D.C.I.T., Circle-5, Kolkata, Kolkata V. M/s Hindustan Copper Ltd., Kolkata

ITA 2583/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4159 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 12-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Keywords: Business expenditure; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 2583 / KOL / 2013 ASSESSMENT YEAR :2007-08 DCIT, CIRCLE-5, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 V/S . M/S HINDUSTAN COPPER LTD., TAMRA BHAWAN, 1, ASUTOSH CHOUDHURY AVENUE, KOLKATA-700 019 [ AAACH 7409 R ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI G.MALLIKARJUNA, CIT-DR /BY RESPONDENT SHRI SANJAY BHATTACHARYA, FCA /DATE OF HEARING 10-11-2016 /DATE OF PRONOUNCEMENT 09-12-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA DATED 17.04.2013. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-5, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 22.0 3.2013 FOR ASSESSMENT YEAR 2007-08. SHRI G. MALLIKARJUNA, LD. DEPARTMENTAL REPRESENTATI VE APPEARED ON BEHALF OF REVENUE AND SHRI SANJAY BHATTACHARYA, LD. AUTHORIZE D REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE. ITA NO.2583/KOL/2013 A.Y.2007-08 DCIT CIR-5 KOL. VS. M/S HINDUSTAN COP PER LTD. PAGE 2 2. FIRST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER FOR RS.3,90,13,000/- IGNORING THE PROVISION AS SPECIFIED U/S 35DDA OF THE ACT. 3. THE ASSESSEE, FOR THE YEAR UNDER CONSIDERATION H AS CLAIMED EXPENDITURE OF R.3,90,13,000/- UNDER VOLUNTEER RETI REMENT SCHEME (VRS FOR SHORT). THE ASSESSEE ALSO RECEIVED GRANT-IN-AID FRO M THE GOVERNMENT FOR THE SAME AMOUNT WHICH WAS ACCORDINGLY ADJUSTED WITH THE VRS EXPENSES. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSE RVED THAT ASSESSEE IS ENTITLED TO CLAIM 1/5 TH OF THE VRS EXPENSE AS PER THE PROVISION OF SEC. 35 DDA OF THE ACT. ACCORDINGLY, AO DISALLOWED A SUM OF RS. 3,12,10,400/- AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT THE GRANT-IN-AID WAS RECEIV ED FROM THE CENTRAL GOVERNMENT WITH THE SPECIFIC DIRECTION TO UTILIZE F OR VRS COMPENSATION. THEREFORE, THE GRANT RECEIVED WAS UTILIZED IN MAKIN G THE PAYMENT OF VRS TO THE EMPLOYEES. AS SUCH, ASSESSEE ON ONE HAND CLAIME D EXPENSES IN THE NAME OF VRS AND ON THE OTHER HAND ASSESSEE HAS SHOW N THE INCOME OF THE SAME AMOUNT IN THE NAME OF GRANT-IN-AID FROM THE CE NTRAL GOVT. THEREFORE, THERE WAS NO EFFECT ON THE PROFIT OF THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTED THAT IN CASE ONLY 1/5 VRS IS ALLOWED AS D EDUCTION THEN THE AMOUNT OF GRANT-IN-AID SHOULD ALSO BE RECOGNIZED AS INCOME CORRESPONDING TO VRS EXPENSES CLAIMED IN THE YEAR UNDER CONSIDERATION. A FTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) DELETED T HE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 6.2 IT IS SEEN, THAT THIS ISSUE IS ALSO OF RECURRI NG NATURE AND WAS INVOLVED IN EARLIER AS WELL AS SUBSEQUENT ASSESSMEN T YEARS. MY PREDECESSOR HAS CONSIDERED THIS ISSUE IN HIS ORDER IN APPEAL NO.212/CIT(A)-VI/R-5/2010-11/KOL FOR A.Y 2008-09 PA SSED ON 14.2.2012. IN THIS, HE HAS, FOLLOWING THE ORDERS FO R AY 2002-03, 2004-03 AND 2005-06, HELD THAT:- THE SAME ISSUE WAS INVOLVED IN THE ASSESSMENT YEAR 002-03 AND 2005-06 IN ISSUE IN THE FAVOUR OF THE APPELLANT. I HAVE FOLLOWED THE SAID JUDGMENT OF THE LD. CIT-V,KOLKATA IN THE CASE OF THE APPELLANT FOR ASSESSMENT YEAR 2004-05 IN APPEAL NO. ITA NO.2583/KOL/2013 A.Y.2007-08 DCIT CIR-5 KOL. VS. M/S HINDUSTAN COP PER LTD. PAGE 3 1485/CIT(A)-VI/CIRCLE-5/09-10/KOL/ DATED 16.1.2012 BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE OBSERVATIONS OF THE ASSESS ING OFFICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT, IT IS NOTED THAT THE CENTRAL GOVERNMENT HAD GIVEN GRANT TO THE APPELLANT FOR THE SPECIFIC PURPOSE OF DISBURSEMENT OF VRS COMPENSATION. FOLLOWING THE ACCOUNTING STANDARD AS-2 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) THE APPELLANT RECOGNIZED THE GOVT. GRANT ON A SYSTEMATIC BASIS IN IT P&L A/C TO MATCH THE SAID GRANT WITH THE RELATED COT WH ICH THE SAID GRANT WAS INTENDED TO COMPENSATE. SO THE SUM O F RS.123,78,96,000/- BEING THE UTILIZED GOVT. GRANT, WAS ON ONE HAND CREDITED TO THE APPELLANTS P&L A/C AND ON THE OTHER HAND DEBITED TO THE P&L A/C, THE RESULTING EF FECT BEING NIL. IT HAS BEEN ALREADY HELD BY THE LD. CIT( A)-V, KOLKATA THAT THE GOVT. GRANT RECEIVED BY THE APPELL ANT FOR THE SPECIFIC PURPOSE OF DISBURSEMENT OF VRS COMPENSATION, SHOULD BE CONSIDERED BY IT AS IT INCO ME ON THE BASIS OF MATCHING CONCEPT AS DIRECTED BY ICI T ROUGH ITS ACCOUNTING STANDARD AS-12. THE APPELLANT SUBMIT TED THAT AS IT WAS A CASE OF DISBURSEMENT OF THE GOVT. GRANT THEE SHOULD NEITHER BE ANY INCOME NOR ANY EXPENSE, ON THIS ACCOUNT. THE AUTHORISED REPRESENTATIVE ALSO SU BMITTED THAT IF THE UTILIZATION OF THE GOVT. GRANT WOULD BE CONSIDERED AS A CAPITAL EXPENDITURE THEN THE GOVT. GRANT ITSEL F SHOULD BE CONSIDERED AS A CAPITAL RECEIPT AND AGAIN THE RE SULTING EFFECT WILL BE NIL. I AM INCLINED TO ACCEPT THE SUBMISSIONS OF THE AUTH ORISED REPRESENTATIVE THAT THE SUM OF RS.123,78,96,000- HA VING BEEN UTILIZED TOWARDS DISBURSEMENT OF GOVT. GRANT F OR VRS EXPENSES OUT OF THE GOVT. GRANT CREDITED TO THE P&L A/C, THERE SHOULD NEITHER BE ANY INCOME NOR ANY EXPENDIT URE ON THIS ACCOUNT. ACCORDINGLY, THERE SHOULD NOT ARISE A NY QUESTION OF TREATING THE DISBURSEMENT OF VRS COMPEN SATION AS ANY CAPITAL EXPENDITURE AND THUS THERE SHOULD NO T BE ANY APPLICABILITY OF SECTION 35DDA. FOLLOWING THE JUDGEMENT OF THE LD. CIT(A)-V, KOLKAT A IN THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 2002-03 & 2 005- 06 AND ON THE BASIS OF MY ABOVE OBSERVATIONS, I HOL D THAT THE ENTIRE GRANT OF RS.123,78,96,000/- SHOULD BE AL LOWED. THE APPEAL IS ALLOWED ON THESE GROUNDS. THEREFORE, FOLLOWING THE REASONING GIVEN BY THE UND ERSIGNED IN THE ASSESSMENT YEAR 2004-05, THE APPELLANT IS ALLOWED D EDUCTION OF ITA NO.2583/KOL/2013 A.Y.2007-08 DCIT CIR-5 KOL. VS. M/S HINDUSTAN COP PER LTD. PAGE 4 RS.1,76,92,000/- AS VRS EXPENSES. THE ADDITION OF R S.1,41,53,600/- IS HEREBY DELETED. THESE GROUNDS OF APPEAL ARE ALLOW ED. THE FACTS DURING THE YEAR UNDER APPEAL ARE SIMILAR. I FIND NO REASON TO DIFFER FROM THE VIEW TAKEN BY MY LD. PREDECESSORS. THE ADDITION OF RS.3,12,1,400/- IS ACCORDINGLY DELETED. AGGRIEVED BY THIS, REVENUE HAS COME UP AN APPEAL BE FORE US. 5. BEFORE US LD. DR FOR THE REVENUE VEHEMENTLY RELI ED ON THE ORDER OF ASSESSING OFFICER WHEREAS LD. AR FOR THE ASSESSEE R ELIED ON THE ORDER OF LD. CIT(A) AND HE FILED PAPER BOOK WHICH IS RUNNING PAG ES FROM 1 TO 68. HE FURTHER DREW OUR ATTENTION ON PAGE 45 OF THE PAPER BOOK WHERE THE VRS EXPENSES CLAIMED BY ASSESSEE WERE ADJUSTED WITH THE AMOUNT OF GRANT-IN-AID IN ITS FINANCIAL STATEMENT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FI ND THAT ASSESSEE HAS NOT CLAIMED ANY EXPENSES IN ITS PROFIT AND LOSS ACCOUNT IN THE NAME OF VRS EXPENSE. THEREFORE, THE QUESTION OF DISALLOWING VRS EXPENSE IN TERMS OF THE PROVISION OF SEC.35DDA DOES NOT ARISE. WE ALSO FIND THAT THE ASSESSEE HAS CLAIMED VRS EXPENSE IN EARLIER YEAR WHICH WAS ALSO ADJUSTED WITH THE AMOUNT OF GRANT-IN-AID RECEIVED FROM THE CENTRAL GOVT. AND NO DISALLOWANCE WAS WARRANTED. IN THE LIGHT OF ABOVE REASONING, WE HOLD THAT THE ORDER OF THE LD. CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. WE UPHOLD THE SAME. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 7. NEXT ISSUE RAISED BY REVENUE IN THIS APPEAL IS T HAT LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF MINE DEVELOPMENT EXPEN SE AGAINST THE PROVISION OF SEC. 35E OF THE ACT. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAS CLAIMED MINE DEVELOPMENT EXPENSE FOR R S.434,57,27,000/- WHICH ARE ALLOWABLE 1/10 AS PER THE PROVISION OF SE C. 35E OF THE ACT. AS PER THE AO 1/10 TH OF MINE DEVELOPMENT EXPENSE COMES TO RS.43,45,72,7 00/- BUT ASSESSEE HAS CLAIMED MINE DEVELOPMENT EXPENSE OF RS .62,46,60,000/-. ITA NO.2583/KOL/2013 A.Y.2007-08 DCIT CIR-5 KOL. VS. M/S HINDUSTAN COP PER LTD. PAGE 5 ACCORDINGLY, AO DISALLOWED THE EXCESS DEDUCTION AS CLAIMED BY ASSESSEE FOR RS.19,00,87,300/- AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT THE EXPENSES AGGREGATING TO RS.62,26,60,000/- IS NORMAL COURSE OF BUSINESS EXPENDITURE WHICH ARE ALL OWABLE U/S. 37(1) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT EXPENSE CL AIMED IN THE NAME OF MINE DEVELOPMENT EXPENSES ARE NOT IN THE NATURE OF PROSPECTIVE OF MINERALS OR COMMENCING OF ANY COMMERCIAL PRODUCTION AS ENVIS AGED U/S. 35E OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT IN THE EAR LIER ASSESSMENT YEAR (2001-02), 2004-05 AND SUCCEEDING AY 2008-09 THE RE LIEF WAS GRANTED BY LD. CIT(A) IN ASSESSEES OWN CASE. THE REVENUE HAS NOT PREFERRED ANY APPEAL AGAINST THE ORDER OF LD. CIT(A) AS THE COD WAS NOT PERMITTED FOR FILING THE APPEAL. ACCORDINGLY, LD. CIT(A) DELETED THE ADDITIO N MADE BY AO BY OBSERVING AS UNDER:- 5.2 IT IS SEEN THAT THE ISSUE UNDER CONSIDERATION IS OF RECURRING NATURE AND WAS INVOLVED IN THE ASSESSMENT YEARS 2001-02, 2 004-05 AND 208- 09 ALSO. THE APPEAL NO.212/CIT(A)-VI/R-5/2010-11/KO L, FOR AY 2008-09 WAS DISPOSED OFF BY MY PREDECESSOR VIDE HIS ORDER D ATED 14.2.2012. IN THIS ORDER, HE HAS, FOLLOWING THE APPELLATE ORDER OF CIT(A)-V FOR ASSESSMENT YEAR 2001-02 AND ASSESSMENT YEAR 2004-05 , HELD AS UNDER:- THE SAME ISSUE WAS INVOLVED AN ASSESSMENT YEAR 200 1-02 AND THE LD. CIT(A), KOLKATA IN APPEAL NO. CIT-V/KOL/148 /CIRCLE- 5/200607 DATED 15.4.2008 HAD DECIDED THE ISSUE IN F AVOR OF THE APPELLANT. I HAVE FOLLOWED THE SAID JUDGMENT IN THE CASE OF THE APPELLANT IN APPEAL NO. 1485/CIT(A)-IV/CIRCLE-5/09- 10/KOL DATED 16.1.2002 OBSERVING AS FOLLOWS: IN THE ASSESSMENT YEAR 2001-02 THE LD. CIT(A)-V, K OLKATA HAS ALREADY HELD THAT THE EXPENSES BOOKED BY THE AP PELLANT WERE NOT COVERED U/S 35E AND SHOULD BE TREATED AS REVENUE EXPENDITURE DEDUCTIBLE U/S. 37. FURTHER, IT IS SEEN THAT THE APPELLANT HAS BOTH UNDERGROUND AS WELL AS OPENCAST MINES AS PER HIS SUBMISSIONS SECTION 35E C OVERS EXPENSES ON OPERATIONS UNDERTAKEN FOR THE PURPOSES OF EXPLORING, LOCATING OR PROVING DEPOSITS OF ANY MINE RAL AND INCLUDES ANY SUCH OPERATION WHICH PROVES TO BE INFR UCTUOUS OR ABORTIVE. IN THE CASE OF THE APPELLANT THE EXPEN SE IN RELATING TO UNDERGROUND MINE ARE FOUND TO BE DIRECT LY ITA NO.2583/KOL/2013 A.Y.2007-08 DCIT CIR-5 KOL. VS. M/S HINDUSTAN COP PER LTD. PAGE 6 RELATED TO THE ORE PRODUCTION AND NOT IN ANY WAY CO NNECTED WITH PROSPECTING. IN REGARD TO THE OPEN CAST MIND T HE EXPENSES ON WASTE DEVELOPMENT WHICH IS CARRIED OUT SIMULTANEOUSLY BOTH IN ORE AND WASTE, ARE BOOKED UN DER THE HEAD MINE DEVELOPMENT EXPENDITURE. HENCE IN BOT H THE CASES I.E. UNDERGROUND MINE AND OPENCAST MINE, THE EXPENSES RELATED TO THE ORE PRODUCTION ARE BOOKED U NDER THE HEAD MINE DEVELOPMENT EXPENDITURE AND THE SAME ARE OF REVENUE NATURE. RESPECTFULLY, FOLLOWING THE APPELLATE ORDER OF THE CIT(A)-V, KOLKATA FOR THE ASSESSMENT YEAR 2001-02 AND IN THE FACTS AND CIRCUMSTANCES IT IS HELD THAT THE ASSESSING OFF ICERS ACTION OF ALLOWING ONLY RS.4,13,49,500 OUT OF RS.41,34,95,000 BY APPLYING SECTION 35E, WAS WRONG AND ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED NOT T O APPLY SECTION 35E AND ALLOW RS.41,34,95,000/- TOWARDS THE APPELLANTS MINE DEVELOPMENT EXPENDITURE. THESE GRO UNDS OF APPEAL ARE ALLOWED. FURTHER, AS PER THE SUBMISSIONS OF THE APPELLANT TH E INCOME-TAX DEPARTMENTS APPEAL FILED BEFORE THE ITAT FOR THE AS SESSMENT YEAR 2001-02, WAS DECLINED PERMISSION FOR BEING PURSUED BY THE HIGH POWERED COMMITTEE ON DISPUTES (COD). FOLLOWING THE APPELLATE ORDER OF THE CIT(A)-V, KOLKATA FOR THE ASSESSMENT YEAR 20 01-02 AS WELL AS THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 2004-05 , AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE ASSESSING OFFICERS ACTION OF MAKING AN ADDITION OF RS.1931,53,000 BY A PPLYING SECTION 35E WAS WRONG AND ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED NOT TO APPLY SECTION 35E AND ALLOW RS.66,04,93,000 TOWARDS THE APPELLANTS MINE DEVELOPMENT EXPENDITURE. THESE GROUNDS OF APPE AL ARE ALLOWED. THE FACT DURING THE YEAR UNDER APPEAL BEING SIMILAR , I FIND NO REASON TO DIFFER FROM THE VIEW TAKEN BY MY LD. PREDECESSORS. FOLLOWING THE APPELLATE ORDERS FOR AY 2001-02, 2004-05 AND 2008-0 9, I DIRECT THE ASSESSING OFFICER TO ALLOW THE MINE DEVELOPMENT EX PENDITURE CLAIMED WITHOUT APPLYING THE SECTION 35E. AGGRIEVED BY THIS, REVENUE HAS COME UP AN APPEAL BE FORE US. 10. BEFORE US BOTH PARTIES RELIED ON THE ORDER OF A UTHORITIES BELOW AS FAVOURABLE TO THEM. ITA NO.2583/KOL/2013 A.Y.2007-08 DCIT CIR-5 KOL. VS. M/S HINDUSTAN COP PER LTD. PAGE 7 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIALS ON RECORD. FROM THE PERUSAL OF THE FACTS OF THE CASE W E FIND THAT THE AO HAS TREATED MINE DEVELOPMENT EXPENDITURE AS COVERED UND ER SECTION 35E OF THE ACT AND ACCORDINGLY ALLOWED ONE TENTH OF SUCH EXPEN DITURE AND DISALLOWED THE REMAINING EXPENDITURE AS CLAIMED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THE FACTS OF THE CASE HAVE ALREADY B EEN DISCUSSED AFORESAID. HOWEVER THE LD. CIT(A) FOUND THE SAME AS NOT CONNEC TED DIRECTLY WITH THE PROSPECTING OF MINERALS BUT ARE DIRECTLY RELATED TO ORE PRODUCTIONS. ACCORDINGLY THE LD. CIT(A) REVERSED THE ORDER OF THE AO RELYING IN THE ORDERS OF LD. CIT(A) IN ASSESSEES OWN CASE IN THE EARLIER AND SUCCEEDING A SSESSMENT YEARS. NOW THE CRUX OF THE CONTROVERSY BEFORE US ARISES SO TO WHETHER THE EXPENDITURE ARE CONNECTED WITH THE PROSPECTING OF MINERALS AS ENVIS AGED UNDER SECTION 35E OF THE ACT. AT THIS JUNCTURE IT IS IMPORTANT TO REPROD UCE THE PROVISIONS OF SECTION 35E OF THE ACT WHICH READS AS UNDER:- [ DEDUCTION FOR EXPENDITURE ON PROSPECTING, ETC., FOR CERTAIN MINERALS . 35E. (1) WHERE AN ASSESSEE, BEING AN INDIAN COMPANY OR A PERSON (OTHER THAN A COMPANY) WHO IS RESIDENT IN INDIA, IS ENGAGED IN ANY OPERATIONS RELATING TO PROSPECTING FOR, OR EXTRACTI ON OR PRODUCTION OF, ANY MINERAL AND INCURS, AFTER THE 31 ST DAY OF MARCH, 1970, ANY EXPENDITURE SPECIFIED IN SUB-SECTION (2), THE ASSESSEE SHALL, I N ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOW ED FOR EACH ONE OF THE RELEVANT PREVIOUS YEARS A DEDUCTION OF AN AMOUNT EQ UAL TO ONE-TENTH OF THE MOUNT OF SUCH EXPENDITURE. (2) THE EXPENDITURE REFERRED TO IN SUB-SECTION (1) IS THAT INCURRED BY THE ASSESSEE AFTER THE DATE SPECIFIED IN THAT SUB-SECTI ON AT ANY TIME DURING THE YEAR OF COMMERCIAL PRODUCTION AND ANY ONE OR MO RE OF THE FOUR YEARS IMMEDIATELY PRECEDING THAT YEAR, WHOLLY AND E XCLUSIVELY ON ANY OPERATIONS RELATING TO PROSPECTING FOR ANY MINERAL OR GROUP OF ASSOCIATED MINERALS SPECIFIED IN PART A OR PART B, RESPECTIVEL Y, OF THE SEVENTH SCHEDULE OR ON THE DEVELOPMENT OF A MINE OR OTHER N ATURAL DEPOSIT OF ANY SUCH MINERAL OR GROUP OF ASSOCIATED MINERALS: PROVIDED THAT THERE SHALL BE EXCLUDED FROM SUCH EXPENDITURE ANY PORTION THEREOF WHICH IS MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY AND ANY SALE, SALVAGE, COMPENSATION OR IN SURANCE MONEYS REALIZED BY THE ASSESSEE IN RESPECT OF ANY PROPERTY OR RIGHTS BROUGHT INTO EXISTENCE AS A RESULT OF THE EXPENDITURE. (3) ANY EXPENDITURE- ITA NO.2583/KOL/2013 A.Y.2007-08 DCIT CIR-5 KOL. VS. M/S HINDUSTAN COP PER LTD. PAGE 8 (I) ON THE ACQUISITION OF THE SITE OF THE SOURCE OF ANY MINERAL OR GROUP OF ASSOCIATED MINERALS REFERRED TO IN SUB-SEC TION (2) OR OF ANY RIGHTS IN OR OVER SUCH SITE; (II) ON THE ACQUISITION OF THE DEPOSITS OF SUCH MIN ERAL OR GROUP OF ASSOCIATED MINERALS OR OF ANY RIGHTS IN OR OVER SUC H DEPOSITS; OR (III) OF A CAPITAL NATURE IN RESPECT OF ANY BUILDIN G, MACHINERY, PLANT OR FURNITURE FOR WHICH ALLOWANCE BY WAY OF DEPRECIA TION IS ADMISSIBLE UNDER SECTION 32, SHALL NOT BE DEEMED TO BE EXPENDITURE INCURRED BY THE ASSESSEE FOR ANY OF THE PURPOSES SPECIFIED IN SUB-SECTION (2). FROM A BARE READING OF THE ABOVE PROVISIONS, WE FIN D THAT PROSPECTING IS AN ACTIVITY PRIOR TO ACTIVITY OF MINING. WITHOUT PROSP ECTING AND EXAMINING WHETHER PARTICULAR PRECIOUS STONES/MINERALS WERE AVAILABLE IN A PARTICULAR AREA, IT IS NOT POSSIBLE TO UNDERTAKE MINING ACTIVITIES. PROSPECTIN G ACTIVITIES PRECEDE THE ACTIVITY OF MINING. THE EXPENDITURE RELATED TO NON- PROSPECTING IS ALLOWABLE EXPENDITURE UNDER SECTION 37(1) OF THE ACT. IN THE CASE ON HAND THE MINE DEVELOPMENT EXPENDITURE CLAIMED BY THE ASSESSEE ARE NOT RELATED TO PROSPECTING THEREFORE THE SAME ARE ALLOWABLE AS BUS INESS EXPENDITURE. WE ALSO FIND THAT ON PERUSAL OF THE RECORDS WHICH CLEA RLY SHOWS THAT COD HAS RATHER SUPPORTED THE CASE OF THE ASSESSEE AS AGAINS T THE FINDING OF THE LD. CIT(A) IN THE EARLIER ASSESSMENT YEARS. IN THE BACK GROUND OF THE ABOVE DISCUSSIONS AND PRECEDENT WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF LD. CIT(A) AND ACCORDINGLY WE UPHOLD THE SAME. HENCE, T HIS GROUND OF REVENUES APPEAL IS DISMISSED. 12. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 09 /12/2016 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 09 / 12 /201 6 ITA NO.2583/KOL/2013 A.Y.2007-08 DCIT CIR-5 KOL. VS. M/S HINDUSTAN COP PER LTD. PAGE 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE-5, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 2. /RESPONDENT-M/S HINDUSTAN COPPER LTD., TAMRA BHAWAN , 1, ASUTOSH CHOUDHURY AVEN UE, KOLKATA-700 019 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,