Velingkar Brothers., Goa V. Asst. Commissioner of Income tax Cir. 2 (1), Panaji

CO 13/PAN/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9629 (ITAT-PANAJI)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 17-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2014
• Court: TRIBUNAL
• Department Lawyers: PRAMOD B DES
• Assessee Lawyers: B BARTHAKUR LD
• Keywords: Capital asset; Business income; Transfer pricing; Business expenditure; International transaction; Question of law; Cost of acquisition; Benefit of exemption; Commercial expediency; Reason to believe; Revenue expenditure; Capital expenditure
• Section: 10B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO.18 /PNJ/2014 (ASSESSMENT YEAR - 2008 - 09 ) THE ASST. COMM ISSIONER OF INCOME TAX, CIRCLE - 2 (1), PANAJI, GOA (APPELLANT) VS. M/S. VELINGKAR BROTHERS VELING KAR MARDOL, PONDA - GOA. PAN:AA BFV8653M (RESPONDENT) C.O. NO. 1 3 [C /PNJ/2014 OUT OF ITA NO.18 /PNJ/2014 (ASSESSMENT YEAR 2008 - 09 ) M/S. VELINGKAR BROTHERS VELING MARDOL, PONDA - GOA. PAN:AABFV8653M (OBJECTOR) VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI, GOA (RESPONDENT) APPELLANT BY : SHRI B.BARTHAKUR LD. DR. RESPONDENT BY : SHRI PRAMOD B. DESPANDE, CA. SHRI SATISH R. DHUME, CA DATE OF HEARING : 17/04/2014 DATE OF PRONOUNCEMENT : 30 /05/2014 PER: D.T. GARASIA THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A) - PANAJI, DATED 25.10.2013 AND C.O HAS BEEN FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2009 - 10 . 2. THE GROUNDS ARE RAISED IN THIS APPEAL WHICH READ AS UNDER: - 1. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 4.95 CRORES ON ACCOUNT OF UNDER PRICING OF SALES TO SISTER CONCERN WHICH IS ENTITLED FOR 10B EXEMPTION. 2. THE LD. CIT(A) ERRED IN DELETING THE AFFORESTATION EXPENSES WHICH ARE CAPITAL IN NATURE. 2 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS 2.1 . THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM ENGAGED IN BUSINESS OF MINING AND EXPORT OF IRON ORE. IT HAS TWO DIVISION ONE MINING DIVISION AND EOU DIVISION. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR A . Y . 2008 - 09 ON 28 - 09 - 2008 DECLARIN G THE TOTAL INCOME OF RS. 2,03,55,300 / - . DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT THE MINING DIVISION OF THE ASSESSEE SOLD IRON ORE TO ITS GROUP CONCERN VIZ. M/S. RAMCANTA VELINGKAR MINERALS (100% EOU). THE A SSESSING O FF ICER OBSERVED THAT AS PER THE DESCRIPTION ON THE INVOICES, THE ASSESSEE HAS SOLD IRON ORE FINES/LUMPY TO THE SAID RAMCANTA VELINGKAR MINERALS HAVING AROUND 54 - 54% IRON CONTENT. THE ASSESSEE WAS ASKED TO PROVIDE THE GRADE - WISE LIST OF PURCHASE AND SALES DATA WHICH IS REPRODUCE IN ASSESS MENT ORDER AS UNDER: PURCHASE DATA: PURCHASE OF ORE - MINING DIVISION : S. NO. NAME OF THE PARTY (SELLER) QUANTITY (MT) GRADE UNIT RATE (RS./MT) TOTAL COST (RS.) 1 MR. M.S.REGE 20 ,871. 300 47.60 480 10,41,985 2 MR. M.S.REGE 17, 062. 400 47.90 480 8,51,755 3 MR. M.S.REGE 3011 48.30 510 1,59,703 4 MR. M.S.REGE 22,537.500 47.80 480 11,25,072 5 MR. M.S.REGE 3,946 48 510 2,09,296 6 MR. M.S.REGE 22,731 47.50 480 11,34,771.45 7 MR. M.S.REGE 4,011 48.20 510 2,12,743.45 PURCHASE OF ORE - EOU DIVISION: SL. NO. NAME O THE PARTY ADDRESS QUANTITY GRADE RATE TOTAL COST+V AT 1 ATCHUTA V.S. VELINGKAR (SECORDA MINE) VELING. MARDOL, GOA 403404. 30,000.000 53.10 300 9000000 2 ATCHUTA V.S. VELINGKAR (SACORDA MINE ) VELING. MARDOL, GOA 403404 . 12,969.400 53.20 300 3890820 3 RAMACANTA V.S. VELINGKAR (CORPADEGA MINE) VELING MARDOL, GOA 403404 . 17,000.000 53.60 450 7650000 4 VELINGKAR DALAL 2,030.600 52.90 300 609180 3 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS BROTHERS (ATCHUTTA) COMMERCIAL COMPLEX, 4 TH FLOOR, NEAR HARI MANDIR, MARGAO GOA 403601 . 21150000 SALES DATA: SALE OF ORE - MINING DIVISION SR. NO. NAME OF THE PARTY ADDRESS QUANTITY GRADE RATE TOTAL COST+VAT 1. MR. RAMACANTA VELINGKAR MINERALS 100% EOU S.O.14, FIRST FLOOR, NAVELCAR TRADE CENTRE, PANAJI - GOA 403001 36,534.00 52.80 450 16440300 2 MR. RAMACANTA VELINGKAR MINERALS 100% EOU S.O. 14, FIRST FLOOR, NAVELCAR TRADE CENTRE, PANAJI - GOA 403001 27,761.000 3,385.000 53.50 54.30 450 450 12492450 1523250 3 MR. RAMACANTA VELINGKAR MINERALS 100% EOU S.O. 14, FIRST FLOOR, NAVELCAR TRADE CENTRE, PANAJI - GOA 403001 19,067.000 1,003.000 53.20 53.80 450 450 8580150 451350 4 MR. RAMACANTA VELINGKAR MINERALS 100% EOU S.O. 14, FIRST FLOOR, NAVELCAR TRADE CENTRE, PANAJI - GOA 403001 5,000.000 53.90 450 2250000 5 MR. RAMACANTA VELINGKAR MINERALS 100% EOU S.O. 14, FIRST FLOOR, NAVELCAR TRADE CENTRE, PANAJI - GOA 403001 . 54,780.000 52.70 150 8217000 6 ATCHUTA V.S. VELINGKA (SACORDA MINE) VELING. MARDOL, GOA 403404 . 30,000.000 53.10 300 9000000 7 ATCHUTA V.S. VELINGKA (SACORDA MINE) VELING. MARDOL, GOA 403404 12,969.400 53.2 0 300 3890820 8 RAMACANTA V.S. VELINGKAR (CORPADEGA MINE) VELING. MARDOL, GOA 403404 17,000.000 53.60 450 7650000 4 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS 9 VELINGKA BROTHERS DALAL COMMERCIAL COMPLEX, 4 TH FLOOR, NEAR HARI MANDIR,MARGAO GOA 403601. 2,030.600 52.90 300 609180 71104500 SALE OF ORE - EOU DIVISION: SR. NO. NAME OF THE PARTY ADDRESS QUANTITY GRADE RATE TOTAL VALUE (IN RUPEES) 1 SUNDIAL METALS AND MINERALS LTD. FLAT/RM A 15/F HILLIER COMMON BLDG 65 - 67 BONHAM STRAND EAST SHEUNG WAN, HONGKONG 41,800.000 58.07 PCT US $ 36.10 56137529.00 5,61,37,529.00 AT THIS POINT OF TIME IT IS CRUCIAL TO DISCUSS ONE ANOTHER IMPORTANT PROVISION OF S.10B OF THE IT ACT, UNDER WHICH THE SISTER CONCERN OF THE ASSESSEE, M/S RAMACANTS VELINGKAR MINERALS HAS STARTED TO CLAIM THE DEDUCTION. IT WAS FOUND THAT AS MENTIONED IN T HE ABOVE QUOTED PROVISIONS THERE EXISTED A RELATING AND CLOSE CONNECTION BETWEEN THE ASSESSEE AND ONE OF THE BUYER M/S RAMACANTA VELINGKAR MINERALS AS PRESENTED BELOW: M/S VELINGKAR BROTHERS ASSESSEE FIRM S. NO. PARTNERS NAME PROFIT SHARIN G RATIO(%) 1. ATCHUTA V.S. VELINGKAR 10 2. RAMACANTA V.S. VELINGKAR 10 3. VISHNUM N.S. VELINGKAR 15 4. ANILKUMAR N.S. VELINGKAR 15 5. PRAFULLA N.S. VELINGKAR 7.5 6. DINESH N.S. VELINGKAR 15 7. VASUDEVA A.S. VELINGKAR 10 8. DATTARARAJ VELINGKAR 10 9. GAURAV P.S. VELINGKAR 7.5 M/S RAMACANTA VELINGKAR MINERAL BUYER S. NO. PARTNERS NAME PROFIT SHARING RATIO(%) 5 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS 1. SH. VASUDEVA A.S. VELINGKAR 20 2. SH. DATTARAJ R.S. VELINGKAR 20 3. GAURAV P.S. VELINGKAR 20 4. DIPTIP N.S. VELINGKAR 20 5. AVINAS N.S. VELINGKAR 20 TO BRING ON RECORD THE MISSING DETAILS REGARDING THE PHYSICAL FEATURES OF THE ORE PURCH ASES, ALL THE PURCHASES INVOICES WERE ASKED FOR. FROM THE PURCHASE INVOICES THE FOLLOWING CLEAR PICTURE EMERGED WITH RESPECT TO THE PURCHASES MADE FROM ASSOCIATED/RELATED FIRM/CLOSELY CONNECTED PARTY. SL. NO. DATA NAME OF THE PARTY(SELLER) AS PER INVOICES QUANTITY (M T) GRADE DESCRIPTION UNIT RATE (RS/ M T) 1 31.5.2007 MR. RAMACANTA V.S. VELINGKAR* 36,534 52.48 IRON ORE FINES 450 2 1.9.2007 MR. RAMACANTA V.S. VELINGKAR* 27,761 53.5 IRON ORE FINES 450 3 1.9.2007 MR. RAMACANTA V.S. VELINGKAR* 3385 54.3 IRON ORE LUMPY 450 4 25.9.2007 MR. RAMACANTA V.S. VELINGKAR* 19,067 53.2 IRON ORE FINES 450 5 25.9.2007 MR. RAMACANTA V.S. VELINGKAR* 1,003 53.8 IRON ORE LUMPY 450 6 15.2.2008 MR. RAMACANTA V.S. VELINGKAR* 5,000 53.9 IRON ORE FINES 450 7 21.2.2008 MR. VELINGKAR BROTHERS 54,780 52.7 ROM FINES 150 TOTAL SALES MADE TO RELATED/CONNECTED FIRMS/ENTITIES 1,42,530 MT *THE SALES WERE ACTUALLY MADE BY M/S VELINGKAR BROTHERS, BUT THE INVOICES WERE IN THE NAME OF THE INDIVIDUAL. FROM THE ABOVE DETAILS, IT IS SEEN THAT THE ASSESSEE HAS SOLD 54,780 MT OF ROM FINES 52.7% GRADE TO THE GROUP CONCERN M/S. RAMACANTA VELINGKAR BROTHERS AT RS. 150/ - PER MT, AND EVEN THE REMAINING SALES OF ABOUT 92,000 MT OF IRON ORE FINES IN THE RANGE OF 52.53% GRADE HAVE BEEN SOLD BY SH. RAMACANTA V.S. VELINGKAR AT THE PRICE OF RS. 450/ - MT. 6 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS IT EMERGED THAT THE ARRANGEMENT MADE BY THE SISTER CONCERN, M/S RAMACANTA VELINGKAR MINERALS, OF THE ASSESSEE FIRM WITH REGARD TO THE PURCHASES GETS SQUARELY COVERED BY THE S.10B(7) PRESENTED ABOVE. TH IS IS BECAUSE THE SALE PRICE QUOTED BY THE ASSESSEE, EVEN AFTER FACTORING IN FOR THE PRICE FLUCTUATIONS, OTHER DELIVERY CONDITIONS ETC, ARE FAR BELOW THE MARKET RATES FOR THOSE GRADES, S ESTIMATED BASED ON CERTAIN SAMPLE OF SIMILAR SALES - PURCHASES INVOICES FOR THE PERIOD. THE RATES ESTIMATED BASED ON INDUSTRY INFORMATION AND SIMILAR PURCHASE - SALES TRANSACTIONS ARE PRESENT E D BELOW: S. NO. GRADE (FE%) DESCRIPTION ESTIMATED RATE (RS./MT) 1. 52% IRON ORE FINES 800/ - 2. 53% IRON ORE FINES 900/ - 3. 54% IRON ORE FINES 1000/ - 4. 54% IRON ORE LUMPY 900/ - 5. 52% ROM ORE 300/ - THE ASSESSEE HAS MENTIONED THAT THE BASIS ON WHICH THE ESTIMATES WERE MADE WAS NOT PROVIDED. THE DETAILED TABULATION, BASED ON WHICH THE PRICES OF THE DIFFERENT TYPES OF ORE WERE ESTIMATED, WAS PROVIDED TO THE ASSESSEE ON 27.12.2010. IN THE FOURTH PARAGRAP H, THE ASSESSEE HAD MENTIONED THAT THE PROVISIONS OF THE IT ACT BASED ON WHICH THE ADDITIONS WERE PROPOSED TO BE MADE WERE UNKNOWN. THE SAME IS NOT CORRECT AS THE DETAILS WERE GIVEN ON 20.12.2010 AND PLACED ON RECORD. IN THE THIRD PARAGRAPH OF THE REPLY PR ODUCED BY THE ASSESSEE, NOTICE HAS BEEN BROUGHT ON CHAPTER X WHICH ENUMERATES ON THE SECTIONS 92 TO 94 DEALING WITH TRANSFER PRICING. TRANSFER PRICING IS APPLICABLE ONLY TO, INTERNATIONAL TRANSACTIONS AND NOT TO DOMESTIC TRANSACTION. BY MENTIONING ABOUT TH E TRANSFER PRICING PROVISIONS, THE ASSESSEE IS ONLY TRYING TO DEVIATE AWAY FROM THE ISSUE. THERE WAS NO MENTION ABOUT THE SECTIONS 92 TO 94 IN THE ORDER SHEET NOTING MADE BY ME. THE NOTING ONLY 7 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS MENTIONED ABOUT THE RECALCULATION OF PROFIT B ASED ON THE FAIR MARKET PRICE. IN THE LAST PARAGRAPH OF THE LETTER, THE ASSESSEE HAD ACCEPTED THE ESTIMATE OF RS.300/ - FOR THE ROM ORE. ONLY AFTER ENSURING THE CORRECTNESS OF THE FACTUAL MATRIX AS P ER THE ASSESSEES OWN INVOICES, I T HAS BEEN CONCLUDED THAT THERE EXISTS A N ARRANGEMENT WHEREIN IT HAS RESULTED IN THE ELIGIBLE UNIT OF THE ASSESSEE (IE) M/S. RAMACANTA VELINGKAR MINERALS MAKING MORE THAN THE ORDINARY PROFITS; SUBSEQUENTLY THE AO OF THE SISTER FIRM M/S. RAMACANTA VELINGKAR MINERALS PROCEEDED TO COMPARE THE RATES WITH THE ESTIMATE BASED ON SIMILAR INDUSTRY TRANSACTIONS. COMING TO THE DETAILED NOTE MENTIONED BY THE ASSESSEE WHEREIN IT HAD MENTIONED THE PARAMETERS THAT GO BEHIND THE PRICING OF IRON ORE. THEREFORE THE CONTENTION OF THE ASSESSEE HAS ALREADY BEEN INCOR PORATED IN THE ESTIMATES. FROM THE TABLE PRODUCED ABOVE, IT IS CLEAR THAT OUT OF 5 INVOICES OF SALE MADE TO M/S RAMACANTA VELINGKAR MINERALS, ONLY IN ONE INVOICE THE DESCRIPTION IS MENTIONED AS ROM FINES IN ALL THE OTHER 4 INVOICES, IT IS MENTIONED AS IRON ORE FINES AND IRON ORE LUMPY. HOWEVER, THE ASSESSEE DID NOT PRODUCE ANY OF THE ORIGINAL INVOICES OR ANY OTHER PRIMARY RECORDS TO PROVE THAT IT WAS ACTUALLY A MISTAKE . IT IS NOW A WELL ESTABLISHED FACT THAT THE ASSESSEE HAS SHIFTED ALL ITS PROFITS TO T HE SISTER CONCERN, M/S RAMACANTA VELINGKA R MINERALS, W HICH IS A TAX EXEMPT EXPORT ORIENTED UNIT. BUT IN THE SUBMISSION, THE ASSESSEE ITSELF HAS MENTIONED THAT THE ORE GRADE AND TYPE PLAY A ROLE IN FIXING THE PRICE OF THE COMMODITY. THOUGH THE ONUS WAS ON T HE ASSESSEE, IT WAS NOT ABLE TO PRODUCE ANY OTHER DOCUMENTS. IT ONLY MENTIONED IN THE LETTER SAYING THAT ROM WAS WRONGLY MENTIONED AS IRON ORE FINES & LUMPS. THE FOLLOWING POINTS ARE ALSO TO BE NOTED IN THIS MATTER: THE GRADE OF THE IRON ORE SOLD BY M/S. VELINGKAR BROTHERS WAS NOT QUOTED IN ANY OF THE INVOICES. THE ASSESSEE DID NOT PRODUCE ANY RECORDS TO PROVE THAT THE INVOICES WERE WRONG . THE ABOVE ERRORS DO NOT PERTAIN TO JUST ONE SINGLE INVOICE; IT IS 8 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS APPLICABLE TO ALL THE SALE INVOICES TO THE SISTER/CON NECTED CONCERNS. STRANGELY, WHILE THE MATERIAL WAS SOLD BY THE FIRM MIS. VELINGKAR BROTHERS (AS VERIFIED FROM THE P/L ACCOUNT OF THE SELLER FIRM), IN SIX OUT OF SEVEN INVOICES RATHER THAN THE NAME OF THE SELLER - FIRM, ONLY THE NAME OF THE PARTNER I.E. MR. R AMACANTA V.S. VELINGKAR, IS QUOTED. ONLY IN ONE OF THE INVOICES, DATED 21.02.2008, THE NAME OF THE SELLER - FIRM WAS MENTIONED ON IT. TO SUM UP, IN ALMOST ALL THE INVOICES - THE NAME OF THE SELLER PARTY OR GRADE OF THE ORE OR THE DESCRIPTION - THE THREE MOST IMPORTANT FACTORS HAVE ALL BEEN QUOTED WRONGLY OR NOT QUOTED AT ALL. IN ALL THE INVOICES, THE NAME OF THE BUYER, THE QUANTITY, AMOUNT ETC WERE TYPED CORRECTLY. THE ASSESSEE WAS NOT ABLE TO EXPLAIN WHY THERE WAS MISTAKE ONLY IN THE DESCRIPTION OF THE ORE. GOING BY ALL THE ABOVE IT IS DECIDED THAT THE ASSESSEE FIRM HAS INDEED MADE A CONVENIENT ARRANGEMENT WITH A RELATED / CLOSELY CONNECTED FIRM / PARTY BY WHICH WHILE THE PROFITS OF THE SELLER - UNIT THAT IS NOT ELIGIBLE FOR ANY TAX DEDUCTIONS, THE BUYER - FIRM THA T IS ELIGIBLE FOR DEDUCTION U/S10 B OF THE IT ACT, IS ABLE TO MAKE MORE THAN ORDINARY PROFITS. THIS IS A CLASSIC CASE OF AN ASSESSEE WORKING THROUGH THE SYSTEM IN SUCH A WAY THAT EVEN THE BENIGN PROVISIONS OF THE IT ACT OFFERING TAX DEDUCTIONS AND E XEMPTIONS ARE EXPLOITED AND IN FACT ABUSED TO A SIGNIFICANT EXTENT RESULTING IN A HUGE REVENUE LOSS FOR THE EXCHEQUER. THIS CASE IS CLEARLY CO VERED BY THE PROVISIONS OF S. 10 B(7) OF THE IT ACT. IF WE GO BY THE NAMES AS PROVIDED IN THE INVOICES S.80 - IA(8) I S APPLICABLE; OR IF WE GO BY WHAT THE ASSESSEE CLAIMS AND CONSIDER THE SUPPLIER IS ACTUALLY THE FIRM, THEN S.80 - IA(10) IS APPLICABLE. IN A NY OF THESE TWO SCENARIOS THE WORKING OF THE REVISED PROFIT REMAINS THE SAME. ACCORDINGLY, GIVEN BELOW IS THE WORKING OF THE RECOMPUTED SALES VALUE AND THEREBY THE REVISED INCOME FOR THE ASSESSEE: S. NO. NAME OF THE PARTY(SELLER) AS PER INVOICES QUANTITY (MT) DESCRIPTION UNIT RATE (RS/MT) CLAIMED TOTAL COST (RS.) ESTD. RATE (RS/MT) ESTD. TOTAL COST (RS.) 9 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS GRADE% 1. MR. RAMACANTA V.S. VELINGKAR* 36,534, IRON ORE FINES, 52.5 450 1,64,40,300 900 3,28,80,600 2. MR. RAMACANTA V.S. VELINGKAR* 27,761,IRON ORE FINES, 53.5 450 1,24,92,450 900 2,49,84,900 3. MR. RAMACANTA V.S. VELINGKAR* 3385, IRON ORE LUMPY, 54.3 450 15,23,250 800 27,80,000 4. MR. RAMACANTA V.S. VELINGKAR* 19,067, IRON ORE FINES, 53.2 450 85,80,150 900 1,71,60,300 5. MR. RAMACANTA V.S. VELINGKAR* 1,003, IRON ORE LUMPY, 53.8 450 4,51,350 800 8,02,400 6. MR. RAMACANTA V.S. VELINGKAR* 5,000 IRON ORE FINES, 53.9 450 22,50,000 900 45,00,000 7. MR. VELINGKAR BROTHERS* 54,789, ROM FINES, 52.7 150 82,17,000 300 1,64,34,000 4,99,54,500 9,94,70,200 CONSEQUENTLY, THE JURISDICTIONAL A.O. OF THE BUYER - FIRM, M/S. RAMACANTA VELINGKAR MINERALS, HAD INFORMED ABOUT THE RECOMPUTED PURCHASE RATES, AND INFORMED TO MAKE APPROPRIATE ADJUSTMENTS WHILE ASSESSING THE INCOME OF THE SELLER - FIRM. HENCE THE DIFFERENCE OF AMOUNT OF SALES RS.4,95,15,700/ - IS BEING ADDED BACK TO THE TOTAL INCOME . 2.2. THE MATTER CARRIED TO CIT (A) AND CIT(A) HAS DELETED THE ADDIT ION BY OBSERVING AS UNDER: 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, SUBMISSION OF THE APPELLANT AND FACTS AVAILABLE ON RECORD. I HAVE, ALREADY DECIDED THE APPEAL I N THE CASE OF THE SISTER CONCERN M/S. RAMACANTA VELINGKAR MINERALS AND ON FACTS, I HAV E HELD THAT NO UNDER INVOICING OR UNDER PRICING HAS BEEN DONE BY THE APPELLANT OF ITS SALES MADE TO SISTER CONCERN. IT IS CLEAR FROM THE DATA AVAILABLE ON RECORD THAT THE A.O. REPLACED THE PRICE OF R.O.M. WITH THAT OF PROCESSED ORE, WHILE WORKING OUT THE P URCHASE PRICE OF THE SISTER CONCERN. EVEN OTHERWISE, THE A.O. SHOULD NOT HAVE MADE ON THE BASIS OF ASSUMPTIONS AND PRESUMPTIONS FOR THE FOLLOWING REASONS: THERE IS NO DOUBT ABOUT THE FACT THAT BOTH THE PARTIES ARE SISTER CONCERNS BUT THERE ARE MANY DIFFERE NT PARTNERS IN BOTH THE VARIED PERCENTAGE OF SHARES THE A.O. HAS NOT BEEN ABLE TO PROVE THAT ANY MONEY HAS COME BACK TO THE APPELLANT AND THAT THE BOOK RESULTS OF THE APPELLANT WAS INCORRECT OR UNRELIABLE. III) THE A.O. HAS NOT BEEN ABLE TO ESTABLISH THAT THE ASSESSEE HAS EARNED MORE INCOME THAN DECLARED IN ITS BOOKS OF ACCOUNTS. 