M/s. Shriram Minerals, Kolhapur V. Income-tax Officer, Ward - 1(1), Kolhapur

ITA 205/PUN/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0627 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-11-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 05-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Rule of consistency; Commercial expediency; Capital expenditure
• Section: 143(3); 250; 13

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.205/PUN/2019 / ASSESSMENT YEAR : 2010-11 M/S. SHRIRAM MINERALS, C/O DONGALE & SONS, 1325/111, SHIVAJI UDYAMNAGAR, KOLHAPUR-416008. PAN : AAXFS1466K . /APPELLANT VS. ITO, WARD-1(1), KOLHAPUR. . / RESPONDENT / APPELLANT BY : SHRI S. N. PURANIK / RESPONDENT BY : SHRI S. P. WALIMBE / DATE OF HEARING : 17.12.2019 / DATE OF PRONOUNCEMENT: 17.12.2019 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-1, KOLHAPUR DATED 20.12.2018 FOR THE ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- THE LEARNED ASSESSING OFFICER AS WELL AS LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLHAPUR BY HIS ORDER PASSED UNDER SECTION 250 DATED 20- 12-2018 RECEIVED ON 21-12-2018 IN CASE OF YOUR APPELLANT M/S SHIVRAM MINERALS HAS ERRED IN BOTH ON FACTS AND IN LAW :- A) MINE DEVELOPMENT CHARGES RS. 7,51,474 1. WHETHER ON THE FACT AND CIRCUMSTANCES OF THE EASE, ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) IS CORRECT IN TREATING MINE DEVELOPMENT EXPENSES OF RS. 7,51,474 INCURRED TO OPEN NEW PLEASE AS CAPITAL EXPENDITURE WITHOUT APPRECIATING THE PRINCIPLE THAT SUCH EXPENSES DOESNT RESULTS INTO ACQUIRING ANY ASSETS OR BENEFIT OF ENDURING NATURE. 2. WITHOUT PREJUDICIAL TO ABOVE, WHETHER ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX(APPEALS) IS CORRECT IN CONCLUDING THAT LAND DEVELOPMENT' EXPENSES BEING TREATED AS CAPITAL ITA NO.205/PUN/2019 - 2 - EXPENDITURE IN FIRST PHASE ARE SIMILAR TO 'MINE DEVELOPMENT EXPENSES' INCURRED TO OPEN NEW PHASE, WITHOUT APPRECIATING THE FACT THAT THESE EXPENSES DIFFER FROM EACH OTHER. B) SOCIAL WELFARE EXPENDITURE RS. 2,30,614 3. WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CASE, ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) IS CORRECT DISALLOWING EXPENDITURE INCURRED ON SOCIAL WELFARE OF RS. 2,30,614 WITHOUT APPRECIATING THE PRINCIPLE OF 'COMMERCIAL EXPEDIENCY' BEHIND INCURRING SUCH EXPENSES. FURTHER IT IS REQUESTED THAT: - 1) THE ASSESSEE CRAVES LEAVE TO AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 2) IT IS PRAYED THAT THE ABOVE CLAIMS AND ALLOWANCES BE ALLOWED. 3. BEFORE ME, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE FILED A CHART MENTIONING THAT THERE ARE COUPLE OF ISSUES FOR ALLEGATION BEFORE THE TRIBUNAL. THEY ARE : (I) CAPITALIZATION OF EXPENSES RELATING TO REMOVAL OVER BURDEN AND PIT CLEANING AND ROAD AND (II) SOCIAL WELFARE EXPENSES. 4. CAPITALIZATION OF EXPENSES RELATING TO REMOVAL OVER BURDEN AND PIT CLEANING AND ROAD : THE ASSESSEE INCURRED RS.8,34,971/- WHICH WAS DISALLOWED BY THE ASSESSING OFFICER HOLDING THAT THEY ARE OF CAPITAL NATURE. THE CIT(A) CONFIRMED THE SAME. ON THIS ISSUE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS THE 8 TH YEARS OF EXPLORATION OF MINERALS BUSINESS. THE ASSESSEE HAS BEEN CLAIMED SIMILAR EXPENSES OVER THE YEARS AND BOTH IN THE PAST AS WELL AS IN SUBSEQUENT ASSESSMENT YEARS. MENTIONING THAT THIS ADDITION WAS ALLOWED IN THE PREVIOUS ASSESSMENT YEARS AS WELL AS LATER SUBSEQUENT ASSESSMENT YEAR 2015-16, LD. COUNSEL SUBMITTED THAT THE SAME IS ALLOWED UNDER SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT. REFERRING TO THE PRINCIPLE OF CONSISTENCY, LD. COUNSEL SUBMITTED THAT DISTURBING THE CLAIM OF THE ASSESSEE IGNORING THE SIMILARITY OF THE FACTS IN THE YEAR UNDER CONSIDERATION IS UNSUSTAINABLE IN LAW AND GOES AGAINST THE RATIO LAID DOWN ITA NO.205/PUN/2019 - 3 - BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. GOPAL PUROHIT IN C.C. NO.16802/2010 DATED 15.11.2010 (SC). FURTHER, LD. COUNSEL MENTIONED THAT SUCH EXPENSES ARE ALLOWABLE IN PRINCIPLE, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KIRKEND COAL CO. LTD., 77 ITR 530 (SC). 5. ON HEARING BOTH THE SIDES, I AM OF THE OPINION THAT THE RULE OF CONSISTENCY ASSUMES VERY IMPORTANT. THE ASSESSING OFFICER HAS NOT MADE OUT OF CASE WHICH IS LEGALLY UNSUSTAINABLE IN LAW, IN THE YEAR UNDER CONSIDERATION FOR DEVIATING FROM THE SAID RULE OF CONSISTENCY. THEREFORE, WITHOUT GOING INTO THE CAPITAL NATURE OR OTHERS OF THE EXPENSES CLAIMED, MERELY BASED ON THE PRINCIPLE OF CONSISTENCY, THE ASSESSEE IS ENTITLED TO RELIEF. ACCORDINGLY, THE RELEVANT GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ALLOWED. 6. SOCIAL WELFARE EXPENSES : THE ASSESSEE INCURRED SUM OF RS.2,30,614/- ON ACCOUNT OF VARIOUS EXPENSES WHICH ARE CALLED BUSINESS FACILITATION EXPENSES. 7. ON PERUSAL OF THE DETAILS OF THE EXPENSES PLACED AT PAGE 13 OF THE PAPER BOOK, IT IS NOTICED THAT THE EXPENSES ARE INCURRED ON ACCOUNTS OF DONATION TO CONSTRUCTION OF MULTIPARPASE SAMAJ MANDIR AT MOUJE KOLGAON GRAM TAL. SHAHUWADI, DIST. KOLHAPUR/SHRI GANESH VARGANI TARUN MANDAL AT MALEWADI, TAL. SHAHUWADI, DIST. KOLHAPUR ETC. THERE IS A RELIGIOUS TOUCH TO THE SAID EXPENSES. DEVIATING FROM THE GROUNDS, LD. COUNSEL SUBMITTED ITA NO.205/PUN/2019 - 4 - THAT THE ASSESSEE WILL HAVE NO GRIEVANCE IF PART OF THE EXPENSES ARE DISALLOWED BUT NOT THE ENTIRE AMOUNT OF RS.2,30,614/-. 8. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE DETAILS PLACED IN THE PAPER BOOK, I AM OF THE OPINION THAT THE DISALLOWANCE OF RS.1 LAKH ON AD-HOC BASIS SHOULD BE MET THE ENDS OF THE JUSTICE. AS SUCH, THIS MULTIPURPOSE BHAVANS/MANDALS ARE OPEN TO BOTH RELIGION AS WELL AS SOCIAL PURPOSES OR COMMERCIAL ACTIVITIES OF THE ASSESSEE QUA THE MATTERS OF USE OF THE SAME BY THE CITIZENS OF THE LOCALITY. ACCORDINGLY, THE RELEVANT GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 17 TH DAY OF DECEMBER, 2019. SD/- (D. KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; DATED : 17 TH DECEMBER, 2019. SUJEET / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-1, KOLHAPUR; 4. THE PR. CIT-1, KOLHAPUR; 5. , , - / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE