Appeal Details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 1996 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-10-2017
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2012-2013
Appeal Filed On
09-06-2017
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 534/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. M/S BARMER LIGNITE MINING CO. LTD. SARDAR PATEL MARG, C- SCHEME, JAIPUR CUKE VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AADCB 0574 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 510/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR CUKE VS. M/S BARMER LIGNITE MINING CORP. LTD. SARDAR PATEL MARG, C- SCHEME, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AADCB 0574 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL(CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. ROLLY AGARWAL(CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23.08.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 12/10/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THESE TWO CROSS APPEALS BY THE ASSESSEE AND THE REV ENUE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT (APPEALS)-2, JAIPU R DATED 29.03.2017 PERTAINING TO ASSESSMENT YEAR 2012-13. BOTH THE APPEALS WERE TAKE N UP TOGETHER AND ARE BEING DISPOSED OF BY WAY OF CONSOLIDATED ORDER FOR THE SA KE OF BREVITY AND CONVENIENCE. 2 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. ITA NO. 534/JP/2017 (ASSESSEE) 2. FIRST, WE TAKE ASSESSEES APPEAL IN ITA NO. 534 /JP/2017 PERTAINING TO THE A.Y. 2012-13. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF LD. ASSESSING OFF ICER IN TAXING INTEREST RECEIPT OF R. 12,64,01,627/- CREDITED TO CAPITAL WO RK IN PROCESS (CWIP), UNDER THE HEAD INCOME FROM OTHER SOURCE AS AGAINST THE CLAIM OF ASSESSEE THAT THE SAME SHOULD BE REDUCED FROM EX PENDITURE INCURRED DURING CONSTRUCTION PERIOD. 2. WITHOUT PREJUDICE TO THE GROUND NO. 1, IN THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRM ING THE ACTION OF LD. ASSESSING OFFICER IN NOT ALLOWING DEDUCTION OF THE INTEREST EXPENSES OF RS. 17.94 CRORES, DEBITED TO THE CWIP, AGAINST THE SAID INTEREST INCOME ASSESSED BY HIM, THOUGH THERE BEING A DIRECT NEXUS OF INTEREST PAID ON BORROWED FUNDS WITH THE SAID INTEREST RECEIPT. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF LD. ASSESSING OFF ICER IN DISALLOWING THE MANDATORY CSR EXPENSES OF RS. 95,08,197/- PROVI DED AS PER TERMS OF ENVIRONMENT CLEARANCE GRANTED BY MINISTRY OF ENV IRONMENT & FORESTS (MOEF) WHICH WERE INCURRED WHOLLY AND EXCLUSIVELY F OR PURPOSE OF BUSINESS. 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF LD. ASSESS ING OFFICER IN DISALLOWING THE CLAIM OF THE APPELLANT FOR AMORTIZA TION OF SURFACE RIGHTS AMOUNTING TO RS. 8,18,38,172/-. 5. WITHOUT PREJUDICE TO THE GROUND NO. 4, LD. CIT(A ) ERRED IN NOT ALLOWING DEPRECIATION ON THE SURFACE RIGHTS BEING INTANGIBL E RIGHTS ACQUIRED BY THE APPELLANT. 6. WITHOUT PREJUDICE TO THE GROUND NO. 4 & 5 ABOVE, LD. CIT(A) ERRED IN NOT ALLOWING DEDUCTION U/S 35E OF THE ACT IN RESPEC T OF EXPENSES INCURRED BY THE APPELLANT. 7. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF LD. ASSESS ING OFFICER IN DISALLOWING DEPRECIATION CLAIM OF RS. 42,49,575 IN RESPECT OF INTANGIBLE ASSET IN THE NATURE OF BUSINESS RIGHTS. 3 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. 8. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR MODIFY ANY GROUND OF APPEAL. 9. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT, T HE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS FRAMED VIDE ORDER DATED 25.02.2015. WHILE FRAMING THE ASSESSMENT, TH E AO MADE ADDITION OF RS. 63, 44,181/- ON ACCOUNT OF DISALLOWANCE OF LAND TAX PAI D ON THE GROUND THAT THE ASSESEE HIMSELF HAD STATED THAT THE AMOUNT HAD BEEN DEPOSIT ED UNDER THE DIRECTION OF THE COURT AND THE MATTER WAS SUB-JUDICE BEFORE THE HON BLE RAJASTHAN HIGH COURT. HENCE, THE ASSESSING OFFICER MADE ADDITION ON ACCOU NT OF DISALLOWANCE OF MINE CLOSURE CHARGES OF RS. 4,70,80,000/-, THE ASSESSING OFFICER ALSO MADE ADDITION ON ACCOUNT OF INTEREST ON DEPOSITS OF RS. 13,40,90,000 /-, THE ASSESSING OFFICER MADE OTHER DISALLOWANCE IN RESPECT OF CORPORATE SOCIAL R ESPONSIBILITY EXPENDITURE OF RS. 9508197/-, DISALLOWANCE ON LEGAL AND PROFESSIONAL E XPENSES OF RS. 44,81,910/-, UPFRONT FEES PAID OF RS. 52,58,106/-, LEGAL EXPENS ES PAID TO INDUSTRIAL DEVELOPMENT FINANCIAL CORPORATION LIMITED OF RS. 1, 94,94,460/-, DIFFERENCE IN CLAIM OF DEPRECIATION FOR RS. 8,18,38,172/-, DISALLOWANCE ON DEPRECIATION ON INTANGIBLE ASSETS OF RS. 42,49,575/-, ADJUSTMENT U/S 145A OF T HE ACT OF RS. 5,33,18,202/-. AGAINST THIS, THE ASSESSEE PREFERRED AN APPEAL BEFO RE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, PARTLY ALLOWED THE APP EAL. WHILE PARTLY ALLOWING THE APPEAL, THE LD. CIT(A) DELETED THE ADDITION MADE ON ACCOUNT OF LAND TAX PAID AND DELETED THE ADDITION MADE ON ACCOUNT OF MINE-CLOSUR E CHARGES, CONFIRMED THE ADDITION MADE ON ACCOUNT OF INTEREST CREDITED TO TH E CAPITAL WORK IN PROGRESS OF RS. 4 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. 13,40,90,000/-, CONFIRMED THE ADDITION MADE ON ACCO UNT OF DISALLOWANCE OF CORPORATE SOCIAL RESPONSIBILITY EXPENDITURE OF RS. 9508197/-, CONFIRMED THE ADDITION OF RS. 8,18,3,172/-, CONFIRMED THE DEPRECIATION ON INTANGIBLE ASSETS OF RS. 42,49,575/-. HOWEVER, DELETED THE ADDITION MADE ON ACCOUNT OF ADJUSTMENT TO THE CLOSING STOCK OF U/S 145A OF RS. 5,33,18,202/-. 4. AGGRIEVED BY THIS, BOTH ASSESSEE AND REVENUE ARE IN SEPARATE APPEAL. 5. THE GROUND NO. 1 AND 2 ARE INTER-RELATED AND ARE AGAINST THE TAXING INTEREST RECEIPT. 5.1 LD. COUNSEL FOR THE ASSESSEE STRONGLY URGED THA T THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TAXING THE INTEREST RECEIPTS. LD. COUNSEL REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. FOR THE SAKE O F CLARITY AND CONVENIENCE THE WRITTEN SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED HEREIN BELOW:- SUBMISSION:- 1. IT IS A FACT ON RECORD THAT ALMOST THE ENTIRE FUNDS OF THE ASSESSEE ARE BORROWED FUNDS (PB 324) . FROM THE BALANCE SHEET IT CAN BE NOTED THAT THE S HARE CAPITAL OF THE ASSESSEE IS ONLY RS.20 CRORES. OUT OF THIS C APITAL, 51% CAPITAL (I.E. RS.10.20 CRORES) IS ALLOTTED TO RSMML IN FORM OF SH ARES ISSUED FOR CONSIDERATION OTHER THAN CASH AND 49% CAPITAL (I.E. RS.9.80 CRORE S) IS ALLOTTED TO RWPL IN CASH. THE BORROWED FUNDS ARE RS.1220.34 CRORES WHICH IS B ORROWING FROM THE BANKS OR THE SUBORDINATE LOANS FROM RWPL. THUS, THE ENTIRE P ROJECT HAS BEEN FUNDED OUT OF INTEREST BEARING FUNDS. THE TERM LOAN HAS BEEN O BTAINED FROM BANKERS/ FINANCIAL INSTITUTIONS AT AN AVERAGE BORROWING COST OF 13% AND THE SUBORDINATED LOAN HAS BEEN TAKEN AT A RATE OF 10%. 2. IT IS THE ABOVE BORROWED FUNDS WHICH HAVE BEEN UTIL ISED FOR DEPOSITING IN ESCROW ACCOUNT FOR THE PURPOSE OF ACQUIRING LAND BY RSMML AND INTEREST PAID ON SUCH BORROWING HAS BEEN CHARGED TO CWIP. ON THE AMOUNT S O DEPOSITED IN THE 5 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. ESCROW ACCOUNT IN THE NAME OF RSMML, THE INTEREST R ECEIVED IS INEXTRICABLY LINKED TO THE COST OF THE PROJECT AND THEREFORE, SU CH INTEREST INCOME CANNOT BE CHARGED TO TAX AS INCOME FROM OTHER SOURCES BUT NEE DS TO BE REDUCED FROM THE COST OF THE PROJECT. EVEN THE GOVERNMENT IN ITS LET TER DT. 11.07.2011 (PB 193) HAS STATED THAT EXPENDITURE RELATED TO LAO AND EXPE NDITURE INCURRED BY RSMML CAN BE ADJUSTED AGAINST THE INTEREST ACCRUED ON THE AMOUNT DEPOSITED BY THE ASSESSEE. THUS, IT IS A CASE OF BORROWED FUNDS ADVA NCED TO RSMML (THE ENTITY AUTHORIZED TO ACQUIRE THE LAND FOR THE ASSESSEE FOR ITS MINING PROJECT AS PER IMPLEMENTATION AGREEMENT) YIELDING INTEREST INCOME TILL IT IS UTILIZED TOWARDS THE PROJECT. THE CASE OF THE ASSESSEE IS THEREFORE, DIR ECTLY COVERED BY THE RATIO OF DECISION OF SUPREME COURT IN CASE OF CIT VS. BOKARO STEELS LTD. 236 ITR 315 WHERE AT PARA 5, IT IS HELD AS UNDER:- THE ACTIVITIES OF THE ASSESSEE IN CONNECTION WITH ALL THREE RECEIPTS VIZ. RENT CHARGED BY THE ASSESSEE TO ITS CONTRACTORS FOR HOUS ING WORKERS AND STAFF EMPLOYED BY THE CONTRACTOR FOR THE CONSTRUCTION WOR K OF THE ASSESSEE INCLUDING CERTAIN AMENITIES GRANTED TO THE STAFF BY THE ASSES SEE; SECONDLY, HIRE CHARGES FOR PLANT AND MACHINERY WHICH WAS GIVEN TO THE CONTRACT ORS BY THE ASSESSEE FOR USE IN THE CONSTRUCTION WORK OF THE ASSESSEE AND THIRDL Y, INTEREST FROM ADVANCES MADE TO THE CONTRACTORS BY THE ASSESSEE FOR THE PUR POSE OF FACILITATING THE WORK OF CONSTRUCTION ARE DIRECTLY CONNECTED WITH OR ARE INCIDENTAL TO THE WORK OF CONSTRUCTION OF ITS PLANT UNDERTAKEN BY THE ASSESSE E. BROADLY SPEAKING, THESE PERTAIN TO THE ARRANGEMENTS MADE BY THE ASSESSEE WI TH ITS CONTRACTORS PERTAINING TO THE WORK OF CONSTRUCTION. TO FACILITA TE THE WORK OF THE CONTRACTOR, THE ASSESSEE PERMITTED THE CONTRACTOR TO USE THE PR EMISES OF THE ASSESSEE FOR HOUSING ITS STAFF AND WORKERS ENGAGED IN THE CONSTR UCTION ACTIVITY OF THE ASSESSEES PLANT. THIS WAS CLEARLY TO FACILITATE TH E WORK OF CONSTRUCTION. HAD THIS FACILITY NOT BEEN PROVIDED BY THE ASSESSEE, THE CON TRACTORS WOULD HAVE HAD TO MAKE THEIR OWN ARRANGEMENTS AND THIS WOULD HAVE BEE N REFLECTED IN THE CHARGES OF THE CONTRACTORS FOR THE CONSTRUCTION WORK. INSTE AD, THE ASSESSEE HAS PROVIDED THESE FACILITIES. THE SAME IS TRUE OF THE HIRE CHAR GES FOR PLANT AND MACHINERY WHICH WAS GIVEN BY THE ASSESSEE TO THE CONTRACTOR F OR THE ASSESSEES CONSTRUCTION WORK. THE RECEIPTS IN THIS CONNECTION ALSO GO TO COMPENSATE THE ASSESSEE FOR THE WEAR AND TEAR ON THE MACHINERY. TH E ADVANCES WHICH THE ASSESSEE MADE TO THE CONTRACTOR TO FACILITATE THE C ONSTRUCTION ACTIVITY OF PUTTING TOGETHER A VERY LARGE PROJECT WAS AS MUCH TO ENSURE THAT THE WORK OF THE CONTRACTORS PROCEEDED WITHOUT ANY FINANCIAL HITCHES AS TO HELP THE CONTRACTORS. THE ARRANGEMENTS WHICH WERE MADE BETWEEN THE ASSESS EE-COMPANY AND THE CONTRACTORS PERTAINING TO THESE THREE RECEIPTS ARE ARRANGEMENTS WHICH ARE INTRINSICALLY CONNECTED WITH THE CONSTRUCTION OF IT S STEEL PLANT. THE RECEIPTS HAVE 6 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. BEEN ADJUSTED AGAINST THE CHARGES PAYABLE TO THE CO NTRACTORS AND HAVE GONE TO REDUCE THE COST OF CONSTRUCTION. THEY HAVE, THEREFO RE, BEEN RIGHTLY HELD AS CAPITAL RECEIPTS AND NOT INCOME OF THE ASSESSEE FRO M ANY INDEPENDENT SOURCE. 3. IN THE ABOVE DECISION, HONBLE SUPREME COURT DISTIN GUISHED THE DECISION IN CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. C IT BY GIVING THE FOLLOWING FINDINGS AT PARA 7 OF HIS ORDER:- THE APPELLANT, HOWEVER, RELIED UPON THE DECISION O F THIS COURT IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT (SUPRA). THAT CASE DEALT WITH THE QUESTION WHETHER INVESTMENT OF BORROWED FUNDS PRIOR TO COMME NCEMENT OF BUSINESS, RESULTING IN EARNING OF INTEREST BY THE ASSESSEE WO ULD AMOUNT TO THE ASSESSEE EARNING ANY INCOME. THIS COURT HELD THAT IF A PERSO N BORROWS MONEY FOR BUSINESS PURPOSES, BUT UTILIZES THAT MONEY TO EARN INTEREST, HOWEVER TEMPORARILY, THE INTEREST SO GENERATED WILL BE HIS INCOME. THIS INCO ME CAN BE UTILIZED BY THE ASSESSEE WHICHEVER WAY HE LIKES. MERELY BECAUSE HE UTILISED IT TO REPAY THE INTEREST ON THE LOAN TAKEN, WILL NOT MAKE THE INTER EST INCOME AS A CAPITAL RECEIPT. THE DEPARTMENT RELIED UPON THE OBSERVATIONS MADE IN THAT JUDGMENT (AT P. 179) TO THE EFFECT THAT IF THE COMPANY, EVEN BEFORE IT C OMMENCES BUSINESS, INVESTS SURPLUS FUNDS IN ITS HANDS FOR PURCHASE OF LAND OR HOUSE PROPERTY AND LATER SELLS IT AT PROFIT, THE GAIN MADE BY THE COMPANY WILL BE ASSESSABLE UNDER THE HEAD CAPITAL GAINS. SIMILARLY, IF A COMPANY PURCHASES RENTED HOUSE AND GETS RENT, SUCH RENT WILL BE ASSESSABLE TO TAX UNDER S. 22 AS INCOME FROM HOUSE PROPERTY. LIKEWISE, THE COMPANY MAY HAVE INCOME FROM OTHER SO URCES. THE COMPANY MAY ALSO, AS IN THAT CASE, KEEP THE SURPLUS FUNDS IN SH ORT-TERM DEPOSITS IN ORDER TO EARN INTEREST. SUCH INTEREST WILL BE CHARGEABLE UND ER S. 56 OF THE IT ACT. THIS COURT ALSO EMPHASISED THE FACT THAT THE COMPANY WAS NOT BOUND TO UTILISE THE INTEREST SO EARNED TO ADJUST IT AGAINST THE INTERES T PAID ON BORROWED CAPITAL. THE COMPANY WAS FREE TO USE THIS INCOME IN ANY MANNER I T LIKED. HOWEVER, WHILE INTEREST EARNED BY INVESTING BORROWED CAPITAL IN SH ORT-TERM DEPOSITS IS AN INDEPENDENT SOURCE OF INCOME NOT CONNECTED WITH THE CONSTRUCTION ACTIVITIES OR BUSINESS ACTIVITIES OF THE ASSESSEE, THE SAME CANNO T BE SAID IN THE PRESENT CASE WHERE THE UTILISATION OF VARIOUS ASSETS OF THE COMP ANY AND THE PAYMENTS RECEIVED FOR SUCH UTILISATION ARE DIRECTLY LINKED W ITH THE ACTIVITY OF SETTING UP THE STEEL PLANT OF THE ASSESSEE. THESE RECEIPTS ARE INE XTRICABLY LINKED WITH THE SETTING UP OF THE CAPITAL STRUCTURE OF THE ASSESSEE-COMPANY . THEY MUST, THEREFORE, BE VIEWED AS CAPITAL RECEIPTS GOING TO REDUCE THE COST OF CONSTRUCTION. IN THE CASE OF CHALLAPALLI SUGARS LTD. VS. CIT 1974 CTR (SC) 30 9 : (1975) 98 ITR 167 (SC) : TC 17R.834, THIS COURT EXAMINED THE QUESTION WHETHE R INTEREST PAID BEFORE THE COMMENCEMENT OF PRODUCTION BY A COMPANY ON AMOUNTS BORROWED FOR THE ACQUISITION AND INSTALLATION OF PLANT AND MACHINERY WOULD FORM A PART OF THE ACTUAL COST OF THE ASSET TO THE ASSESSEE WITHIN THE MEANING OF THAT EXPRESSION IN S. 10(5) OF THE INDIAN IT ACT, 1922, AND WHETHER TH E ASSESSEE WILL BE ENTITLED TO DEPRECIATION ALLOWANCES AND DEVELOPMENT REBATE WITH REFERENCE TO SUCH INTEREST 7 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. ALSO. THE COURT HELD THAT THE ACCEPTED ACCOUNTANCY RULE FOR DETERMINING COST OF FIXED ASSETS IS TO INCLUDE ALL EXPENDITURE NECESSAR Y TO BRING SUCH ASSETS INTO EXISTENCE AND TO PUT THEM IN WORKING CONDITION. IN CASE MONEY IS BORROWED BY A NEWLY STARTED COMPANY WHICH IS IN THE PROCESS OF CO NSTRUCTING AND ERECTING ITS PLANT, THE INTEREST INCURRED BEFORE THE COMMENCEMEN T OF PRODUCTION ON SUCH BORROWED MONEY CAN BE CAPITALISED AND ADDED TO THE COST OF THE FIXED ASSETS CREATED AS A RESULT OF SUCH EXPENDITURE. BY THE SAM E REASONING IF THE ASSESSEE RECEIVES ANY AMOUNTS WHICH ARE INEXTRICABLY LINKED WITH THE PROCESS OF SETTING UP ITS PLANT AND MACHINERY, SUCH RECEIPTS WILL GO TO R EDUCE THE COST OF ITS ASSETS. THESE ARE RECEIPTS OF A CAPITAL NATURE AND CANNOT B E TAXED AS INCOME. 4. THE AO INSPITE OF THE DECISION OF BOKARO STEEL LTD. CITED BEFORE HIM HAS NOT GIVEN ANY FINDING AS TO HOW THE RATIO OF THIS DECIS ION IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. INFACT THE AO HIMSELF HAS OBSERVED THAT THERE WAS NO MOTIVE OF THE ASSESSEE TO INVEST THE FUNDS WITH AN INTENTION TO EARN THE INCOME BY WAY OF INTEREST THOUGH HE HAS INCORRECTLY MENTIONED THAT THE ESCROW ACCOUNT IS MAINTAINED BY RSMML ON BEHALF OF THE ASS ESSEE. THE LD. CIT(A) THOUGH OBSERVED THAT IN CASE OF BOKARO STEEL LTD., INTEREST RECEIVED FROM CONTRACTORS ON ADVANCES GIVEN TO HIM WAS HELD TO DE DUCTIBLE FROM THE PROJECT COST BECAUSE THE SAME WAS DIRECTLY RELATABLE TO THE EXECUTION OF THE CONTRACT FOR THE SUCCESSFUL COMPLETION OF THE PROJECT BUT STILL DID NOT PLACE ANYTHING ON RECORD AS TO HOW THE AMOUNT GIVEN TO RSMML FOR ACQUIRING T HE MINING RIGHTS IN THE LAND ON WHICH INTEREST IS REFUNDED BY RSMML TO THE ASSES SEE IS NOT INEXTRICABLY LINKED TO THE PROJECT. 5. SIMILAR ISSUE HAS BEEN DECIDED BY HONBLE ITAT, JAIPUR BENCH IN CASE OF ROAD INFRASTRUCTURE DEVELOPMENT COMPANY OF RAJASTHA N LTD. VS. DCIT IN ITA NO.628/JP/14 ORDER DT. 11.08.2016 WHERE AFTER CONSIDERING THE VARIOUS DECISIONS OF SUPREME COURT AND HIGH COURT O N THIS ISSUE, IT WAS HELD AS UNDER:- 2.18 FROM THE ABOVE, IT IS EVIDENT THAT THERE ARE TWO SETS OF JUDGMENTS OF HONBLE SUPREME COURT, PROCEEDING ON DIFFERENT LINE S OF REASONINGS. THE HONBLE DELHI HIGH COURT IN CASE OF INDIAN OIL PANIPAT CONS ORTIUM LTD (SUPRA) HAS CONSIDERED AND INTERPRETED THE DECISIONS OF HONBLE SUPREME COURT IN CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS (SUPRA) AS WELL AS BOKARO STEEL L2TD 8 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. (SUPRA). AFTER ANALYZING BOTH THE DECISIONS OF HON BLE SUPREME COURT, IT HELD THAT THE TEST WHICH PERMEATES THROUGH THE JUDGMENT OF THE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD.S CAS E (SUPRA) IS THAT IF FUNDS HAVE BEEN BORROWED FOR SETTING UP OF A PLANT AND IF THE FUNDS ARE SURPLUS AND THEN BY VIRTUE OF THAT CIRCUMSTANCE THEY ARE INVESTED IN FIXED DEPOSITS THE INCOME EARNED IN THE FORM OF INTEREST WILL BE TAXABLE UNDE R THE HEAD INCOME FROM OTHER SOURCES. ON THE OTHER HAND THE RATIO OF THE SUPREM E COURT JUDGMENT IN BOKARO STEEL LTD.S CASE (SUPRA) TO OUR MIND IS THAT IF IN COME IS EARNED, WHETHER BY WAY OF INTEREST OR IN ANY OTHER MANNER ON FUNDS WHICH A RE OTHERWISE INEXTRICABLY LINKED TO THE SETTING UP OF THE PLANT, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES. 2.19 THE FACTS IN THE INSTANT CASE ARE PARI MATERIA WITH THE FACTS OF THE INDIAN OIL PANIPAT (SUPRA) AND THE RATIO DECIDENDI OF HON BLE DELHI HIGH COURT IN THAT CASE WILL SQUARELY APPLY TO THE FACTS OF THE ASSESS EE. IN THE INSTANT CASE, UNDISPUTEDLY, THE FUNDS HAVE BEEN BORROWED FOR THE SPECIFIC PURPOSE OF EXECUTION OF THE MEGA ROAD PROJECTS AND AS PER THE LOAN AGREEMENT EXECUTED BETWEEN THE CONSORTIUM OF BANKERS AND THE ASSESSEE DATED 23.11.2005, ALL THE DISBURSEMENTS SHALL BE DEPOSITED IN THE TRUST AND R ETENTION ACCOUNT WHICH SHALL BE SUBJECT TO STRICT CONTROL AND VERIFICATION BY TH E SENIOR LENDERS AND ALL DISBURSEMENTS SHALL BE UTILIZED SOLELY FOR THE PURP OSES OF IMPLEMENTATION OF THE PROJECT AND NO OTHER PURPOSE. THE FUNDS ARE THUS IN EXTRICABLY LINKED TO THE SETTING UP OF THE MEGA ROAD PROJECTS AND INTEREST E ARNED ON SUCH BORROWED FUNDS INFUSED IN THE BUSINESS COULD NOT BE CLASSIFI ED AS INCOME FROM OTHER SOURCES. WE ALSO NOTE A DISTINGUISHING FEATURE IN T HE INSTANT CASE THAT THE ASSESSEE IS NOT AT LIBERTY TO USE THE INTEREST SO E ARNED AS PER ITS WILL AND DISCRETION UNLIKE THE CASE IN TUTICORIN ALKALI CHEM ICALS & FERTILIZERS (SUPRA) AND THE INTEREST HAS TO BE USED SOLELY FOR THE PURPOSES OF IMPLEMENTATION OF THE SPECIFIED PROJECTS ONLY. THE IMPUGNED INTEREST RECE IPT OF RS. 35,39,479/- ON SUCH BORROWED FUNDS RELATES TO THE MEGA ROAD PROJECTS/ST RETCHES WHICH WERE UNDER CONSTRUCTION AND THE COMPLETED ROAD PROJECTS/STRETC HES UPTO THE DATE OF COMMENCEMENT OF COMMERCIAL OPERATIONS. THEREFORE, T HE INTEREST RECEIVED PRIOR TO COMMENCEMENT OF COMMERCIAL OPERATIONS OF THE SPE CIFIED MEGA ROAD PROJECTS WILL BE IN THE NATURE OF CAPITAL RECEIPT AND WILL B E REQUIRED TO BE SET OFF AGAINST THE PRE-OPERATIVE EXPENDITURE CAPITALIZED UNDER THE HEAD CAPITAL WORK IN PROGRESS AND THE SAME CANNOT BE BROUGHT TO TAX UND ER THE HEAD INCOME FROM OTHER SOURCES. 6. THE DECISIONS RELIED BY LD. CIT(A) REPORTED IN 31 T AXMANN.COM 165 (HYD.), 16 TAXMANN.COM 242 (BOM.), 234 ITR 412 (SC) AND 248 IT R 110 (SC) ALL RELATED TO THE CASE OF INTEREST EARNED ON SURPLUS FUND OUT OF THE BORROWED CAPITAL NOT REQUIRED FOR THE PROJECT. THESE CASES ARE THEREFORE , NOT APPLICABLE AS IN THE CASE OF THE ASSESSEE, IT HAS NOT INVESTED THE FUNDS OUT OF THE BORROWED CAPITAL RATHER THE BORROWED CAPITAL IS PROVIDED TO RSMML, THE CONT RACTOR, TO ACQUIRE THE MINING 9 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. RIGHTS IN LAND AND ON THE FUNDS SO PROVIDED FOR THE PROJECT, INTEREST IS RECEIVED FROM RSMML AS REIMBURSEMENT WHICH IS INEXTRICABLY L INKED TO THE COST OF THE PROJECT. THEREFORE, SUBSEQUENT DECISION OF SUPREME COURT IN CASE OF CIT VS. KARNAL CO-OPERATIVE SUGAR MILLS LTD. 243 ITR 2 WHERE IT IS HELD THAT INTEREST EARNED DURING CONSTRUCTION PERIOD ON MONEY DEPOSITED TO OPEN LETTER OF CREDIT FOR PURCHASE OF MACHINERY IS INCIDENTAL TO A CQUISITION OF ASSETS AND HAS TO BE CAPITALISED AND THE 3 JUDGES DECISION OF SUPREME COURT IN CASE OF CIT VS. KARNATAKA POWER CORPORATION 247 ITR 268 WHERE IT IS HELD THAT HIRE CHARGES REALISED BY ASSESSEE FOR PLANT AND MACHINER Y GIVEN TO CONTRACTORS FOR USE IN CONSTRUCTION WORK AND INTEREST CHARGED ON AD VANCES MADE TO THEM WERE CAPITAL RECEIPTS WHICH REDUCED THE CAPITAL COST, IS APPLICABLE. 7. IT IS SUBMITTED THAT HONBLE RAJASTHAN HIGH COURT I N CASE OF CIT VS. BHAWAL SYNTHETICS INDIA LTD. REPORTED IN 152 DTR 273 AT PA RA 6 OF THE ORDER HELD THAT WHERE FD IS MADE FOR OBTAINING THE LETTER OF CREDIT TO PURCHASE MACHINERY, THE INTEREST EARNED ON FDR IS NOTHING BUT INCOME FROM O THER SOURCES. HOWEVER, IN THIS CASE, NOBODY APPEARED FROM THE SIDE OF THE ASS ESSEE AND THE SUBSEQUENT DECISION OF SUPREME COURT IN CASE OF CIT VS. KARNAL CO-OPERATIVE SUGAR MILLS LTD. WHERE IT WAS HELD THAT INTEREST EARNED BY THE ASSES SEE ON DEPOSITS AGAINST MARGIN MONEY REQUIRED FOR OBTAINING LETTER OF CREDI T OR BANK GUARANTEE, ETC. IS NOT TAXABLE INCOME BUT A CAPITAL RECEIPT AND THE SA ME BE ADJUSTED AGAINST THE PROJECT COST, WAS NOT BROUGHT TO ITS NOTICE. THUS, THIS DECISION OF HONBLE RAJASTHAN HIGH COURT IS PER INCURIAM. 8. WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT TH ERE IS A DIRECT NEXUS OF THE BORROWED FUNDS HAVING BEEN ADVANCED TO RSMML (PB 209, 308 TO 317 & 211 TO 262) FOR ACQUIRING THE MINING RIGHT IN THE LAND AND THE REFUND OF INTEREST BY IT TO THE ASSESSEE ON THE INTEREST EARNED BY IT ON SUC H FUNDS. THE INTEREST COST INCURRED BY THE ASSESSEE ON SUCH BORROWING IS RS.17 .94 CRORES WHEREAS THE INTEREST EARNED IS ONLY RS.12.64 CRORES. THEREFORE, IF SUCH INTEREST RECEIVED IS TAXED AS INCOME FROM OTHER SOURCES, THE INTEREST EX PENDITURE INCURRED IS 10 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. ALLOWABLE U/S 57. THE LD. CIT(A) WITHOUT APPRECIATI NG THE EVIDENCES PRODUCED BEFORE HER HAS INCORRECTLY HELD THAT DIRECT NEXUS O F INTEREST BEARING FUNDS TO THE SPECIFIC DEPOSITS WHICH EARNED INTEREST HAS NOT BEE N PROVED. IN VIEW OF ABOVE, THE ADDITION OF RS.12,64,01,627/- CONFIRMED BY LD. CIT(A) BY HOLDING THAT INTEREST INCOME IS TO BE TAXED AS INCO ME FROM OTHER SOURCES BE DIRECTED TO BE DELETED. 5.2 LD. D/R OPPOSED THE SUBMISSIONS AND SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. LD. D/R SUBMITTED THAT, ADMITTEDLY, THE INT EREST IS EARNED ON UNUTILIZED AMOUNT LYING WITH RSMML. AS PER THE ASSESSEES OWN SHARING THIS AMOUNT IS PAID TO THE ASSESSEE ON THE DIRECTION OF RAJASTHAN GOVERNME NT. 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW . THE ASSESSING OFFICER MADE ADDITION ON THE BASIS THAT THE ASSESSEE EARNED INTE REST ON FDR OF SUM OF RS. 13,40,90,000/-. THIS AMOUNT WAS CREDITED BY THE AS SESSEE COMPANY AS CAPITAL WORK IN PROGRESS ON THE GROUND THAT IT IS PURELY WITH RE GARD TO MINING PROJECT AS CORRESPONDING INTEREST COST INCURRED BY THE COMPANY FOR EARNING SUCH INTEREST IS ALSO FORMING PART OF CAPITAL WORK IN PROGRESS IN SHORT C WIP. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THIS ACT OF THE AUTHORITIES BELOW IS CONTRARY TO THE JUDGMENTS OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF THE CIT VS. BOKARO STEELS LTD. 236 ITR 315. LD. CIT(A) WHO CONFIRMED T HIS ADDITION BY FOLLOWING THE JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICAL & FERTILIZERS LTD. VS. 227 ITR 172. FURTHER, LD. CIT (A) FOLLOWED THE JUDGMENTS OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT V S. AUTOCAST LTD. 248 ITR 110 11 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. (SC). THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE AMOUNT SO CREDITED IS INTEREST EARNED ON MONEY WHICH WAS GIVEN BY THE ASS ESSEE TO RAJASTHAN STATE MINES AND MINERALS LTD. IN SHORT RSMML A GOVERNMENT OF RA JASTHAN UNDERTAKING. WE ARE UNABLE TO ACCEPT THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE, IN VIEW OF THE JUDGMENTS OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT VS. TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA), CIT VS . AUTOCAST LTD. (SUPRA) HONBLE SUPREME COURT IN THE CASE OF CIT VS. AUTOCAST LTD. 248 ITR 110 (SC) FOLLOWING THE RATIO LAID IN THE CASE OF M/S TUTICORIN ALKALI CHEM ICALS & FERTILIZERS VS. CIT HELD AS UNDER:- THE QUESTION THAT WAS BEFORE THE HIGH COURT (SEE [ 1998] 229 ITR 789) READ THUS (PAGE 790) WHETHER, ON THE FACT AND IN THE CIRCUMSTANCES OF T HE CASE, THE INTEREST INCOME IS NOT ASSESSABLE TO TAX IN THE HAN DS OF THE APPELLANT? THE HIGH COURT ANSWERED THE QUESTION AGAINST THE RE VENUE. THE REVENUE IS IN APPEAL BY SPECIAL LEAVE. IT IS NOT NOW IN DISPUTE THAT THE APPEAL MUST SUCCE ED, HAVING REGARD TO THE JUDGMENT OF THIS COURT IN TUTICORIN ALKALI CHEM ICALS AND FERTILIZERS LTD. VS. CIT [1997] 227 ITR 172. THE CIVIL APPEAL IS ACCORDINGLY ALLOWED. THE JUDGM ENT AND ORDER UNDER CHALLENGE IS SET ASIDE. THE QUESTION IS ANSWERED I N THE NEGATIVE AND IN FAVOUR OF THE REVENUE. IN OTHER WORDS, THE INTEREST INCOM E IS ASSESSABLE TO TAX IN THE HANDS OF THE ASSESSEE. NO ORDER AS TO COSTS. 