10 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS IV) THE ASSUMED PRICE CAN NOT REPLACE THE REAL PRICE. APART FROM THE ABOVE, TO SUPPORT ITS CONTENTION, THE APPELLANT HAS PLACED RELIANCE ON MANY JUDICIAL PRONOUNCEMENTS. AMONG, THE SE, WORTH MENTIONING IS THE ORDER OF THE HONBLE APEX COURT IN THE CASE OF CIT V/S. A. RAMAN AND CO. (1968) 67 ITR 11 (SC) WHEREIN IT WAS HELD THAT ITO CANNOT :HAVE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT FOR PURPOSE OF 147 (B) ON THE PLEA THA T INCOME WHICH COULD HAVE BEEN EARNED BY THE ASSESSEE FIRM WAS NOT EARNED AND EARNED BY THE ASSESSEE FIRM WAS NOT EARNED AND BY A SUBTERFUGE OR CONTRIVANCE, PART OF THAT INCOME WAS EARNED BY THE HUF, WHOSE KARTAS WERE PARTNERS OF THE ASSESSEE FIRM: THERE BEING NO CASE THAT HUFS WERE BENAM IDARS OF THE ASSESSEE. SIMILARLY IN THE CASE OF CIT V/S CALCUTTA DISCOUNT 91 ITR 8(SC) THE HONBLE SUPREME COURT HELD THAT WHEN ONE TRADER TRANSFERS HIS GOODS TO ANOTHER TRADER AT A PRICE LESS THAN THE MARKET PRICE, THE T AXING AUTHORITY CAN NOT TAKE INTO CONSIDERATION THE MARKET PRICE OF THESE GOODS, IGNORING THE REA 1 PRICE FETCHED. IN THE INSTANT CASE, THE APPELLANT HAS SOLD ITS PRODUCT AT THE MARKET PRICE AND THEREFORE IN MY OPINION, THE ADDITION WAS NOT JUSTIFIED. THE A. O. IS DIRECTED TO DELETE THE ADDITION AMOUNTING TO RS.4,95, 15,700/ - . THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 2.3 . THE LEARNED DR SUBMITTED THAT ASSESSEE IS MINING DIVISION OF THE ASSESSEE SOLD IRON ORE TO ITS GROUP CONCERN V/Z. M/S RAMCANTA VELINGKAR MINERALS WHO IS 100% EOU. THE ASSESSING OFFICER HAS VERIFIED THE INVOICES AND HE WAS OF THE VIEW THAT ASSESSEE HAS SOLD IRON ORE FINES/LUMPY TO THE SAID M/S RAMCANTA VELINGK AR MINERALS HAVING AROUND 53 - 54% OF IRON CONTENT SOLD TO HIS SISTER CONCERNED. THE ASSESSEE HAS MADE ARRANGEMENTS WITH ITS SISTER CONCERN WHICH IS GETTING BENEFIT OF EXEMPTION U/S 10B BY SELLING THE IR ON ORE AT A PRICE FAR BELOW THE MARKET RATES FOR THOSE GRADES AND HENCE ASSESSEES INCOME NEEDS TO BE INCREASED AND ADJUSTED TO THAT EFFECT. THE AO HAS CARRIED OUT INDEPENDENT SEARCH AS TO MARKET RATES OF THE RAW MATERIAL AS PER THE DESCRIPTION IN THE INV O ICES . AS REGARDS, IRON ORE LUMPY (AROUND 54% GRADE) THE ESTIMATE WAS WORKED OUT AT RS. 900 BY AVERAGING THE PURCHASE COST INFORMATION OBTAINED FROM VARIOUS PARTIES RANGING FROM RS.525/MT TO RS.1395/MT. THE COST OF ROM OF 53% LOW GRADE ROM WAS ARRIVED AT R S. 300 AND THE AO HAS INVOKED THE PROVISIONS OF SECTION 10B(7) R.W.S 80IA (10) AND RECOMPUTED THE PROFIT, THEREFORE, CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION. 11 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS 2.4 . THE LEARNED AR SUBMITTED BEFORE US THAT THE ASSESSEE IS A MINE OWNER WHO SOLD RUN OF MINE (ROM) ORE OF RS. 4 ,99,54,500 TO ITS SISTER FIRM M/S RAMACANTA VELINGKAR MINERALS. THE SAID RAMACANTA VELINGKAR MINERALS (RVM) OWNS A 100% EXPORT ORIENTED UNIT (EOU), AND OWNS A PLANT TO PROCESS THE ROM TO CONVERT THE SAME INTO MARKETABLE IRON ORE CONCENTRATE FINES. RVM IS 100% ENTITLED FOR EXEMPTION U/S.10B. THE ASSESSEE FIRM HAS INDEED MADE A CONVENIENT ARRANGEMENT WITH A RELATED/CLOSELY CONNECTED FIRM/PARTY BY WHICH WHILE THE PROFITS OF THE SELLER UNIT THAT IS NOT ELIGIBLE FOR DEDUCTION U/S 10B OF THE IT ACT, IS ABLE TO MAKE MORE THAN ORDINARY PROFITS. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS SOLD THE GOODS OF IRON ORE FINES AND IRON ORE LUMPY. TH E ASSES S ING OFFICER HELD THAT THE ASSESSEE CASE IS COVERED BY SECTION 80IA (8) OR 80IA (10) BUT T HE ASSESSEE HAS NOT CLAIMED DEDUCTION UNDER 10B(7) OF THE ACT. THEREFORE PROVISION OF SECTION 80IA(8)/ 80IA(10) IS NOT APPLICABLE. THE ASSESSEE HAS SOLD ROM WHICH IS CRUDE ORE EXTRACTED FROM THE MINE ON AS IS WHERE IS BASIS. THE SAID ROM INC L UDED MANY IMPURITIES SUCH AS MUD, SILICA, STONES SULFUR, BOULDERS, ETC. THE ASSESSING OFFICER HAS APPLIED THE RATES OF PROCESSED FINE ORE. THE SALE PRICE OF ROM CANNOT BE APPLIED EQUA TED WITH THAT OF FINISHED GOODS. THEREFORE, AO IS NOT JUSTIFIED IN HIS AC TION. THE PRICE OF ROM VARIES BETWEEN RS. 360 TO RS. 575 FOR PER TON WHERE AS THE ASSESSEE HAS CHARGED RS. 450 FOR PER TON NE WHICH CONCLUSIVELY PROVE S THAT THE ASSESSEE HAS SOLD THE ORE AT THE MARKET RATE. THE ASSESSING OFFICER HAS APPLIED THE RATE ON ESTIMA TED BASIS. THE ASSESSING OFFICER HAS RELIED UPON THE DECISION S OF HONBLE PANJ AB & HARYANA HIGH COURT IN THE CASE OF PATIALA BISCUITS MANUFACTURERS VS.CIT (1976) 103 ITR208 (P&H), CIT VS. A RAMAN & CO. (1968) 67 ITR 11(SC), CIT VS.CALCUTTA DISCOUNT 91 ITR 8(SC) AND MARGHABHAI K. PATEL & CO VS. CIT(1977) 108 ITR 54 (GUJ) AND SUBMITTED THAT EVEN IF THE GOODS ARE SOLD LESSER RATE TO THE BU Y ER , IT DOES NOT ENTITLE THE DEPARTMENT TO ASSESS THE DIFFERENCE AS THE INCOME OF THE ASSESSEE. IT MAY BE NOTED THAT THE LAW DOES NOT OBLIGE A TRADER TO MAKE THE 12 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS MAXIMUM PROFIT THAT HE CAN MAKE OUT OF HIS TRADING TRANSACTION. THE ASSESSEE CANNOT BE ASSESSED ON THE NOTIONAL PROFIT WHICH IT DID NOT MAKE BUT COULD HAVE MADE BY EFFECTING THE SALE AT HIGHER VALUE. THE AS SESSEE DID NOT EARN ANY ADDITIONAL INCOME THAN WHATEVER WAS DISCLOSED IN THE AUDITED ACCOUNTS. THEREFORE, NO ADDITION CAN BE MADE. THE ASSUMED P RICE CANNOT REPLACE THE REA L PRICE. 2.5 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND IN THE CASE OF SISTER CONCERN M/S. RAMACANTA VE LINGKAR MINERALS AND ON FACTS, WE HAVE HELD THAT NO UNDER INVOICING OR UNDER PRICING HAS BEEN DONE BY THE ASSESSEE OF ITS SALES MADE TO SISTER CONCERN. THE ASSESS ING OFFICER HAS DECIDED THE SALE PRICE OF R.O.M WITH THAT A PROCESSED ORE, WHILE WORKING OUT THE PURCHASE PRICE OF THE SISTER CONCERN. BUT THE EVIDENCE SHOWS THAT THE ASSESSEE HAS NOT PURCHASED ANY IRON ORE FROM HIS SISTER CONCERN BELOW MARKET PRICE. WE FI ND THAT THE ASSESSING OFFICER HAS COMPARED THE PRICE OF SALE WHICH WAS ACCRUED OR EXTRACTED FROM THE MINES ON AS IS WHERE IS BASIS . THE SAID ROM INCLUDED MANY IMPURITIES SUCH MUD , SILICA , SULFUR, STONES BOULDERS, ETC. THE ASSESSING OFFICER HAS APPLIED THE RATE S OF PROCESSED FINE ORE WITH ROM AND WRONGLY CONCLU DED THE RATES WERE NOT PROPERLY CHARGED. THE PRICE OF ROM VARIES BETWEEN RS. 360 TO RS. 575FOR PER TONNE WHEREAS THE ASSESSEE HAS CHARGED RS. 450 TON N E WHICH SHOWS THAT ASSESSEE HAS SOLD THE ORE AT THE MARKET RATE. THEREFORE, WE ARE OF THE VIEW THAT CIT(A) IS JUSTIFIED IN HIS ACTION. IN THE CASE OF CIT(A) VS. CALCUTTA DISCOUNT 91 ITR 8(SC) THE HONBLE SUPREME COURT HELD THAT WHEN ONE TRADER TRANSFERS HIS GOOD S TO ANOTHER TRADER AT A PRICE LESS THAN THE MARKET PRICE , THE TAXING AUTHORITY CANNOT TAKE INTO CONSIDERATION THE MARKET PRICE OF THESE GOODS, IGNORING THE REAL PRICE FETCH. IN THE CASE OF MARGHBHAI K. PATEL & CO. VS. CIT (1977) 108 ITR 54 (GUJ) WHEREIN GUJRAT HIGH COURT HELD THAT THE TAXING AUTHORITIES HAS NO RIGHT TO SUBSTITUTE THE MARKET PRICE OR AVERAGE PRICE IN PLACE OF AGREED PRICE. UNLESS IT HAS BEEN SHOWN THAT THE TRANSACTION IN QUESTION WAS A 13 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS SHAM ONE OR UNLESS THE VALUE SHOWN WAS NOT THE VALUE IN THE BOOKS OF ACCOUNT OR UNLESS IT WAS NOT THE VALUE IN THE BOOKS OF ACCOUNT OR UNLESS IT WAS NOT BONA FIDE TRANSACTION, IT IS NOT OPEN TO THE TAXING AUTHORITIES TO DISREGARD THE FIGURES OF THE TRANSACTIONS SHOWN IN THE BOOKS OF ACCOUNT AND DISALLOW A P ART OF PRICE PAID TO PARTNERS IN RESPECT OF PURCHASES MADE BY THEM. WE RESPECTFULLY FOLLOWING THE SAME, WE ARE OF THE VIEW THAT CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTE R F ERENCE IS NOT REQU IRED . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED ON THIS GROUND. 3 . GROUND NO.2 - DURING THE COURSE OF ASSESSMENT PROCEEDING ASSESSEE HAS CLAIMED EXPEND ITURE OF RS. 1,07,73,000 / - AS LAND COMPENSATION AND RS. 1,93,899/ - AS COMPENSATION FOR AFFORESTATION CHARGES. THE ASSESSEE IS CARRYING OUT MINING ACTIVITIES AND ASSESSEE HAS TREATED THIS EXPENDITURE AS REVENUE EXPENDITURE. THE ASSESSEE CONTENDED THAT THE ASSESSEE MADE PAYMENTS TOWARDS THE NET PRESENT VALUE COMPENSATION FOR USING THE LAND FOR MINING PURPOSES. THE PAYMENT WAS MADE FOR ALLOWING THE LAND TO BE US ED FOR MINING PURPOSES AND WAS PRIMARILY MEANT TO OFFSET THE ECOLOGICAL DEGRADATION THAT W OULD ENSURE AS A RESULT OF MINING ACTIVITIES ON THE AFORESAID LAND. THEREFORE, THIS PAYMENT IS CHANGING THE NATURE OF LAND USE OF THE AFORESAID PIECE OF LAND FOR MINI NG ACTIVITIES WHICH WOULD RENDER BENEFIT OF LASTING DURATION TO THE ASSESSEE AND THIS EXPENDITURE WAS INCURRED FOR DIVERSION OF FOREST LAND FOR NON - FOREST LAND USE I.E. MINING. THE LEVY OF CHARGES IMPOSED AS PER THE DECISION OF SUPREME COURT AND PAYMENT O F NET PRESENT VALUE IS INCIDENTALLY CONNECTED WITH THE LEASE OF THE MINES. THEREFORE, IT WAS TREATED AS REVENUE EXPENDITURE BY THE AO. 3.1 . THE MATTER CARRIED TO CIT(A) AND CIA(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 5.4. I HAVE GONE THROUGH THE CONTENTS OF THE ASSESSMENT ORDER, SUBMISSION OF THE APPELLANT, FACTS OF THE CASE AND VARIOUS JUDICIA L PRONOUNCEMENTS RELIED UPON. . THE A.O. HAS NOT DOUBTED THE GENUINENESS OF THE PAYMENT . THIS IS ALSO AN UNDISPUTED FACT 14 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS THAT THE PAYMENT HAS BEEN M ADE T O THE GOVT. FOREST DEPARTMENT ON A LETTER OF DEMAND FROM THEM, WHICH WAS NECESSARY FOR CONTINUANCE OF BUSINESS OF MINING BY THE ASSESSEE. NON - PAYMENT WOULD HAVE MADE THE ASSESSEE LIABLE FOR CANCELLATION OF MINING LEASE AND BUSINESS OF THE ASSESSEE WOULD HA VE STOPPED. THIS IS ALSO A FACT THAT BY PAYING IN CESS TO THE FOREST DEPARTMENT, THE ASSESSEE HAS NOT ACQUIRED ANY CAPITAL ASSET, I.E. TANGIBLE OR ANY LONG - TERM RIGHTS. IN ALL THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE A.O. SOME OR THE OTHER TANGIBL E CAPITAL ASSET CAME INTO EXISTENCE, WHICH IS NOT THE FACT IN THE INSTANT CASE. IN ITS SUPPORT, THE ASSESSEE PLACED RELIANCE ON THE JUDGEMENT OF JURISDICTIONAL ITAT, PANAJI IN THE CASE OF DR. PRGFULLA R. HEDE V/S CIT IN ITA NO.135/PNJ/201 1. IN THIS CASE DR . PRAFULLA R. HEDE CLAIMED REVENUE EXPENDITURE OF RS.2,14,26,295/ - ON ACCOUNT OF PAYMENT OF NPV AND AFFORESTATION CHARGES. THE A.O. HAD ALLOWED THE CLAIM OF EXPENSES OF THE ASSESS EE. HOWEVER, THE LD CIT, PANAJI , DISALLOWED THESE EXPENSES AS BEING CAPITAL I N NATURE IN AN ORDER PASSED U/S 263. ON APPEAL, HONBLE ITAT DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT AND HELD THAT THE ORDER PASSED BY THE A.O. WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 5.5 IN VIEW OF THE ABOVE FACTS, IN MY OP INION, THE A.O. WAS NOT JUSTIFIED IN DISALLOWING NPV PAYMENTS TREATING THEM BEING CAPITAL IN NATURE AND THERE ADDITION AMO UNTING TO RS. 1,09,66,899/ - IS HEREBY DELETED AND THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED ACCORDINGLY. 3.2 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAS PAID THE COMPENSATION FOR USE OF FOR EST AREA FOR MINING. FOREST ARE A /LAND USED BY ASSESSEE IS A CAPITAL ASSET AND ANYTHING PAID F OR ACQUIRING A CAPITAL ASSET IS CAPITAL EXPENDITURE AND NOT A REVENUE EXPENDITURE. BUT IN THIS CASE THE ASSESSEE HAS NOT ACQUIRED ANY CAPITAL ASSET BUT ASSESSEE HAS PAID THE AMOUNT OF COMPENSATION FOR CARRYING OUT MINING ACTIVITIES AND THE ASSESSEE HAS PA ID COMPENSATION AS CHARGES FOR DEGRADING THE FOREST LAND AND THE EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MINING BUSINESS AND SAME HAS BEEN TREATED AS REVENUE EXPENDITURE BY CIT(A). WE FIND THAT SIMILAR ISSUE HAS COME UP BEFORE HON BLE BOMBAY HIGH COURT IN THE CASE OF DEPUTY COMMISSIONER OF INCOME TAX VS. TIMBLO PVT. LTD. IN TAX APPEAL NO. 66/2012 WHEREIN THE QUESTION NO. D WHICH READ AS UNDER: D. WHETHER THE TRIBUNAL IS CORRECT IN LAW IN HOLDING THAT ONE TIME AMOUNT MADE TO THE FOREST DEPARTMENT TOWARDS NET PRESENT VALUE (NPV) AND AFORESTATION COMPENSATION IS NOT A CAPITAL EXPENDITURE BUT REVENUE EXPENDITURE? 