The Assistant Commissioner of Income Tax, Circle-1, Margao., Margao V. Mrs Anjum Salim Shaikh., Curchorem

ITA 109/PAN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1243 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANAND SHANKAR MARATHE
• Assessee Lawyers: SHRINIVAS NAYAK
• Keywords: Capital asset; Gift; Business income; Commercial expediency; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N S SAINI, HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO 108/PAN/2016 : (ASST. YEAR : 2010 - 11 ) ASSISTANT COMMISSIONER OF INCOME TAX, VS. MR. SALIM MOHAMMED SHAIKH, CIRCLE 1, MARGAO. H.NO. 84/C, ASHYANA PARK, NR. POWER HOUSE, DAVORLI M R OAD, AQUEM, MARGAO , GOA 403 601 PAN : ALIPS2969K ITA NO 109/PAN/2016 : (ASST. YEAR : 2010 - 11 ) ASSISTANT COMMISSIONER OF INCOME TAX, VS. MR S . ANJUM SALIM SHAIKH, CIRCLE 1, MARGAO. H.NO. 84/C, ASHYANA PARK, NR. POWER HOUSE, DAVORLIM ROAD, AQUEM, MARGAO, GOA 403 601 PAN : ALIPS2978Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANAND SHANKAR MARATHE - DR RESPONDENT BY : SHRI SHRINIVAS NAYAK - CA DATE OF HEARING : 31/08 /2016 DATE OF ORDER : 31/08 /2016 O R D E R PER N. S. SAINI: AM THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDERS OF THE CIT (A) DATED. 21/03/2016. - 2 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 2. THE SOLE ISSUE INVOLVED IN BOTH THESE APPEALS IS THAT THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 1 ,35,77,778 / - HALF SHARE OF RS. 67, 88,889/ - ASSESSED IN THE HANDS OF SHRI SALIM MOHAMMAD SHAIKH AND THE OTHER HAL F SHARE OF RS. 67,88,889/ - IN THE HANDS OF HIS WIFE MRS ANJUM SALIM SHAIKH MADE BY THE AO ON ACCOUNT OF CAPITAL EXPENDITURE. 3. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 1,35,77,778/ - BEING THE AMOUNT PAID TO THE FOLLOWI NG PERSONS: - S. NO. NAME OF PARTIES AMOUNT 1 NASREEN ABDUL 3,47,222 2 PRAVEEN MOHAMMED 3,47,222 3 SHAHEEN MUBHASHIR KHAN 3,47,222 4 SHAMIN IQBAL TEHSILDAR 2,08,334 5 SHAMSHAD BEGUM ALIAS SHOMSO 3,00,000 6 SHAIKH MOHAMMED ISSAK 2,00,000 7 FARZANA BI SHAIKH 7,00,000 8 ASHRAF ALI SHAIKH ALIAS SHAIKH ASH 50,000 9 FARIDA BI SHAIKH 17,50,000 10 ASHRAFUNNISSA SHAIKH 26,77,778 11 NASIMA BI 9,50,000 12 ROXIDA BI 9,50,000 13 SOFIYA BI 9,50,000 - 3 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 14 ASHRAF SHAIKH 19,00,000 15 NAHID KHAN 19,00,000 TOTAL 1,35,77, 7 78 4. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE ENTERED INTO AN AGREEMENT DATED 10/11/2009 AND 11/11/2009 FOR TRANSFER AND ASSIGNMENT OF ILLIQUIFIED RIGHTS BY THE ABOVE PARTIES. HE OBSERVED THAT FROM A PERUSAL OF THE AGREEMENTS IT IS OBSERVED THAT THE ABOVE PARTIES WERE HAVING ILLIQUI FI ED AND UNASCERTAINED RIGHTS OVER THE MINES AND THESE RIGHTS WERE TRANSFERRED TO THE ASSESSEE AND THE PAYMENTS ARE MAD E AS CONSIDERATION FOR ACQUIRING THE RIGHTS OF THE ABOVE PARTIES IN THE MINES. THEREFORE THE PAYMENTS MADE TO THE ABOVE PARTIES ARE IN THE NATURE OF CAPITAL EXPENDITURE. 