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TMI Blog2022 (11) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... dealt by the Hon ble Delhi High Court in the case of CIT vs Hindustan Coca Cola Beverages (P.) Ltd. [ 2011 (1) TMI 30 - DELHI HIGH COURT] In the case of ONGC Videsh Ltd. Vs. Deputy Commissioner of Income-tax [ 2009 (10) TMI 76 - ITAT DELHI-F] wherein the Coordinate Bench of Delhi Tribunal considered similar issue that the Commercial rights of exploration of minerals, oil, by entering into production sharing agreement with Russian Government fall under the expression any other business or commercial rights on similar nature , same being akin to licenses as stipulated in section 32(1)(ii) of the Act and therefore, they are in the nature of intangible assets, eligible for depreciation at the prescribed rate. We are of the opinion that the amount expended by the assessee to acquire the right of mining the coal, therefore, to be considered as Capital Expenditure and the assessee is entitled for depreciation. In view of this, we direct the AO to treat this as Capital Expenditure , which is in enduring nature and grant applicable rate of depreciation on it as appliable to commercial rights of similar nature. Disallowance claimed u/s 35E - HELD THAT:- If the assessee clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of depreciation on leasehold land claimed by the assessee u/s 32(1)(ii) of the Income-tax Act,1961 ['the Act' for short]. 2.1 Next ground in ITA No.2135/Bang/2018 for the AY 2010-11 is with regard to not adjudicating the ground No.4 with regard to allowability of carry forward loss. 2.2 Third ground in ITA No.2136 to 2139/Bang/2018 for the AYs 2011-12 to 2014-15 is with regard to sustaining disallowance claimed u/s 35E of the Act. 2.3 Fourth ground in ITA Nos.2136 2137/Bang/2018 for the AYs 2011-12 2012-13 is with regard to non-granting of depreciation on intangible assets claimed u/s 32(1)(ii) of the Act. 2.4 The fifth and last ground in ITA No.2138 2139/Bang/2018 for the AYs 2013-14 2014-15 is with regard to disallowance being interest on TDS made by the assessee u/s 37 of the Act. 3. The assessee has also filed additional ground in these appeals which is as follows:- 1. That in the alternate to Ground No 2, raised in memorandum of appeal, the appellant ought to be allowed deduction u/s 37 of the Act in respect of investment in land purchased/ allotted for mining of coal in forms of mining agreement in respect of the year in which land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of Maharashtra vide Mining Agreement dated 25-09-2006 ( Mining Agreement ) for a period of 30 years. 6.2 The Grant of Mining Lease had covered an area of 1379.50 Hectares in seven villages in the State of Maharashtra. Pursuant to the grant of lease, assessee became entitled to carry out mining operations. However, these lands were neither vacant nor owned by the Government. These lands were owned by various individuals and legal persons. For the purpose of undertaking mining activity, the assessee was required to purchase the surface rights of the said lands from its occupants by paying necessary compensation based on the principles outlined by the Government. 6.3 Accordingly, assessee had to purchase land comprised in the mining area of 1379.50 Hectares of land from its present owners/occupants after making payment of necessary compensation. For the period till 31st March 2014, a total of Rs. 189.78 Crs. was spent on purchase of land including Rs. 19.97 Crs. during the impugned period FY 2009-10. The copy of sample deed evidencing payment of compensation/acquiring land from the seller/occupier is referred by Ld. A.R. in page no. 122-123 of paper book of assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elation to the allocated land in the mining area was Rs. 189.78 Crs. (Till FY 2013-14) 6.8 It is thus the submission of the assessee that the surface rights of these lands, though were purchased by the assessee, were ultimately to be transferred to the Government after a period of 30 years, being the period of mining lease agreement. 6.9 Ld. A.R. submitted that the assessee was even contractually legally bound to acquire the surface rights of the land comprising the mining area. 6.9.1 The ld. AR submitted that in terms of the Mining Lease agreement entered into by it with Government of Maharashtra, it is its responsibility to purchase all the surface rights of the lands forming part of the Mining Lease area of 1379.50 Hectares. Further, post termination/expiry of the Mining lease, the entire land along with its surface rights shall vests with the Government. She drew our attention to relevant paras of Primary agreement which is placed at paper book page No.26 in AY 2012-13. 