DCIT, Hyderabad V. M/s SRAP Minerals Pvt Ltd, Hyderabad

ITA 302/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59105 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Revised return; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER. ITA NO.302/HYD/2010 : ASSESSMENT YEAR 2004-05 DY. COMMISSIONER OF INCOME - TAX, CIRCLE-3(2), HYDERABAD. V/S. M/S. SRAP MINERALS PVT. LTD., HYDERABAD. ( PAN- AAHCS 5906 R ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.DIWAKAR PRASAD RESPONDENT BY : SHRI K.A.SAI PRASAD DATE OF HEARING 18. 1.2012 DATE OF PRONOUNCEMENT 18.1.2012 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS), TIRUPATI DATED 27.11.2009, FOR THE ASSESSMENT YEAR 2004-05. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO ADDITION, BY WAY OF DISALLOWANCE OF MINING FRANCHISE FEE OF RS.15,00 ,000, MADE BY THE ASSESSING OFFICER, WHICH HAS BEEN DELETED BY THE CI T(A). 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE ENTERED INTO AN AGREEMENT WITH ANDHRA PRADESH MINERAL DEVELOPMENT C ORPORATION LTD., FOR PROSPERING AND QUARRYING OF GALAXY GRANITE IN BLOCK NO.V, MEASURING AC.1.90 IN SY. NO.55/3A OF RL PURAM (V), CHIMKURTHY (M) PRAKASAM DISTRICT. WHILE FRAMING THE ASSESSMENT FOR THE ASS ESSMENT YEAR 2004-05, UNDER S.143(3) OF THE ACT VIDE ORDER DATED 23.10.20 06, DETERMINING THE LOSS OF THE ASSESSEE AT RS.47,57,264, AS AGAINST LO SS AS PER REVISED RETURN ITA NO.302/HYD/2010 M/S. SRAP MINERALS PVT. LTD., HYDERABAD. 2 FILED BY THE ASSESSEE OF RS.75,41,198, THE ASSESSIN G OFFICER INTER-ALIA DISALLOWED THE ASSESSEES CLAIM FOR DEDUCTION IN RE SPECT OF MINING FRANCHISE FEES OF RS.15,00,000, ON THE GROUND THAT THE SAID E XPENDITURE IS IN THE NATURE OF CAPITAL EXPENDITURE. IN SUPPORT OF THIS DISALLOWANCE, HE PLACED RELIANCE ON THE DECISIONS OF THE APEX COURT IN THE CASE OF PINGLAY INDUSTRIES LIMITED (40 ITR 67) AND ADITYA MINERALS PVT. LTD. (239 ITR 817). 4. ON APPEAL, THE CIT(A), OBSERVING THAT CLAUSE 2 OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH ANDHRA PRADESH MI NERAL DEVELOPMENT CORPORATION LTD. HAS ONLY LAID DOWN A MINIMUM FEE O F RS.15,00,000 OR AS PER THE QUANTITY EXPORTED WHICHEVER IS HIGHER, AND HENCE THIS CANNOT BE CATEGORIZED AS SURFACE RIGHTS OR AS A CAPITAL EXPEN DITURE, HELD IT TO BE ONLY A REVENUE EXPENDITURE IN NATURE, AS THE LIABILITY IS INCURRED BY THE ASSESSEE FOR EXPLOITING THE QUARRY. HE ACCORDINGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS GROUND. 5. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A) IN THIS BEHALF, REVENUE PREFERRED THE PRESENT APPEAL BEFORE US. 6. LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY SUPPORTING THE ORDER OF THE ASSESSING OFFICER, SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AND PLACED RELIANCE ON THE DECISION OF THE APEX COURT IN THE CASE OF PNGLE YS INDUSTRIES LIMITED (40 ITR 67). 7. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, STRONGLY SUPPORTED THE ORDER OF THE CIT(A) AND PLAC ED RELIANCE ON THE CIRCULAR OF THE CBDT NO.1D(V.53) OF 1966, WHEREIN I T WAS LAID DOWN THAT WHERE THE ROYALTY HAS RELATION TO THE QUANTITY EXTR ACTED, THE ROYALTY AND THE DEAD RENT MAY BE ALLOWED AS REVENUE EXPENDITURE. H E HAS ALSO FILED ITA NO.302/HYD/2010 M/S. SRAP MINERALS PVT. LTD., HYDERABAD. 3 ELABORATE WRITTEN SUBMISSIONS IN SUPPORT OF HIS ARG UMENTS, DULY DISCUSSING THE CASE-LAW ON THE POINT AT ISSUE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO GONE THROUGH THE MINING FRANCHISE AGREEMENT ENTERED INTO BY THE ASSESSEE WI TH ANDHRA PRADESH MINERAL DEVELOPMENT CORPORATION LTD. AS PER CLAUSE 2.2 OF THE SAID AGREEMENT, WE FIND THAT MINING FRANCHISE FEE OF RS. 32,000 PER CUBIC METER OF GALAXY GRANITE MINED AND DESPATCHED IN ADDITION TO ALL THE STATUTORY TAXES/LEVIES ARE PAYABLE BY M/S. SRAPMPL. IT IS AL SO AGREED IN CLAUSE 2.2 AND 2.3 THAT MINIMUM MINING FRANCHISE FEE OF RS.15, 00,00 BE PAID ANNUALLY BY M/S. SRAPMPL OR MINING FRANCHISE FEE FOR THE ACT UAL QUANTITIES OF THE GALAXY GRANITE PRODUCED, WHICHEVER IS HIGHER. IN V IEW OF THE SUBSEQUENT JUDGMENT OF THE APEX COURT IN GOTAN LIME SYNDICATE (59 ITR 718), CONSEQUENT TO WHICH THE CBDT ISSUED CLARIFICATORY C IRCULAR NOTED ABOVE, THE EARLIER DECISION OF THE APEX COURT IN THE CASE OF P INGLEY INDUSTRIES LIMITED (40 ITR 67) IS NO MORE A GOOD LAW. IN THIS VIEW O F THE MATTER, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A), WHICH IS ACCO RDINGLY UPHELD AND THE GROUNDS OF THE REVENUE IN THIS APPEAL ARE REJECTED. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 18.1.2012 SD/- SD/- (ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DATED 18 TH JANUARY, 2012 COPY FORWARDED TO: 1. M/S. SRAP MINERALS PVT. LTD., PLOT NO.205, VIVE KANANDA NAGAR COLONY, KUKATPALLY, HYDERABAD- 500 072. ITA NO.302/HYD/2010 M/S. SRAP MINERALS PVT. LTD., HYDERABAD. 4 2. DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(2), HY DERABAD. 3. COMMISSIONER OF INCOME - TAX(APPEALS) , TIRUPATI 4. COMMISSIONER OF INCOME - TAX - 3, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. B.V.S