15 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS WHEREIN THE HONBLE HIGH COURT HAS DECIDED THIS ISSUE BY OBSERVING AS UNDER: 5.THE ISSUE RAISED IN PARAGRAPH 5(D) IS COVERED AGAINST THE APPELLANT AND IN FAVOUR OF THE ASSESSEE IN VIEW OF THE ORDER OF THIS COURT DATED 6/02/2012 IN THE CASE OF THE COMMISSIONER OF INCOME TAX V/S. DR. PRAFULLA R. HEDE AND ANR. IN TXA NO.15/2012. IN THAT APPEAL ALSO THE ASSESSEE WAS DIRECTED TO PAY THE NET PRESENT VALUE FOR DIVERSION OF FOREST LAND FOR THE PURPOSE OF MINING. THE DIVISION BENCH HELD THE EXPENDITURE SO INCURRED TO BE FOR COMMERCIAL EXPEDIENCY AND THAT IT SHOULD THEREFORE NOT BE TREATED AS EXPENDITURE OF CAPITAL NATURE. 6. IN VI EW OF THIS JUDGMENT QUESTION (D) DOES NOT GIVE RISE TO A SUBSTANTIAL QUESTION OF LAW. FROM THIS ABOVE DECISION OF HONBLE BOMBAY HIGH COURT, WE ARE OF THE VIEW THAT COMMISSIONER OF INCOME TAX IS JUSTIFIED IN HOLDING THE PAYMENT ON NET PRESENT VALUE AS AF F ORESTATION CHARGES IN RESPECT OF THE MINING LESSEES ALREADY OBTAINED HAS BEEN DECIDED AND IS TREATED AS REVENUE EXPENDITURE. THEREFORE, WE RESPECTFULLY FOLLOWING THE SAME, DISMISS THE DEPARTMENTS APPEAL. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. C.O. NO. 13/PNJ/2014 , FOR THE A.Y. 2008 - 09 4 . IN C.O. , THE ASSESSEE H AS CLAIMED THAT THE HE HAS MADE CONTRIBUTION RS. 15 LACS TOWARDS CONSTRUCTION OF BRIDGE AT USGAON GOA HAD DEBITED SUM OF RS. 15 LA CS TOWARDS CONTRIBUTION TO GOA INFRASTRUCTURE D EVELOPMENT FOR CONSTRUCTION OF USGAO BRIDGE. THE ASSESSING OFFICE R WAS OF THE VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY BY WAY OF CONTRIBUTION FOR CONSTRUCTION OF BRIDGE IS IN THE CAPITAL FIELD AND T HEREFORE, IT IS A NATURE OF CAPITAL EXPENDITURE. THE ASSESSEE S COMPANY IS NOT DIRECTLY RELATABLE TO THE BRIDGE BUSINESS , THEREFORE, IT IS NOT A BUSINESS EXPENDITURE. SINCE, THE EXPENDITURE IS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS , IT WAS NOT ALLOWED. THE CIT(A) HAS CONFIRMED THE SAME. 16 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS 4.1 . THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS CON TRIBUTED 15 LACKS TOWARDS CONSTRUCTION OF BRIDGE WHICH WAS TO BE USED FOR TRANSPORTATION OF ORE AS WELL AS PUBLIC. THE BRIDGE WAS OPEN FOR ORE TRANSPORT AS WELL AS FOR PUBLIC. THE ASSESSEE DID NOT OWN THE BRIDG E. THE TOTAL C OSTS OF BRIDGE WAS 24 CRORES OUT OF WHICH THE ASSESSEE CONTRIBUTED RS.15 LACS AS DEMANDED BY GOA IN FRASTRUCTURE DEVELOPMENT PVT. LTD . THE ASSESSEE IS IRON OR E EXPORTER , THEREFORE , BRIDGE IS NECESSARY FOR HIS BUSINESS, THEREFORE, IT MAY BE ALLOWED. 4.2 . THE L EARNED DR RELIE D UPON THE ORDER OF THE REVENUE AUTHORITIES . 4.3 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT T H E ASSESSEE HAS PAID RS.15,00,000 / - BY WAY OF CONTRIBUTION FOR CONSTRUCTION AND DEVEL OPME NT OF ROAD S BETWEEN S UGAR CANE PRODUCING CENTRE AND SUGAR F ACTORY OF THE ASSESSEE. IN THAT CASE, THE CLOSE PROXIMITY EXISTED BETWEEN CONSTRUCTION OF THE ROAD AND RUNNING OF FACTORY. IN THIS CASE, WE FIND THAT THE ASSESSEE HAS MADE CONTRIBUTION TO THE SA ID GOVT. FOR CONSTRUCTION OF THE BRIDGE. THE BRIDGE WAS OWN ED BY THE STATE GOV ERNMENT AND IT IS USED BY GENERAL PUBLIC A S WELL AS MINING COMPANIES AND TRUCK O WNERS. THE CONSTRUCTION OF THE BRIDGE IS NOT A STATUTOR Y OBLIGATION BUT IT IS A DUTY OF THE STATE GOVERNMENT. WE FIND THAT THE ASSESSING OFFICER HIMSELF HAS TREATED THIS EXPENDITURE AS CAP ITAL EXPENDITURE. WE ARE OF THE VIEW THAT THIS EXPENDITURE IS IN REVENUE NATURE, THEREFORE, WE ALLOW THE SAME. + 5 . IN T HE RESULT, THE APPEAL FILED BY THE REV ENUE IS DISMISSED AND C.O. FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 .5.2014. SD/ - SD/ - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 30 .5.2014 17 . ITA NO.18/PNJ/2014 (A.Y.2008 - 09) ACIT VS. M/S. VELINGKAR BROTHERS P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER