Dy.CIT, Corporate Circle-2(1), Bhubaneswar V. M/s. Orissa Mining Corporation Pvt. Limited, Bhubaneswar

ITA 352/CTK/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5180 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 31-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Revenue expenditure; Capital expenditure
• Section: 37(1); 73

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री जाजज माथन, न्याययक सदस्य एवं श्री अरुण खोड़पऩया ऱेखा सदस्य के समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.352/CTK/2019 (नििाारण वषा / Asses s m ent Year :2016-2017) DCIT, Circle-2(1), Bhubaneswar ... ......... ...... R evenue Versus M/s Orissa Mining Corporation Ltd., OMC House, Post Box No.34, Bhubaneswar-01 P AN No. AAACO 3324 L ... ......... ..... A ssessee Shri Siddharth Ranjan, CA for the assessee Shri M.K.Gautam, CIT-DR for the Revenue Date of Hearing : 21/06/2022 Date of Pronouncement : 21/06/2022 आदेश / O R D E R Per Bench : This is an appeal filed by the revenue against the order of the ld. CIT(A)-1, Bhubaneswar, dated 16.08.2019 passed in I.T.Appeal No.0472/17-18 for the assessment year 2016-2017. 2. There are two issues raised in this appeal by the revenue. It was submitted by the ld. CIT-DR that grounds No.2 & 3 are against the action of the ld. CIT(A) in deleting the addition made on account of Net Present Value(NPV) paid towards acquisition of forest land and compensatory afforestation. It was the submission that the assessee had treated the same as revenue expenditure. The AO held that the expenditure are liable ITA No.352/CTK/2019 2 to be treated as capital expenditure. Ld. CIT-DR vehemently supported the order of the AO. It was also submitted by the ld. CIT-DR that the CIT(A) has erred in treating the acquisition of the land and the afforestation of the forest as revenue expenditure whereas in fact capital assets have come into existence. 3. In reply, ld. AR submitted that the issue is squarely covered by the decision of the coordinate bench of the Tribunal in assessee’s own case for the A.Ys. 2002-2003, 2003-2004 & 2004-2005 in ITA Nos.76,266&240/CTK/2010, order dated 12.08.2011, wherein the coordinate bench has held as follows :- 6. At the outset the learned Counsel for the assessee submitted that the issue is covered by the decision of the Tribunal in assessee's own case for the Assessment Year 2007-08 which order dt.27.5.2011 is directly on the issue when the Tribunal was pleased to consider the issue from all angle by upholding the order of the learned CIT(A) who had noted that as per the contract with the State Government, the assessee was required to pay the aforesaid amount on each renewal of the lease for such land making it mineable. The payment of such amount was for protection of environment and not relating to any proprietary rights which was originally considered by the Assessing Officer as capital in nature. The learned CIT(A) therefore, distinguished the facts as were narrated in the case laws cited by the learned Assessing Officer by relying on the decision of the ITAT, Cuttack Bench for the Assessment Year 1991-92' and earlier in the case of Orissa Forest Development Corporation Ltd., when it was seen that the payments had been made to earmarked accounts of the Government of India, Ministry of Environments and Forest namely "compensatory afforestation fund" made pursuant to an Government order and similarly to settle payments. This payment was on the basis of direction of the Hon'ble Supreme Court in the case of T.N.Goidavarman Thirumulpad v. UOI & Ors [ WP(C) NO.202 of 1995 when Hon'ble Court observed that this afforestation will have a long term benefit for future generation. We are of the considered view that the learned CIT(A) rightly directed to delete the same from the disallowance insofar as the enduring benefit was to future generation and not to the assessee in view of the fact that the assessee was required to make this payment was compensatory for having rendered income from original source was revenue in nature ITA No.352/CTK/2019 3 and was rightly claimed and considered by the learned CIT(A). In this view of the matter, the issue agitated by the Revenue is dismissed.” 