5. THE ASSESSING OFFICER OBSERVED THAT THE SPECIAL BENCH OF THE BANGALORE TRIBUNAL IN AZTEC SOFTWARE AND TECHNOLOGY SERVICES LTD VS. ACIT REPORTED IN 107 ITD 141 HAS HELD THAT AMOUNT PAID TOWARDS FORECLOSURE OF LEASE AGREEMENT IS CAPITAL EXPENDITURE. 6. ON APPEAL BEFORE THE CIT (A) THE ASSESSEE ARGUED THAT THE ASSESSING O FFICER ERRED IN PRE SUMING THAT THE PAYMENTS WERE ONE TIME SETTLEMENT FOR SURRENDERING THE RIGHTS AS CO - OWNERS IN THE MINES. IT WAS ARGUED THAT AS PER THE MINING LEASE AGREEMENT CO - OWNERS LEASEHOLD RIGHTS CAN NEITHER BE PURCHASED NOR SOLD NOR TRANSFERABLE IN ANY MANNER. PERPE TUALLY THE CO - OWNERS CONTINUED TO BE CO - OWNERS AND EVERY YEAR THE CO - OWNERS WILL HAVE TO BE PAID THEIR SHARE OF EARNING FROM THE SAID MINES. 7. SINCE CO - OWNERS ARE ENTITLED TO THEIR SHARE OF INCOME, PAYMENT MADE TO CO - OWNERS BY AGREEMENT ARE DEDUCTIBLE FRO M THE GROSS INCOME AS CO - - 4 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 OWNERS SHARE AND HENCE REVENUE IN NATURE. SINCE MINING LEASE RIGHTS ARE NOT TRANSFERABLE THE ABOVE PAYMENTS CANNOT BE TREATED AS A CAPITAL EXPENDITURE. 8. THE CIT (A) AFTER CONSIDERING THE SUBMISS ION OF ASSESSEE HELD AS UNDER: - I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. THE ASSESSEE IS AN IRON ORE MINING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE IS AN OWNER OF LEASED MINES ALONG WITH MANY CO - OWNERS. DURING THE YEAR UNDER CONSIDERATION, WHATEVER INCOME WAS EARNED BY THE ASSESSEE FROM MINING OPERATIONS, A PORTION OF THE SAME, AMOUNTING TO RS. 1,35,77 , 778/ - WAS GIVEN TO 15 OTHER CO - OWNERS. AFTER EXAMINING THE CLAIM AND ARGUMENTS OF THE ASSESSEE THE AO HELD THAT THE ASS ESSEE MADE THE ABOVE PAYMENTS AS ONE TIME SETTLEMENT FOR SURRENDERING THEIR RIGHTS AS CO - OWNERS IN THE MINE. THE PAYMENTS MADE BY THE ASSESSEE WERE NOT IN THE NATURE OF THEIR SHARE OF INCOME IN THE MINE WHICH IS PAYABLE EVERY YEAR WITH THIS CONCLUSION THE AO DISALLOWED THE PAYMENT CLAIMS TREATING THEM TO BE CAPITAL IN NATURE. D URING THE COURSE OF APPELLATE PROCEEDINGS, THE LEARNED COUNSEL STRESSED ON THE FACT THAT THESE LEASE HOLD MINING RIGHTS ARE THOUGH INHERITABLE, BUT THEY ARE NOT TRANSFERABLE MINING RIGHTS CAN ONLY BE SURRENDERED TO THE STATE GOVERNMENT. SINCE THERE WERE MANY CO - OWNERS OF THE MINING RIGHTS, THROUGH DEED OF ASSIGNMENT DATED 01.07.2009 AND COURT DECREE DATED 03.07.2010, THE APPELLANT AGREED TO PAY ANNUALLY, TO THE CO - OWNERS. THERE IS NO DISPUTE ABOUT THIS FACT. THE AO HAS NOT DOUBTED GENUINENESS OF THE PAYMENT. THE ONLY QUESTION WHICH NEEDS TO BE ANSWERED, IS WHETHER PAYMENTS MADE TO CO - OWNERS IS A CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. IN THIS CASE, THE SUBJECT OBJECT IS MINING RIG HTS. THE LAND - 5 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 BELONGS TO THE GOVT. THE ASSESSEE AND OTHER CO - OWNERS HAVE A RIGHT TO MINE THE LAND. THIS MINING LEASE CAN BE INHERITED