Asst. Commissioner of Income tax Cir. 1, Margao V. Shri Gangadhar Narsingdas Agrawal(HUF), Margao

ITA 426/PAN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6698 (ITAT-PANAJI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONAL SONKAVDE LD
• Assessee Lawyers: MOHAN B PYATI
• Keywords: Capital asset; Question of law; Commercial expediency; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 426 /PNJ/2013 (ASSESSMENT YEAR - 2009 - 10 ) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1 , MARGAO , GOA (APPELLANT) VS. SHRI GANGADHAR NARSINGDAS AGRAWAL (HUF) , ANAND BHUVAN, STATION ROAD, MARGAO - GOA. PAN: AABHG4804R (RESPONDENT) APPELLANT BY : SMT. SONAL SONKAVDE LD. DR. RESPOND ENT BY : SHRI MOHAN B. PYATI, CA. DATE OF HEARING : 20/03 /2014 DATE OF PRONOUNCEMENT : 09 /05 /2014 O R D E R PER: D.T. GARASIA THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A), BANGALORE, ORDER DATED 11 TH OCTOBER 2013 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE FOLLOWING GROUNDS ARE RAISED IN THIS APPEAL READ AS UNDER: 1. THE ORDER OF LD. CIT(A) - VI, BANGALORE IS OPPOSED TO LAW AND FACT OF THE CASE. 2. THE LD. CIT(A) - VI, BANGALORE HAS ERRED IN TREATING A SUM OF RS. 1,44,51,897/ - PAID TO DEPUTY CONSERVATOR OF FOREST TOWARDS COMPENSATORY AFORESTATION CHARGES FOR THE DEGRADED FOREST LAND AS REVENUE EXPENDITURE AS AGAINST THE CAPITAL EXPENDITURE AND DELETED THE ADDITION MADE BY THE AO. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN BUSINESS OF IRON ORE MINING AND POWER GENERATION THROUGH WIND MILLS. THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS. 1,44,51,897/ - TOWARDS PAYMENT MADE BY THE ASSESSEE TO DY. 2 . ITA NO. 426/PNJ/2013(A.Y 2009 - 10) ACIT VS. S HRI GANGADHAR NARSINGDAS AGRAWAL (HUF) CONSERVATOR OF FORESTS, GOA AS COMPENSATORY AFORESTATION CHARGES OVER THE DEGRADED FOREST LAND. T HE AO WAS OF THE VIEW THAT IT IS A CAPITAL EXPENDITURE AND HE HAS TREATED THIS EXPENDITURE AS A CAPITAL EXPENDITURE. THE ASSESSEE HAS CLAIMED BEFORE THE AO HE HAS P AID THE SAID SUM IN COMPLIANCE WITH THE ORDER OF SUPREME COURT DATED 04.01.2008 AS COMPENS ATORY AFORESTATION CHARGES FOR CARRYING OUT MINING ACTIVITIES WITHOUT THE APPROVAL UNDER THE FOREST CONSERVATOR ACT 1980. THEREFORE, IT MUST BE TREATED AS REVENUE EXPENDITURE. THE AO HAS TREAT THIS AS A REVENUE EXPENDITURE. 4. THE MATTER CARRIED TO CI T AND CIT HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER: 4. DURING THE COURSE OF APPEAL, THE APPELLANT HAS REITERATED ITS STAND TAKEN BEFORE THE ASSESSING OFFICER. THE APPELLANT HAS ALSO PRODUCED BEFORE ME, THE ORDERS OF HONBLE HIGH COURT OF BOMBAY AT GOA IN TAX APPEAL NO.66 OF 2012 IN THE CASE OF DCIT VS TIMBLO PVT LTD AND TAX APPEAL NO.15 OF 2012 IN THE CASE OF CIT VS DR PRAFULL R HEDE AND ANR. 5. IN THE SAID ORDER, I.E. IN THE HIGH COURT OF BOMBAY AT GOA, IN THE CASE OF DCIT VS TIMBLO PVT LTD, IN TA X APPEAL NO.66 OF 2012, A SIMILAR ISSUE WAS BEFORE THE HONBLE COURT WITH REGARD TO PAYMENT OF NET PRESENT VALUE BY THE MINING LESSEES AND THE COURT HAS HELD THAT : - THE ISSUE RAISED IN PARAGRAPH 5(D) IS COVERED AGAINST THE APPELLANT AND IN FAVOUR OF THE ASSESSEE IN VIEW OF THE ORDER OF THIS COURT DATED 6.022012 IN THE CASE OF THE COMMISSIONER OF INCOME TAX V/S DR PRAFULLA R HEDE AND ANR IN TXA NO.15/2012. IN THAT APPEAL ALSO THE ASSESSEE WAS DIRECTED TO PAY THE NET PRESENT VALUE FOR DIVERSION OF FOREST L AND FOR THE PURPOSE OF MINING. THE DIVISION BENCH HELD THE EXPENDITURE SO INCURRED TO BE FOR COMMERCIAL EXPEDIENCY AND THAT IT SHOULD THEREFORE NOT BE TREATED ASEXPENDITURE OF CAPITAL NATURE. IN THE REFERRED ORDER OF HONBLE HIGH COURT I.E. THE HIGH COURT OF BOMBAY AT GOA, IN TAX APPEAL NO.15 OF 2012 IN THE CASE OF CIT VS DR PRAFULL R HEDE AND ANR., THE HONBLE COURT WHI LE DECIDING THE ISSUE HELD THAT WE AGREE WITH THEM AND WE ARE OF THE OPINION THAT THEY DO NOT GIVE RISE TO ANY QUESTION OF LAW, REQ UIRING INTERFERENCE BY THIS COURT IN ITS APPELLATE POWERS. THE EXPENDITURE SO INCURRED I FOR COMMERCIAL EXPEDIENCY AND SHOULD NOT BE TREATED AS EXPENDITURE OF CAPITAL NATURE. IN VIEW OF THE ABOVE ORDERS OF THE HONBLE HIGH COURT, BOTH BEING OF THE JURI SDICTIONAL HIGH COURT WITH RESPECT TO THE CASES PERTAINING TO GOA, THE PAY MENT ON NET PRESENT VALUE AS AF ORESTATION CHARGES IN RESPECT OF THE MINING LESSEES ALREADY OBTAINED HAS BEEN DECIDED AND IS A COVERED ISSUE AND TREATED AS REVENUE EXPENDITURE. 3 . ITA NO. 426/PNJ/2013(A.Y 2009 - 10) ACIT VS. S HRI GANGADHAR NARSINGDAS AGRAWAL (HUF) FOLLOWING THE SAME, IN THIS CASE ALSO, THE EXPENDITURE OF 1,44,51,897/ - IS HELD AS REVENUE EXPENDITURE AND IS ALLOWED. 5. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. L OOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSE E HAS PAID THE COMPENSATION FOR USE OF FOREST AREA FOR MINING. FOREST ARE/LAND USED BY ASSESSEE IS A CAPITAL ASSET AND ANYTHING PAID FOR ACQUIRING A CAPITAL ASSET IS CAP ITAL EXPENDITURE AND NOT A REVENUE EXPENDITURE. BUT IN THIS CASE THE ASSESSEE HAS N OT ACQUIRED ANY CAPITAL ASSET BUT ASSESSEE HAS PAID THE AMOUNT OF COMPENSATION FOR CARRYING OUT MINING ACTIVITIES AND THE ASSESSEE HAS PAID COMPENSATION AS CHARGES FOR DEGRADING THE FOREST LAND AND THE EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MINING BUSINESS AND SAME HAS BEEN TREATED AS REVENUE EXPENDITURE BY CIT(A). WE FIND THAT SIMILAR ISSUE HAS COME UP BEFORE HONBLE BOMBAY HIGH COURT IN THE CASE OF DEPUTY CO MMISSIONER OF INCOME TAX VS. TIMBLO PVT. LTD. IN TAX APPEAL NO. 66/2012 WHEREIN THE QUESTION NO. D WHICH READ AS UNDER: D. WHETHER THE TRIBUNAL IS CORRECT IN LAW IN HOLDING THAT ONE TIME AMOUNT MADE TO THE FOREST DEPARTMENT TOWARDS NET PRESENT VALUE (NPV) AND AFORESTATION COMPENSATION IS NOT A CAPITAL EXPENDITURE BUT REVENU E EXPENDITURE? WHEREIN THE HONBLE HIGH COURT HAS DECIDED THIS ISSUE BY OBSERVING AS UNDER: 5. THE ISSUE RAISED IN PARAGRAPH 5(D) IS COVERED AGAINST THE APPELLANT AND IN FAVOUR OF THE ASSESSEE IN VIEW OF THE ORDER OF THIS COURT DATED 6/02/2012 IN THE CASE OF THE COMMISSIONER OF INCOME TAX V/S. DR. PRAFULLA R. HEDE AND A NR. IN TXA NO.15/2012. IN THAT APPEAL ALSO THE ASSESSEE WAS DIRECTED TO PAY THE NET PRESENT VALUE FOR DIVERSION OF FOREST LAND FOR THE PU RPOSE OF MINING. THE DIVISION BENCH HELD THE EXPE NDITURE SO INCURRED TO BE FOR COMMERCIAL EXPEDIENCY AND THAT IT SHOULD THEREFORE NOT BE TREATED AS EXPENDITURE OF CAPITAL NATURE. 6. IN VIEW OF THIS JUDGMENT QUESTION (D ) DOES NOT GIVE RISE TO A SUBSTANTIAL QUESTION OF LAW. FROM THIS ABOVE DECISION OF HONBLE BOMBAY HIGH COURT, WE ARE OF THE VIEW THAT COMMISSIONER OF INCOME TAX IS JUSTIFIED IN HOLDING THE PAYMENT ON NET PRESENT VALUE AS AFORESTATION CHARGES IN RESPECT OF THE MINING LESSEES ALREADY 4 . ITA NO. 426/PNJ/2013(A.Y 2009 - 10) ACIT VS. S HRI GANGADHAR NARSINGDAS AGRAWAL (HUF) OBTAINED HAS BEEN DECIDED AND IS TREATED AS REVENUE EXPENDITURE. THEREFORE, WE RE SPECTFULLY FOLLOWING THE SAME, DISMISS THE DEPARTMENTS APPEAL. 6. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 . 5 .2014. S D / - S D / - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 9 . 5 .2014 P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER