DCIT, Circle - 5, Kolkata, Kolkata V. M/s. Rungta Mines Ltd., Kolkata

ITA 192/KOL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87673 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 07-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 02-02-2011
• Court: TRIBUNAL
• Department Lawyers: DEBASISH ROY
• Keywords: Capital asset; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 37(1); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA [BEFORE HON BLE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA AM ] I.T.A NO.192/KOL/2011 ASSESSMENT YEAR: 2007 - 08 D.C.I.T., CIRCLE - 5, VS. M/S. RUNGTA MINES LTD. KOLKATA KOLKATA (APPELLANT) ( RESPONDENT) (PAN: AABCR 6463 N) FOR THE APPELLANT : SHRI DEBASISH ROY, JCIT FOR THE RESPONDENT : SHRI SUBASH AGARWAL, ADVOCATE DATE OF HEARING : 02.02 .2015. DATE OF PRONOUNCEMENT: 02.02.2015. ORDER PER SHRI SHAMIM YAHYA, AM : THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) - VI, KOLKATA DATED 04.11.2010 AND PERTAIN S TO ASSESSMENT YEAR 2007 - 08. 2. THE GROUNDS OF APPEAL READ AS UNDER : - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) - V I, KOLKATA HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE BY DELETING THE ADDITION OF RS.1,03,55,795/ - ON ACCOUNT OF CAPITAL EXPENDITURE BY NOT CONSIDERING THE FACT THAT THE PAYMENT WAS MADE FOR GETTING THE MINING RIGHTS ON THE LAND ON WHICH FOREST WAS T HERE AND WITHOUT WHICH NO MINING COULD HAVE BEEN POSSIBLE. 2. THAT THE APPELLANT CRAVES FOR LEAVE TO ADD, DELETE OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD DEBITED A S UM OF RS.1,03,55,795/ - UNDER THE HEAD ENVIRONMENT & ECOLOGY IN ITS PROFIT & LOSS ACCOUNT. THE ASSESSEE WAS ASKED BY THE AO TO SUBMIT THE DETAILS OF THIS EXPENDITURE. THE ASSESSEE SUBMITTED THAT THE CENTRAL GOVT. HAD GIVEN APPROVAL U/S 2 OF THE FOREST (CO NVERSATION) ACT, 1980 FOR DIVERSION OF 33.799 HA OF FOREST LANDS FOR MANGANESE ORE MINING IN VILLAGE KANTHAR KOIRA, DIST. SUNDERGARH, ORISSA IN FAVOUR OF THE ASSESEE COMPANY FOR MINING LEASE OVER THE SAID FOREST LAND SUBJECT TO COMPLIANCE AND PAYMENT ITA NO. 192/KOL/2011 M/S.RUNGTA MINES LTD. A.YR. 2007 - 08 2 OF R S.1,03,55,795/ - . THE SAID EXPENSES WERE INCURRED AS PER THE CONDITIONS AND AGREED TERMS WITH THE GOVERNMENT. IT WAS CLAIMED THAT THESE EXPENSES WERE IN THE NATURE OF FENCING PROTECTION AND GENERATION OF SAFETY ZONE AREA, AFFORESTATION, MAINTENANCE AND REGE NERATION OF SURRENDERED FOREST AREA ETC. THE ASSESSEE COMPANY HAD TO INCUR SUCH EXPENSES FOR KEEPING ENVIRONMENTAL/ECOLOGICAL BALANCE IN THE SURROUNDING AREA OF MINE AS PER NEED AND AGREEMENT WITH THE GOVT. OF INDIA. 3.1. THE ASSESSEE CLAIMED THAT THIS E XPENDITURE WAS REVENUE EXPENDITURE. THE AO DID NOT ACCEPT THIS ARGUMENT OF THE ASSESSEE. HE WAS OF THE VIEW THAT THE NET PRESENT VALUE (NPV) WAS ACTUALLY AN AMOUNT WHICH THE ASSESSEE PAID TO THE FOREST DEPARTMENT FOR TRANSFER OF FOREST LAND TO NON - FOREST U SES I.E. MINING. THE PAYMENT WAS TO BE MADE BY EACH USER AGENCY TOWARDS REGENERATION OF FOREST FOR DIVERSION OF FOREST TO NON - FOREST USE. THE NPV WAS LEVIED ON THE USER AGENCIES CONVERTING FOREST LAND TO NON - FOREST PURPOSES AS A ONE TIME LEVY TO CONTRIBU TE AT A TIME FOR REPAIRING THE DAMAGE CAUSED EARLIER AND WHICH MAY BE CAUSED IN THE FUTURE. THE HON BLE SUPREME COURT IN ITS DECISION IN WRIT PETITION NO.202 OF 1995 HAS ORDERED THE USERS TO PAY THE NPV TO THE FOREST DEPARTMENT. THE SUPREME COURT HAS CATE GORIZED IT AS A FEE. AO HELD THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE. 3.2. UPON ASSESSEE S APPEAL THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : - I HAVE CAREFULLY CONSIDERED ALL THE FACTS AND CIRCUMSTANCES OF T HIS ISSUE. ON EXAMINATION OF THE LETTERS OF THE DIVISIONAL FOREST OFFICER, BONAI DIVISION, IT IS SEEN THAT THE ASSESSEE HAD BEEN ASKED TO MAKE THIS PAYMENT OF RS.1,03,55,795/ - FOR THE FOLLOWING PURPOSES. (1)RS.92,51,000/ - TOWARDS NPV OF 15.95 HA. OF BY DFO S LETTER NO.5218 FOREST LAND@ 5.80 LAKH PER HA. DT. 23.11.06 (2)RS.11.04,795/ - TOWARDS PROPORTIONATE CONTRI - BY DFO S LETTER NO.5219 BUTION @ RS.15,000/ - PER HA. OF DT. 23.11.06 M.L.AREA FOR COMPLEMENTATION OF REGIONAL WILD LIFE MANAGEMENT PLAN PREPARED FOR BONAI AND KEONJHAR DIVISION. FIRST OF ALL IN RESPECT OF NPV IT IS FOUND THAT IT HAD TO BE PAID BY THE ASSESSEE FOR DIVERSION OF FOREST LAND IN VIEW OF A SUPREME COURT DECISION DTD. 15.09.2006 IN IA NO.1473 AND 1620 IN WRIT PETITIO N WO(C) NO.202 OF 1995. IT IS SEEN THAT THE ASSESSEE ALREADY HAD MINING LEASE FOR MANGANESE ORE IN VILLAGE KONTHAT KOIRA IN THE DISTRICT OF ITA NO. 192/KOL/2011 M/S.RUNGTA MINES LTD. A.YR. 2007 - 08 3 SUNDERGARH, ORISSA SINCE LONG. THIS SHOWS THAT THE ASSESSEE DID NOT GET ANY FRESH RIGHT TO MINING BY MAKING THIS P AYMENT UNDER THE ORDER OF THE S.C., THE ASSESSEE WAS ALREADY RUNNING A MINING BUSINESS FOR QUITE SOME TIME AND DURING THE COURSE OF BUSINESS SOME PAYMENT WAS REQUIRED TO BE MADE BY IT IN PURSUANCE OF THE ABOVE REFERRED S.C. ORDER. THIS PAYMENT NEITHER GAVE THE ASSESSEE ANY FRESH RIGHT TO ACQUIRE ANY CAPITAL ASSET NOR ANY EXTENSION OF RIGHT. ON THE OTHER HAND, HAD THIS PAYMENT NOT BEEN MADE THE ASSESSEE WOULD HAVE BEEN LIABLE FOR CONTEMPT AND STOPPAGE OF ITS MINING OPERATIONS. SO THIS PAYMENT MAY BE CONSTRUE D AS EXPENDITURE MADE TO REMOVE SOME RESTRICTION, OBSTRUCTION OR DISABILITY. SIMPLY BECAUSE THIS IS A ONE TIME PAYMENT, THE SAME CANNOT BE TREATED AS CAPITAL EXPENDITURE. FURTHER BY REFERRING TO THE DECISION OF HON BLE APEX COURT IN THE CASE OF BIKANER GYPSUMS LTD. VS CIT (1991) 107 ITR 39 THE LD. CIT(A) HELD THAT THE AMOUNT OF RS.92,51,000/ - W AS A REVENUE EXPENDITURE ALLOWABLE AS DEDUCTION IN A.YR.2007 - 08. 3.3. THE LD. CIT(A) FURTHER HELD THAT NOW IF WE CONSIDER THE SECOND AMOUNT OF RS.11,04,795/ - IT IS SEEN THAT THIS AMOUNT HAS BEEN COLLECTED BY THE FOREST DEPARTMENT FROM THE ASSESSEE FOR IMPLEMENTATION OF REGIONAL WILD LIFE MANAGEMENT PLAN PREPARED FOR BONAI AND KEONJHAR DIVISIONS OF ORISSA. IT IS SEEN THAT THIS AMOUNT IS ALSO TO BE DEPOSITED IN THE SAME ACCOUNT IN WHICH THE AMOUNT OF NPV IS TO BE DEPOSITED. THESE FACTS SHOW THAT BOTH THESE AMOUNTS OF RS.92,51,000 (NPV) AND RS.11,04,795/ - ARE BEING COLLECTED FOR THE SAME REASON AND ARE GOING TO THE SAME ACCOUNT TO BE USED FOR DIFFERENT SPECIFIC PURP OSES. THEREFORE, THIS AMOUNT OF RS.11,04,795/ - CAN ALSO BE SAID TO BE SPENT BY THE ASSESSEE FOR REMOVAL OF CERTAIN RESTRICTION OR OBSTRUCTION OR DISABILITY DURING THE COURSE OF CONTINUATION OF THE BUSINESS OF THE ASSESSEE. THEREFORE, THIS AMOUNT IS ALSO RE VENUE IN NATURE AND IS ALLOWABLE AS A BUSINESS EXPENDITURE U/S 37(1) OF THE I.T.ACT. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, KOLKATA BENCH IN THE CASE OF GROUP CONCERN OF THE ASSESSEE IN THE CASE OF ACIT VS RUNGTA & SONS (P) LTD IN ITA NO.933/KOL/2009 VIDE ORDER DATED 05.08.2011 . THE LD. DR FAIRLY AGRE ED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. ITA NO. 192/KOL/2011 M/S.RUNGTA MINES LTD. A.YR. 2007 - 08 4 4.1. WE HAVE CAREFULLY PERUSED THE RECORDS. WE FIND THAT THE TRIBUNAL IN THE ABOVE DECISION HAS ELABORATELY CONSIDERED THE ISSUE. THE TRIBUNAL HAD FOUND THAT THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF BIKANER G YPSUMS LTD. VS CIT (SUPRA) APPLIED TO THE CASE OF THE ASSESSEE AND THE EXPENDITURE CANNOT BE TREATED AS CAPITAL EXPENDITURE. THE TRIBUNAL HAD ALSO REFERRED TO SEVERAL OTHER CASE LAWS. THE TRIBUNAL HAD CONCL UDED AS UNDER : - 15. IN VIEW OF THE ABOVE DECISION AND THE FACTS OF THE CASE BEFORE US, WE HOLD THAT LD. CIT(APPEALS) HAS RIGHTLY HELD THAT THE ABOVE EXPENDITURE OF RS.3,95,56,500/ - PAID BY THE ASSESSEE AS NPV TO ENABLE THE ASSESSEE TO CARRY ON ITS MINING BUSINESS IS REVENUE IN NATURE, WHICH IS ALLOWABLE AS BUSINESS EXPENDITURE UNDER SECTION37(1) OF THE ACT. THEREFORE, WE UPHOLD THE ORDER OF LD. CIT(APPEALS) BY REJECTING GROUND NO.1 OF THE APPEAL TAKEN BY THE DEPARTMENT. HENCE, GROUND NO.1 IS REJECTED. 4 .2. SINCE THE FACTS ARE IDENTICAL AND IT IS NOT THE CASE OF REVENUE THAT THE ABOVE DECISION HAS BEEN REVERSED BY HON BLE HIGH COURT, WE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL ABOVE WE HOLD THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CI T(A). ACCORDINGLY WE UPHOLD THE SAME. 5. IN THE RESULT THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDE R PRONOUNCED IN THE OPEN COURT ON 02.02.2015. SD/ - SD/ - [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 02.02.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . M/S.RUNGTA MINES LTD., 42A, SHAKESPEAR SARANI, KOLKATA - 700017. 2 D.C.I.T., CIRCLE - 5, KOLKATA. 3 . CIT(A) - VI , KOLKATA 4. CIT - KOLK ATA. 5. CIT - DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA NO. 192/KOL/2011 M/S.RUNGTA MINES LTD. A.YR. 2007 - 08 5