3. It was also submitted by the ld. AR that the issue is also covered by the decision of the coordinate bench of the Tribunal in the case of Rungta Mines Ltd., reported in [2015] 62 taxmann.com 73 (Kolkata-Trib), wherein in para 4.1 the Tribunal has applied the principle laid down by the Hon’ble Supreme Court in the case of Bikaner Gypsums Ltd., reported in [1991] 187 ITR 39, which reads as under :- 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 Gypsums Ltd. (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 law. The Tribunal had concluded as under : "15. In view of the above decision and the facts of the case before us, we hold that the learned Commissioner of Income- tax (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 section 37(1) of the Act. Therefore, we uphold the order of the learned Commissioner of Income-tax (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 the Revenue that the above decision has been reversed by the 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 learned Commissioner of Income-tax (Appeals). Accordingly we uphold the same. 4. We have considered rival submissions and perused the order of ld. CIT(A) at para 2.1 & 2.2. It is noticed that the ld. CIT(A) has followed judicial discipline in following the decision of the coordinate bench of the Tribunal in assessee’s own case for A.Y.2008-2009 in deleting the ITA No.352/CTK/2019 4 addition made by the AO. It is further noticed that the issue is squarely covered by the decision of the coordinate bench of the Tribunal in assessee’s own case for the A.Ys. 2002-2003, 2003-2004 & 2004-2005 (supra) as also the decision of the ITAT Kolkata Bench of the Tribunal in the case of Rungta Mines Ltd. (supra). This being so, we find no error in the order of the ld. CIT(A) on this issue which calls for any inference. This ground of revenue is dismissed. 5. In regard to ground No.3, it was submitted by ld. CIT-DR that the issue is against the action of the ld. CIT(A0in deleting the addition made on account of afforestation expenses which was treated as capital expenditure by the AO but was claimed as revenue expenditure by the assessee. It was the submission that the afforestation is required to be done to bring back the land to its original state in which it was before the mining operation were done. It was submitted that clearly a new capital asset came into existence and was of an enduring benefit and the same should be treated as capital expenditure. 6. In reply, ld. AR submitted that the issue is squarely covered by the decision of the coordinate bench of the Tribunal in the case of Orissa Forest Development Corporation Ltd. Vs. JCIT, reported in [2002] 801 ITD 300 (Cuttack), wherein it has been held that the expenditure towards afforestation of new trees over different years in areas from which the trees had been felled and exploited and sometimes in new areas also as per policies and directives of Central as well as State Government are to be treated as revenue expenditure and, therefore, allowable. It was the ITA No.352/CTK/2019 5 submission that the afforestation is a compulsory part of the mining process and it is an undertaking that the company has to give before it starts mining operation. Failure on the part of the assessee can lead to suspension of license itself. It was the submission that the expenditure are liable to be treated as revenue expenditure. It was the submission that the land did not belong to the assessee and the assessee gained no enduring benefit from the said land. 7. We have considered rival submissions and perused the order of the ld.CIT(A). 8. A perusal of the order of the ld. CIT(A) in para 3.2 shows that the ld. CIT(A) has taken into consideration the notifications of the Revenue & Disaster Management Department regarding the diversion of the forest land for non-forest purpose and she has categorically given a finding that the notification made compulsory for afforestation to be done. Clearly the land on which the afforestation is done nor the land on which is acquired for the purpose of afforestation did not belong to the assessee. Thus, the assessee does not derive any enduring benefit from the aforesaid activity. Further, ld. CIT(A) has recognised the fact that the expenditure is on account of revenue notification. This being so and also on the fact that the assessee is doing mining activities and it is a pre-condition that the assessee has to restore the land to its original form, once the mining activities are completed and the land not belonging to the assessee nor the assessee having any right over those trees planted during the afforestation, the assessee derives no enduring benefit. Further this issue ITA No.352/CTK/2019 6 is also covered by the decision of the coordinate bench of the Tribunal in the case of Orissa Forest Development Corporation Ltd.(supra). This being so, we find no error in the order of the ld. CIT(A) on this issue and the same stands confirmed. 9. In the result, appeal filed by the revenue is dismissed. Order dictated and pronounced in the open court on 21/06/2022. Sd/- (अरुण खोड़पऩया) (ARUN KHODPIA) Sd/- (जाजज माथन) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 21/06/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीऱाथी / The Appellant- M/s O r issa Min in g Corpo ration Ltd. , OMC House, Bhub anes war-01 2. प्रत्यथी / The Respondent- Pr.CIT-1, Bhubanes war 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. पिभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 6. गार्ज पाईऱ / Guard file. सत्यापऩत प्रयत //True Copy//