5.4 IN VIEW OF THE ABOVE JUDGMENT, THE SUBMISSIONS OF THE ASSESSEE THAT INTEREST EARNED ON DEPOSIT SHOULD NOT BE TAXED AS THE INCOME FROM OTHER SOURCES IS DEVOID OF ANY MERIT, HENCE REJECTED. 12 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. ANOTHER SUBMISSIONS OF THE ASSESSEE AS GROUND NO. 2 , IT IS CONTENDED BY THE ASSESSEE THAT IN EARNING THIS INCOME THE ASSESSEE H AS INCURRED EXPENDITURE THAT WHICH ALLOWABLE U/S 57 OF THE ACT. IT IS CONTENDED THAT THE INTEREST COST INCURRED BY THE ASSESSEE OF SUCH BORROWING IS RS. 17.94 CRORES WHEREAS THE INTEREST EARNED IS ONLY RS. 12.64 CRORES. WE HAVE GIVEN OUR THOUGHTFU L CONSIDERATION TO THIS SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE HAS PER SECTION 57 OF THE ACT. AS PER SECTION 57 OF THE ACT INCOME CHARGEABLE UNDER THE H EAD INCOME FROM THE OTHER SOURCES SHALL BE COMPUTED AFTER MAKING THE DEDUCTI ONS OF EXPENDITURE (NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE) LAID OUT OR EXPE NDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME. THEREFORE, THE ASESSEE IS REQUIRED TO DEMONSTRATE F OR THE PURPOSE OF CLAIMING DEDUCTION OF EXPENDITURE THAT SUCH EXPENDITURE WAS WHOLLY AND EXCLUSIVELY INCURRED OR EXPENDED FOR EARNING SUCH INCOME. THE ASSESSEE I S REQUIRED TO PROVE NEXUS BETWEEN THE EXPENDITURE AND THE INCOME SO EARNED. UNDER THESE FACTS, WE DEEM IT PROPER AND IN THE INTEREST OF JUSTICE TO RESTORE TH IS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE CLAIM OF THE ASSESS EE THAT IT HAD INCURRED EXPENDITURE FOR EARNING INCOME WHICH HAS BEEN TAXED BY THE AO U NDER THE HEAD INCOME FROM THE OTHER SOURCES. GROUND NO. 2 OF THE ASSESSEES APPE AL IS ALLOWED FOR STATISTICAL PURPOSE. 6. GROUND NO. 3, IS AGAINST CONFIRMING THE ADDITION OF RS. 95,08,19 7/- MADE ON ACCOUNT OF DISALLOWANCE OF CSR EXPENSES. 6.1 LD. COUNSEL FOR THE ASSESEE SUBMITTED THAT MINI STRY OF ENVIRONMENT & FORESTS VIDE ITS LETTER DATED 10.12.2008 WHILE ACCORDING TH E ENVIRONMENTAL CLEARANCE FOR KAPURDI LIGNITE MINE PROJECT HAS PUT CERTAIN SPECIF IC CONDITIONS. ONE OF THE 13 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. CONDITIONS ENUMERATED WAS THAT PROVISIONS OF AT LEA ST RS. 2 CRORES PER ANNUM RECURRING EXPENDITURE SHALL BE MADE IN CONSULTATION WITH LOCAL COMMUNITIES TOWARDS CSR ACTIVITIES TILL THE END OF MINE LIFE. THIS SHA LL INCLUDE CONSTRUCTION OF BIOMASS PLANTS, SOLAR HEATERS ETC. FOR THE SURROUNDING VILL AGES. IN PURSUANCE OF THE SAID TERM A PROPORTIONATE PROVISION OF RS. 0.95 CRORES WAS MA DE DURING THE YEAR UNDER APPEAL. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASS ESSING OFFICER IN INCORRECTLY MENTIONED THAT ASSESSEE HAS FAILED TO BRING ANY CON CRETE MATERIAL TO PROVE ITS CONTENTION THAT THE SAME HAS BEEN INCURRED TO OBTAI N ENVIRONMENT CLEARANCE FROM POLLUTION CONTROL BOARD FOR CARRYING OUT THE MINING ACTIVITIES AT VARIOUS MINING SITES BY IGNORING THE LETTER DT. 10.12.2008 OF MINISTRY O F ENVIRONMENT AND FORESTS WHERE THE ENVIRONMENT CLEARANCE WAS MAKING PROVISIONS FOR SUCH EXPENDITURE. 6.2 LD. COUNSEL PLACED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH RENDERED IN THE CASE OF ACIT VS. JINDAL POWER LTD. 138 DTR 313, SRI VENKATA SATYANARAYANA RICE MILL CONTRACTOR VS. CIT 223 ITR 101 (SC), JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJAS THAN SPINNING & WEAVING MILLS LTD. 274 ITR 463 (RAJ.), CIT VS. RUPSA RICE MILL 10 4 ITR 249 (ORISSA) (SC). 6.3 ON THE CONTRARY, LD. DEPARTMENTAL REPRESENTATI VES OPPOSED THE SUBMISSIONS, AND SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 6.4 WE HAVE HEARD THE RIVAL CONTENTIONS; THE ISSUE REQUIRES TO BE ADJUDICATED IS WHETHER FOR PROVISIONING OF CERTAIN EXPENSES UNDER THE CONTRACT IS ALLOWABLE EXPENDITURE. LAW IS WELL SETTLED THAT DEDUCTION IS ALLOWABLE FOR BUSINESS EXPENDITURE IF IT IS EXPENDED WHOLLY AND EXCLUSIVELY FOR BUSINE SS PURPOSE. AS PER THE ASSESSEE SUCH PROVISION IS REQUIRED TO BE MADE IN FURTHERANC E OF CONDITIONS LAID DOWN BY THE 14 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. MINISTRY OF ENVIRONMENT & FOREST. IT IS STATED THA T EXPENDITURE IS NOT IN THE NATURE OF THE CSR EXPENSES AS MENTIONED IN THE SECTION 135 OF THE COMPANIES ACT, 2013. 6.5 WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATIONS TO THE RIVAL CONTENTIONS, IN OUR VIEW, A PROVISION FOR EXPENDITURE IS ALLOWABLE IF T HE ASSESSEE PROVES THAT SUCH EXPENDITURE IS REQUIRED TO BE LAID DOWN ON THE BASI S OF PAST EXPERIENCE AND DEDUCED SCIENTIFICALLY. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT NO EXPENDITURE IS MADE DURING THE YEAR UNDER APPEAL. THE ASSESSEE HA S ALSO NOT STATED PAST HISTORY OR THE PAST EXPERIENCE. THEREFORE, THERE IS NO BAS IS AVAILABLE FOR ARRIVING AT THE FIGURE OF EXPENDITURE SO CLAIMED UNDER THESE FACTS; WE ARE UNABLE TO ACCEPT THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE. H ENCE, THE FINDING OF THE LD. CIT(A) IS HEREBY AFFIRMED ON THIS ISSUE. THIS GROU ND OF THE ASSESSEES APPEAL IS DISMISSED. 7. GROUND NO. 4 & 5 ARE INTER-RELATED, THEREFORE ARE BEING DISPOSED OF TOGETHER. 7.1 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. FOR THE SAKE OF CLARITY THE S UBMISSIONS OF THE ASSESSEE ARE REPRODUCED HEREIN BELOW:- SUBMISSION:- 1. IT IS SUBMITTED THAT ALL MINERALS VEST IN THE STATE . THESE MINERALS LIE BENEATH THE LAND. THE SURFACE OF THE LAND MAY BE IN THE POSSESS ION OF THIRD PARTY WHETHER AS OWNERS OR IN THE CAPACITY OF BEING STATUTORY AGRICU LTURAL TENANTS/KHATEDARS/KHASTAKARS. THEREFORE, UNLESS THE LAND IS POSSESSED BY THE STATE, IT CANNOT HANDOVER THE POSSESSION OF THE LAN D TO FACILITATE MINING OPERATIONS. ACCORDINGLY, IN TERMS OF IA AND JV AGRE EMENT, RSMML APPLIED TO GOR FOR ACQUISITION OF LAND IN POSSESSION OF THIRD PART IES WHO RESORTED TO THE PROVISION 15 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. OF THE LAND ACQUISITION ACT FOR SECURING POSSESSION OF THE LAND. IN THE PROCESS, COMPENSATION WAS PAID TO THE THIRD PARTY OCCUPYING THE LAND TO EXTINGUISH THEIR RIGHT AND THE POSSESSION OVER THE LAND WAS HAND OVE R TO RSMML AND THE MUTATION IN THE GOVERNMENT RECORDS IS MADE IN THE FAVOUR OF RSMML AS LESSEE, GOVERNMENT BEING THE LESSOR. 2. THE GOR VIDE LETTER DATED 04.09.2012 (PB 265) HAS CLARIFIED THAT THE IMPUGNED LAND WILL NOT BE TRANSFERRED TO ASSESSEE NEITHER I T WOULD BE ALLOWED TO CREATE ANY CHARGE OR MORTGAGE ON THE SAID PROJECT LAND MUTATED IN FAVOUR OF RSMML FOR ANY FINANCING PURPOSES. THIS PROVES, IN NO UNCERTAIN TE RMS, THAT ASSESSEE DOES NOT HAVE ANY OWNERSHIP OR ASSOCIATED RIGHT OVER THE PRO JECT LAND AND THE EXPENDITURE INCURRED BY IT IS ONLY TO SECURE MINING ACTIVITY RI GHTS FOR A LIMITED PERIOD OF MINING LEASE I.E. UPTO 28-12-2040. THUS, ASSESSEE DOES NOT HAVE ANY RIGHT OF OWNERSHIP IN THE IMPUGNED LAND EXCEPT CONDUCTING MINING ACTIV ITIES AND EXTRACTION OF LIGNITE, MAXIMUM QUANTITY TO BE EXTRACTED WHICH IS ALSO SPEC IFIED, FOR LIMITED PURPOSE OF SUPPLY OF SAME TO DESIGNATED POWER PLANTS. 3. THUS, ON PAYMENT OF COMPENSATION BY THE ASSESSEE TH ROUGH RSMML, WHAT THE ASSESSEE ACQUIRE IS ONLY THE SURFACE RIGHT FOR DOIN G MINING AS A SUB-LICENSEE OF RSMML. THE TITLE IN THE LAND IS NOT TRANSFERRED IN FAVOUR OF RSMML BY EXECUTING A CONVEYANCE AND THEREFORE, THE QUESTION OF RSMML TRA NSFERRING IT IN FAVOUR OF THE ASSESSEE DO NOT ARISE. THIS BASIC ASPECT HAS BEEN O VERLOOKED BY BOTH THE LOWER AUTHORITIES IN HOLDING THAT ASSESSEE HAS OWNERSHIP RIGHT OVER THE LAND OR THAT RSMML BEING A MAJORITY STAKEHOLDER IN THE ASSESSEE, EFFECTIVELY THE LAND IS IN THE POSSESSION OF THE ASSESSEE AS OWNER. THUS, IT IS AN ERRONEOUS PRESUMPTION OF THE LOWER AUTHORITIES THAT ASSESSEE IS THE OWNER OF THE LAND. 4. THE AO HAS OBSERVED THAT THE LAND IS NOT A DEPRECIA BLE ASSET AND THEREFORE, THERE IS NO QUESTION OF ALLOWABILITY OF DEPRECIATION OVER THE SAME. IN OBSERVING SO HE IGNORED THAT ASSESSEE HAS NOT CLAIMED ANY DEPRECIAT ION BUT HAS CLAIMED AMORTIZATION SO THAT THE EXPENDITURE INCURRED ON AC QUIRING THE SURFACE RIGHT OVER 16 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. THE LAND FOR DOING THE MINING IS SPREAD OVER THE PE RIOD OF 30 YEARS FOR WHICH SUCH RIGHT IS AVAILABLE TO THE ASSESSEE. IT MAY BE NOTED THAT THE SOLE PURPOSE OF THE EXPENDITURE INCURRED BY THE ASSESSEE IS FOR EXTRACT ION OF MINERAL RESOURCES AND EXTRACTION OF SUCH MINERAL IS THE ONLY ECONOMIC USE OF THE RIGHT WHICH IT ACQUIRED OVER THE LAND. THEREFORE, THE USEFUL LIFE OF THE RI GHT OVER THE LAND, CONSIDERING THE MATCHING CONCEPT OF ACCOUNTANCY, HAS TO BE CHARGED OFF OVER THE LEASE PERIOD OF SUCH LAND TO ARRIVE AT THE CORRECT PROFITS FOR THE YEAR. SUCH AMORTIZATION OF RIGHT OVER THE LAND IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THEREFORE, THE SAME IS ALLOWABLE U/S 3 7(1). THE CONCEPT OF AMORTIZATION OF EXPENDITURE IS ALSO RECOGNIZED BY T HE HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATIO N LTD. VS. CIT 225 ITR 802 . IN THIS CASE, COMPANY ISSUED DEBENTURES AT A DISC OUNT, REDEEMABLE AT PAR AFTER 12 YEARS. THE HONBLE COURT HELD THAT THE DIFFERENCE BETWEEN THE ISSUE PRICE AND REDEEMABLE PRICE IS REVENUE EXPENDITURE A LLOWABLE PROPORTIONATELY OVER THE LIFE OF THE DEBENTURES. HONBLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. SUN PHARMACEUTICALS IND. LTD. 329 ITR 479 WHERE LEASE RENT OF RS.48,02,616/- WAS PAID @ RS. 40 PER YEAR TO THE ST ATE INDUSTRIAL DEVELOPMENT CORPORATION FOR USE OF LAND FOR 99 YEARS, ALLOWED T HE SAME BY HOLDING AS UNDER:- THE TRIBUNAL HAS FOUND THAT LAND IN QUESTION WAS N OT ACQUIRED BY THE ASSESSEE. MERELY BECAUSE DEED WAS REGISTERED, THE TRANSACTION IN QUESTION WOULD NOT ASSUME A DIFFERENT CHARACTER. THE LEASE RENT WAS VE RY NOMINAL. BY OBTAINING THE LAND ON LEASE THE CAPITAL STRUCTURE OF THE ASSESSEE DID NOT UNDERGO ANY CHANGE. THE ASSESSEE ONLY ACQUIRED A FACILITY TO CARRY ON B USINESS PROFITABLY BY PAYING NOMINAL LEASE RENT. IN THE LIGHT OF THE AFORESAID F INDINGS OF FACT AND THE RATIO OF THE APEX COURT DECISIONS, THE COURT DOES NOT FIND T HIS TO BE A CASE WHICH WARRANTS INTERFERENCE. EVEN THE ASSESSING OFFICER H AS RECORDED THAT THE PAYMENT WAS FOR USE OF LAND. THERE IS NO LEGAL INFIRMITY CO MMITTED BY THE TRIBUNAL. 5. THE LD. CIT(A) HAS RELIED ON THE DECISION OF ITAT, JAIPUR BENCH IN CASE OF RSMM LTD. VS. ACIT IN ITA NO.144 & 124/JP/2014 DT. 12.02 .2016. IN THIS DECISION ALSO, IT 17 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. IS HELD THAT EXPENSES LAID BY THE ASSESSEE FOR THE PURPOSE OF GETTING THE MINING LAND AND LEASEHOLD LAND ARE REQUIRED TO BE TREATED AS CAPITAL EXPENDITURE BUT THE AO IS DIRECTED TO GIVE ALL BENEFITS AS CAPITAL EXPE NDITURE. THOUGH THE FACTS OF THE ASSESSEES CASE IS DIFFERENT THAN THAT IN THE ABOVE CASE IN AS MUCH AS ASSESSEE IS ONLY A SUB-LICENSEE AND NEITHER THE LEASEHOLD RIGHT IN THE LAND IS TRANSFERRED IN ITS NAME NOR IT HAS ANY RIGHT TO CREATE MORTGAGE OF THE MINING LEASES, BUT STILL EVEN AS PER THE RATIO OF ABOVE DECISION, IF IT IS HELD T HAT EXPENDITURE IS CAPITAL IN NATURE, THEN THE BENEFIT OF THE CAPITAL EXPENDITURE IS TO B E ALLOWED. THEREFORE, IN VIEW OF THIS DIRECTION, THE EXPENSES INCURRED BY THE ASSESS EE FOR ACQUIRING THE RIGHT OVER THE LAND TO CARRY OUT THE MINING NEEDS TO BE ALLOWE D OVER ITS USEFUL LIFE. 6. IT IS SUBMITTED THAT AS PER CLAUSE 6.1 & 6.4 OF THE IA (PB 48) , THE ENTIRE PROJECT OF THE MINING IS DONE ON BUILD, OWN, OPERATE & MAIN TAIN BASIS. IT IS PERMITTED TO MINE THE LIGNITE ONLY TO THE EXTENT IT IS REQUIRED FOR POWER GENERATION BY THE POWER PLANT. NO SALE OF LIGNITE BY THE ASSESSEE IS PERMIT TED. THUS, THE ASSESSEE HAS ONLY A LIMITED RIGHT AND THAT TOO FOR A PERIOD OF 30 YEA RS ONLY. THE CBDT IN CIRCULAR NO.9/2014 DT. 23.04.2014 WITH REFERENCE TO TREATMEN T OF EXPENDITURE INCURRED FOR DEVELOPMENT OF ROADS/HIGHWAYS IN BOT AGREEMENTS HAS CLARIFIED IN PARA 3 TO 8 AS UNDER:- 3. IN BOT ARRANGEMENTS FOR DEVELOPMENT OF ROADS/HI GHWAYS, AS A MATTER OF GENERAL PRACTICE, POSSESSION OF LAND IS HANDED OVER TO THE ASSESSEE BY THE GOVERNMENT/NOTIFIED AUTHORITY FOR THE PURPOSES OF C ONSTRUCTION OF THE PROJECT WITHOUT ANY ACTUAL TRANSFER OF OWNERSHIP AND SUCH A SSESSEE HAS ONLY A RIGHT TO DEVELOP AND MAINTAIN SUCH ASSET. IT ALSO ENJOYS THE BENEFITS ARISING FROM USE OF ASSET THROUGH COLLECTION OF TOLL FOR A SPECIFIED PE RIOD WITHOUT HAVING ACTUAL OWNERSHIP OVER SUCH ASSET. THEREFORE, THE RIGHTS IN THE LAND REMAIN VESTED WITH THE GOVERNMENT OR ITS AGENCIES. THUS, AS THE ASSESS EE DOES NOT HOLD ANY RIGHTS IN THE PROJECT EXCEPT RECOVERY OF TOLL FEE TO RECOUP T HE EXPENDITURE INCURRED, IT CANNOT THEREFORE BE TREATED AS AN OWNER OF THE PROP ERTY, EITHER WHOLLY OR PARTLY, FOR PURPOSES OF ALLOWABILITY OF DEPRECIATION U/S 32 (1)(II) OF THE ACT. THUS, PRESENT 18 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. PROVISIONS OF THE ACT DO NOT ALLOW CLAIM OF DEPRECI ATION ON TOLL WAYS DUE TO NON- FULFILMENT OF OWNERSHIP CRITERIA IN SUCH CASES. 1. THERE IS NO DOUBT WHERE THE ASSESSEE INCURS EXPENDI TURE ON A PROJECT FOR DEVELOPMENT OF ROADS/HIGHWAYS, HE IS ENTITLED TO RE COVER COST INCURRED BY HIM TOWARDS DEVELOPMENT OF SUCH FACILITY (COMPRISING OF CONSTRUCTION COST AND OTHER PRE-OPERATIVE EXPENSES) DURING THE CONSTRUCTION PER IOD. FURTHER, EXPENDITURE INCURRED BY THE ASSESSEE ON SUCH BOT PROJECTS BRING S TO IT AN ENDURING BENEFIT IN THE FORM OF RIGHT TO COLLECT THE TOLL DURING THE PE RIOD OF THE AGREEMENT. HON'BLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVE STMENT CORPORATION LTD. V. CIT 225 ITR 802 ALLOWED SPREADING OVER OF LIABILITY OVER A NUMBER OF YEARS ON THE GROUND THAT THERE WAS CONTINUING BENEFIT TO THE COM PANY OVER A PERIOD. THEREFORE, ANALOGOUSLY, EXPENDITURE INCURRED ON AN INFRASTRUCTURE PROJECT FOR DEVELOPMENT OF ROADS/HIGHWAYS UNDER BOT AGREEMENT M AY BE TREATED AS HAVING BEEN MADE/INCURRED FOR THE PURPOSES OF BUSINESS OR PROFESSION OF THE ASSESSEE AND SAME MAY BE ALLOWED TO BE SPREAD DURING THE TEN URE OF CONCESSIONAIRE AGREEMENT. 2. IN VIEW OF ABOVE, CENTRAL BOARD OF DIRECT TAXES, IN EXERCISE OF THE POWERS CONFERRED UNDER SECTION 119 OF THE ACT HEREBY CLARI FIES THAT THE COST OF CONSTRUCTION ON DEVELOPMENT OF INFRASTRUCTURE FACIL ITY OF ROADS/HIGHWAYS UNDER BOT PROJECTS MAY BE AMORTIZED AND CLAIMED AS ALLOWA BLE BUSINESS EXPENDITURE UNDER THE ACT. 3. THE AMORTIZATION ALLOWABLE MAY BE COMPUTED AT THE R ATE WHICH ENSURES THAT THE WHOLE OF THE COST INCURRED IN CREATION OF INFRA STRUCTURAL FACILITY OF ROAD/HIGHWAY IS AMORTIZED EVENLY OVER THE PERIOD OF CONCESSIONAI RE AGREEMENT AFTER EXCLUDING THE TIME TAKEN FOR CREATION OF SUCH FACILITY. 4. IN THE CASE WHERE AN ASSESSEE HAS CLAIMED ANY DEDUC TION OUT OF INITIAL COST OF DEVELOPMENT OF INFRASTRUCTURE FACILITY OF ROADS/HIG HWAYS UNDER BOT PROJECTS IN 19 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. EARLIER YEAR, THE TOTAL DEDUCTION SO CLAIMED FOR TH E ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR UNDER CONSIDERATION MAY BE DEDUCTED FROM THE INITIAL COST OF INFRASTRUCTURE FACILITY OF ROADS/HIGHWAYS AND THE C OST 'SO REDUCED' SHALL BE AMORTIZED EQUALLY OVER THE REMAINING PERIOD OF TOLL CONCESSIONAIRE AGREEMENT. 5. IT IS HEREBY CLARIFIED THAT THIS CIRCULAR IS APPLIC ABLE ONLY TO THOSE INFRASTRUCTURE PROJECTS FOR DEVELOPMENT OF ROAD/HIGHWAYS ON BOT BA SIS WHERE OWNERSHIP IS NOT VESTED WITH THE ASSESSEE UNDER THE CONCESSIONAIRE A GREEMENT. IN VIEW OF THE RATIO LAID DOWN IN THE ABOVE CIRCULA R, THE EXPENDITURE INCURRED BY THE ASSESSEE FOR OBTAINING SURFACE RIGHTS OVER THE LAND FOR MINING FOR A PERIOD OF 30 YEARS IS REQUIRED TO BE ALLOWED ON AMORTIZATION BASIS OVER THE SAID PERIOD. 7. IT IS FURTHER SUBMITTED THAT SIMILAR ISSUE HAS ARIS EN IN CASE OF MANGALAM CEMENT LTD. WHERE THE AO DID NOT ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF COMPENSATION PAID TO THE FARMERS FOR ACQUIRING THE LAND FOR MINING OVER THE PERIOD OF LEASE. THE LD. CIT(A) ALLOWED THE CLAIM OF THE A SSESSEE AGAINST WHICH REVENUE FILED BEFORE THE ITAT. HONBLE ITAT IN ITA NO.425/JP/2014 DT. 29.06.2017 FOR AY 2010-11 AT PARA 10.1 TO 10.3 HELD AS UNDER:- 10. GROUND NO.1, IS AGAINST DIRECTED THE AO TO ALL OW EXPENDITURE IN 20 ANNUAL INSTALMENTS OF COMPENSATION PAID TO THE FARMERS. 10.1 LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ASSESSMENT ORDER AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN GIVING THE DIRECTION OR ALLOWING THE EXPENDITURE OVER A PERIOD OF 20 YEARS. 10.2 ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSES SEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE AO DISALLOWED THE EXPENDITURE ON THE BASIS THAT THE EXPENDITURE WAS INCURRED TO PROTECT THE LONG-TE RM EXPLOITATION RIGHT OVER THE HUGE AREA OF MINING LAND IS OF CAPITAL IN NATURE AN D AS SUCH NOT BE ALLOWED U/S 20 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. 37(1) OF THE ACT. LD. COUNSEL PLACED RELIANCE ON TH E HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF SHANKAR DAS SETHI & SONS VS . CIT 157 ITR 770 (DEL.), THE RELIANCE IN ALSO PLACED ON THE DECISION OF THE TRIB UNAL RENDERED IN THE CASE OF ACIT VS. RAJASTHAN STATE MINES & MINERALS LTD. 144/JP/20 14. 10.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD. THE LD. CIT(A) HAS GIVEN A FINDING ON FACT BY OBSERVING AS UNDER:- IN MY OPINION, THE MAIN PURPOSE OF ACQUIRING THE L AND WAS TO EXTRACT LIME STONES WHICH IS THE RAW MATERIAL FOR ASSESSEE. AFTER EXTRA CTION THE LAND BECOME UNUSABLE FOR ANY OTHER PURPOSE. THE ASSESSEE CANNOT USE THIS LAND PERPETUALLY AS IN THE CASE OF A NORMAL AGRICULTURE OR RESIDENTIAL LAND, THIS LAND CAN BE U SED TILL ITS DEPOSITS (I.E. LIME STONE) LASTS. THEREFORE, I AGREE WITH THE FINDINGS OF THE AO IN AY 2008-09 WHEREIN HE ALLOWED SUCH EXPENDITURE IN 20 EQUAL INSTALMENTS . CONSIDERING THE ABOVE, THE AO IS DIRECTED TO ALLOW THE EXPENDITURE EQUALLY IN 20 YEARS INCLUDING THE CURRENT YEAR. THEREFORE, ADDITI ON OF RS.46,56,887/- IS CONFIRMED. THE AO IS DIRECTED TO ALLOW EXPENDITURE OF RS.2,45,099/-. THERE IS NO DISPUTE WITH REGARD TO THE FACT THE AO HIMSELF HAD ALLOWED EXPENDITURE IN 20 EQUAL INSTALMENTS IN AY 2008-09. IN THE YEAR UNDER APPEAL, THE REVENUE HAS NOT DEMONSTRATED THE CHANGE INTO THE FA CTS AND THE REASON FOR CHANGING THE STAND. THEREFORE, WE DID NOT SEE ANY R EASON TO INTERFERE INTO THE ORDER OF LD. CIT(A), SAME IS HEREBY AFFIRMED. THIS GROUND IS DISMISSED. 8. ALTERNATIVELY, THE RIGHT WHICH THE ASSESSEE HAS ACQ UIRED OVER THE LAND IS ONLY A RIGHT TO MINE LIGNITE FOR 30 YEARS FOR USE ONLY FOR POWER GENERATION IN BHADRESH (BARMER POWER PLANT) AS SPECIFIED IN LETTER DT. 30. 03.2011 ISSUED BY GOR. THUS, THIS RIGHT IS A COMMERCIAL RIGHT IN THE NATURE OF L ICENCE WHEREBY GOVERNMENT HAS GIVEN PERMISSION TO THE ASSESSEE TO MINE THE LIGNIT E FOR SPECIFIC PURPOSE AND FOR THE SPECIFIED PERIOD. SUCH RIGHT IS AN INTANGIBLE A SSET AS DEFINED IN SECTION 2(11) 21 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. OF THE IT ACT WHERE INTANGIBLE ASSET IS DEFINED AS BEING KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. AN INTANGIBLE ASSET IS EL IGIBLE FOR DEPRECIATION U/S 32(1)(II) OF THE ACT. THE ITAT HYDERABAD BENCH IN CASE OF NMDC LTD. VS. JCIT 43 CCH 491 IN SIMILAR FACTS AT PARA 20-22 OF ITS ORDER HELD AS UNDER:- 20. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBM ITTED THAT THE ACCOUNTING POLICY/METHOD IS CONSISTENTLY FOLLOWED BY NUMBER OF YEARS AND, THEREFORE, THE SAME MAY BE ALLOWED AS DEDUCTION. HE RELIED ON THE FOLLOWING CASE LAWS: 1. EAST INDIA MINERALS LTD. VS. JCIT, ITA NO. 224/C TK/2012. 2. MYSORE MINERALS LTD. VS. ACIT, ITAT, BANGALORE 1 00% ALLOWED AS REVENUE EXPENDITURE. 3. JITENDRA PATHIAK VS. DCIT, ITA NO. 185/CTK/2010 21. THE LEARNED DR HAS RELIED ON THE ORDER OF THE C IT(A). 22. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. SIMILAR CAME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF ITAT, CUTTACK IN CASE EAST INDIA MINERALS LTD. VS. JCIT IN ITA NO. 224/CTK/2012, VID E ITS ORDER DATED 25/06/2012, ON WHICH RELIANCE PLACED BY THE ASSESSE E, WHEREIN IT HAS BEEN HELD AS FOLLOWS: 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE FACTS AND CIRC UMSTANCES OF THE CASE, WE UPHOLD THE CONTENTION OF THE LEARNED COUNSEL FOR TH E ASSESSEE FOR THE SIMPLE REASON THAT THE DENIAL OF CLAIM OF DEPRECIATION HAS BEEN MADE ON MISINTERPRETATION OF LAW AND THE APPLICABILITY THER EOF. EXPLANATION TO SECTION 32(1)(II) LEANS IN FAVOUR OF THE ASSESSEE TO THE EX TENT THAT IT IS THE ACTUAL ACTION OF PUT TO USE WHICH ENTITLES THE ASSESSEE TO CLAIM DEPRECIATION. A STRAIGHT LINE METHOD OF CLAIMING THE WRITING OFF OF LEASE HOLD RI GHTS FOR THE PERIOD OF LEASE 22 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. CANNOT BE DENIED TO THE ASSESSEE FOR THE SIMPLE REA SON IT BEING INTANGIBLE ASSET HAS BEEN WRITTEN OFF WHICH PERTAINS TO LAND BEING A INTANGIBLE ASSET. IT IS NOBODYS CASE THAT THE LAND EITHER BELONGED TO THE LESSEE OR TO THE GOVERNMENT. THIS SIMPLY INDICATES THAT A DEPLETION OF THE LAND AGAINST THE PAYMENT OF PREMIUM IT WAS LEASED HAS TO BE CLAIMED AFTER CAPIT ALIZATION THEREOF BY THE ASSESSEE WHICH IS FOR THE PURPOSE OF ITS MAIN BUSIN ESS. ALL EXPENSES ARE INCURRED FOR THE PURPOSE OF BUSINESS AND ARE INCIDENTAL TO T HE HOLDING OF RIGHTS WERE CLAIMED U/S.32(1)(II) BEING THE LICENSE TO CARRY OU T THE MINING THEREFORE COULD NOT BE DENIED INSOFAR AS THE GOVERNMENT AND THE LES SEE ARE IN CONTROL OF THE ASSET. THE DEFINITION OF DEPRECIATION THEREFORE HAS BEEN MISCONSTRUED FOR THE PURPOSE OF ALLOWING DEDUCTION BY THE ASSESSING OFFI CER AND THE LEARNED CIT(A) IN HOLDING A VIEW ON THE PROMULGATION OF SECTION 32(1) (II) WITH EFFECT FROM THE YEAR 1998-99 WHICH HAS BEEN FURTHER AMENDED W.E.F. ASSES SMENT YEAR 2003-04. IN THIS VIEW OF THE MATER, WE ARE INCLINED TO HOLD THA T THE ASSESSEE IS ENTITLED TO DEPRECIATION AS CHARGED TO THE P & L ACCOUNT IN ACC ORDANCE WITH ITS BUSINESS EXIGENCIES. WE DIRECT ACCORDINGLY. ON THE CLAIM OF DEDUCTION/S.80G, THE A.O., IS DIRECTED TO VERIFY THE RECEIPTS AND ALLOW THE DEDUC TION IN ACCORDANCE WITH THE PROVISIONS OF INCOME-TAX ACT, 1961. 22.1 SINCE THE ISSUE UNDER CONSIDERATION IS MATERIA LLY IDENTICAL TO THAT OF THE CASE DECIDE BY THE TRIBUNAL IN THE CASE OF EAST IND IA MINERALS LTD., RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE ORDER OF THE C IT(A) AND DIRECT THE AO TO DELETE THE ADDITION MADE IN THIS REGARD. 9. THE LD. CIT(A) IN THIS CONNECTION RELIED ON THE DEC ISION OF ITAT, BANGALORE BENCH IN CASE OF M/S CYBER PARK DEVELOPMENT & CONST RUCTION LTD. (SUPRA). IN THIS CASE ASSESSEE WAS ENGAGED IN BUSINESS OF DEVEL OPMENT AND MAINTENANCE OF INFRASTRUCTURE FACILITIES FOR SOFTWARE AND RELATED SECTORS. FOR THIS PURPOSE, IT HAD TAKEN LAND ON LEASE FOR PERIOD OF 66 YEARS FROM SOF TWARE TECHNOLOGICAL PARK OF INDIA (STPI). IN CONSIDERATION OF GRANTING LEASEHOL D RIGHTS, ASSESSEE-COMPANY DEVELOPED 42,665 SQ.FT. OF SPACE FOR USE BY STPI IN TERMS OF AGREEMENT ENTERED INTO BY IT WITH STPI. COST OF DEVELOPMENT OF THIS S PACE WAS TREATED AS COST OF 23 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. LEASEHOLD RIGHTS TREATING AS INTANGIBLE ASSET AND D EPRECIATION WAS CLAIMED ON THIS. ON THESE FACTS IT WAS HELD THAT TERM 'INTANGI BLE ASSETS' HAD BEEN DEFINED BEING KNOW-HOW, PATENTS, COPY RIGHTS, TRADE MARKS, LICENSE, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE. OBVIOUSLY, LEASEHOLD RIGHTS ON LAND DID NOT FALL IN CATEGORY OF ABOVE CATEGORIE S. IT DID NOT FALL EVEN IN RESIDUARY CATEGORY OF ANY OTHER BUSINESS OR COMMERC IAL RIGHTS OF SIMILAR NATURE. BECAUSE TERM 'RIGHTS OF SIMILAR NATURE' QUALIFIED T HAT EVEN TO FALL UNDER RESIDUARY CLAUSE, IT SHOULD BE IN NATURE OF ABOVE KNOW-HOW, P ATENTS, COPY-RIGHTS, TRADE MARKS LICENSE OR FRANCHISE. APPLYING RULE OF EJUSDE M GENERIS EVEN TO FALL WITHIN RESIDUARY CATEGORY IT SHOULD BE IN NATURE OF RIGHTS ENUMERATED ABOVE. RIGHT OF ENJOYMENT TO IMMOVABLE PROPERTY UNDER LEASE WAS IMM OVABLE PROPERTY WITHIN MEANING GIVEN IN SEC.103 OF TRANSFER OF PROPERTY AC T. THEREFORE, BY VIRTUE OF LEASE ONLY, AN INTEREST IN LAND IS CREATED WHICH DO ES NOT QUALIFY FOR ALLOWANCE OF DEPRECIATION. FROM THE ABOVE IT CAN BE NOTED THAT THE FACTS OF TH IS CASE ARE ENTIRELY DIFFERENT. IN THIS CASE THE ASSESSEE WAS ALLOWED THE LEASEHOLD RIGHT FOR ENJOYMENT OF LAND WHEREAS IN THE CASE UNDER CONSIDERATION, THE SURFAC E RIGHT OF LAND WAS GIVEN FOR MINING THE LIGNITE FOR SPECIFIC PURPOSE AND NOT FOR ENJOYMENT OF LAND AS SUCH. THEREFORE, THE RATIO LAID DOWN IN THE CASE RELIED B Y THE LD. CIT(A) IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. AS AGAINST THIS, THE CASES RELIED BY ASSESSEE WITH REFERENCE TO GROUND NO.7 ARE APPLICAB LE TO THE FACTS OF THE CASE AND BE CONSIDERED. 10. SO FAR AS THE ALTERNATE GROUND FOR ALLOWING CLAIM U /S 35E IS CONCERNED, THE SAME IS NOT PRESSED. IN VIEW OF ABOVE, AO BE DIRECTED TO ALLOW THE AMORT IZATION OF EXPENDITURE TO THE ASSESSEE OR ALTERNATIVELY, TO ALLOW DEPRECIATION AS INTANGIBLE ASSET. 24 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. 7.2 ON THE CONTRARY, LD. D/R OPPOSED THE SUBMISSION S AND PLACED RELIANCE ON THE DECISION OF THE CIT(A). LD. CIT(A) HAS DECIDED THE ISSUE IN PARA 7.3 OF THE ORDER AS UNDER:- 7.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. AS NOTED AN AMOUNT OF RS. 9,56,28,198/- HAD BEEN CLAIMED AS DEPRECIATION ON F IXED ASSETS WHICH INCLUDED AN AMOUNT OF RS. 8,18,38,172/- ON AMORTIZA TION EXPENSES. THE ASSESSING OFFICER CONCLUDED THAT THE LAND WAS NOT A DEPRECIABLE ASSET, THE CLAIM COULD NOT BE ALLOWED UNDER SECTION 32(1)(II) OF THE I.T. ACT, 1961 AND ALSO NOT UNDER SECTION 35E OF THE I.T. AT, 1961. THE FACTS OF THIS ISSUE ARE THAT UNDER THE IMPLEMEN TATION AGREEMENT BETWEEN GOVERNMENT OF RAJASTHAN AND M/S RWPL, THE MINING LE ASES WERE TO BE TRANSFERRED TO THE JV COMPANY OF M/S RSMML, AND M/S RWPL I.E. THE APPELLANT AND THE FINANCIAL OBLIGATION WERE TO BE F ULFILLED BY M/S RWPL. THE LEASE FOR KAPURDI LIGNITE MINES WAS GRANTED TO M/S RSMML FOR 30 YEARS AND THE SAID MINING LEASE WAS TRANSFERRED TO THE APPELL ANT COMPANY WITH THE PRIOR APPROVAL OF GOVERNMENT OF RAJASTHAN. THE EXPENDITU RE INCURRED BY M/S RSMML FOR THE SAME WAS TRANSFERRED BY THE APPELLANT COMPANY. THE APPELLANT COMPANY COMMENCED MINING OPERATION AT KAP URDI MINES AND AMORTIZED RS. 8.18 CRORE OF THE TOTAL SURFACE RIGHT EXPENSES ON PROPORTIONATE BASIS OF TOTAL LIGNITE EXTRACTED FROM THE MINES DUR ING THE FINANCIAL YEAR VIS-- VIS THE TOTAL LIGNITE PERMITTED TO BE EXTRACTED FRO M KAPURDI MINES DURING THE LEASE PERIOD OF 30 YEARS. THE APPELLANT HAS CLAIMED THAT THE DEDUCTION FOR AC QUISITION OF BUSINESS RIGHTS HAS BEEN MADE ON A MOST RATIONAL BASIS AND SHOULD B E ALLOWED. IT WAS FURTHER SUBMITTED THAT THE EXPENDITURE HAS BEEN INC URRED TO OBTAIN THE RIGHTS TO CONDUCT MINING BUSINESS AND THIS EXPENDITURE AMO UNTS TO PAYMENT FOR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS AND IF THE EXP ENDITURE IS TREATED AS 25 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. CAPITAL EXPENDITURE, THEN THE SAME SHOULD BE CONSID ERED FOR 32(1)(II) OF THE I.T. ACT, 1961. AN ALTERNATE PLEA WAS ALSO TAKEN T HAT THE EXPENDITURE WAS ALSO ALLOWABLE UNDER SECTION 35E OF THE I.T. ACT, 1 961. RELIANCE WAS PLACED ON THE DECISION OF ITAT, CUTTACK BENCH IN THE CASE OF EAST INDIA MINERALS LTD. IN ITA NO. 224/CTR/2012 ORDER DATED 25.06.2012 ON S IMILAR FACTS AND THAT THIS DECISION WAS FOLLOWED BY THE HONBLE HYDERABAD BENCH IN THE CASE OF M/S NMDC LTD. IN ITA NO. 714/HYD/2012. IT HAS BEEN EMP HASIZED AND CLARIFIED THAT THE OWNERSHIP OF THE LAND ACQUIRED FOR PROJECT CONTINUED WITH M/S RSMML, A GOVERNMENT OF RAJASTHAN UNDERTAKING AND DO ES NOT FORM PART OF ASSETS OF APPELLANT COMPANY WHICH IS A JV BETWEEN R SMML AND A PRIVATE ENTERPRISE WITH 51% SHARE BEING HELD BY M/S RSMML. IT WAS STATED THAT M/S BARMER LIGNITE MINING COMPANY LTD. DOES NOT HAVE AN Y OWNERSHIP OR ASSOCIATED RIGHT OVER THE PROJECT LAND AND EXPENDIT URE INCURRED BY IT IS TO SECURE ONLY MINING ACTIVITY RIGHTS FOR A LIMITED PE RIOD OF MINING LEASE. AS DISCUSSED ABOVE, THE LAND IS ACQUIRED AND TRANSF ERRED TO M/S RSMML WHICH IS A MAJORITY STAKE HOLDER IN THE APPELLANT COMPANY . THUS EFFECTIVELY THE LAND IS IN THE POSSESSION OF THE APPELLANT COMPANY. FUR THER, IT EXERCISES THE SAME RIGHTS AS M/S RSMML, THE ONLY DIFFERENCE BEING THAT THE LAND HAS NOT BEEN TRANSFERRED IN THEIR NAME. A LOT OF EMPHASIS HAS BEEN PLACED BY THE APPELLANT ON THE FACT THAT THE LAND WAS TRANSFERRED BY THE GOVERNMENT OF RAJASTHAN TO M /S RSMML AND NOT TO THE APPELLANT COMPANY AND ALSO THAT THE TITLE OF LA ND WOULD NOT VEST EVEN WITH M/S RSMML. IT WAS FURTHER STRESSED THAT HANDING OV ER THE POSSESSION OF LAND IS COMPLETELY DISTINCT AND DIFFERENT FROM TRANSFERR ING THE TITLE OF LAND. THE FACTS OF THIS CASE ARE IDENTICAL WITH THE CASE OF M /S RAJASTHAN STATE MINES & MINERALS LTD. VS. ACIT, CIRCLE-6, JAIPUR IN ITA NO. 144/JP/2014 AND 124/JP/2014 DATED 12/02/2016 WHEREIN IT WAS HELD AS FOLLOWS: 26 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. 20.1 THE VEXED QUESTION BEFORE US IS THE AMORTIZAT ION OF AMOUNT PAID FOR GETTING THE MINING LAND/LEASEHOLD LAND BY THE ASSES SEE. WHETHER IT IS REQUIRED TO THE TREATED AS REVENUE EXPENDITURE AND IS REQUIRED TO BE ALLOWED U/S 37(1) OF THE ACT OR NOT? FOR THE PURPOSE OF AL LOWING AND EXPENDITURE, IT IS NECESSARY TO LOOK INTO THE NATURE OF EXPENDITURE. SECTION 37 OF THE ACT PROVIDES AS UNDER:- SEC. 37(1): ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTION 30 TO 36 AND NOT BEING IN THE NATURE OF CAP ITAL EXPENDITURE OR PERSONAL EXPENSE OF THE ASSESSEE), LAID OUT OR EXPENDED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OR PROFESSION SHALL BE ALLO WED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. [EXPLANATION: FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO H AVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE.] [(2B) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SEC TION (1), NO ALLOWANCE SHALL BE MADE IN RESPECT OF EXPENDITURE INCURRED BY AN ASSESSEE ON ADVERTISEMENT IN ANY SOUVENIR, BROCHURE, TRACT, PAM PHLET OR THE LIKE PUBLISHED BY A POLITICAL PARTY.] SECTION 37, THEREFORE, CONTEMPLATES THAT IF THE NAT URE OF EXPENDITURE IS NOT THE CAPITAL/PERSONAL IN NATURE, AND IS LAID OUT OF EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSI ON, THEN IT IS REQUIRED TO BE ALLOWED BY THE AUTHORITY. IN OUR VIEW, THE EXPENDI TURE, WHICH WAS INCURRED FOR GETTING THE MINING LAND ON LEASEHOLD BASIS OR MININ G BASIS, IS TO BE TREATED AS CAPITAL EXPENDITURE BECAUSE THE LESSEE WILL HAVE TH E ENDURING BENEFIT FOR MAKING SUCH IN INVESTMENT. OUR VIEW IS ALSO FORTIFI ED BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE MATTER OF ADITYA MINER ALS VS. CIT (1999) 8 SSC 97 AND ALSO BY THE JUDGMENT OF HONBLE SUPREME COUR T IN THE MATTER OF 27 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. ENTERPRISING ENTERPRISES VS. DCIT IN THE CIVIL APPE AL NO. 5656 OF 2006 WHEREBY HONBLE SUPREME COURT HAS HELD THAT WHERE THE ENTI RE AMOUNT OF LEASE IS PAID EITHER AT A TIME OR IN INSTALLMENT, IT WOULD B E A CAPITAL EXPENDITURE. THEREFORE, WE ARE BOUND BY THE JUDGMENTS PASSES BY THE HONBLE SUPREME COURT. THUS, THE EXPENSE LAID BY THE ASSESSEE FOR THE PURPOSES OF GETTING THE MINING LAND AND LEASEHOLD LAND, ARE REQUIRED TO BE TREATED AS CAPITAL EXPENDITURE. THE AO IS, THEREFORE, DIRECTED TO TRE AT THE AMOUNT PAID FOR GETTING THE MINING LAND AND LEASE HOLD LAND AS CAPI TAL EXPENDITURE. THE AO IS FURTHER DIRECTED TO GIVEN ALL BENEFITS AS A CAPITAL EXPENDITURE. THE JUDGMENT RELIED UPON BY THE ASSESSEE OF HONBLE SUPREME COUR T IN THE MATTER OF MADARS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT, 225 ITR 802 IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. HOWEVER, THE JUDGMENT OF HONBLE SUPREME COURT IN THE MATTER OF ENTERPRISING ENTERPR ISES (2007) 160 TAX AN 188 (SC) IS SQUARELY APPLICABLE TO THE FACTS AND CI RCUMSTANCES OF THE CASE AND FURTHER THE SAID JUDGMENT IS OF LATER DATE AND, THE REFORE, IS REQUIRED TO BE FOLLOWED BY THE BENCH. THE JUDGMENT OF NMDC LTD. V S. JCIT (SUPRA) IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CA SE AS IN THE AID JUDGMENT THE ISSUE WAS NOT WITH RESPECT TO APPLICABILITY OF SECTION 37 BUT WAS IN RESPECT TO ALLOWING THE DEPRECIATION U/S 32 OF THE ACT. TH E SUBMISSION OF THE LD. A/R FOR THE ASSESSEE IS THAT THE VALUE OF WASTING ASSET WILL DEPRECIATE WITH THE EXTRACTION OF MINERAL, IN OUR VIEW, IS PREPOSTEROUS . IN OUR VIEW, THE PASSAGE OF GUIDELINES FOR PROTECTING THE ENVIRONMENT, NOW IT I S THE DUTY OF THE LESSER/ASSESSEE TO SUBMIT AND EXECUTE THE MINE CLOS ING PLAN SO AS TO ENSURE THAT THE LAND IS USED SUBSEQUENT TO THE CLOSURE OF THE MINING OPERATION. EVEN OTHERWISE, THE MINING ACTIVITY IS DONE NOT ON THE S URFACE OF THE EARTH BUT ON THE CORE TOWARDS THE LOWER SIDE OF THE SURFACE. TH E SURFACE, CAN BE PUT TO USE FOR BENEFICIAL PURPOSES AFTER THE TERM OF LEASE/MIN ING ACTIVITY IS OVER AND IT CAN BE EXPLOITED FOR COMMERCIAL PURPOSES BY THE OWN ER/APPROPRIATE AUTHORITY. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE WILL DOUBLE TAXED AS THE AO HAS ALREADY COMPLETED THE ASSESSMEN T FOR THE A.Y. 2011-12 ON THE BASIS ON THE WRITTEN BACK OF THE AMORTIZATIO N OF THE ASSETS AMOUNTING 28 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. TO RS. 5,79,10,137/-. IN OUR VIEW THE ASSESSEE WAS TAXED ON THE BASIS OF THE SUBMISSION MADE BY IT BEFORE THE AO BEFORE THE ASSE SSMENT OR THE A.Y. 2010- 11 IS FINALIZED. THE MERE ACCEPTABLE OF THE METHOD OLOGY BY THE AO FOR A.Y. 2011-12 WILL NOT WITHHOLD US TO DECIDED THE ISSUE O N MERIT AND IN LAW FOR THE . AUTHORITY AND BOUND TO FOLLOW THE PRINCIPLE LAID DOWN BY THE TRIBUNAL AND NOT THE VICE VERSA. THEREFORE, THE SUBMISSION OF T HE LD. A/R FOR THE ASSESSEE ON THIS COUNT IS ALSO REJECTED. HOWEVER, IT IS MAD E CLEAR THAT THE ASSESSEE WOULD BE ENTITLED TO ALL BENEFITS AS AVAILABLE IN L AW AND THE ASSESSEE WILL NOT BE SUBJECTED TO DOUBLE TAXATION FOR THE A.Y. 2011-1 2. THE AO IS DIRECTED TO GIVE EFFECT TO THE ABOVE SAID DIRECTION AND NULLIFY THE EFFECT OF THE DOUBLE TAXATION, IF ANY, AS CLAIMED BY THE ASSESSEE. IN TH E LIGHT OF THE ABOVE, GROUND NO. 2 OF THE ASSESSEE IS DISMISSED. THE ISSUE OF ALLOWABILITY OF THIS EXPENDITURE U/S 3 7(1) AND 32 OF THE IT ACT, 1961 HAVE BEEN ELABORATELY DISCUSSED. THE DISTINCT ION SOUGHT TO BE CREATED BY THE APPELLANT IN TERMS OF RIGHT OF USAGE OF THE LAND FOR MINING PURPOSES IN THE TWO CASES IS NOT ACCEPTABLE AS M/S RSMML ALSO H AD CERTAIN LANDS ON LEASE HOLD BASIS SIMILAR FACTS IT HAS BEEN HELD CLE ARLY THAT LEASE HOLD RIGHTS DO NOT CONSTITUTE TANGIBLE ASSETS FOR PURPOSE OF SEC TION 32 OF THE I.T. ACT, 1961. THE RELEVANT PORTION FROM THE CASE OF M/S CYBER PAR K DEVELOPMENT & CONSTRUCTION LTD. VS. DCIT, CIRCLE 11/(2),BANGALORE , IN 71 TAXMANN.COM 210 (2016) (BANGALORE-TRIB.) IS REPRODUCED BELOW: IN THIS GROUND OF APPEAL, IT IS TO BE ADJUDICATED WHETHER THE LEASEHOLD RIGHTS FALL WITHIN THE TERM AND SCOPE OF EXPRESSION INTAN GIBLE ASSET AS DEFINED UNDER THE PROVISIONS OF SECTION 32(1)(II). THERE I S NO DISPUTE ABOUT THE COST OF ACQUISITION. THE ONLY DISPUTE IS WITH REGARD TO NA TURE OF THE ASSET ACQUIRED WHETHER LEASEHOLD RIGHTS PARTAKE CHARACTER OF LAND OR INTANGIBLE ASSET. INTANGIBLE ASSET HAS BEEN DEFINED U/S 32(1)(II)BEIN G KNOWHOW, PATENTS, COPY RIGHTS, TRADE MARKS, LICENSE, FRANCHISES OR ANY OTH ER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. OBVIOUSLY, LEASEHOLD RIGH TS ON LAND DO NOT FALL IN THE 29 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. CATEGORY OF ABOVE CATEGORIES. IT DOES NOT FALL EVE N IN RESIDUARY CATEGORY OF ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. BECAUSE THE TERM RIGHTS OF SIMILAR NATURE QUALIFIES THAT EVEN TO F ALL UNDER RESIDUARY CLAUSE, IT SHOULD BE IN THE NATURE OF ABOVE KNOW-HOW, PATENTS, COPY-RIGHTS, TRADE MARKS LICENSE OR FRANCHISE. APPLYING THE RULE OF EJUSDEM GENERIS EVEN TO FALL WITHIN THE RESIDUARY CATEGORY IT SHOULD BE IN THE NATURE O F RIGHTS ENUMERATED ABOVE. FURTHER, DEFINITION OF THE TERM IMMOVABLE PROPERTY IS GIVEN IN SECTION3(26) OF THE GENERAL CLAUSES ACT AND STATES THAT IT SHALL IN CLUDE LAND, BENEFITS TO ARISE OUT OF LAND AND THING ATTACHED TO THE EARTH OR PERM ANENTLY FASTENED TO ANYTHING ATTACHED TO EARTH. RIGHT OF ENJOYMENT TO I MMOVABLE PROPERTY UNDER A LEASE IS IMMOVABLE PROPERTY WITHIN THE MEANING GI VEN IN SECTION 103 OF THE TRANSFER OF PROPERTY ACT. UNDER SECTION 105 OF THE TRANSFER OF PROPERTY ACT, A LEASE CREATES A RIGHT OR A INTEREST IN THE ENJOYMEN T OF THE LAND PROPERTY. HAVING REFERRED TO THE ABOVE LEGAL POSITION, IT IS TO BE HELD THAT BY VIRTUE OF LEASE ONLY AN INTEREST IN LAND IS CREATED WHICH DOE S NOT QUALIFY FOR ALLOWANCE OF DEPRECIATION. FURTHER, SECTION 35E IS CLEARLY NOT APPLICABLE TO T HE APPELLANT IN VIEW OF PROVISIONS OF SECTION 35E(3)(I) AS A RIGHT HAS BEEN ACQUIRED OVER THE SITE OF SOURCE OF THE MINERAL. IN VIEW OF THE ABOVE DISCUSSION THE JUDGMENTS RELIE D ON, THE DISALLOWANCE OF LAND AMORTIZATION CHARGES IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 7.