6.9.2 In view of the aforesaid, the assessee submitted that even as per the Mining Lease, the assessee was bound to surrender the land along with its surface rights comprised in the entire mining a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. [(2010) 4 ITR(T) 513 (Cochin)]; and Drilbits International Pvt. Ltd. vs DCIT Nasik [TS 822 ITAT 2011 (Pune)] which are also distinguishable to the facts of assessee s case since they are lease of land simpliciter where as in present case it is mining lease. 6.13 Hence, Ld. A.R. submitted that claim of the depreciation made by the assessee is a genuine claim and allowable on the following ground. 6.14 Claim of depreciation has been allowed by AO in the remand proceedings for AY 2009-10 6.15 The Assessee submitted that during AY 2009-10, the assessee has claimed depreciation on similar facts of Rs. 51,29,299/- . During the appeal proceedings, the matter was remanded to the AO for fresh examination in view of the documents furnished by the assessee. In his remand report (He referred Page 171-172 of the PB), the AO has specifically observed that the impugned depreciation on of Rs. 51,29,299/- is allowable. 6.16 Ld. A.R. submitted that the Ld. CIT(A) failed to appreciate the facts and law correctly by observing that the assessee is not the owner of such land comprising the mining area 6.17 Ld. A.R. further submitted that Ld. CIT(A) has been observed that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Ld. A.R. submitted that it is the rightful owner of the land in as much as it has purchased the surface rights from the occupants and it is using those lands for mining of the coal, in other words for its business purposes. 6.21 According to Ld. A.R. Royalty is different than compensation paid to lease hold land owners: 6.22 The ld. A.R. submitted that the Ld. CIT(A) failed to appreciate the facts correctly in as much as he has equated purchase of mining land to payment of royalty and came to the conclusion that mining area purchased by the assessee is not an expenditure related to mining operation 6.23 The ld. A.R. submitted that the Hon ble Bench to Para 5.3 (I) of the impugned order of the Ld. CIT(A) whereby the Ld. CIT(A) has stated that the leasehold arrangement is essentially for acquiring mining rights for which royalty is prescribed by the State Government. The CIT(A) has observed that AO has noted that no consideration has been paid for acquiring the impugned land in perpetuity. The CIT(A) also notes that payment of royalty on the coal mined has already been claimed as revenue expenditure and that claim of depreciation on land is over and above the mining ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 6.29 The ld. A.R. submitted that the issue of depreciation u/s 32 on such mining land is well settled and is no more res integra 6.30 Allowability of depreciation on the mining land purchased by entities engaged in the business of extraction of minerals has already been settled by various courts and assessee forums in favour of the assessee. She placed reliance on the order of Tribunal in the case of NMDC Ltd. vs JCIT, Hyderabad [2015] 56 taxmann.com 396 (Hyderabad - Trib.). 6.31 Further, she also placed reliance on the order of Tribunal in the case of ACIT vs Progressive Constructions Ltd [2018] 92 Taxmann.com 104 (ITAT-Hyderabad) (SB). 6.32 The ld. A.R. submitted that the Mining Lease being right to undertake mining activity and the acquisition of surface rights thereon falls with the purview of the term business or commercial right 6.33 The lease granted to the assessee is nothing but a license under the Mines and Minerals (Development Regulation) Act, 1957 to undertake mining of coal. Without the mining lease, no person can undertake any mining activity. Further, the license/lease holder is also required to acquire the surface rights of the area falling wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question should be a capital asset, whether tangible or intangible. It is necessary therefore that the impugned investment should be of an investment of capital nature. The AO has noted in this regard that, the company in the present case has taken land on lease for the purpose of mining, which does not result in capital building or construction. In the present case, it is a peculiar situation where there is no physical construction or building of any structured asset but, on the contrary a depletion of the earth-material, due to mining-processes involved. Essentially therefore, there is neither capital accretion nor the wear and tear against which depreciation can be allowed in the normal course. 7.4 The judicial position on the issue at hand reveals. that, the issue is predominantly against assessee's case in the present facts and circumstances. It is clear that depreciat ion is not al lowable for lease hold rights as well as tenancy rights as held in the case of Peerless General Finance Investment company limited vs CIT [2013] 35 Taxmann.com (Kolkata) and Dabur India Ltd. Vs ACIT (2013) 37 Taxmann.com 289 (Mumbai-Trib) . In the case of CIT Vs. O.P. Monga ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the mining area of 1379.50 Hectares of land from its present owners/occupants after making payment of necessary compensation. For the period till 31st March 2014, a total of Rs. 189.78 Crs. was spent on purchase of land including Rs. 19.97 Crs. during the impugned period FY 2009-10. The copy of sample deed evidencing payment of compensation/acquiring land from the seller/occupier is referred by Ld. A.R. in page no. 122-123 of paper book of assessment year 2012-13. 8.3 The grant of mining lease does not automatically provide the assessee right of way to the land area. The lease only provides the right to undertake mining activity in a specific area which would have to be acquired from its occupants. In this regard, ld. A.R. made reference to Section 24A of the Mines and Minerals (Development and Regulation) Act, 1957 ( MMDR Act ), relevant extract (He referred Page 173 of the Paper book of assessment year 2012-13). Further the extract of MMDR Act which is very clear that the mining lease holder would be required to pay compensation to the occupier of the lands. Section 24A: Rights and liabilities of a holder of prospecting licence or mining lease. (i) On the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost expiration/termination of the mining lease, the entire land, surface right of which is acquired by the mining lease holder, is transferred to the government without any further compensation to the mining lease holder. Effectively, purchase of mining land is part of the mining lease granted and is part of the cost of obtaining license to undertaking the mining activity. In other words, what the assessee has acquired is the surface right of the land forming part of the mining lease since the title in the land would ultimately vests with the Government. 8.5 Post getting mining lease, it was required to acquire the surface rights of the entire land comprised in the allocated mining area of 1379.50 hectares. These surface rights were purchased over a period of time as under: (h) Prior to FY 2008-09: Rs. 65,77,73,136/- (i) FY 2008-09: Rs. 17,61,20,528/- (j) FY 2009-10: Rs. 58,48,23,149/- (k) FY 2010-11: Rs. 12,51,91,928/- (l) FY 2011-12: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt shall be guided by the principles of Land Acquisition Act. (b) Para 20 of Part VII of the Mining Agreement (ld. AR referred Page No. 20 of paper book for the assessment year 2012-13) 20. Delivery of working in good order to State Government after determination of lease The lessee/lessees shall at the expiration or sooner determination of the said term or any renewal thereof deliver up to the state government all mines, pits, shafts, inclines, drills, levels, waterways, airways and other works now existing or hereafter to be sunk or made on or under the said lands except such as have been abandoned with the sanction of the state government and in any ordinary and fair course of working all engines machinery, plant buildings, structures, other works and conveniences which at the commencement of the said terms were upon or under the said lands and all such machinery set up by the lessee/lessees below ground which cannot be removed without causing injury to the mines or work under the said lands (except such of the same as may with the sanction of the state government has become disused) and all buildings and structure of bricks of stone erected by lessee/lessees ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire mining area of 1379.50 hectares to the Maharashtra Government upon the termination/expiration of the Mining Lease Agreement. 8.10 The Mining Area of 1379.50 hectares was private land and not land owned by Government i. The total mining area of 1379.50 Hectares, only 103.29 Hectares was owned by Government and balance 1,276.21 Hectares was owned/occupied by private individuals. ii. In order to commence the mining activity, assessee was required to have access to these lands since the Mining Agreement granted the right to mine minerals but not the right to access the land which is a private property. For getting the right to access land, assessee was required to purchase the surface rights from the existing owners/occupiers to enable it to undertake the mining activity. Accordingly, assessee not only purchased the surface rights of the said land from the private individuals who were the owners/occupiers, it also purchased such surface rights from the Government. Total amount spent as stated aforesaid is Rs. 189.78 Crs. 8.11 It is noted that during AY 2009-10, the assessee has claimed depreciation on similar facts of Rs. 51,29,299/-. During the appeal proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has been denied the benefit of section 32. On the other hand, the Housing Board would be denied the benefit of section 32 because in spite of its being the legal owner it was not using the building for its business or profession. We do not think such a benefit-to-none situation could have been intended by the Legislature. 