Dy. CIT, Cir-2(3), Hyderabad V. M/s The Andhra Pradesh Mineral Development Corporation Limited, Hyderabad

ITA 1839/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74472 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 20-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: V SHIV KUMAR; C S SUBRAHMANYAM
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1839/HYD/2012 ASSESSMENT YEAR 2007)08 THE DEPUTY CIT CIRCLE)2(3) HYDERABAD VS. M/S. THE ANDHRA PRADESH MINERAL DEVELOPMENT CORPORATION LTD. HYDERABAD PAN: AAACT7391N [APPELLANT] [RESPONDENT] APPELLANT BY: SRI D. SUDHAKAR RAO RESPONDENT BY: SRI C.S. SUBRAHMANYAM & SRI V. SHIV KUMAR DATE OF HEARING: 21.01.2014 DATE OF PRONOUNCEMENT: 21.01.2014 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER OF THE CIT(A), VIJAYAWADA DATED 31.8.2012 FOR ASSESSMENT YEAR 2007)08. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT(A) ERRED IN LAW IN GRANTING RELIEF TO THE ASSESSEE ON THE ISSUE OF REHABILITATION EXPENSES. 2. THE CIT(A) ERRED IN LAW IN HOLDING THAT REHABILITATION EXPENSES ARE REVENUE IN NATURE THOUGH THEY ARE INCURRED BY WAY OF ITA NO. 1839/HYD/2012 M/S THE AP MINERAL DEVP. CORPN. ========================== 2 COMPENSATION PAID TO VILLAGERS TO GAIN ENDURING BENEFIT FOR MINING WHICH IS CAPITAL IN NATURE. 3. THE CIT(A) ERRED IN LAW IN TREATING REHABILITATION EXPENDITURE AS REVENUE THOUGH THE EXPENDITURE IN THE NATURE OF CREATING PROFIT MAKING APPARENTLY TO THE ASSESSEE IN FORM OF ENDURING BENEFIT. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE CLAI MED AN AMOUNT OF RS. 8,90,13,890 TOWARDS REHABILITATION EX PENDITURE. AS PER THE MINES ACT, THE DIRECTOR OF MINES IS EMPOWER ED TO STOP MINING OPERATIONS IN CASE THE OPERATIONS EXTEND TO 'DANGER ZONE' AREA WHICH IS WITHIN 500 METRES FROM THE ULTI MATE PIT BOTTOM OF THE MINE. EXPENDITURE INCURRED TO CLEAR THE 'DANGER ZONE' OF INHABITANTS IS CLAIMED AS REHABILITATION E XPENDITURE. THE ASSESSING OFFICER PROPOSED TO DISALLOW THE SAME ON THE GROUND THAT IT CONSTITUTES CAPITAL EXPENDITURE. TH E ASSESSEE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR A.YS. 2002) 03, 2003)04 AND 2004)05 VIDE ITS ORDERS IN ITA NOS. 1255/H/05, 1001/H/06 AND 731/H/07 DATED 24.9.2009. HOWEVER, THE ASSESSI NG OFFICER DISALLOWED THE EXPENDITURE ON THE GROUND THAT THE O RDER OF THE TRIBUNAL WAS NOT RECEIVED BY HIM AND THAT THE MATTE R IS SUBJUDICE. 4. ON APPEAL, THE CIT(A) DECIDED THE ISSUE IN FAVOUR O F THE ASSESSEE BY PLACING RELIANCE ON THE ORDER OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR A.YS. 2002)03, 2003)04 AND 2004)05 ITA NO. 1839/HYD/2012 M/S THE AP MINERAL DEVP. CORPN. ========================== 3 DATED 24 TH SEPTEMBER, 2009 IN ITA NOS. 1255/HYD/05, 1001/HYD/ 06 AND 731/HYD/07, WHEREIN THE TRIBUNAL HELD AS FOL LOWS: '8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THR OUGH THE DETAILED WRITTEN ARGUMENTS FIELD BY THE ASSESSEE AND OTHER M ATERIAL ON RECORD AND IN THE LIGHT OF CASE LAW RELIED UPON BY THE PAR TIES. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS A STATE GOVERN MENT PUBLIC SECTOR UNDERTAKING, CARRYING ON MINING ACTIVITY. IT IS AL SO AN UNDISPUTED FACT THAT THE EXPENDITURE IN QUESTION HAS BEEN INCU RRED BY THE ASSESSEE IN ORDER TO DISCHARGE THE STATUTORY OBLIGA TIONS, FETTERED TO IT AS A PREREQUISITE FOR CARRYING ON THE MINING ACTIVI TY. THE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE IN THE NORMAL COU RSE OF ITS REGULAR ACTIVITY OF MINING. IT IS ALSO AN UNDISPUTED FACT T HAT THE ASSESSEE HAS INCURRED THESE EXPENDITURE IN RELATION TO THE PROPE RTY IN RESPECT OF WHICH IT HAS ONLY LEASEHOLD RIGHTS. NOTWITHSTANDIN G THE PERIOD OF LEASE, WHICH IS STATED TO BE 30 YEARS, THE EXPENDIT URE IN QUESTION, IN OUR CONSIDERED OPINION, HAS TO BE CLASSIFIED ONLY A S REVENUE EXPENDITURE. IN THE CASE OF BIKANER GYPSUMS LTD. ( SUPRA), RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE A SSESSEE HAS TAKEN OVER ON LEASE 4.27 SQ. MILES FOR MINING GYPSUM FOR A PERIOD OF 20 YEARS AND CARRIED ON THE BUSINESS OF MINING IN ACCO RDANCE WITH THE TERMS AND CONDITIONS OF LEASE. THE EXPENDITURE INCU RRED BY THE ASSESSEE FOR SHIFTING THE RAILWAY STATION, TRACK, E TC. I.E., TO REMOVE AN OBSTRUCTION TO FACILITATE THE BUSINESS OF MINING, I N ACCORDANCE WITH THE TERMS OF LEASE, WAS HELD TO BE OF REVENUE NATUR E. IT WAS HELD THAT SUCH EXPENDITURE DID NOT BRING INTO EXISTENCE ANY A DVANTAGE OF AN ENDURING NATURE. THE SAID DECISION OF THE APEX COU RT SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE, SINCE THE EVACUATION FROM THE DANGER ZONE HAS BEEN DONE IN ACCORDANCE WITH THE LE ASE AGREEMENT AND IN DISCHARGE OF THE STATUTORY OBLIGATIONS IMPOS ED, AS A PRE- REQUISITE FOR THE ASSESSEE TO CARRY ON THE MINING O PERATIONS ON THE LEASE HOLD LANDS. THE CASE-LAW RELIED ON BY THE REV ENUE, ON THE OTHER HAND, IS CLEARLY DISTINGUISHABLE, IN AS MUCH AS IN ALL THOSE CASES, THE ASSESSEE HAS ACQUIRED THE PROPERTY, IN RELATION TO WHICH THE EXPENDITURE IN QUESTION HAS BEEN INCURRED. IN THAT VIEW OF THE MATTER, WE ACCEPT THE CONTENTIONS OF THE ASSESSEE ON THIS I SSUE, AND DIRECT THE ASSESSING OFFICER TO TREAT THE DANGER ZONE EXPENDIT URE AS OF REVENUE NATURE, AND ALLOW THE SAME ACCORDINGLY. AS A CONSEQ UENCE, THE ASSESSING OFFICER SHALL OF COURSE, WITHDRAW THE DEP RECIATION IF ANY ALLOWED IN RELATION TO SUCH EXPENDITURE TREATED AS OF CAPITAL NATURE. ASSESSEE'S GROUNDS ON THIS ISSUE ARE ALLOWED ACCORD INGLY.' 5. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THE SAME ISSUE WAS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS (SUPRA) IN FAVOUR OF THE A SSESSEE BY THE CO)ORDINATE BENCH. BEING SO, WE DO NOT FIND ANY IN FIRMITY IN THE ITA NO. 1839/HYD/2012 M/S THE AP MINERAL DEVP. CORPN. ========================== 4 ORDER OF THE CIT(A) IN HOLDING THAT REHABILITATION EXPENDITURE INCURRED BY THE ASSESSEE IS REVENUE EXPENDITURE AND IT IS NOT A CAPITAL EXPENDITURE. WE ARE COMPLETELY IN AGREEMEN T WITH THE ORDER OF THE CIT(A) AND THE SAME IS CONFIRMED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY, 2014. SD/) (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/) (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 21 ST JANUARY, 2014 TPRAO COPY FORWARDED TO: 1. THE DEPUTY CIT, CIRCLE)2(3), 8 TH FLOOR, 'B' BLOCK, IT TOWERS, MASAB TANK, HYDERABAD)500 004. 2. M/S. THE ANDHRA PRADESH MINERAL DEVELOPMENT CORPORATION LTD., 6)2)915, METRO WATER WORKS, HMWSS B REAR BLOCK, 3 RD FLOOR, KHAIRATABAD, HYDERABAD)500 004. 3. THE CIT(A), VIJAYAWADA. 4. THE CIT)II, HYDERABAD. 5. THE DR BENCH 'B', ITAT, HYDERABAD