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE ISSUE REQUIRES TO BE ADJUDICATED IS WH ETHER THE ASSESSEE HAS RIGHTLY CLAIMED AMORTIZATION OF EXPENSES OF RS. 8,18,38,172 /-. THE AO HAS DECIDED THE ISSUE AS UNDER:- I HAVE CAREFULLY CONSIDERED THE REPLY OF THE ASSES SEE BUT SAME IS NOT ACCEPTABLE BECAUSE OF CONTENTION OF ASSESSEE TO AMO RTIZE THE LAND U/S 37 30 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. OVER A PERIOD OF 30 YEARS WORKED OUT ON THE BASIS O F TOTAL LIGNITE EXTRACTED FROM THE MINES DURING FINANCIAL YEAR VIS--VIS TOTA L LIGNITE PERMITTED TO BE EXTRACTED FROM KAPURDI MINES IS NOT CORRECT. THE A SSESSEE HAS THE OWNERSHIP RIGHT OVER THE LAND THOUGH IT HAS NOT BEEN REGISTER ED IN THE NAME OF ASSESSEE. FROM THE PLAIN READING OF THE AGREEMENT, IT IS CLEA R THAT THE ENTIRE LAND ACQUISITION WOULD BE DONE BY RSMML AND THE FUNDING WOULD BE PROVIDED BY RWPL. THE BASIC INTENT OF FUNDING BY JV PARTNER RX PL IS THAT OF BUYING OF LAND THROUGH RSMML AND GOVERNMENT OF RAJASTHAN. AS SESSEE COMPANY IS SPECIAL PURPOSE VEHICLE (SPV) TO EXTRACT THE LIGNIT E FROM MINES. IT DOES NOT MAKE ANY DIFFERENCE THAT LAND IS REGISTERED IN THE NAME OF ASSESSEE COMPANY (SVP) OR ITS JV PARTNER, OWNERSHIP RIGHT OF LAND IS VESTED WITH ASSESSEE COMPANY AND IN SUBSTANCE ASSESSEE COMPANY HAS PURCH ASED THE LAND. MERELY REGISTRATION OF LAND IS IN THE NAME OF JV PA RTNERS DOES NOT ALTER THE NATURE OF TRANSACTION. SINCE LAND IS NOT A DEPRECI ABLE ASSET, HENCE THERE IS NO QUESTION OF ALLOWABILITY OF DEPRECIATION OVER THE S AME. ANOTHER CONTENTION OF THE ASSESSEE TO ALLOW THE DEP RECIATION ON THE BASIS OF INTANGIBLE RIGHT IS ALSO NOT ACCEPTABLE. SECTION 32(1)(II) ALLOWS THE DEPRECIATION ON INTANGIBLE ASSETS WHICH PROVIDES DE PRECIATION OF KNOW HOW, PATENTS, COPY RIGHTS, TRADE MARKS, LICENSES, FRANCH ISEES OR ANY OTHER BUSINESS OF COMMERCIAL RIGHTS OF SIMILAR NATURE BEING INTANG IBLE ASSETS ACQUIRED ON OR AFTER THE APRIL 1, 1998. THE PAYMENT SO MADE BY AS SESEE FOR ACQUISITION OF MINING LAND DOES NOT FALLS WITHIN THE AMBIT OF SECT ION 32(1)(II) OF THE ACT BECAUSE THE PAYMENT IS NOT IN THE NATURE OF KNOW-HO W, PATENTS, TRADEMARKS, LICENSES, FRANCHISEE. SO FAR AS THE WORK OTHER BU SINESS OR COMMERCIAL RIGHT IS CONCERNED SAME IS ALSO HAVING LIMITED SCOPE HAS IT REFERS TO OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE, IT MEANS OT HER BUSINESS OR COMMERCIAL RIGHT HAVING NATURE OF KNOWHOW, PATENTS, TRADEMARKS , LICENSES, FRANCHISE. THE INTANGIBLE ASSET REFERS IN THIS PROVISION RE OF HAVING NATURE OF RIGHTS WHICH ARE GRANTED BY GOVERNMENT AUTHORITIES ONLY. RIGHTS ACQUIRED IN NORMAL COURSE OF BUSINESS ARE NOT ELIGIBLE FOR DEPRECIATIO N UNDER THIS PROVISION. HENCE, DEPRECIATION ON THE SAID SUM IS NOT ALLOWABL E UNDER THIS PROVISION. 31 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. ANOTHER CONTENTION OF ASSESSEE TO ALLOW DEDUCTION U /S 35E IS ALSO NOT ACCEPTABLE. SUB-SECTION (3) OF SECTION 35E SPECIFI CALLY RESTRICTS THE ALLOWANCE OF EXPENDITURE ON THE ACQUISITION OF SITE OF THE SO URCE OF ANY MINERALS OR GROUP OF ASSOCIATED MINERALS. HENCE, THE SAID AMOU NT IS ALSO NOT ELIGIBLE FOR DEDUCTION U/S 35E OF THE ACT. THEREFORE I DISALLOW THE AMORTIZATION OF RS. 818381 72/- AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 7.4 THE LD. CIT(A) CONFIRMED THE ABOVE FINDING OF T HE ASSESSING OFFICER. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSE E HAS INCURRED THE EXPENDITURE. THE CONTENTION OF THE ASSESSEE IS THAT IF THE EXPEN DITURE IS TREATED AS CAPITAL EXPENDITURE THEN IT IS ENTITLED FOR CLAIM OF DEPREC IATION. FURTHER, THE EXPENSES ARE INCURRED FOR BUSINESS PURPOSE, AS PER ASSESSEE THE RIGHT WHICH IS ACQUIRED OVER THE LAND MINE LIGNITE FOR 30 YEARS TO BE USED FOR POWER GENERATION AS PER THE LETTER DATED 30.03.2011, GOVERNMENT OF RAJASTHAN. IT IS S TATED THAT THE ASSESSEE INCURRED A SUM OF RS. 365.85 CRORES AS SURFACE RIGHT EXPENSE S TO OBTAIN BUSINESS RIGHTS FOR CONDUCTING MINING BUSINESS AT KAPURDI MINES FOR LEA SE PERIODS OF 30 YEARS WITHOUT ACQUIRING LAND OR FIXED ASSETS. 7.5 NOW, THE ISSUE REQUIRES CONSIDERATION IS WHETHE R SUCH EXPENDITURE IS ALLOWABLE TO AMORTIZE AS CLAIMED. ADMITTEDLY, BOTH THE AUTHORITIES BELOW HAVE DISALLOWED AMORTIZATION OF EXPENSES. WE FIND THAT, THE CO-ORDINATE BENCH HELD THAT THE EXPENDITURE INCURRED IS FOR ENDURING BENEFIT IS OF CAPITAL IN NATURE, THEREFORE NOT ALLOWABLE U/S 37 OF THE ACT. IT IS CONTENDED BY TH E LD. COUNSEL FOR THE ASSESSEE THAT THE BENCH HOWEVER ALLOWED THE CLAIM OF DEPRECIATION . HE SUBMITTED THAT CIRCULAR ISSUED BY THE CBDT CIRCULAR NO. 9/2014 DT. 23.04.20 14 WAS NOT CONSIDERED BY THE TRIBUNAL. LD. CIT(A) CONFIRMED THE FINDING OF THE ASSESSING OFFICER BY RELYING UPON 32 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE O F CYBER PARK DEVELOPMENT & CONSTRUCTION LTD. VS. DCIT AND THE CASE OF RAJASTHA N STATE MINES & MINERALS LTD. VS. ACIT IN ITA NO. 144 & 124/JP/2014. THE CASE OF THE ASSESSEE IS THAT IT HAS INCURRED EXPENSES FOR ACQUIRING MINING RIGHTS. THE CO-ORDIN ATE BENCH HAS ALLOWED THE BENEFIT OF SECTION 32 IN THE CASE OF RAJASTHAN STAT E MINES & MINERAL LTD. VS. ACIT. IN OUR VIEW, THE CIRCULAR OF THE CBDT RELATED TO TH E DEVELOPMENT PROJECTS ISSUED BY THE CBDT. THE HONBLE SUPREME COURT IN THE CASE OF ASSAM BENGAL CEMENT CO. LTD. VS. COMMISSIONER OF INCOME-TAX [1955] 27 ITR 34 (SC ) UNDER THE IDENTICAL FACTS HELD AS UNDER:- THESE ARE THE PRINCIPLES WHICH HAVE TO BE APPLIED I N ORDER TO DETERMINE WHETHER IN THE PRESENT CASE THE EXPENDITURE INCURRE D BY THE COMPANY WAS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. UNDER C LAUSE 4 OF THE DEED THE LESSORS UNDERTOOK NOT TO GRANT ANY LEASE, PERMIT OR PROSPECTING LICENCE REGARDING LIMESTONE TO ANY OTHER PARTY IN RESPECT O F THE GROUP OF QUARRIES CALLED THE DURGASIL AREA WITHOUT A CONDITION THEREI N THAT NO LIMESTONE SHALL BE USED FOR THE MANUFACTURE OF CEMENT. THE CONSIDERATI ON OF RS. 5,000 PER ANNUM WAS TO BE PAID BY THE COMPANY TO THE LESSOR D URING THE WHOLE PERIOD OF THE LEASE AND THIS ADVANTAGE OR BENEFIT WAS TO E NURE FOR THE WHOLE PERIOD OF THE LEASE. IT WAS AN ENDURING BENEFIT FOR THE BE NEFIT OF THE WHOLE OF THE BUSINESS OF THE COMPANY AND CAME WELL WITHIN THE TE ST LAID DOWN BY VISCOUNT CAVE. IT WAS NOT A LUMP SUM PAYMENT BUT WAS SPREAD OVER THE WHOLE PERIOD OF THE LEASE AND IT COULD BE URGED THAT IT WAS A RE CURRING PAYMENT. THE FACT HOWEVER THAT IT WAS A RECURRING PAYMENT WAS IMMATER IAL, BECAUSE ONE HAD GOT TO LOOK TO THE NATURE OF THE PAYMENT WHICH IN I TS TURN WAS DETERMINED BY THE NATURE OF THE ASSET WHICH THE COMPANY HAD ACQUI RED. THE ASSET WHICH THE COMPANY HAD ACQUIRED IN CONSIDERATION OF THIS RECUR RING PAYMENT WAS IN THE NATURE OF A CAPITAL ASSET, THE RIGHT TO CARRY ON IT S BUSINESS UNFETTERED BY ANY COMPETITION FROM OUTSIDERS WITHIN THE AREA. IT WAS A PROTECTION ACQUIRED BY 33 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. THE COMPANY FOR ITS BUSINESS AS A WHOLE. IT WAS NOT A PART OF THE WORKING OF THE BUSINESS BUT WENT TO APPRECIATE THE WHOLE OF TH E CAPITAL ASSET AND MAKE IT MORE PROFIT YIELDING. THE EXPENDITURE MADE BY TH E COMPANY IN ACQUIRING THIS ADVANTAGE WHICH WAS CERTAINLY AN ENDURING ADVA NTAGE WAS THUS OF THE NATURE OF CAPITAL EXPENDITURE AND WAS NOT AN ALLOWA BLE DEDUCTION UNDER SECTION 10(2)(XV) OF THE INCOME-TAX ACT. THE FURTHER PROTECTION FEE WHICH WAS PAID BY THE CO MPANY TO THE LESSOR UNDER CLAUSE 5 OF THE DEED WAS ALSO OF A SIMILAR NA TURE. IT WAS NO DOUBT SPREAD OVER A PERIOD OF 5 YEARS, BUT THE ADVANTAGE WHICH THE COMPANY GOT AS A RESULT OF THE PAYMENT WAS TO ENURE FOR ITS BENEFI T FOR THE WHOLE OF THE PERIOD OF THE LEASE UNLESS DETERMINED IN THE MANNER PROVIDED IN THE LAST PART OF THE CLAUSE. IT PROVIDED PROTECTION TO THE COMPAN Y AGAINST ALL COMPETITORS IN THE WHOLE OF THE KHASI AND JAINTIA HILLS DISTRICT A ND THE CAPITAL ASSET WHICH THE COMPANY ACQUIRED UNDER THE LEASE WAS THEREBY APPREC IATED TO A CONSIDERABLE EXTENT. THE SUM OF RS. 35,000 AGREED TO BE PAID BY THE COMPANY TO THE LESSOR FOR THE PERIOD OF 5 YEARS WAS NOT A REVENUE EXPENDITURE WHICH WAS MADE BY THE COMPANY FOR WORKING THE CAPITAL ASSET W HICH IT HAD ACQUIRED. IT WAS NO PART OF THE WORKING OR OPERATIONAL EXPENSES OF THE COMPANY. IT WAS AN EXPENDITURE MADE FOR THE PURPOSE OF ACQUIRING AN APPRECIATED CAPITAL ASSET WHICH WOULD NO DOUBT BY REASON OF THE UNDERTA KING GIVEN BY THE LESSOR MAKE THE CAPITAL ASSET MORE PROFIT YIELDING. THE PE RIOD OF 5 YEARS OVER WHICH THE PAYMENTS WERE SPREAD DID NOT MAKE ANY DIFFERENC E TO THE NATURE OF THE ACQUISITION. IT WAS NONE THE LESS AN ACQUISITION OF AN ADVANTAGE OF AN ENDURING NATURE WHICH ENURED FOR THE BENEFIT OF THE WHOLE OF THE BUSINESS FOR THE FULL PERIOD OF THE LEASE UNLESS TERMINATED BY T HE LESSOR BY NOTICE AS PRESCRIBED IN THE LAST PART OF THE CLAUSE. THIS AGA IN WAS THE ACQUISITION OF AN ASSET OR ADVANTAGE OF AN ENDURING NATURE FOR THE WH OLE OF THE BUSINESS AND WAS OF THE NATURE OF CAPITAL EXPENDITURE AND THUS W AS NOT AN ALLOWABLE DEDUCTION UNDER SECTION 10 (2) (XV) OF THE ACT. 34 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. FURTHER, THE COORDINATED-BENCH OF THIS TRIBUNAL IN THE CASE OF ONGC VIDESH LTD. VS. DCIT [2010] 37 SOT 97 (DELHI) HELD THAT EXPENDITURE INCURRED ON PURCHASE OF EVALUATION OF THE SEISMIC DATA OF FOREIGN BLOCK. A S THE EXPENDITURE INCURRED FOR FURTHERANCE OF THE ACTIVITIES UNDERTAKEN BY THE ASS ESSEE IN THE NORMAL COURSE OF ITS BUSINESS AT THEREFORE ALLOWABLE AS BUSINESS EXPENDI TURE. IN THE CASE IN HAND THE EXPENDITURE IS INCURRED FOR RIGHTS OF MINING AS GIV EN BY THE GOVERNMENT OF RAJASTHAN ASSIGNED TO RSSML AND THIS LEASE WAS ASSIGNED TO TH E ASSESSEE WITH THE CONCURRENCE OF THE GOVERNMENT OF RAJASTHAN AND GOVE RNMENT OF INDIA. THE RSSML HAD INCURRED EXPENDITURE OF RS. 283.79 CRORES ON AC QUISITION OF LAND WHICH WAS DULY REIMBURSED BY BLMCL IN TERMS OF JV AGREEMENT IN LIE U OF TRANSFER OF MINING LEASE, SURFACE RIGHTS AND OTHER ASSOCIATED RIGHTS FOR DEVE LOPMENT, OPERATION AND MANAGEMENT OF MINES. ASSESSEE FURTHER INCURRED EXP ENSES AMOUNTING TO RS. 7.07 CRORES BEING ADMINISTRATIVE AND PRE OPERATING EXPEN SES FOR ACQUIRING THE AFORESAID MINING RIGHTS OVER KAPURDI LIGNITE MINING LEASE AND ALSO INCURRED NET INTEREST AND FINANCE COST OF RS. 74.99 CRORES IN RESPECT OF FUND S BORROWED FOR AFORESAID EXPENDITURE WHICH HAS BEEN CAPITALIZED UNDER THE CA TEGORY OF SURFACE RIGHT EXPENSES REPRESENTING AMOUNT OF RS. 365.85 CRORES WHICH INCURRED BY ASSESSEE TO OBTAIN BUSINESS RIGHT FOR CONDUCTING MINING BUSINES S AT KAPURDI MINES FOR LEASE PERIOD OF 30 YEARS WITHOUT ACQUIRING ANY RIGHT IN T HE LAND OR OTHER FIXED ASSETS. ACCORDINGLY, ASSESSEE AMORTIZED THE COST ON THE BAS IS OF ACTUAL PRODUCTION AND CLAIMED A SUM OF RS. 8,18,38,172 ON ACCOUNT OF AMOR TIZATION OF THE COST OF SURFACE RIGHTS. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E ASSESSEE NEITHER ACQUIRED TITLE OVER THE MINES NOR THE RIGHTS INTO ANY FIXED ASSETS BY MAKING EXPENDITURE. THE 35 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. ASSESSEE HAS ACQUIRED ABSOLUTE RIGHTS FOR MINING LI GNITE THIS IS ESSENTIALLY FOR 30 YEARS WITHOUT ANY IMPEDIMENT. THE MOOT QUESTION IS WHETHER SUCH EXPENDITURE IS FOR ACQUIRING ANY CAPITAL ASSET OR MERELY SOME BUSINESS RIGHTS. IT IS NOT THE CASE OF ACQUIRING FIXED ASSETS FOR ENDURING BENEFIT BUT THE ASSESSEE WOULD HAVE ENDURING BUSINESS RIGHTS IN RESPECT OF MINING THE LIGNITE. ADMITTEDLY, THE EXPENDITURE HAS BEEN INCURRED THROUGH RSMML IT IS NOT CLEAR WHETHER THE RSMML HAS ALSO CLAIMED SUCH EXPENDITURE IN THE ABSENCE OF SAME, WE DEEM I T PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DECISION AFRE SH. THE AO WOULD VERIFY WHETHER THE RSMML HAS MADE ANY CLAIM ON THE SAME EXPENDITUR E WHICH THE ASSESSEE HAS CLAIMED AND ASCERTAIN THE OUTCOME OF SUCH CLAIM WHE THER SUCH EXPENDITURE HAS BEEN ALLOWED. THEN, THE AO WOULD DECIDE IN ACCORDA NCE WITH THE LAW AND THE CASE LAWS AS CITED BY THE ASSESSEE. THUS, THIS GROUND O F THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 8. GROUND NO. 6, AT THE TIME OF HEARING, GROUND NO. 6 WAS NOT PRESS ED. THEREFORE, THIS GROUND IS DISMISSED AS NOT PRESS. 9. GROUND NO. 7, IS AGAINST CONFIRMING THE ACTION OF THE AO IN DISA LLOWING DEPRECIATION CLAIM OF RS. 42,49,575/- IN RESPECT OF INTANGIBLE ASSET IN THE NATURE OF BUSINESS RIGHTS. 9.1 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. FOR THE SAKE OF CLARITY THE S UBMISSIONS OF THE ASSESSEE ARE REPRODUCED HEREIN BELOW:- SUBMISSION:- 36 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. 1. SECTION 2(11) OF THE IT ACT DEFINES BLOCK OF ASSET TO MEAN INTANGIBLE ASSETS, BEING KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LI CENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE. THEREFORE, A BUSINESS OR COMMERCIAL RIGHTS WHICH IS SIMILAR TO THE WORDS PRE CEDING IT, IS AN INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION U/S 32(1)(II). 2. IN THE PRESENT CASE, ASSESSEE HAS ALLOTTED SHARES O F RS.10.20 CRORES TO RSMML WITHOUT ANY FINANCIAL OBLIGATION ON IT IN LIEU OF I T HAVING OBTAINED THE MINING LEASE FOR THE MINES, TRANSFERRING SUCH MINING LEASE , SURFACE RIGHTS AND OTHER RIGHTS IN RELATION THERETO FOR THE DEVELOPMENT, OPE RATION AND MANAGEMENT OF MINES IN FAVOUR OF THE ASSESSEE AND TO CONTRIBUTE I TS LOCAL KNOWLEDGE, TECHNICAL KNOWLEDGE AND OTHER EXPERTISE IN RELATION TO THE MI NES AS REFERRED IN CLAUSE 2 AND CLAUSE 3 (PB 73-75) OF JV AGREEMENT DT. 27.12.2006. THUS, CLEARLY WHAT THE ASSESSEE HAS OBTAINED BY WAY OF ALLOTTING SHARE S TO RSMML FREE OF COST IS A VALUABLE ASSET BY WAY OF KNOW-HOW AND LICENSE WHICH IS A BUSINESS/COMMERCIAL RIGHT. IT IS NOT A SIMPLE CASE OF ASSESSEE COMPENSA TING RSMML FOR SERVICES PROVIDED AS HELD BY THE LD. CIT(A) RATHER IT IS A C ASE OF ASSESSEE OBTAINING VALUABLE RIGHTS BY WAY OF KNOW-HOW TO DEVELOP THE M INES AND ALSO THE LICENSE TO OPERATE & MANAGE THE MINES AS ALL THE LICENSES, APP ROVALS, CONSENTS REQUIRED FOR OPERATION OF THE MINES IS TRANSFERRED BY RSMML TO T HE ASSESSEE AS A SUB- LICENSEE. THE WORD KNOW-HOW HAS BEEN EXPLAINED BY WAY OF EXPLANATION 4 TO SECTION 32(1) WHICH MEANS ANY INDUSTRIAL INFORMATIO N OR TECHNIQUE LIKELY TO ASSIST IN THE MANUFACTURE OR PROCESSING OF GOODS OR IN THE WORKING OF MINE, OIL WELL OR OTHER SOURCE OF MINERAL DEPOSIT. IN FACT THIS IS SP ECIFICALLY PROVIDED IN CLAUSE 3.1(IV) (PB 73) WHERE IT IS SPECIFICALLY PROVIDED THAT RSMML WOULD ENSURE THAT ALL THE LICENSES, APPROVALS, CONSENT REQUIRED FOR O PERATION OF THE MINES AND THE MINING PROJECT ARE VALID AND CONTINUED TO BE VALID, SUBSISTING AND SHALL BE RENEWED IF REQUIRED DURING THE TERM OF THIS AGREEME NT. CLAUSE 3.1 WHICH IS RELEVANT TO DECIDE THE ISSUE HAS NOT BEEN REPRODUCE D BY THE LD. CIT(A) AT PG 34 OF THE ORDER WHILE REPRODUCING CLAUSE 3.2 & 3.3 OF THIS AGREEMENT. IN VIEW OF 37 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. THESE CLAUSES OF THE AGREEMENT, IT IS EVIDENT THAT ASSESSEE HAS OBTAINED AN INTANGIBLE ASSET ON WHICH IT IS ENTITLED TO DEPRECI ATION. 3. THE SUPREME COURT IN CASE OF TECHNO SHARES & STOCKS LTD . & ORS. VS. CIT 327 ITR 323 HELD THAT MEMBERSHIP CARD OF BSE IS A BUSINESS OR COMMERCIAL RIGHT AS IT GIVES A RIGHT TO ACCESS THE EXCHANGE AND TO PARTICIPATE THEREIN TO A NON-DEFAULTING CONTINUING MEMBER AND I N THAT SENSE IT IS A LICENCE OR AKIN TO LICENCE IN TERMS OF S. 32(1)(II) AND THEREF ORE, DEPRECIATION IS ALLOWABLE ON THE COST OF BSE MEMBERSHIP CARD. THE HELD PART OF T HIS JUDGMENT IS REPRODUCED AS UNDER:- ON THE ANALYSIS OF THE RULES OF BSE, IT IS CLEAR TH AT THE RIGHT OF MEMBERSHIP (INCLUDING RIGHT OF NOMINATION) GETS VESTED IN THE EXCHANGE ON THE DEMISE/DEFAULT COMMITTED BY THE MEMBER; THAT, ON SU CH FORFEITURE AND VESTING IN THE EXCHANGE THE SAME GETS DISPOSED OF BY INVITI NG OFFERS AND THE CONSIDERATION RECEIVED THEREOF IS USED TO LIQUIDATE THE DUES OWED BY THE FORMER/DEFAULTING MEMBER TO THE EXCHANGE, CLEARING HOUSE, ETC. (SEE R. 16 AND BYE-LAW 400). IT IS THIS RIGHT OF MEMBERSHIP WHICH ALLOWS THE NON-DEFAULTING MEMBER TO PARTICIPATE IN THE TRADING SESSION ON THE FLOOR OF THE EXCHANGE. THUS, THE SAID MEMBERSHIP RIGHT IS A 'BUSINESS OR COMMERC IAL RIGHT' CONFERRED BY THE RULES OF BSE ON THE NON-DEFAULTING CONTINUING MEMBE R. THE MEMBERSHIP RIGHT COULD BE SAID TO BE OWNED BY T HE ASSESSEE AND USED FOR THE BUSINESS PURPOSE IN TERMS OF S. 32(1)(II) FOR T HE REASON THAT THE RULES AND THE BYE-LAWS INDICATE THAT THE RIGHT OF MEMBERSHIP (INCLUDING THE RIGHT OF NOMINATION) VESTS IN THE EXCHANGE ONLY WHEN A MEMBE R COMMITS DEFAULT. OTHERWISE, HE CONTINUES TO PARTICIPATE IN THE TRADI NG SESSION ON THE FLOOR OF THE EXCHANGE; THAT HE CONTINUES TO DEAL WITH OTHER MEMB ERS OF THE EXCHANGE AND EVEN HAS THE RIGHT TO NOMINATE SUBJECT TO COMPLIANC E OF THE RULES. MOREOVER, BY VIRTUE OF EXPLN. 3 TO S. 32(1)(II) THE COMMERCIAL O R BUSINESS RIGHT WHICH IS SIMILAR TO A 'LICENCE' OR 'FRANCHISE' IS DECLARED TO BE AN INTANGIBLE ASSET. MOREOVER, UNDER R. 5 MEMBERSHIP IS A PERSONAL PERMISSION FROM THE EXCHANGE WHICH IS NOTHING BUT A 'LICENCE' WHICH ENABLES THE MEMBER TO EXERCISE RIGHTS AND 38 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. PRIVILEGES ATTACHED THERETO. IT IS THIS LICENCE WHI CH ENABLES THE MEMBER TO TRADE ON THE FLOOR OF THE EXCHANGE AND TO PARTICIPATE IN THE TRADING SESSION ON THE FLOOR OF THE EXCHANGE. IT IS THIS LICENCE WHICH ENA BLES THE MEMBER TO ACCESS THE MARKET. THEREFORE, THE RIGHT OF MEMBERSHIP, WHICH I NCLUDES RIGHT OF NOMINATION, IS A 'LICENCE' OR 'AKIN TO A LICENCE' WHICH IS ONE OF THE ITEMS WHICH FALLS IN S. 32(1)(II). THE RIGHT TO PARTICIPATE IN THE MARKET H AS AN ECONOMIC AND MONEY VALUE. IT IS AN EXPENSE INCURRED BY THE ASSESSEE WH ICH SATISFIES THE TEST OF BEING A 'LICENCE' OR 'ANY OTHER BUSINESS OR COMMERCIAL RI GHT OF SIMILAR NATURE' IN TERMS OF S. 32(1)(II). IT IS CLARIFIED THAT PRESENT JUDGM ENT IS STRICTLY CONFINED TO THE RIGHT OF MEMBERSHIP CONFERRED UPON THE MEMBER UNDER THE B SE MEMBERSHIP CARD DURING THE RELEVANT ASSESSMENT YEARS. THE SAID RIGH T OF MEMBERSHIP IS A 'BUSINESS OR COMMERCIAL RIGHT' WHICH GIVES A NON-DE FAULTING CONTINUING MEMBER A RIGHT TO ACCESS THE EXCHANGE AND TO PARTICIPATE T HEREIN AND IN THAT SENSE IT IS A LICENCE OR AKIN TO LICENCE IN TERMS OF S. 32(1)(II) . SUCH A RIGHT VESTS IN THE EXCHANGE ONLY ON DEFAULT/DEMISE IN TERMS OF THE RUL ES AND BYE-LAWS OF BSE, AS THEY STOOD AT THE RELEVANT TIME. THIS JUDGMENT SHOU LD NOT BE UNDERSTOOD TO MEAN THAT EVERY BUSINESS OR COMMERCIAL RIGHT WOULD CONSTITUTE A 'LICENCE' OR A 'FRANCHISE' IN TERMS OF S. 32(1)(II). ON THE FACTS AND CIRCUMSTANCES OF THESE CASES THE TRIBUNAL WAS RIGHT IN HOLDING THAT DEPREC IATION WAS ALLOWABLE ON THE COST OF THE MEMBERSHIP CARD UNDER S. 32(1)(II).VIN AY BUBNA VS. STOCK EXCHANGE, MUMBAI & ORS. (1999) 155 CTR (SC) 519: (1 999) 6 SCC 215 AND STOCK EXCHANGE, AHMEDABAD VS. ASSTT. CIT (2001) 166 CTR (SC) 285: (2001) 248 ITR 209 (SC) RELIED ON; CIT VS. TECHNO SHARES & STOCKS LTD. & ORS. (2009) 225 CTR (BOM) 337: (2009) 28 DTR (BOM) 201 SET ASIDE. THE SUPREME COURT AGAIN IN CASE OF CIT VS. SMIFS SECURI TIES LTD. 348 ITR 302 HELD THAT STOCK EXCHANGE MEMBERSHIP CARD IS AN ASS ET ELIGIBLE FOR DEPRECIATION U/S 32. IT FURTHER HELD THAT GOODWILL ARISING ON AMALGAMATION WOULD FALL UNDER THE EXPRESSION ANY OTHER BUSINESS OR CO MMERCIAL RIGHT OF SIMILAR NATURE AND IS AN ASSET UNDER EXPLANATION 3(B) TO S ECTION 32(1) OF THE ACT AND THUS, ELIGIBLE FOR DEPRECIATION. 39 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. 4. FURTHER, RELIANCE IS PLACED ON THE FOLLOWING CASES: - AREVA T & D INDIA LTD. & ORS. VS. DCIT & ORS. (2012 ) 345 ITR 421 (DEL.) (HC) THE HELD PART OF THIS JUDGMENT READS AS UNDER:- APPLYING THE PRINCIPLE OF EJUSDEM GENERIS, AS SPECI FIED FOR INTERPRETING THE EXPRESSION 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILA R NATURE' SPECIFIED IN S 32(1)(II) OF THE ACT, IT IS SEEN THAT SUCH RIGHTS N EED NOT ANSWER THE DESCRIPTION OF 'KNOWHOW, PATENTS, TRADEMARKS, LICENSES OR FRANCHIS ES' BUT MUST BE OF SIMILAR NATURE AS THE SPECIFIED ASSETS. ON A PERUSAL OF THE MEANING OF THE CATEGORIES OF SPECIFIC INTANGIBLE ASSETS REFERRED IN S 32(1)(II) OF THE ACT PRECEDING THE TERM 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE', IT IS SEEN THAT THE AFORESAID INTANGIBLE ASSETS ARE NOT OF THE SAME KIND AND ARE CLEARLY DISTINCT FROM ONE ANOTHER. THE FACT THAT AFTER THE SPECIFIED INTANGIB LE ASSETS THE WORDS 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' HAVE BEEN A DDITIONALLY USED, CLEARLY DEMONSTRATES THAT THE LEGISLATURE DID NOT INTEND TO PROVIDE FOR DEPRECIATION ONLY IN RESPECT OF SPECIFIED INTANGIBLE ASSETS BUT ALSO TO OTHER CATEGORIES OF INTANGIBLE ASSETS, WHICH WERE NEITHER FEASIBLE NOR POSSIBLE TO EXHAUSTIVELY ENUMERATE. IN THE CIRCUMSTANCES, THE NATURE OF 'BUSINESS OR COMME RCIAL RIGHTS' CANNOT BE RESTRICTED TO ONLY THE AFORESAID SIX CATEGORIES OF ASSETS, VIZ., KNOWHOW, PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES OR FRANCHISES. THE NATURE OF 'BUSINESS OR COMMERCIAL RIGHTS' CAN BE OF THE SAME GENUS IN WHIC H ALL THE AFORESAID SIX ASSETS FALL. ALL THE ABOVE FALL IN THE GENUS OF INTANGIBLE ASSETS THAT FORM PART OF THE TOOL OF TRADE OF AN ASSESSEE FACILITATING SMOOTH CARRYIN G ON OF THE BUSINESS. IN THE CIRCUMSTANCES, IT IS OBSERVED THAT IN CASE OF THE A SSESSEE, INTANGIBLE ASSETS, VIZ., BUSINESS CLAIMS; BUSINESS INFORMATION; BUSINESS REC ORDS; CONTRACTS; EMPLOYEES; AND KNOWHOW, ARE ALL ASSETS, WHICH ARE INVALUABLE A ND RESULT IN CARRYING ON THE TRANSMISSION AND DISTRIBUTION BUSINESS BY THE ASSES SEE, WHICH WAS HITHERTO BEING CARRIED OUT BY THE TRANSFEROR, WITHOUT ANY INTERRUP TION. THE AFORESAID INTANGIBLE ASSETS ARE, THEREFORE, COMPARABLE TO A LICENSE TO C ARRY OUT THE EXISTING TRANSMISSION AND DISTRIBUTION BUSINESS OF THE TRANS FEROR. IN THE ABSENCE OF THE 40 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. AFORESAID INTANGIBLE ASSETS, THE ASSESSEE WOULD HAV E HAD TO COMMENCE BUSINESS FROM SCRATCH AND GO THROUGH THE GESTATION PERIOD WH EREAS BY ACQUIRING THE AFORESAID BUSINESS RIGHTS ALONG WITH THE TANGIBLE A SSETS, THE ASSESSEE GOT AN UP AND RUNNING BUSINESS. THIS VIEW IS FORTIFIED BY THE RATIO OF THE DECISION OF THE SUPREME COURT IN TECHNO SHARES AND STOCKS LTD. V. CIT, 327 ITR 323 WHEREIN IT WAS HELD THAT INTANGIBLE ASSETS OWNED BY THE ASSESSEE AND USED FOR THE BUSINESS PURPOSE WHICH ENABLES THE ASSESSEE TO ACCESS THE MARKET AND HAS AN ECONOMIC AND MONEY VALUE IS A 'LICENSE' OR ' AKIN TO A LICENSE' WHICH IS ONE OF THE ITEMS FALLING IN S 32(1)(II) OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, THE SPECIFIED INTANGIBLE ASSETS ACQUIRED UNDER SLUM P SALE AGREEMENT WERE IN THE NATURE OF 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' SPECIFIED IN S 32(1)(II) OF THE ACT AND WERE ACCORDINGLY ELIGIBLE FOR DEPREC IATION UNDER THAT SECTION. IN VIEW OF THE ABOVE, IT IS NOT NECESSARY TO DECIDE TH E ALTERNATIVE SUBMISSION MADE ON BEHALF OF THE ASSESSEE THAT GOODWILL PER SE IS E LIGIBLE FOR DEPRECIATION UNDER S32(1)(II) OF THE ACT. THE SUBSTANTIAL QUESTION OF LAW IS DECIDED IN THE AFFIRMATIVE AND THIS APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSE E AND AGAINST THE REVENUE AND THE IMPUGNED ORDER IS SET ASIDE. TECHNO SHARES AND STOCKS LTD. V. CIT, 327 ITR 323 (SC), CIT V. HINDUSTAN COCO COLA BEVERAGES (P) LTD., 331 ITR 192 (DEL) RELIED. CIT VS. INGERSOLL RAND INTERNATIONAL LTD. (2014) 22 7 TAXMAN 176 (KAR.) (HC) (MAGZ.) IN THIS CASE, THE PAYMENT OF NON COMPETE FEES WAS H ELD TO BE AN INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION. THE PARA 8 OF THIS JUDGMENT READ AS UNDER:- THEREFORE WHAT IS TO BE SEEN IS, WHAT ARE THE NATUR E OF INTANGIBLE ASSETS WHICH WOULD CONSTITUTE BUSINESS OR COMMERCIAL RIGHTS TO B E