BARMER LIGNITE MINING CO LTD V. THE DCIT CENTRAL CIRCLE-6

ITA/54/2018

AI Insights

The case involves Barmer Lignite Mining Co. Ltd., the appellant, contesting the ITAT's decision which partly allowed their appeal for statistical purposes regarding the tax treatment of interest income and disallowance of CSR expenses. The primary legal questions were whether the interest income of Rs.12,64,01,627 should be classified as income from other sources and whether CSR expenses of Rs.95,08,197 should be allowed. The High Court examined precedents and the specific circumstances of the case, ultimately deciding in favor of the appellant on both counts.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 759010 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 24-07-2018
• Assessment Year: misc
• Other Referred Cases: Pr. Commissioner of Income Tax vs. M/s. Road Infrastructure Corporation of Raj. Ltd., Commissioner of Income Tax vs. Bokaro Steel Ltd., Indian Oil Panipat Power Consortium Ltd. vs. Income Tax Officer
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: PRATEEK KEDAWAT; PRABHANSH SHARMA; R B MATHUR
• Assessee Lawyers: SANJAY JHANWAR; PRAKUL KHURANA
• Keywords: Capital receipt; CSR expenses; Environmental clearance; Income from other sources
• Section: 142(1); 143(2)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 54/2018 Barmer Lignite Mining Co. Ltd. Sardar Patel Marg, C-Scheme, Jaipur, Through Its Authorized Signatory Nitesh Gangwal ----Appellant Versus The DCIT, Central Circle-6, Jaipur. ----Respondent For Appellant(s) : Mr. Sanjay Jhanwar with Mr. Prakul Khurana For Respondent(s) : Mr. Prateek Kedawat with Mr. Prabhansh Sharma for Mr. R.B. Mathur HON'BLE MR. JUSTICE KALPESH SATYENDRA JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 24/07/2018 1. By way of this appeal, the appellant has assailed the judgment and order of the tribunal whereby the tribunal has partly allowed the appeal of the assessee for statistical purposes. 2. This court while admitting the appeal on 22.2.2018 framed the following substantial question of law:- i) Whether under the facts and circumstances of the case the ld. ITAT has not legally erred in holding that the interest receipt of Rs.12,64,01,627/- in the hands of the appellant is income from other sources? ii). Whether under the facts and circumstances of the case and in law the ld. ITAT has not legally erred in disallowing the mandatory CSR expenses claimed for Rs.95,08,197/- pursuant to the terms and conditions of the environment clearance granted by Ministry of Environment and Forest? (2 of 15) [ITA-54/2018] 3. The facts of the case are that the assessee company e-filed its return of income for A.Y. 2012-13 declaring total income of Rs. NIL which was further revised on 23.7.2013 declaring total income of Rs.73,21,160/-. The case was selected for scrutiny under CASS and accordingly, notice u/s 143(2) was issued on 23.9.2013, fixing the case for hearing on 27.9.2013. Further notice u/s 142(1) alongwith questionnaire was issued on 22.9.2014 in compliance to which Sh. Nitesh Gangwal, Company Secretary Authorized representative of the assessee company appeared from time to time, furnished relevant details and the case was discussed with him. 4. Regarding issue no.1, counsel for the appellant has relied upon the following decisions:- 4.1 In Pr. Commissioner of Income Tax vs. M/s. Road Infrastructure Corporation of Raj. Ltd., DBITA No.144/2017 decided on 18.7.2017, it has been held as under:- 3. While considering the matter, tribunal has observed as under:- “4. We have heard the rival contentions and perused the material available on record. The issue under consideration for the both the years relate to treatment of the interest received prior to commencement of commercial operations of the specified mega road projects. As per the Revenue, the same is to be brought to tax under the head “income from other sources.” As per the assessee, it is in the nature of capital receipt and will be required to be set off against the pre-operative expenditure capitalized under the head “Capital work in progress” and the same cannot be brought to tax under the head “income from other sources.” The said issue has been examined at great length by the Coordinate Bench in its decision referred supra and therein the decision of the Hon’ble Supreme Court in case of Tuticorin Alkali Chemicals and Fertilizers (227 ITR 172) as well as decision in (3 of 15) [ITA-54/2018] case of Bokaro steel Ltd (236 ITR 316) has been duly considered. The relevant findings of the Coordinate Bench in assessee’s own case in ITA No.628/JP/2014 for A.Y. 2009-10 dated 11.08.2016 are reproduced as under: “2.18 From the above, it is evident that there are two sets of judgments of Hon’ble Supreme Court, proceedings on different lines of reasonings. The Hon’ble Delhi High Court in case of Indian Oil Panipat Consortium Ltd. (supra) has considered and interpreted the decisions of Hon’ble Supreme Court in case of Tuticorin Alkali Chemicals & Fertilizers (supra) as well as Bokaro Steel Ld. (supra). After analyzing both the decisions of Hon’ble Supreme court, it held that “the test which premeates through the judgment of the Supreme Court in Tuticorin Alkali Chemicals & fertilizers Ltd’s case (supra) is that if funds have been borrowed for setting up of a plant and if the funds are ‘surplus’ and then by virtue of that circumstance they are invested in fixed deposits the income earned in the form of interest will be taxable under the head “income from other sources”. On the other hand the ratio of the Supreme court judgment in Bokaro Steel Ltd.’s case (supra) to our mind is that if income earned, whether by way of interest or in any other manner on funds which are otherwise ‘inextricably linked” to the setting up of the plant such income is required to be capitalized to be set off against preoperative expenses.” “2.19 The facts in the instant case are pari materia with the facts of the Indian Oil Panipat (supra) and the ratio decidendi of Hon’ble Delhi High Court in that case will squarely apply to the facts of the assessee. In the instant case, undisputedly, the funds have been borrowed for the specific purpose of execution of the mega road projects and as per the loan agreement executed between the consortium of bankers and the assessee dated 23.11.2005, all the disbursements shall be deposited in the trust and retention account which shall be subject to strict control and verification by the Senior lenders and all disbursements shall be utilized solely for the purposes of implementation of the project and no other purpose. The funds are thus inextricably linked to the setting up of the mega road projects and interest earned on such borrowed funds infused in the business could not be classified as income from other sources. We also note a distinguishing feature in the instant case that the assessee is not all liberty to use the interest so earned as per its will and (4 of 15) [ITA-54/2018] discretion unlike the case in Tuticorin Alkali Chemicals & Fertilizers (supra) and the interest has to be used solely for the purposes of implementation of the specified projects only. The impugned interest receipt of Rs. 35,39,479/- on such borrowed funds relates to the mega road projects/stretches which were under construction and the completed road projects/stretches upto the date of commencement of commercial operations. Therefore, the interest received prior to commencement of commercial operations of the specified mega road projects will be in the nature of capital receipt and will be required to be set off against the pre-operative expenditure capitalized under the head “income from other sources”. Hence, ground no.1 of the assessee is allowed.” 5. Undisputedly, there are no changes in the facts and circumstances of the case. No contrary authority has been brought to our notice subsequent to above decision of the Coordinate Bench or the fact that said decision of the Coordinate Bench has been stayed by the Hon’ble High Court. In view of the similar facts and circumstances of the case and respectfully following the decision of Coordinate Bench in assessee’s own case (supra), we hold that the interest received prior to commencement of commercial operations of the specified mega road projects will be in the nature of capital receipt and will be required to be set off against the preoperative expenditure capitalized under the head “Capital work in progress” and the same cannot be brought to tax under the head “income from other sources”. 4. However, Mr. Mathur has taken us to the order of the AO wherein the assessing officer while considering the income observed as under:- “3. However, without prejudice, we would like to reiterate here that even if this is considered as income from other source, the net effect would be that the gross block of the road will be increased by the equivalent amount and whatever is the income from other sources would be set off against the loss from current year’s business and profession as company has started operation during the year and there would be no demand of tax. The reply of the assessee has been considered but is not acceptable. The assessee has parked its spare funds in the FDRs in the Banks and the interest there from can not considered as a business receipts. The assessee received interest during (5 of 15) [ITA-54/2018] preceding years also which shows that the assessee was having spare funds to invest in the FDRs wherefrom it earned interest. Merely commencement of business alone can not change of treatment of income.” 4.2 In Commissioner of Income Tax vs. Bokaro Steel Ltd., (1999) 236 ITR 315 (SC), it has been held as under:- 5. We will take the first three heads under which the assessee has received certain amounts. These are, the rent charged by the assessee to its contractors for housing workers and staff employed by the contractor for the construction work of the assessee including certain amenities granted to the staff by the assessee. Secondly, hire charges for plant and machinery which was given to the contractors by the assessee for the purpose of facilitating the work of construction. The activities of the assessee in connection with all these three receipts are directly connected with or are incidental to the work of construction of its plant undertaken by the assessee. Broadly speaking, these pertain to the arrangements made by the assessee with its contractors pertaining to the work of construction. To facilitate the work of the contractor, the assessee permitted the contractor to use the premises of the assessee for housing its staff and workers engaged in the construction activity of the assessee's plant. This was clearly to facilitate the work of construction. Had this facility not been provided by the assessee, the contractors would have had to make their own arrangements and this would have been reflected in the charges of the contractors for the construction work. Instead, the assessee had provided these facilities. The same is true of the hire charges for plant and machinery which was given by the assessee to the contractor for the assessee's construction work. The receipts in this connection also go to compensate the assessee for the wear and tear on the machinery. The advances which the assessee made to the contractor to facilitate the construction activity of putting together a very large project was as much to ensure that the work of the contractors proceeded without any financial hitches as to help the contractors. The arrangements which were made between the assessee-company and the contractors pertaining to these three receipts are arrangements which are intrinsically connected with the construction of its steel plant. The receipts have been adjusted against (6 of 15) [ITA-54/2018] the charges payable to the contractors and have gone to reduce the cost of construction. They have, therefore, been rightly held as capital receipts and not income of the assessee from any independent source. 6. In the case of Addl. Commissioner of Income- tax, New Delhi V. Indian Drugs and Pharmaceuticals ltd. ([1983] 141 ITR 134), the Delhi High Court considered a case where the work of construction of the factory of the assessee was in progress and production had not commenced. receipts from sale of tender forms and supply of water and electricity to the contractors engaged in construction as also receipts on account of sale of stones, boulders, grass and trees were held to be receipts not from independent sources but were considered as inextricably linked with the process of setting up of business. These were directly related to the capital structure of business and were held to be capital in nature. We agree with this view taken by the Delhi High Court. 7. The appellant, however, relied upon the decision of this Court in Tuticorin Alkali Chemicals and Fertilizers Ltd. v. Commissioner of Income- tax (supra). That case dealt with the question whether investment of borrowed funds prior to commencement of business, resulting in earning of interest by the assessee would amount to the assessee earning any income. This Court held that if a person borrows money for business purposes, but utilizes that money to earn interest, however temporarily, the interest so generated will be his income. This income can be utilized by the assessee whichever way he likes. Merely because he utilized it to re-pay the interest on the loan taken, will not make the interest income as a capital receipt. The department relied upon the observations made in that judgment (at page 179) to the effect that it the company, even before it commences business, invests surplus funds in its hands for purchase of land or house property and later sells it at profit, the gain made by the company will be assessable under the head \"capital gains\". Similarly, if a company purchases rented house and gets rent, such rent will be assessable to tax under Section 22 as income from house property. Likewise, the company may have income from other sources. The company may also, as in that case, keep the surplus funds in short-term deposits in order to earn interest. Such interest will be chargeable under Section 56 of the Income-tax Act. This Court (7 