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TMI Blog2012 (5) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... st appellate authority. The learned CIT issuing show cause notice u/s.263 asked the assessee to primarily consider as to how the net present value being claimed by the Divisional Forest Officer (DFO) be not considered for disallowance as claimed for deduction in view of it being capital in nature. The learned CIT had also raised this issue with respect to part of the net present value being paid to the Government on account of illegal felling of trees within its own mining leased area whether could be allowed as expenditure u/s.37(1) read with Explanation thereto. Another issue being the contribution being the periphery development expenses paid to the local authorities in the impugned AYs could pertain for deduction being earlier period expenses as per the claim of demand from the Member-cum-Deputy Director of Mines, Joda, P.D.Committee, Keonjhar. 3. The learned Counsel for the assessee initiating his arguments submitted a Paper Book enclosing the documents which were filed before the Assessing Officer on his specific queries on the very issues which have been raised by the learned CIT in his order u/s.263. With respect to the issue regarding net present value the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation also similar nature of expenses for plantation etc., were borne by the OFDC when the nature of asset could not be held as an asset in the hands of the assessee. The learned CIT therefore proposed to thrust his opinion on otherwise finding by the Assessing Officer for both the AYs insofar as the Assessing Officer had called for the details of expenditure incurred and it was also the case of the Assessing Officer not to disallow felling of trees in the course of mining activities as illegal activities the payment being claimed by DFO was neither a penalty nor payment for an offence. The learned AR of the assessee relied on the various correspondences with the Government for this purposes which inextricably justifies the learned CIT finding as was before the Tribunal in the case of Orissa Mining Corporation which decision Tribunal had upheld on the revenue's appeal. As the learned CIT has not based his opinion on a sound finding for holding the expenditure as capital, the assumption of jurisdiction u/s.263 was void ab initio. Neither the learned CIT has pointed out any error in the order of the Assessing Officer nor has demonstrated it being prejudicial to the interest of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authorities required for payment within 15 days thereof. Therefore, the Assessing Officer had already satisfied himself to allow this expenditure was a view which cannot be considered a view not sustainable in law as was also considered by the Hon'ble Apex Court in the case of Malbar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83. He further submitted that the issues remaining the same for both the AYs, the learned CIT assuming jurisdiction/s.263 is suitable for cancellation for both the AYs under consideration. 5. The learned CIT-DR supported the orders of the learned CIT. She submitted that the land belongs to the Government and the assessee has implemented as per the requirement of the Government which amount paid has been claimed as net present value in the compensatory forest account. She submitted that the assessee has derived mining rights and was to renew the Government land in accordance with the lease rights which amount paid has to be capital in nature. The assessee continued to derive benefit for the term of the lease therefore ought not to be claimed as revenue expenditure was rightly considered under the revisionary powers of the CIT as no whisper thereof has been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as capital when the long term benefit is derived by the Government who owns the land. The learned CIT therefore confused his opinion when a view had been taken by the Assessing Officer that the demand from the DFO is on the basis of the very lease rights given to the assessee for excavating which running expenditure has been rendered for claim against income on the basis of raising cost charged by the assessee to the contractors. The learned CIT-DR's proposition that the long term benefit has been derived by the assessee is of no avail insofar as the Government does not acknowledge that the assessee had created any asset in its favour. We are inclined to follow the decision of the ITAT, Cuttack Bench in the case of M/s. Orissa Mining Corporation (supra) wherein the Hon'ble Apex Court finding was also included in considering the issue being payment to Government of India, Ministry of Environments& Forest was entitling the assessee to continue its mining during the time of lease therefore was an expenditure on the direction of the Government and not because the assessee derived a long term benefit in doing so. There is no rule of thumb for determining whether the particular expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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