. 8. Per contra, learned AR submitted that assessee was only trying to defend its position. It was only protecting its rights, which was already there and no new rights were created. Reliance was once again placed on the decision of the Apex Court in the case of Dalmia Jain & Co., supra. 9. We have perused the orders and heard the rival contentions. There is no dispute that expenditure incurred for defending Writ Petitions filed by the third parties in which the grant of mining lease to the assessee by the Government was challenged. It is also not disputed that the lease of the mines were granted to the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payment made to forest department was prior to commencement of mining. It was a pre-condition for undertaking mining activity. As per the AO for a claim to be made u/s 35E of the Act the expenditure incurred necessarily had to in the operations relating to prospecting of any mineral. Here, the payment of NPV was a pre-condition for getting the mining license. The AO also noted that the assessee had failed to furnish the audit report, as prescribed audit u/s 35E(6) of the Act. He therefore, disallowed the claim. 12. Before the CIT(A) argument of the assessee was that the payment to department of forest was made in the year 2004 and it had not resulted in acquisition of any capital asset. In the grounds raised before the CIT(A) assessee had assailed the disallowance of claim u/s 35E of the IT Act, 1961 alone. However, it seems it had also alternatively pleaded for allowing the claim u/s 37(1) as well. For this, assessee relied on a decision of the Kolkata Bench of the Tribunal in the case of Rungta Sons (P)Ltd., Vs Dept, of IT in ITA No.933/Kol/2009 dated 05-08-2011. As per the assessee in the above decision, it was held by the said Bench that the NPV payment to forest department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how the assessee could have raised an alternative claim before him, when all along he had made the claim before the AO u/s 35E of the Act. We are therefore, of the opinion, the matter needs a fresh look by the CIT(A). We therefore, set aside the order of the learned CIT(A) on this aspect and remit the issue back to the learned CT(A) for disposal in accordance with law. 16. Vide its ground 8 to 10 which appear in appeal for the assessment year 2008-09, grievance raised by the revenue is that an addition of Rs. 98,11,890/- made by the AO for difference in valuation of closing stock was deleted by the learned CIT(A). Along with this we are also considering the cross appeal of the assessee which also dwells on the same issue. 17. Facts apropos this issue are that the closing stock of Iron Ore as per the books of accounts was 40,596 MT. However, the closing stock as per the return filed by the assessee before the Director of Mines & Geology was 45,728 MT. There was a difference of 5132 MT. Explanation of the assessee was sought by the AO. Assessee stated that the dispatch particulars were approximately mentioned in the returns filed before the Director of Mines & Geology. As per the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to it, valuing sub-grade and finished ore at the same cost was not fair. Reliance was placed on judgment in the case of Hon. Apex Court in the case of British Paints India Ltd., 188 ITR 144. 20. Learned CIT(A) was partly appreciative of the above contentions. According to him, asseseee was following a consistent method of valuation and the AO ought not have disturbed such a method. As per the CIT(A) when assesee applied same principles for valuing opening stock and closing stock and this method was applied consistently, there was no reason to disturb such method. He held that there was no defect in the method followed by the assessee. However, according to him, valuation of sub-grade Iron Ore at Rs. 50 per MT was abysmally low. He substituted this with Rs. 80/- per ton. But for this, he deleted the addition made by the AO. 21. Now before us, revenue is challenging the deletion of disallowance, whereas assessee in its cross objection is challenging the enhancement of value of sub-grade Iron Ore from Rs. 50.per ton to Rs. 80 per ton. Assessee is also aggrieved that learned CIT(A) did not address the issue regarding difference in quantity of stock. 22. Learned DR is support of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