of 15) [ITA-54/2018] also emphasised the fact that the company was not bound to utilize the interest so earned to adjust it against the interest paid on borrowed capital. The company was free to use this income in any manner it liked. However, while interest earned by investing borrowed capital in short-term deposits is an independent source of income not connected with the construction activities or business activities of the assessee, the same cannot be said in the present case where the utilisation of various assets of the company and the payments received for such utilisation are directly linked with the activity of setting up the steel plant of the assessee. These receipts are inextricably linked with the setting up of the capital structure of the assessee-company. They must, therefore, be viewed as capital receipts going to reduce the cost of construction. In the case of Challapalli Sugars Ltd. v. Commissioner of Income-tax, A.P. ([1975] 98 ITR 167), this Court examined the question whether interest paid before the commencement of production by a company on amounts borrowed for the acquisition and installation of plant and machinery would form a part of the actual cost of the asset to the assessee within the meaning of that expression in Section 10(5) of the Indian Income-tax Act, 1922 and whether the assessee will be entitled to depreciation allowances and development rebate with reference to such interest also. The Court held that the accepted accountancy rule for determining cost off fixed assets is to include all expenditure necessary to bring such assets into existence and to put them in working condition. In case money is borrowed by a newly started company which is in the process of constructing and erecting its plant, the interest incurred before the commencement of production of such borrowed money can be capitalised and added to the cost of the fixed assets created as a result of such expenditure. By the same reasoning if the assessee such expenditure. By the same reasoning if the assessee receives any amounts which are inextricably linked with the process of setting up its plant and machinery, such receipts will go to reduce the cost of its assets. These are receipts of a capital nature and cannot be taxed as income. 4.3 In Commissioner of Income Tax vs. Autokast Ltd. (1997) 227 ITR 172 (SC), it has been held as under:- The question that was before the High Court (see [1998] 229 ITR 789 read thus (page 790) (8 of 15) [ITA-54/2018] “Whether on the facts and in the circumstances of the case, the interest income is not assessable to tax in the hands of the appellant? The High Court answered the question against the Revenue. The Revenue is in appeal by special leave. It is now in dispute that the appeal must succeed, having regard to the judgment of this court in Tuticorin Alkali Chemicals and Fertilizers ltd. vs. CIT [1997] 227 ITR 172. The civil appeal is accordingly allowed. The judgment and order under challenge is set aside. The question is answered in the negative and in favour of the revenue. In other words, the interest income is assessable to tax in the hands of the assessee.” 4.4 In Indian Oil Panipat Power Consortium Ltd. vs. Income Tax Officer (2009) 181 Taxman 249 (Delhi), it has been held as under:- 3.3 The assessee earned interest in the sum of Rs 1,65,75,906/- in assessment year 2001-02 and Rs 1,54,62,098/- in the assessment year 2002-03. As mentioned hereinabove the Assessing Officer applied the ratio of the judgment of the Supreme Court in Tuticorin Alkali Chemicals (supra) and the judgment of the Supreme Court in the case of CIT vs Autokast Ltd; (2001) 248 ITR 110 and held that the interest which accrued to the assessee was assessable under the head \"income from other sources\" and could not be set off against pre- operative expenses as claimed by the assessee. 3.4 Aggrieved by the order the assessee preferred an appeal to the CIT(A). The CIT(A) examined the facts in detail. It is pertinent to note that the CIT(A) in paragraph 4 of his Order dated 06.02.2003 categorically found that the funds were placed in fixed deposit so that liquidity was ensured and money would remain available when required for purchase of land and infrastructure development and hence the interest earned was 'inextricably linked' with the setting up of the power plant. Based on this line of reasoning the CIT(A) applied the judgment of the Supreme Court in Bokaro Steel Ltd. (supra) and allowed the claim of the assessee by directing the Assessing Officer to delete the addition and consider the same for capitalization towards pre- operative expenses. (9 of 15) [ITA-54/2018] 5. In our opinion the Tribunal has misconstrued the ratio of the judgment of the Supreme Court in the case of Tuticorin Alkali Chemicals (supra) and that of Bokaro Steel Ltd. (supra). The test which permeates through the judgment of the Supreme Court in Tuticorin Alkali Chemicals (supra) is that if funds have been borrowed for setting up of a plant and if the funds are „surplus‟ and then by virtue of that circumstance they are invested in fixed deposits the income earned in the form of interest will be taxable under the head \"income from other sources‟. On the other hand the ratio of the Supreme Court judgment in Bokaro Steel Ltd. (supra) to our mind is that if income is earned, whether by way of interest or in any other manner on funds which are otherwise „inextricably linked‟ to the setting up of the plant, such income is required to be capitalized to be set off against pre-operative expenses. 5. Counsel for the respondent contended that the aforesaid judgment of Delhi High Court is subject matter of SLP before the Supreme Court being appeal no.26612/2009. 6. Regarding issue no.2, counsel for the appellant Mr. Sanjay Jhanwar has relied upon the following decisions:- 6.1 In Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. Commissioner of Income Tax (1997) 223 ITR 101 (SC), it has been held as under:- The principles for determining whether the payment of the kind made by assessee could be regarded as a business expense are well settled. What is to be seen is not whether it was compulsory for the assessee to make the payment or not but the correct test is that of commercial expediency. As long as the payment which is made is for the purposes of the business, and the payment made is not by way of penalty for infraction of any Law, the same would be allowable as a deduction. The contribution which was made by the assessee could under no circumstances be regarded as illegal payments or payments which were opposed to public policy. This was not a case where the assessee was paying any bribe to any person nor is this a case where money was being (10 of 15) [ITA-54/2018] contributed to any private fund or for the benefit of any individual which could be regarded as a form of illegal gratification. By a voluntary scheme, with which the District Collector was associated, the District Welfare Fund has been established for the benefit of the general public. The payment to such a fund which was openly made by all the millers and which fund was being used for public benefit could not be regarded as being opposed to public policy. Requiring payment to be made, made for a just cause which would entitle a businessman to obtain a licence or permit cannot he regarded as being against the the public policy. Any contribution made by an assessee to a public welfare fund which is directly, connected related with the carrying on of the assessee’s business or which results in the benefit to the assessee’s business has to be regarded as an allowable deduction u/s 37(1). Such a donation, whether voluntary or at the instance of the authorities concerned, when made to a Chief Minister’s Drought Relief Fund or a District Welfare Fund established by the District Collector or any other fund for the benefit of the public and with a view to secure benefit to the assessee’s business, cannot be regarded as payment opposed to public policy. It is not as if the payment in the present case had been made as an illegal gratification. There is no law which prohibits the making of such a donation. The mere fact that making of a donation for no ground to deny the assessee a deduction of that amount u/s 37(1) when such payment had been made for the purpose of assessee’s business. Therefore, the payment made by the assessee in the instant case was allowable as deduction. 6.2 In Commissioner of Income Tax vs. Rupsa Rice Mill (1976) 104 ITR 249 (Orissa), it has been held as under:- 9. Three more decisions were cited before us as throwing light on the point. The first is the case of Lakshmiji Sugar Mills Co. P. Ltd. v Commissioner of Income-tax, [1971] 82 ITR 376 (SC). The Supreme Court was examining a claim of deduction raised by the assessee--a sugar mill in respect of amounts paid by way of contribution for the construction and development of roads between the various sugarcane producing centres and the sugar factory of the assessee. The roads were property of the Government and even after improvement, title vested in the Government. The court approved the (11 of 15) [ITA-54/2018] tests laid down by it in Cement Company's case (Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax ) and came to hold, that the expenditure for repair of the roads was a revenue expenditure. 10. A Bench of the Madras High Court in the case of Commissioner of Income-tax v. T. V. Sundaram Iyengar & Sons (P.) Ltd., [1974] 95 ITR 428 (Mad) was examining the tenability of the assessee's claim for deduction of money given for purchase of land for construction of houses under the subsidised industrial housing scheme sponsored by the State Government and came to the conclusion that the expenditure was incurred wholly and exclusively for the purpose of the business of the assessee- company. Reliance was placed on the decision of the Supreme Court in Cement Company's case and the rule in the English tax cases in the case of Atherton v. British Insulated and Helsby Cables Ltd., [1925] 10 TC 155 (HL). 11. The last case cited is one from the Bombay High Court in the case of Commissioner of Income-tax v. Associated Cement Companies Ltd., [1974] 96 ITR 650 (Bom) Assessee in this case was a cement factory situated outside the municipal limits of a town. Government decided to include the factory area within the municipal limits. Assessee agreed to provide certain amenities to the town including provision of water supply and Government on its part undertook not to include the properties of the factory within the municipal limit for fifteen years so that the assessee would not have to pay municipal taxes during that period. Assessee spent more than Rs. 2 lakhs in installing pipe lines, etc., which became the property of the municipality. Assessee claimed the sums spent by it as revenue expenses. Assesee's claim was upheld. 12. The principle indicated in these tests certainly support the assessee. As found here by the Tribunal, the primary health centre was the property of the Government. Assessee made a substantial contribution to meet the costs of erection in consideration of the fact that a health centre located near the factory premises would provide treatment to the ailing workmen. Under the State Employees' Insurance Act assessee had obligation to maintain a hospital or meet the expenses on treatment. Taking an overall picture of the matter, the Tribunal recorded the finding that, in the facts of the case, it was business expenditure. We are not inclined to take a different view. 13. Our answer to the question referred, therefore, is : (12 of 15) [ITA-54/2018] On the facts and in the circumstances of the case, the amount of Rs. 12,137, donated by the assessee to the Collector, Balasore, for the construction of the primary health centre building at Rupsa is an admissible revenue expenditure. 6.3 In Additional Commissioner of Income Tax vs. Rajasthan Spg. & Wvg. Mills Ltd. (2005) 274 ITR 465 (Raj.), it has been held as under:- 15. Applying the aforesaid test to voluntary contribution to charitable fund or organisation it is also well-established that any contribution made by an assessee to a public welfare fund which is directly connected or related with the carrying on of the assessee's business or which results in benefit to the assessee's business has to be regarded as an allowable deduction under Section 37(1). Such a donation, whether voluntary or at the instance of the authorities concerned, when made to relief fund or a welfare fund or any other fund for the benefit of the public and with a view to secure benefit to the assessee's business, cannot be regarded as payment opposed to public policy. It is not as if the payment in such circumstances had been made as an illegal gratification. There is no law which prohibits the making of such a donation. The mere fact that making of a donation for a charitable or public cause or in public interest results in the Government giving patronage or benefit can be no ground to deny the assessee a deduction of that amount under Section 37(1). 6.4 In Principal Commissioner of Income Tax-II vs. M/s. Raj. State Mines and Mineral Ltd., DBITA no.147/2015 decided on 12.10.2017 which reads as under:- “3. Counsel for respondent contended that the issue is now covered by the decision of this court in the case of D.B. Income Tax Appeal No.33/2007 CIT Jaipur vs. M/s Rajasthan State Mines & Mi, decided on 30.05.2017 wherein while considering the issues, this court in Paragraph 4 to 7, observed as under:- “4. Counsel for the department has contended that the tribunal has committed error in passing the (13 of 15) [ITA-54/2018] judgment and the issue is required to be answered in favour of the Department. 5. Counsel for the respondent-assessee has relied upon the following decision of this court:- 5.1. In CIT vs. Rajasthan Mines & Minerals Ltd. D.B. ITA No.107/2004 decided on 17.1.2017 wherein it has been observed as under:- “It is not in dispute that the issue is raised in this appeal is squarely covered by the Division Bench judgment of this Court in D.B. Income Tax Reference No.1/2000 (CIT, Jaipur vs. Rajasthan State Mines & Minerals Ltd.) decided on 15.9.2016 wherein it has been held as under:- \"Taking into consideration the fact initially the Corporation has not accepted the liability, therefore, the observations which are made by the Tribunal for the year 1991-92 were in the peculiar facts where the liability was not accepted but subsequently for the year 1992- 93, the Corporation has accepted the liability which was shown in the books of account and in view of the matter additions made by the tribunal for the relevant year would not be applicable in the changed circumstances. Since, they accepted the liability, the resolution which is sought to be passed on 28.8.1992 was administrative formality but for the Income-tax purpose it is shown in the books of account mercantile system, therefore, though the point raised by Mr. Singhi is remained an academic issue but facts and law in mercantile system which is debited for the relevant year i.e. 1992- 93. On first point, the contentions raised by Mr. Singhi has a doubt but in view of the consideration by us the relevant year debited entry in the books of account for the year 1992- 93, therefore, resolution is passed subsequently but since it was mercantile system for the year 1992-93, it will come into force. The contention which has been raised by Mr. Singhi is required to be accepted, it can only be one time revenue expenditure and subsequent claim of the assessee will not be acceptable and if his claim is made and accepted, it will be for the department to recover the tax from the assessee. In that view of the matter, the issue is answered in favour of the assessee and against the Department for the revenue expenses (Rs.2,96,000/-) of year 1992-93 only one time.” 5.2. In CIT vs. Rajasthan Mines & Minerals Ltd. D.B. Income Tax Reference 1/2000 decided on 15.9.2016 wherein similar view was taken. 5.3. In Rajasthan State Mineral Development Corporation, Jaipur vs. Dy. Commissioner of Income Tax, Jaipur decided on 14.12.2016 wherein it has been observed as under:- (14 of 15) [ITA-54/2018] Taking into consideration the observations which are made by this court in earlier judgment of the same assessee in para no. 11 & 13 holding as under:- He relied upon the decision of Hon'ble Supreme Court in the case of Alembic Chemical Works Co. Ltd. vs. Commissioner of Income Tax, reported in (1989) 177 ITR 0377 and Empire Jute Co. Ltd. vs. Commissioner of Income Tax, reported in (1980) 124 ITR 0001 and contended that under mercantile system, the expenses were shown in the year 1992- 93 and even while assessment order was passed for the year 1991- 92, the assessee was made clear that he is accepting the liability and he further contended that he will not make payment which was made by the State Government for the expenditure incurred for the survey which is being done. Therefore, the Corporation had no other option to make payment which has no capital value. Taking into consideration the fact initially the Corporation has not accepted the liability, therefore, the observations which are made by the Tribunal for the year 1991-92 were in the peculiar facts where the liability was not accepted but subsequently for the year 1992-93, the Corporation has accepted the liability which was shown in the books of account and in view of the matter additions made by the tribunal for the relevant year would not be applicable in the changed circumstances. Since, they accepted the liability, the resolution which is sought to be passed on 28.8.1992 was administrative formality but for the Income-tax purpose it is shown in the books of account mercantile system, therefore, though the point raised by Mr. Singhi is remained an academic issue but facts and law in mercantile system which is debited for the relevant year i.e. 1992-93. It is thus very clear that the survey expenses are almost identical and hence required to be allowed as revenue expenses. In view of the observations made by the Supreme Court in the Judgment of Empire Jute Co. Ltd. vs. Commissioner of Income Tax (Supra), we are of the opinion that the expenses which gives fruitful result require to be done according to the necessity of relevant time and development with the nature of expenses. 6. We have heard counsel for the parties. 7. In view of the above, the issues are answered in favour of the assesee and against the department. It is held that the expenses incurred are revenue expenditure and not capital expenditure.” 4. In that view of the matter, the issues are answered in favour of assessee against the department. (15 of 15) [ITA-54/2018] 7. Taking into consideration the decision of Supreme Court in the case of Bokaro Steel Ltd. (supra), the issues are answered in favour of the assessee and against the department. 8. The appeal stands allowed. (VIJAY KUMAR VYAS),J (K.S. JHAVERI),J Brijesh 42. "