8.16 In light of the above decision, it is the rightful owner of the land in as much as it has purchased the surface rights from the occupants and it is using those lands for mining of the coal, in other words for its business purposes. 8.17 In our opinion, royalty is different than compensation paid to lease hold land owners, as rightly pointed out by the ld. AR. 8.18 However, the Ld. CIT(A) has equated purchase of mining land to payment of royalty and came to the conclusion that mining area purchased by the assessee is not an expenditure related to mining operation. 8.19 The Ld. CIT(A) has also noted that the leasehold arrangement is essentially for acquiring mining rights for which royalty is prescribed by the State Government. The ld. CIT(A) has observed that no consideration has been paid for acquiring the impugned land in perpetuit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owability of depreciation on the mining land purchased by entities engaged in the business of extraction of minerals has already been settled by various courts and assessee forums in favour of the assessee. This issue was considered by Coordinate Bench in the case of NMDC Ltd. vs JCIT, Hyderabad [2015] 56 taxmann.com 396 (Hyderabad - Trib.), wherein Tribunal has held as under: 22. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the authorities below. Similar came up for consideration before the coordinate bench of ITAT, Cuttack in case East India Minerals Ltd. (supra) on which reliance placed by the assessee, wherein it has been held as follows: 7. We have heard the rival contentions of the parties and perused the material available on record. Considering the facts and circumstances of the case, we uphold the contention of the learned Counsel for the assessee for the simple reason that the denial of claim of depreciation has been made on misinterpretation of law and the applicability thereof. Explanation to Section 32(1)(ii) leans in favour of the assessee to the extent that it is the actual action of put to u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reimbursed by the Government of India. This fact was known to both the parties before the execution of the agreement as the tender itself has made it clear that the project is to be executed with private sector participation on BOT basis. Thus, from the very inception of the project, assessee was aware of the fact, it has to recoup the cost incurred in implementing the project along with the profit from operating the road and collecting toll charges during the concession period. Therefore, assessee has capitalized the cost incurred on the BOT project on which it has claimed depreciation. Thus, in our view, the expenditure incurred by the assessee of Rs. 214 crores for creating the project or project facilities have created an intangible asset in the form of right to operate the project facility and collect toll charges. Thus, having held that the expenditure of Rs. 214 crores incurred by the assessee has resulted in creation of an intangible asset of enduring nature for the assessee, it is necessary now to examine whether such intangible asset comes within the scope and ambit of section 32(1)(ii) of the Act. For this purpose, it is necessary to look into the said provision w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll' would fall under the expression any other business or commercial rights of similar nature . Thus, as could be seen, even though, 'goodwill' is not one of the specifically identifiable assets preceding the expressing any other business or commercial rights of similar nature , however, the Hon'ble Supreme Court held that 'goodwill' will come within the expression any other business or commercial rights of similar nature . ..The Hon'ble Delhi High Court in case of Areva T and D India Ltd. (supra), while interpreting the aforesaid expression by applying the principles of ejusdem generis observed, the right as finds place in the expression business or commercial rights of similar nature need not answer the description of knowhow, patents, trademarks, license or franchises, but must be of similar nature as the specified asset. The Court observed, looking at the meaning of categories of specified intangible assets referred to in section 32(1)(ii) of the Act preceding the term business or commercial right of similar nature , it could be seen that the said intangible assets are not of the same line and are clearly distinct from one another. The Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the