BUT CANNOT BE TRANSFERRED, MEANING THERE BY; CANNOT BE SOLD. THE APPELLANT SUBMITTED A CHART SHOWING DETAILS OF PAYMENTS M ADE TO CO - OWNERS. FROM THE SAID CHART IT CAN BE SEEN THAT PAYMENTS HAVE BEEN MADE IN F.YRS. 2008 - 09, 2009 - 10 AND 2010 - 11 ALSO, WHICH MAKES ME BELIEVE THAT THE PAYMENT WAS NOT A ONE - TIME SETTLEMENT, BUT HAD THE CHARACTER OF ANNUAL PAYMENT. INDIVIDUAL PAYMEN TS ARE AS SMALL AS RS. 1 LAKH. NO ONE WILL SELL HIS MINING RIGHTS PERPETUALLY FOR JUST A LAKH OF RUPEES. IN VIEW OF THE FACT THAT NO TANGIBLE ASSET HAS BEEN ACQUIRED BY THE ASSESSEE THROUGH DEED OF ASSIGNMENT OR COURT DECREE OF LONG TERM ADVANTAGE AND THE PAYMENT BEING MADE YEAR AFTER YEAR, IN MY OPINION, THE PAYMENT HAS THE CHARACTER OF SHARE OF PROFIT FROM MINING OPERATION AND A REVENUE EXPENDITURE IN THE HANDS OF THE APPELLANT. HOWEVER, IT IS FOR THE AO TO VERIFY WHETHER RECIPIENTS OF THESE PAYMENTS HAVE DECLARED THIS INCOME IN THEIR HANDS OR NOT. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 1 , 35,77,778 / - . THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED ACCORDINGLY. 9. THE DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 10. THE AR RELIED ON THE ORD ER OF THE CIT (A) AND FURTHER SUBMITTED THAT THE HONBLE SUPREME COURT IN THE CASE OF EMPIRE JUTE COMPANY VS. CIT 124 ITR 1 (SC) HAS HELD THAT IF THE ADVANTAGE RECEIVED ON INCURRING EXPENSE FACILITATES THE CARRYING ON THE BUSINESS MORE EFFICIENTLY AND MORE PROFITABLY LEADING THE FIXED CAPITAL UNTOUCHED, EXPENDITURE WOULD BE TREATED AS REVENUE IN NATURE. HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE ALSO THE 15 CO - OWNERS TO WHOM THE PAYMENTS WERE MADE WERE AND HINDRANCE IN THE CARRYING ON OF THE MINING BUSIN ESS BY THE ASSESSEE AND BY MAKING THIS PAYMENT THE ASSESSEE REMOVED THIS HINDRANCE AND THUS THE EXPENDITURE SO - 6 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 INCURRED WAS ALLOWABLE AS DEDUCTION TO THE ASSESSEE AS A REVENUE EXPENDITURE IN VIEW OF THE ABOVE DECISION OF THE HONBLE SUPREME COURT. 11. HE A LSO RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS HARI VIGNESH MOTORS PVT. LTD 282 ITR 338 (MAD) WHEREIN IT WAS FOUND THAT THE ASSESSEE WAS A DEALER IN TWO WHEELERS MANUFACTURED BY TVS SUZUKI LTD AND WAS DOING BUSINESS IN LEASE HOLD PREMISES. DURING THE RELEVANT PERIOD THE ASSESSEE CONSTRUCTED A GROUND FLOOR OVER THE EXISTING BASEMENT FLOOR AT A COST OF RS. 4,82,688/ - ACCORDING THE SPECIFICATIONS GIVEN BY TVS SUZUKI LTD TO ALL ITS DEALERS. THE ASSESSEE CLAIMED THE SAID SUM AS REV ENUE EXPENDITURE. THE ASSESSING O FFICER DISALLOWED THE SAID SUM AS NOT RELATING TO BUSINESS, INASMUCH AS A NEW PERMANENT CAPITAL ASSETS HAD BEEN BROUGHT INTO EXISTENCE AND ADDED TO THE INCOME. THE HONBLE HIGH COURT HELD THAT RIGHT FROM THE INCEPTION THE B UILDING WAS OF THE OWNERSHIP OF THE LESSOR. THEREFORE, BY SPENDING THIS MONEY, THE ASSESSEE DID NOT ACQUIRE ANY CAPITAL ASSET. THE ONLY ADVANTAGE THAT THE ASSESSEE DERIVE BY SPENDING THE MONEY WAS THAT IT GOT THE LEASE OF A NEW BUILDING AT A LOW RENT. IT W AS THEREFORE THE SUBMISSION OF THE AR THAT THE ASSESSEE DID NOT ACQUIRE ANY NEW CAPITAL ASSET OR AN ADVANTAGE OF AN ENDURING NATURE WHICH WOULD CHARACTERISE THE EXPENDITURE AS A CAPITAL EXPENDITURE. THE CO - OWNERS COULD NOT HAVE TRANSFERRED THEIR SHARE OF L EASE HOLD RIGHTS IN THE MINES TO THE ASSESSEE BUT COULD HAVE SURRENDERED THE SAME TO THE GOVERNMENT ONLY. HENCE IT WAS HIS SUBMISSION THAT THE ORDER OF THE CIT (A) SHOULD BE CONFIRMED. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS HOLDING A MINING LEASE IN RESPECT OF AN AREA OF 83 HECTR ES, SURVEYED UNDER SURVEY NUMBERS 1 (PART), 7 (PART), 8 (PART), 9, 10, 11, 12 (PART), 13, 14, 15 (PART), 19 (PART) - 7 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 AND 53 (PART) OF VILLAGE CAUREM. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MINING AND DISCLOSED THE INCOME EARNED THERE FROM AS BUSINESS INC OME. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE PAID RS. 1,35,77,778/ - TO 15 PERSONS AND CLAIMED AS DEDUCTION FROM HIS BUSINESS INCOME. THE AO ON ASSESSMENT DISALLOWED THE ABOVE EXPENDITURE ON THE GROUND THAT THE SAID EXPENDITURE WAS INCURRED FOR ACQ UIRING MINING RIGHTS FROM THE CO - OWNERS OF THE MINING LEASE AND THEREFORE THE SAID EXPENDITURE WAS CAPITAL IN NATURE. 13. ON AN APPEAL THE CIT (A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE SAID PAYMENT WAS NOT FOR ACQUIRING ANY NEW ASSET AND THEREFO RE WAS IN THE NATURE OF REVENUE EXPENDITURE AND ALLOWABLE AS BUSINESS DEDUCTION. 14. THE DR RELIED ON THE ORDER OF THE AO AND ON THE OTHER HAND THE AR OF THE ASSESSEE RELIED UPON THE ORDER OF THE CIT (A) AND ORDER OF THE CIVIL JUDGE SENIOR DIVISION AT QUE PEM IN THE CIVIL SUIT NO. 162/2010/A ORDER DATED 03/07/2010. 15. WE FIND THAT IN THE INSTANT CASE GENUINENESS OF THE PAYMENT IN NOT IN DOUBT. IT IS ALSO NOT IN DOUBT THAT THE PAYMENTS WERE MADE IN THE COURSE OF THE BUSINESS AND FOR THE PURPOSE OF THE BUSI NESS. THE ONLY ISSUE WHICH REQUIRES ADJUDICATION IS WHETHER THE EXPENDITURE IN QUESTION IS IN THE FIELD OF CAPITAL OR IS IN THE FIELD OF REVENUE. WE FIND THAT THE CIVIL JUDGE SENIOR DIVISION AT QUEPEM IN HIS ORDER DATED 03/07/2010 HAS OBSERVED AS UNDER: - IN THE COURT OF THE CIVIL JUDGE SENIOR DIVISION AT QUEPEM. REGULAR CIVIL SUIT NO. 162/2010/A 1. SMT. SHAMSHAD BEGUM ALIAS SHOMSOAD BEGUM, 46 YEARS OF AGE, HOUSEWIFE, WIDOW OF XEC MOMAD ANIF ALIAS SHAIK MO HAMAD HANIF, DAUGHTER OF LATE XEC ADAM XEC ABUBAKAR, - 8 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 2. MR. SHAIKH MOHAMED ISSA, 28 YEARS OF AGE, PROPRIETOR, SON OF LATE XEC MOMAD ANIF ALIAS SHAIKH MOHAMAD HANIF AND HIS WIFE. 3. MRS RESHMA SHAIKH, 18 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF ABDUL KADAR BUKALI, ALL RESIDING AT H. NO.37, OILOWADDO, SANGUEM - GOA. 4. MR. XEC ABDUL HASSAN ALIAS SHAIKH ABUL HASSAN, 57 YEARS OF AGE, BUSINESSMAN, SON OF LATE SHAIK MOHAMED ISSAC ALIAS XEC MOMAD ISSAC AND HIS WIFE. 5. MRS. FARZANA BI SHAIKH, 46 YEARS OF AGE, HOUS EWIFE, DAUGHTER OF ABDUL SATTAR SAUDAGAR, BOTH RESIDING AT H. NO. 1799, HOUSING BOARD COLONY, GOGOL, MARGAO GOA. 6. MR. ASHRAF ALI SHAIKH ALIAS SHAIKH ASHRAF ALI, 52 YEARS OF AGE, BUSINESSMAN, SON OF LATE SHAIKH MOHAMED ISSAC ALIAS XEC MOMAD ISSAC AND HIS WIFE. 7. MRS FARIDA BI SHAIKH, 40 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF ASHAFI GHEEWALA, BOTH RESIDING AT H. NO. 37, WOILOWADDO, SANGUEM GOA 8. MR. SHAIKH NAHID AHAMED, 38 YEARS OF AGE, BUSINESSMAN, SON OF LATE SHAIK MOHAMED ISSAC ALIAS XEC MOM AD ISSAC AND HIS WIFE. 9. MRS ASHRAFUNNISSA SHAIKH, 32 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF IKBAL KAGI, BOTH RESIDING AT H. NO. 37, WOILOWADA, SANGUEM GOA. - 9 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 10. MRS SHAHIDA BI SHAIKH, 42 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF SHAIKH MOHAMED ISSAC AND HER HUSBAND. 11. MR. SHAIKH ISSA, 53 YEARS OF AGE, SERVICE, SON OF XEC ARUN, BOTH RESIDENT OF DAVORLIM, MARGAO GOA, PRESENTLY RESIDING AT AI - ASA, SOUDI ARABIA. 12. MRS WAHIDA BI, 40 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF SHAIK MOHAMED ISSAC, RESIDING AT HOUSING BOARD, GOGOL, MARGAO GOA AND HER HUSBAND. 13. MR. AHMAD RAZA QAZI ALIAS ALLAUDIN KARIMOUDDIN KHAZI, 50 YEARS OF AGE, SERVICE, RESIDENT OF HOUSING BOARD, GOGOL, MARGAO GOA, PRESENTLY RESIDING AT KUWAIT. 14. SMT NAUSHAD NIZAM SHAIKH, 50 YEA RS OF AGE, HOUSEWIFE, DAUGHTER OF LATE XEC ABDUL WAHAB, AND HER HUSBAND. 15. SHRI NIZAM SHAIKH, 55 YEARS OF AGE, BUSINESS, SON OF LATE XEC AIUB, BOTH RESIDING AT BENDWADA, SANGUEM GOA. 16. SMT SHAINAZ GULAM MOHAMAD, 46 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF LATE XEC WAHAB AND HER HUSBAND 17. SHRI GULAM MOHAMAD, 50 YEARS OF AGE, BUSINESS, SON OF ABDUL RASOOL, - 10 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 BOTH RESIDING NEAR REGAL TALKIES, DHARWAR, KARNATAKA. 18. SMT HAMIDA SHAIKH, 44 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF LATE XEC ABDUL WAHAB AND HER HUSBAND 19. SHRI ABDULLA SHAIKH, 46 YEARS OF AGE, BUSINESS, SON OF ABDUL KADAR, BOTH RESIDING AT HOUSING BOARD, SANQUELIM GOA. 20 SHRI SHAIKH ABDUL LATIF, 43 YEARS OF AGE, BUSINESS, SON OF LATE XEC ABDUL WAHAB AND HIS WIFE. 21. SMT SHAMA SHAI KH, 42 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF LATE USMAN KHAN, BOTH RESIDING AT BENDWADA, SANGUEM GOA. 22. SMT. JULEKHA BI 41 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF LATE XEC ABDUL WAHAB AND HER HUSBAND. 23. SHRI NIZAM SHAIKH, 42 YEARS OF AGE, BUSINESS, SON OF SATTAR SHAIKH, BOTH RESIDING AT NAVELIM, SALCETE GOA. 24. SHRI SHAIKH IMTIYAZ, 40 YEARS OF AGE, BUSINESS, SON OF LATE XEC ABDUL WAHAB AND HIS WIFE. 25. SMT FAUZIYA SHAIKH 36 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF FEROZ SAB DEULAPUR, BOTH RESIDING AT BENDWADA, SANGUEM GOA. 26. SMT FAIROZA ROHAN SHAIKH, - 11 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 49 YEARS OF AGE, HOUSEWIFE, DAUGHTER OF LATE XEC ABDUL WAHAB AND HER HUSBAND. 27. SHRI ROHAN SHAIKH, 55 YEARS OF AGE, SERVICE, SON OF AZIZ SHAIKH, BOTH RESIDING AT BENDWADA, SANGUEM GOA. THE PLAINTIFFS NO.10 & 11 ARE REPRESENTED BY THEIR ATTORNEY MR. XEC ABDUL HASSAN, THE PLAINTIFF NO. 4 ABOVE NAMED, THE PLAINTIFF NOS 12 AND 13 ARE REPRESENTED BY THEIR ATTORNEY SHRI SHAIKH ASHRAF ALI, THE PLAINTIFFS 14 TO 23, 25, 26 AND 27 ARE REPRESENTED B Y THEIR ATTORNEY SHRI SHAIKH IMTIYAZ, THE PLAINTIFF NO. 24. PLAINTIFFS V/S 1. SHRI SHAIKH SALIM, 49 YEARS OF AGE, MARRIED, BUSINESSMAN, SON OF LATE XEC MOHHEMED ISSAC, AND HIS WIFE. 2. SMT ANJUM SHAIKH, 40 YEARS OF AGE, HOUSEWIFE, BOTH RESIDING AT SHYANA PARK, AQUEM, MARGAO GOA. DEFENDANTS (ASSESSEE) 1. THE PLAINTIFFS ADMIT THAT THERE EXISTS THE MINING CONCESSION NAMED DEVAPAN OR DEVADONGOR, SITUATED AT CAUREM VILLAGE, WITHIN VILLAGE PANCHAYAT OF CAUREM PIRLA, TALUKA AND SUB - DISTRICT OF QUEPEM AND DISTRICT OF SOUTH GOA, GOA STATE, GRANTED TO MR. XEC MOHAMAD ISSAC, BY THE ERSTWHILE PORTUGUESE GOVERNMENT VIDE TITLE NO. 1 OF 1951, ORIGINALLY HAVING AN AREA OF 100 (HUNDRED) HECTARES, REDUCED TO AN AREA OF 83 (EIGHTY THREE) HECTARES AS AN AREA OF 17 (SEVENTEEN) HECTARES WERE SURRENDERED, HEREINAFTER REFERR ED TO AS SUIT MINE. - 12 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 BY VIRTUE OF THE GOA, DAMAN AND DIU MINING CONCESSIONS (ABOLITION AND DECLARATION AS MINING LEASES) ACT, 1987 THE SAID MINING CONCESSION WAS ABOLISHED AND DECLARED AS A MINING LEASE. 2. THE PLAINTIFFS ADMIT THAT THE PLAINTIFF NOS. 1 TO 9 HAVE GIFTED THEIR UNASCERTAINED AND UNDIVIDED AND ABSTRACT RIGHTS IN THE SUIT MINING LEASE IN FAVOUR OF THE DEFENDANTS AS THE SUIT MINING LEASE IS LOOKED AFTER BY THE DEFENDANTS, BY DEED OF GIFT DATED 10/08/2007, DULY REGISTERED IN THE OFFICE OF THE S UB REGISTRAR, QUEPEM UNDER NO. 602 AT PAGES 158 TO 183 OF BOOK NO. I, VOL. 434 ON 17/08/2007. THE PLAINTIFF NOS. 10 HAS RELINQUISHED HER ILLIQUID AND UNASCERTAINED RIGHTS TO THE ESTATE LEFT BY HER FATHER LATE XEC MOHAMAD ISSAC IN FAVOUR OF CO - HEIRS BY DE ED OF RELINQUISHMENT DRAWN ON 8 TH OCTOBER, 1984 AT SALCETE AT PAGES 19V TO 20 OF DEEDS BOOK NO. 1299. THE PLAINTIFF NO. 12 HAS RELINQUISHED HER ILLIQUID AND UNASCERTAINED RIGHTS TO THE ESTATE LEFT BY HER FATHER LATE XEC MOMAD ISSAC IN FAVOUR OF CO - HEIRS BY DEED OF RELINQUISHMENT DRAWN ON 5 TH MAY, 1993 AT SALCETE AT PAGES 28 TO 29 OF DEEDS/WILLS BOOK NO. 1351. THE PLAINTIFFS 14 TO 27 ARE THE HEIRS OF DECEASED SMT. FATIMA BI AND HER HUSBAND SHAIKH ABDUL WAHAB. SAID FATIMA BI AT THE TIME OF HER MARRIAGE EXECUT ED DEED OF ANTE - NUPCIAL CONVENTIONS WITH GIFT DATED 29/04/1960 RECORDED AT PAGES 23 TO 26 OF NOTARIAL BOOK DEEDS NO. 503 THEREBY RELINQUISHING ALL HER RIGHTS TO THE ESTATE OF HER PARENTS. 3. THE PLAINTIFFS ADMIT THAT BY WILL DATED 22/07/2005, LATE MOTHER OF THE PLAINTIFFS 4, 6, 8, 10 AND 12 HAS BEQUEATHED ALL HER RIGHTS IN RESPECT OF THE SUIT MINING CONCESSION UNDER TITLE NO. 1 OF 1951 IN FAVOUR OF THE DEFENDANT NO. 1. MOTHER DIED ON 12/01/2006. 4. THE PLAINTIFFS ADMIT THAT XEC MOHAMMED ISSAC AND XERAFI B I DIED LEAVING BEHIND 13 CHILDREN, 8 DAUGHTERS AND 5 SONS. PLAINTIFF NOS. 4, 6, 8 AND DEFENDANT NO. 1 ARE THE FOUR SONS. THE ELDEST SON, SHAIKH MOHAMMED HANIF, EXPIRED ON 28/06/1985, LEAVING BEHIND HIS WIDOW, THE PLAINTIFF NO. 1 AND TWO CHILDREN, NAMELY, T HE PLAINTIFF NO. 2 AND SHAKIRABI SHAIKH, WHO DIED ON 09/09/2006. SAID SHAKIRABI SHAIKH DURING HER LIFETIME HAD ALSO RELINQUISHED ALL HER RIGHTS IN THE FATHERS ESTATE VIDE DEED OF RELINQUISHMENT DATED 07/08/2005, EXECUTED AS A SPINSTER. - 13 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 5. PLAINTIFF NOS. 10 AND 12 ARE THE TWO DAUGHTERS OUT OF EIGHT DAUGHTERS. ONE DAUGHTER SMT. FATIMA BI AND HER HUSBAND DIED LEAVING BEHIND THE PLAINTIFF NOS. 14 TO 27 AS THEIR HEIRS. THE OTHER FIVE DAUGHTERS HAVE ALSO RELINQUISHED THEIR RIGHTS AS SPINSTER OR MARRIED ALONG WI TH THEIR SPOUSES IN THEIR FATHERS ESTATE. 6. THE PLAINTIFFS ADMIT THE SUIT MINE WAS OPERATED BY SAID XEC MOHAMMED ISSAC UNTIL HE DIED AS AFORESAID. UPON HIS DEATH, HIS ELDEST SON, SHAIKH MOHAMMED HANIF STARTED OPERATING THE SUIT MINE, WHICH HE DID TILL H E DIED ON 28/06/1985. AFTER HIS DEATH, MR. SHAIKH ABDUL HASSAN, THE PLAINTIFF NO. 4 AS THE NEXT ELDEST SON TOOK OVER THE ADMINISTRATION OF THE SUIT MINE. IN THE MEANTIME BY THE VIRTUE OF GOA, DAMAN AND DIU MINING CONCESSIONS (ABOLITION AND DECLARATION AS M INING LEASES) ACT, 1987, ALL MINING CONCESSIONS IN GOA, DAMAN AND DIU CAME TO BE ABOLISHED AND CAME TO BE DECLARED AS MINING LEASES, INCLUDING THE SUIT MINE. 7. BY APPLICATION DATED 21/11/1988, MR. SHAIKH ABDUL HASSAN, PLAINTIFF NO. 4 APPLIED FOR RENEWAL OF THE MINING LEASE AND SUBMITTED NECESSARY DOCUMENTS IN ORDER TO OBTAIN THE RENEWAL. 8. THE PLAINTIFFS ADMIT THAT ABOUT 10 YEARS BACK, PLAINTIFFS 4 TO 9, AND HEIRS OF LATE SHAIKH HANIF AGREED TO T RANSFER THEIR RIGHTS IN RESPECT OF THE SUIT MINE IN FAVOUR OF DEFENDANT NO. 1 SINCE THEY WERE FINDING IT UNECONOMICAL TO OPERATE THE MINE. FOR THE LAST 10 YEARS, THE DEFENDANT NO. 1 IS LOOKING AFTER THE SUITE MINE. 16. FROM THE ABOVE IT IS OBSERVED THAT TH E ASSESSEE WAS ABSOLUTE OWNER OF THE MINING LEASE PRIOR TO THE MAKING OF THE PAYMENT IN QUESTION. THUS BY INCURRING THE EXPENDITURE IN QUESTION THE ASSESSEE GOT OR ACQUIRED NO NEW ASSET. THUS IN OUR CONSIDERED OPINION THE AO WAS NOT JUSTIFIED IN OBSERVING THAT THE EXPENDITURE IN QUESTION WAS INCURRED FOR ACQUIRING NEW RIGHTS WHICH THE ASSESSEE DID NOT POSSESS EARLIER. THE AR OF THE ASSESSEE ARGUED THAT THE EXPENDITURE IN QUESTION WERE INCURRED BY THE ASSESSEE OUT OF COMMERCIAL EXPEDIENCY TO AVOID UNWANTED L ITIGATION WHICH COULD HAVE JEOPARDISED THE CARRYING OF THE BUSINESS IN AN EFFICIENT AND PROFITABLE MANNER. IT WAS EXPLAINED THAT THE PAYMENTS WERE MADE TO THE PERSONS WHO WERE LEGAL HEIRS - 14 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 OF LATE MR. XEC MOHAMAD ISSAC FROM WHOM THE ASSESSEE HAD INHERITED T HE MINING LEASE RIGHTS ABOUT MORE THAN 10 YEARS BACK. 17. WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO. LTD VS CIT 124 ITR 1 (SC) HAS HELD THAT IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEES TRADING OPERATIONS OR E NABLING TH E MANAGEMENT AND CONDUCT OF THE ASSESSEES BUSINESS TO BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINIT E FUTURE . 18 . FURTHER, IN THE AFORESAID DECISION THE HONBLE SUPREME COURT QUOTED WITH APPROVAL THE DECISION OF THE PRIVY COUNCIL IN THE CASE OF IRC VS CARRON CO. (1968) 45 TAX CASES 18 (HL) AS UNDER: - I T HAS BEEN HELD THAT WHERE CERTAIN EXPENDITURE WAS INCURRED BY THE ASSESSEE - COMPANY FOR THE PURPOSE OF OBTAINING A SUPPLEMENTARY CHARTER ALTERING ITS CONSTITUTION, SO THAT THE MANAGEMENT OF THE COMPANY COULD BE PLACED ON A SOUND COMMERCIAL FOOTING AND RESTRICTIONS ON THE BORROWING POWERS OF THE ASSESSEE - CO MPANY COULD BE REMOVED. THE OLD CHARTER CONTAINED CERTAIN ANTIQUATED PROVISIONS AND ALSO RESTRICTED THE BORROWING POWERS OF THE ASSESSEE - COMPANY AND THESE FEATURES SEVERELY HANDICAPPED THE ASSESSEE - COMPANY IN THE DEVELOPMENT OF ITS TRADING ACTIVITIES. THE HOUSE OF LORDS HELD THAT THE EXPENDITURE INCURRED FOR OBTAINING THE REVISED CHARTER ELIMINATING THESE FEATURES WHICH OPERATED AS IMPEDIMENTS TO THE PROFITABLE DEVELOPMENT OF THE ASSESSEE - COMPANYS BUSINESS WAS IN THE NATURE OF REVENUE EXPENDITURE SINCE IT WAS INCURRED FOR FACILITATING THE DAY - TODAY TRADING OPERATIONS OF THE ASSESSEE - COMPANY AND ENABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEE - COMPANYS BUSINESS TO BE CARRIED ON MORE EFFICIENTLY. LORD REID EMPHASISED IN THE COURSE OF HIS SPEECH THAT THE E XPENDITURE WAS INCURRED BY THE ASSESSEE COMPANY TO REMOVE - 15 - ITA 108,109/PAN/2016 A.Y. 2010 - 11 ANTIQUATED RESTRICTIONS WHICH WERE PREVENTING PROFITS FROM BEING EARNED AND ON THAT ACCOUNT HELD THAT EXPENDITURE TO BE OF REVENUE CHARACTER. 19. IN VIEW OF THE ABOVE SETTLED POSITION OF THE LAW, AS WE FIND THAT NO NEW CAPITAL ASSET OF ENDURING NATURE WAS ACQUIRED BY THE ASSESSEE WHICH IT DID NOT POSSESS EARLIER BY INCURRING THE EXPENDITURE IN QUESTION, IN OUR CONSIDERED VIEW THE ORDER OF AO CANNOT BE UPHELD. WE THEREFORE CONFIRM THE ORDER OF THE CIT (A) AND REJECT THE GROUND OF APPEAL OF THE REVENUE IN THE RESULT APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING IN THE PRESENCE OF THE PARTIES ON WEDNESDAY, THE 31 ST DAY OF AUGUST, 2016 AT GOA. SD/ - (GEORGE MATHAN) JUDICIAL MEMBER SD/ - (N. S. SAINI ) ACCOUNTANT MEMBER PLACE : PANAJI - GOA DATED : 31/08 /2016 * NANU * COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE BY ORDER