assessee is nothing but a license under the Mines and Minerals (Development Regulation) Act, 1957 to undertake mining of coal. Without the mining lease, no person can undertake any mining activity. Further, the license/lease holder is also required to acquire the surface rights of the area falling within the mining area. 8.28 This right to mine and the surface right falls within the definition of intangible assets as defined in Section 32(1)(ii) and Explanation 3 to Section 32(1(ii). The term Business and Commercial Rights has been dealt by the Hon ble Delhi High Court in the case of CIT vs Hindustan Coca Cola Beverages (P.) Ltd. [2011] 198 TAXMAN 104 (Delhi). The Hon ble Court observed as under: 24. It is worth noting that the meaning of business or commercial rights of similar nature has to be understood in the backdrop of section 32(1)(ii) of the Act. Commercial rights are such rights which are obtained for effectively carrying on the business and commerce, as is understood, is a wider term which encompasses in its fold many a facet. Studied in this background, any right which is obtained for carrying on the business with effectiveness is likely to fal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase agreement. Accordingly, the assessee acquired the surface rights from the Government in terms of the said lease agreement for using the said land for its surface operations for the balance period of lease which itself was a long-term period. The purpose for acquiring the said surface rights in the leasehold land as mentioned by the assessee company itself was for the purpose of constructing the utility buildings such as office complex, health centres for workers etc. After acquiring such surface rights in respect of the leasehold land, the assessee company acquired the right to possession of the said land from the villagers who were occupying the said land. For this purpose, the assessee company spent certain amount for relocating and rehabilitating the said villagers. The contention of the learned counsel for the assessee before us was that this entire expenditure was incurred by the assessee for the use of land for a limited period and as no asset of enduring benefit came into existence, the ent ire expendi ture has to be al lowed as revenue expendi ture. In support of this contention, he has relied on various authorities and has also made an attempt to distinguish the preced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) has no application to the facts of the present case. As regards the reliance placed by the learned counsel for the assessee on the decision of Hon'ble Supreme Court in the case of Madras Auto Service (P.) Ltd. (supra), it is observed that the assessee in that case had made substantial savings in monthly rent for the entire lease period by spending the amount on construction of a new building on the land taken on long lease and as the said expenditure resulted in a saving of rent which was a revenue expenditure, the Hon'ble Apex Court allowed the said expenditure as revenue expenditure. Similarly, in the case of CIT v. Associated Cement Co. Ltd. [1988] 172 ITR 257' (SC), the assessee by bearing the cost of laying pipelines as per the agreement entered into with the Government/municipality, was not needed to pay municipal taxes for 15 years and considering that the assessee in the absence of the said arrangement would have to pay the taxes every year to the debit of revenue account, the said expenditure was allowed as revenue expenditure- by the Hon'ble Supreme Court. In the present case as already observed, the expenditure was incurred by the assessee for acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then be of no consequence. In the present case, the expenditure was incurred by the assessee-company with aim and object to acquire the surface rights as well as the right to possession in respect of the leasehold land for a long period and, therefore, the nature of such expenditure was certainly of capital nature. The revenue has also relied on the decision of Hon'ble Mysore High Court in the case of N. Peer Sahib (supra) in respect of which the learned counsel far the assessee has contended that the lease amounts having been paid to the surface owners by the assessee therein for extracting iron coal at the beginning of the mining operation, it was considered as capital in nature whereas in the present case the assessee has made the relevant payments during the currency of the lease period. After carefully perusing the said decision of Hon'ble Mysore High Court, it however, appears that the payment made to the Pattedars who were occupying rights over the land which had been acquired by the assessee from the Government was found to be of the same character as the payments to the Government for acquiring the mining leases and keeping in view this character of the payment, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of lease, the same has to be treated as capital expenditure, as held by the Hon'ble Supreme Court in the case of Assam Bengal Cement Co. Ltd. (supra). As such, considering all the facts of the case and legal position enumerating from the judicial pronouncements discussed hereinabove, we are of the considered opinion that the impugned expenditure incurred by the assessee for acquiring surface rights as well as the right to possession in respect of leasehold land for enduring period was a capital expenditure and the learned CIT(Appeals) was fully justified in upholding the action of the Assessing Officer in treating the same as capital expenditure and thereby disallowing the deduction claimed by the assessee in respect of the same. 8.30 In the case of ONGC Videsh Ltd. Vs. Deputy Commissioner of Income-tax (37 SOT 97), wherein the Coordinate Bench of Delhi Tribunal considered similar issue that the Commercial rights of exploration of minerals, oil, by entering into production sharing agreement with Russian Government fall under the expression any other business or commercial rights on similar nature , same being akin to licenses as stipulated in section 32(1)(ii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cense for exploration of oil. It is not possible to say that such expenditure was neither capital nor revenue in nature. If it is held to be capital, then it is obvious that what the assessee has acquired was a participating right which is in the nature of commercial right of carrying on of business of exploration and production of mineral oil. It also cannot be said that the right so acquired was not an asset. If it is an asset being the right then it is obvious that same is commercial right, therefore in the nature of asset in the form of license. This right had been granted to the assessee by way of license and the assessee became owner of such right i.e., license to have an access and to carry on of business of exploration and development of mineral oil. Accordingly, such an asset falls within the category of asset falling under s. 32(1)(ii). The assessee had acquired business and commercial right and license by making payment of Rs. 1,559.10 crores, which is in the nature of intangible assets entitled to claim of depreciation under s. 32(1) (ii). In view of the above discussion assessee's claim for allowing deduction of entire expenditure of Rs. 1,559.10 crores is declined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the ground of adjustment in AY 2009-10 is similar to the ground in AY 2010-11 and other subsequent years presently before the Hon ble Bench. Hence directions be given to the Ld. AO to reinstate the loss as claimed by the assessee in its return for AY 2009-10. 10. The Ld. D.R. submitted that the issue may be remitted back to AO for fresh consideration. 11. We have heard the rival submissions and perused the materials available on record. After hearing both the parties, we are of the opinion that this issue required to be considered by the AO. Accordingly, the AO is directed to grant the loss claimed by the assessee in accordance with law while passing the consequential order in assessment year 2010-11 under consideration. It is needless to say that AO has to give an opportunity of hearing to the assessee before deciding this issue. Ordered accordingly. 12. Next common ground in ITA Nos.2136 to 2138/Bang/2018 for the AYs 2011-12 to 2014-15 is with regard to sustaining of disallowance claimed u/s 35E of the Act. 12.1 The facts of the case are that the Assessing Officer has drawn the conclusion in the assessment order as follows:- ..On perusal of list of exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate specified in that sub-section at any time during the year of commercial production and any one or more of the four years immediately preceding that year, wholly and exclusively on any operations relating to prospecting for any mineral or group of associated minerals specified in Part A or Part B, respectively, of the Seventh Schedule or on the development of a mine or other natural deposit of any such mineral or group of associated minerals : Provided that there shall be excluded from such expenditure any portion thereof which is met directly or indirectly by any other person or authority and any sale, salvage, compensation or insurance moneys realised by the assessee in respect of any property or rights brought into existence as a result of the expenditure. .. (3) The deduction to be allowed under sub-section (1) for any relevant previous year shall be- (a) an amount equal to one-tenth of the expenditure specified in sub-section (2) (such one-tenth being hereafter in this sub-section referred to as the instalment); or (b) such amount as is sufficient to reduce to nil the income (as computed before making the deduction under this section) of that pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,73,939 Section 35E(3)(iii) depreciable in nature 4 Construction of Ground water tank 2,95,584 Section 35E(3)(iii) depreciable in nature 5 Construction and filling metal in setting tank for water filtration 6,06,198 Section 35E(3)(iii) depreciable in nature TOTAL 1,44,84,394 12.5 The ld. A.R. stated that the Certificates from the Tax Auditor are enclosed in the written submission for ready reference which certifies that the assessee has not claimed any depreciation on the said items and hence there cannot be any case of disallowance u/s 35E(3)(iii); 13. The ld. D.R. submitted that the AO invoked the provision of section 35E(3)( i i i) wherein it is speci f ied that, this al lowance is not claimable in respect of items of a capital nature, on which depreciation is al lowable u/s 32 of the Act. It is seen that the items included by the AO (as extracted in the AO s order) are in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts as well as tenancy rights as held in the case of Peerless General Finance Investment company limited Vs. CIT(2013) 35 Taxmann. corn 615 (Kolkata) Dahur India Limited vs. ACTT (2013)37 Taxmann.com 289 (Mumbai-Trib). Hence, the depreciation claimed on land in the name of commercial rights of Rs. 46,94,697/- is disallowed brought to tax. 15.2 Before the Ld. CIT(A), The assessee company in its additional grounds of appeal stated as under: That the AO grossly erred on facts and in law in disallowing a sum of Rs. 46,94,697/- being the depreciation claimed by the appellant company on an intangible asset being the investment made of Rs. 12,51,91,928/- in additional land (through the Land Acquisition Act mode) for mining purposes. That appellant slates that no additional facts or investigation into faces are required to dispose off the present ground of appeal as all the facts are on recor4and the submissions are legal in nature. The investment of Rs. 12,51,91,928/- in land earmarked for mining )1 coal acquired with the consent of the Government. The Hon 'ble Commissioner of Income-Tax (Appeals) on the facts narrated herein above may graciously be pleased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT Bangalore vs Oriental Insurance Co. Ltd. [2009] 315 ITR 102 (Karnataka) wherein held as under: 7. In the Mittal Steel Ltd.'s case (supra), the proviso to section 201 was under consideration. The said proviso empowers levy of penalty if the TDS deduction is not effected for any valid reason. However, section 201(1A) is a distinct provision to levy interest for delayed remittance. It is in the practice of revenue that for belated payment of tax for any reasonable cause, the assessee is liable to pay interest at the rate of 12 per cent p.a. Similarly, for refunds, revenue pays interest to the assessee. Therefore, the levy of interest under section 201(1A) cannot at any rate be construed as a penalty. In that view, the contra finding of the Tribunal is set aside. The questions of law are answered in favour of the revenue. 17.3 She also placed reliance on the order of Coordinate Bench of Tribunal in the case of M/s IDS Next Business Solutions Pvt. Ltd. vs ACIT [ITA no 510/Bang/2018]. The Tribunal in this case referred the case of Narayani Ispat Pvt Ltd (supra) and held as under: We find that in that case also, the issue involved was regarding all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aya Sugar Mills (P.) Ltd. v. CIT decided on 29-2-1996. In that view of the matter, the appeal is allowed and question Nos. 1 and 2 are answered in favour of the assessee and against the revenue. 17.6 She also placed reliance on the order of Coordinate Bench of Tribunal in case of M/s IDS Next Business Solutions Pvt. Ltd. vs ACIT [ITA no 510/Bang/2018 wherein it was held as under: We find that in that case also, the issue involved was regarding allowability of interest on belated payment of service tax and TDS whereas in the present case, the issue in dispute is regarding interest payment on belated payment of TDS. Hence it is seen that the facts and dispute are similar and therefore, by respectfully following this Tribunal order, we decide the issue in favour of the assessee. 17.7 She submitted that in view of the above, the interest on TDS has to be allowed as revenue expenditure. Thus, she submitted that in absence of any specific adverse, findings of the AO, the payment of interest is compensatory and not penal in nature and should be allowed as expenditure u/s 37 of the Act. 18. The ld. D.R. submitted that in respect of service tax excise, the Assessee has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant. It is respectfully submitted that the facts, required to adjudicate the additional ground, is already on record and there is no requirement for additional facts to be stated or referred. That the additional ground of appeal now raised goes to the very root of the matter and being legal ground can be raised for the first time before the Hon'ble Tribunal in view of decision of Hon'ble Supreme Court in the case of National Thermal Power Ltd vs CIT (1998) 229 ITR 383 (SC), where it has been held that the powers of the Tribunal dealing with this are expressed in widest possible terms. 21. The Ld. A.R. submitted that in alternate to Ground 2 3, the appellant ought to be allowed deduction u/s 37 of the Act in respect of investment in land purchased/allotted for mining of coal in form of mining agreement in respect of the year in which land was purchased allotted to the assessee. The assessee submitted that the following facts are not in dispute: (a) Assessee was awarded a license to mine in the form of a mining lease over an area of 1379.50 hectares by the Government of Maharashtra (b) In the terms of the said Mining lease and the prevalent law of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sink, dig, drive, quarry and extract mineral, i.e., the gypsum and in that process he had right to dig the surface of the entire area leased out to him. Clause 3 of Part III of the lease, however, placed a restriction on his right to mining operations from the Railway area, but that area could also be operated by it for mining purposes with the permission of the authorities. The assessee had under the lease acquired full right to carry on mining operations in the entire area including the Railway area. Under clause 3 he could carry on mining operations only after obtaining the permission of the authorities which had been granted by the Railway authorities. The payment of Rs. 3 lakhs was not made by the assessee for the grant of permission to carry on mining operations within the Railway area, instead the payment was made towards the cost of removing the construction which obstructed the mining operations. The presence of the Railway Station and Railway track was operating as an obstacle to the assessee's business of mining, the assessee made the payment to remove that obstruction to facilitate the mining operations. On the payment made to the Railway authorities the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 lakhs towards the cost of shifting the Railway construction. The payment made by the assessee was for removal of disability and obstacle and it did not bring into existence any advantage of an enduring nature. The Tribunal rightly allowed the expenditure on revenue account. The High Court in our opinion failed to appreciate the true nature of the expenditure. 21.3 In the present case, the mining lease was granted to the assessee over an area of 1379.50 hectares. As per the mining lease agreement, the assessee does not have the right to access such land until and unless it obtains specific approval from its owners/occupiers. Accordingly, to remove such obstacles and to get free and unhindered access to such land, the assessee was bound, both legally as well as contractually, to pay the present owners/occupiers to get unhindered access to such land. These payments made by the assessee did not create any asset for the assessee in as much as such lands would ultimately vests with the Government. In view of the above and relying on the Hon ble Supreme Court decision, the assessee humbly submits that the expenses incurred towards land should be allowed as deduction u/s 37(1). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant for mining of the soap stone. The appellant had in the past also made such payments to other persons for getting possession of the land in order to do the mining in the area. The said findings of the ld. Cit(a) remains uncontroverted before us. Given that piece of land falls within the mining area in respect of which assessee has existing rights to carry on its mining operation and the fact that assessee wishes to carry on mining in that area, the assessee required to pay compensation to the land owner so that the later do not obstruct or challenge to accruing out mining activities underneath the surface of land which belongs to him. The payment is for removing the disability or obstacle and to facilitated the carrying on its business. No fresh rights have been acquired by the assessee by paying of the set compensation. The assessee was already having right on the mining operation. The facts that land stand mutated in the name of government of Rajasthan post surrendered by shri. Ranga also shows that land and surface right have not been acquired by the assessee. In the light of above discussion and respectfully following the decision of Hon ble supreme court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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