ELIGIBLE FOR DEPRECIATION. IN THIS REGARD, IT IS NECESSARY TO NOTICE THAT THE INT ANGIBLE ASSETS ENUMERATED IN SEC.32 OF THE ACT EFFECTIVELY CONFER A RIGHT UPON A N ASSESSEE FOR CARRYING ON A BUSINESS MORE EFFICIENTLY BY UTILIZING AN AVAILABLE KNOWLEDGE OR BY CARRYING ON A BUSINESS TO THE EXCLUSION OF ANOTHER ASSESSEE. A NO N-COMPETE RIGHT 41 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. ENCOMPASSES A RIGHT UNDER WHICH ONE PERSON IS PROHI BITED FROM COMPETING IN BUSINESS WITH ANOTHER FOR A STIPULATED PERIOD. IT W OULD BE THE RIGHT OF THE PERSON TO CARRY ON A BUSINESS IN COMPETITION BUT FOR SUCH AGREEMENT OF NON-COMPETE. THEREFORE THE RIGHT ACQUIRED UNDER A NON-COMPETE AG REEMENT IS A RIGHT FOR WHICH A VALUABLE CONSIDERATION IS PAID. THIS RIGHT IS ACQUIRED SO AS TO ENSURE THAT THE RECIPIENT OF THE NON-COMPETE FEE DOES NOT COMPE TE IN ANY MANNER WITH THE BUSINESS IN WHICH HE WAS EARLIER ASSOCIATED. THE OBJECT OF ACQUIRING A KNOW-HOW, PATENTS, COPYRI GHTS, TRADEMARKS, LICENCES, FRANCHISES IS TO CARRY ON BUSINESS AGAINST RIVALS I N THE SAME BUSINESS IN A MORE EFFICIENT MANNER OR TO PUT IT DIFFERENTLY IN A BEST POSSIBLE MANNER. THE OBJECT OF ENTERING INTO A NON-COMPETE AGREEMENT IS ALSO THE S AME I.E., TO CARRY ON BUSINESS IN A MORE EFFICIENT MANNER BY AVOIDING COM PETITION, ATLEAST FOR A LIMITED PERIOD OF TIME. ON PAYMENT OF NON-COMPETE, THE PAYE R ACQUIRES A BUNDLE OF RIGHTS SUCH AS RESTRICTING RECEIVER DIRECTLY OR IND IRECTLY PARTICIPATING IN A BUSINESS WHICH IS SIMILAR TO THE BUSINESS BEING ACQUIRED, FR OM DIRECTLY OR INDIRECTLY SOLICITING OR INFLUENCING CLIENTS OR CUSTOMERS OF T HE EXISTING BUSINESS OR ANY OTHER PERSON EITHER NOT TO DO BUSINESS WITH THE PERSON WH O HAS ACQUIRED THE BUSINESS AND PAID THE NON-COMPETE FEE OR TO DO BUSINESS WITH THE PERSON RECEIVING THE NON-COMPETE FEE TO DO BUSINESS WITH A PERSON WHO IS DIRECTLY OR INDIRECTLY IN COMPETITION WITH THE BUSINESS WHICH IS BEING ACQUIR ED. THE RIGHT IS ACQUIRED FOR CARRYING ON THE BUSINESS AND THEREFORE IT IS A BUSI NESS RIGHT. THE WORD 'COMMERCIAL'' IS DEFINED IN BLACK'S LAW DI CTIONARY AS RELATED TO OR CONNECTED WITH TRADE AND COMMERCE IN GENERAL', 'COM MERCE' IS DEFINED AS 'THE EXCHANGE OF GOODS, PRODUCTIONS OR PROPERTY OF ANY K IND; THE BUYING, SELLING AND EXCHANGING OF ARTICLES'. A RIGHT BY WAY OF NON-COMP ETE IS ACQUIRED ESSENTIALLY FOR TRADE AND COMMERCE AND THEREFORE IT WILL ALSO QUALI FY AS A COMMERCIAL RIGHT. A RIGHT ACQUIRED BY WAY OF NON-COMPETE CAN BE TRANSFE RRED TO ANY OTHER PERSON IN THE SENSE THAT THE ACQUIRER GETS THE RIGHT TO ENFOR CE THE PERFORMANCE OF THE TERMS OF AGREEMENT UNDER WHICH A PERSON IS RESTRAIN ED FROM COMPETING. WHEN A 42 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. BUSINESSMAN PAYS MONEY TO ANOTHER BUSINESSMAN FOR R ESTRAINING THE OTHER BUSINESSMAN FROM COMPETING WITH THE ASSESSEE, HE GE TS A VESTED RIGHT WHICH CAN BE ENFORCED UNDER LAW AND WITHOUT THAT, THE OTH ER BUSINESSMAN CAN COMPETE WITH THE FIRST BUSINESSMAN. WHEN BY PAYMENT OF NON-COMPETE FEE, THE BUSINESSMAN GETS HIS RIGHT WHAT HE IS PRACTICALLY G ETTING IS KIND OF MONOPOLY TO RUN HIS-BUSINESS WITHOUT BOTHERING ABOUT THE COMPET ITION. GENERALLY, NON-COMPETE FEE IS PAID FOR A DEFINITE P ERIOD. THE IDEA IS THAT BY THAT TIME, THE BUSINESS WOULD STAND FIRMLY ON ITS OWN FO OTING AND CAN SUSTAIN LATER ON. THIS CLEARLY SHOWS THAT THE COMMERCIAL RIGHT CO MES INTO EXISTENCE WHENEVER THE ASSESSEE MAKES PAYMENT FOR NON-COMPETE FEE. THE REFORE THAT RIGHT WHICH THE ASSESSEE ACQUIRES ON PAYMENT OF NON-COMPETE FEE CONFERS IN HIM A COMMERCIAL OR A BUSINESS RIGHT WHICH IS HELD TO BE SIMILAR IN NATURE TO KNOW- HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRA NCHISES. THEREFORE THE COMMERCIAL RIGHT THUS ACQUIRED BY THE ASSESSEE UNAM BIGUOUSLY FALLS IN THE CATEGORY OF AN 'INTANGIBLE ASSET'. THEIR RIGHT TO C ARRY ON BUSINESS WITHOUT COMPETITION HAS AN ECONOMIC INTEREST AND MONEY VALU E. THE TERM 'OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' HA S TO BE INTERPRETED IN SUCH A WAY THAT IT WOULD HAVE SOME SIMILARITIES AS OTHER A SSETS MENTIONED IN CL.(B) OF EXPLN.3. HERE THE DOCTRINE OF EJUSDEM GENERIS WOULD COME INTO OPERATION AND THEREFORE THE NON-COMPETE FEE VESTS A RIGHT IN THE ASSESSEE TO CARRY ON BUSINESS WITHOUT COMPETITION WHICH IN TURN CONFERS A COMMERC IAL RIGHT TO CARRY ON BUSINESS SMOOTHLY. WHEN ONCE THE EXPENDITURE INCURRED FOR ACQUIRING TH E SAID RIGHT IS HELD TO BE CAPITAL IN NATURE, CONSEQUENTLY THE DEPRECIATION PR OVIDED UNDER SEC.32(1)(II) IS ATTRACTED AND THE ASSESSEE WOULD BE ENTITLED TO THE DEDUCTION AS PROVIDED IN THE SAID PROVISION I.E., PRECISELY WHAT THE TRIBUNAL HA S HELD. CIT VS. MIS BHARTI TELETECH LTD. (2015) 119 DTR 139 (DEL.) (HC) 43 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. IN THIS CASE, THE AMOUNT PAID TO ACQUIRE NETWORK AN D THE FACILITIES WAS HELD TO BE INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION. THE HELD PART OF THIS JUDGMENT READS AS UNDER:- THE QUESTION AS TO WHETHER THE CLAIM FOR DEPRECIAT ION CONFIRMS TO ONE OR THE OTHER DESCRIPTION UNDER SECTION 32, ESPECIALLY EXPL ANATION 3 HAS TO BE EXAMINED WITH REFERENCE TO WHAT IS PUT FORWARD BY THE ASSESS EE IN THE GIVEN FACTS OF EACH CASE. THE STRUCTURE OF THE DEFINITION, OR RATHER EX PANDED DEFINITION, WHICH BY EXPLANATION 3 SPELLS OUT WHAT ARE INTANGIBLE ASSETS (KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES ETC.), BEING OF A PECULIAR NATURE, THE CLAIM WHICH THE COURT WOULD NECESSARILY HAVE TO CON SIDER IS WHETHER THE ITEM CLAIMED TO BE ELIGIBLE FOR DEPRECIATION CONFIRMS TO OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. IN THE FACTS OF THE PRES ENT CASE, A READING OF THE AGREEMENT BETWEEN STL AND THE ASSESSEE CLARIFIES TH AT A SPECIFIC AMOUNT, I.E., RS.9 CRORES WAS PAID BY THE ASSESSEE TO THE TRANSFE ROR WHO OWNED COMMERCIAL RIGHTS TOWARDS THE NETWORK AND THE FACILITIES. THE CONSIDERATION WAS A SPECIFIC VALUE BUT FOR WHICH THE NETWORK WOULD NOT HAVE BEEN OTHERWISE TRANSFERRED. IN THAT SENSE, IT CONSTITUTED BUSINESS OR COMMERCIAL R IGHTS WHICH WERE SIMILAR TO THE ENUMERATED INTANGIBLE ASSETS. IN SO CONCLUDING, HOW EVER, THIS COURT DOES NOT LAY DOWN THE GENERAL OR PARTICULAR PRINCIPLE THAT EVERY SUCH CLAIM HAS TO BE NECESSARILY ALLOWED AS WAS APPARENTLY UNDERSTOOD BY THE ITAT. THE CIRCUMSTANCE THAT THE DECLARATION OF LAW IN SMIFS S ECURITIES (SUPRA) ENVISIONS INCLUSION OF GOODWILL AS AN ASSET AND, THEREFORE, E NTITLED TO DEPRECIATION, IN OTHER WORDS DOES NOT NECESSARILY MEAN THAT IN EVERY CASE THE GOODWILL CLAIM HAS TO BE ALLOWED. IN THE PRESENT CASE, THOUGH TERMED AS GOOD WILL, WHAT WAS ACTUALLY PARTED WITH BY STL WAS A COMMERCIAL RIGHT, I.E., EX CLUSIVITY TO THE NETWORK WHICH WOULD NOT HAVE BEEN OTHERWISE AVAILABLE BUT FOR THE TERMS OF THE ARRANGEMENT. SO VIEWED, THIS COURT IS SATISFIED THAT THE CONCLUS IONS ARRIVED AT BY THE CIT (A) AND THE ITAT CANNOT BE FAULTED. NO SUBSTANTIAL QUES TION OF LAW ARISES; THE APPEAL IS CONSEQUENTLY DISMISSED. 44 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. IN VIEW OF THE ABOVE JUDGMENTS OF SUPREME COURT AND HIGH COURT, ON ALLOTMENT OF SHARES TO RSMML WITHOUT COST, ASSESSEE OBTAINED VALUABLE COMMERCIAL AND BUSINESS RIGHTS TO DO MINING AND THEREFORE, THE SAM E IS AN INTANGIBLE ASSET ENTITLED FOR DEPRECIATION. 9.2. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD. THE ISSUE REQUIRES TO BE ADJUDICATED IS WH ETHER THE ASSESSEE IS ENTITLED FOR DEPRECIATION IN RESPECT OF INTANGIBLE ASSET IN THE NATURE OF BUSINESS RIGHTS. LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF TECHNO SHARES & STOCK S LTD. & ORS. VS. CIT 327 ITR 323. AS PER THE ASSESSEE WHAT IT HAS ACQUIRED IS A N INTANGIBLE ASSET AND THEREFORE IS ENTITLED FOR DEPRECIATION. IN OUR CONSIDERED VIEW, THE ASSESSEE IS REQUIRED TO DEMONSTRATE THAT IT HAS ACQUIRED KNOWHOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSE, FRANCHISEE OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE BEING INTANGIBLE ASSETS. IN THE CASE IN HAND, IT IS CONT ENDED THAT ASSESSEE HAS ALLOTTED SHARES OF RS. 10.20 CRORES TO RSMML WITHOUT ANY FIN ANCIAL OBLIGATION ON IT IN LIEU OF IT HAVING OBTAINED THE MINING LEASE, FOR THE MINES, TR ANSFERRED SUCH MINING LEASE, SURFACE RIGHTS AND OTHER RIGHTS IN RELATION THERETO FOR THE DEVELOPMENT, OPERATION AND MANAGEMENT OF MINES IN FAVOUR OF THE ASSESSEE AND T O CONTRIBUTE ITS LOCAL KNOWLEDGE, TECHNICAL KNOWLEDGE AND OTHER EXPARTISE IN RELATION TO THE MINES AS REFERRED IN CLAUSE 2 TO 3 OF THE JV AGREEMENT DATED 27/12/2006. THE ASSESSEE HAS NOT DEMONSTRATED AS WHAT KNOWLEDGE WAS TRANSFERRED TO THE ASSESSEE, IN THE ABSENCE OF THE SAME IT CANNOT BE I NFERRED WITH CERTAINTY THAT WHAT THE ASSESSEE HAS ACQUIRED WOULD FALL UNDER THE CLAU SE 32(1)(II) AND HOW SUCH KNOWLEDGE IS USED FOR THE PURPOSE OF BUSINESS OF TH E ASSESSEE. THEREFORE, IN THE 45 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. INTEREST OF JUSTICE WE SET ASIDE THE ORDER OF THE A UTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE AO TO DECIDE THIS ISSUE AF RESH. AFTER GIVING OPPORTUNITY TO THE ASSESSEE THE AO WOULD VERIFY THE NATURE OF THE RIGH TS AND KNOWHOW ACQUIRED BY THE ASSESSEE. IN CASE THE AO FINDS THAT BY VIRTUE OF T HE AGREEMENT THE ASSESSEE HAS ACQUIRED KNOWHOW OR ANY OTHER BUSINESS OF COMMERCIA L RIGHTS OR SIMILAR NATURE, HE WOULD ALLOWED THE DEPRECIATION AS CLAIMED BY THE AS SESSEE. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOS ES. 10. GROUND NO. 8, IS GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDIC ATION. 11. GROUND NO. 9 IS PRAYER FOR COST. AFTER CONSIDERING THE SUBMISS IONS OF THE LD. COUNSEL FOR THE ASSESSEE WE HOLD THAT PARTIES BEAR THEIR OWN COST. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 510/JP/2017. (REVENUE) 13. NOW, WE TAKE UP REVENUES APPEAL IN ITA NO. 510 /JP/2017 PERTAINING TO THE A.Y. 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS . 63,44,181/- MADE BY THE AO IGNORING THE FACT THAT THE EXPENDITURE WA S NOT INCURRED FOR BUSINESS ACTIVITY HENCE NOT ALLOWABLE AS REVENUE EX PENDITURE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION OF RS. 4 ,70,80,000/- IN RESPECT OF MINES CLOSURE EXPENSES EVEN THE EXPENDIT URE HAS NOT BEEN DEBITED IN THE BOOKS OF ACCOUNTS. 3. THE APPELLANT CRAVES ITS RIGHTS, TO ADD, AMEND O R ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 46 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. 14. GROUND NO. 1 IS AGAINST DELETING THE ADDITION OF RS. 63,44,181/ - MADE BY THE AO. 14.1 THE FACTS RELATED TO THIS GROUND ARE THAT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAS DEBITED AND CLAIMED A SUM OF RS. 2,11,47,269/- TOWARDS LAND TAX. OUT OF WHICH A SUM OF RS. 63,44,181/- HA S BEEN DEPOSITED AND BALANCE SUM OF RS. 14803747/- HAS BEEN DISALLOWED BY THE AS SESSEE DUE TO NON-PAYMENT U/S 43B OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER DISALLOWED THIS CLAIM. ON APPEAL THE LD. CIT(A) ALLOWED THIS EXPENDITURE. 14.2 LD. D/R VEHEMENTLY ARGUED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE DEDUCTION. 14.3 PER CONTRA LD. COUNSEL FOR THE ASSESSEE SUPPOR TED THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE SUBMISSIONS AS MADE IN T HE WRITTEN SUBMISSIONS. 14.4 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW . WE FIND THAT LD. CIT(A) HAS GIVEN A FINDING ON FACT BY OBSERVING AS UNDER:- (2. 3) 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. AS NOTED AN AMOUNT OF RS. 2,11,47,269/- HAS BEEN CLAIMED AS LAND TAX OUT OF W HICH A SUM OF RS. 1,48,03,747/- HAD BEEN DISALLOWED SUO MOTO BY THE A SSESSEE UNDER SECTION 43B OF THE IT ACT, 1961 AS THE SAME HAD NOT BEEN PA ID AND THE BALANCE AMOUNT OF RS. 63,44,181/- WAS CLAIMED. THE ASSESSI NG OFFICER DISALLOWED THE CLAIM AS THE LEVY OF THE SAME HAD BEEN DISPUTED BY THE ASESSEE BEFORE THE LAND TAX AUTHORITIES AND THE MATTER WAS SUB-JUDICE IN THE RAJASTHAN HIGH COURT AND NO DOCUMENTARY EVIDENCES HAD BEEN PROVIDE D BY THE ASSESSEE, OF DISMISSAL OF THE WRIT PETITION FILED BY THE COMPANY . IT WAS FURTHER HELD THAT THE ASSESSEE HAD DEPOSITED THE SAID SUM ON THE BASI S OF DEMAND RAISED ON 47 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. M/S RAJASTHAN STATE MINE & MINERALS LTD. AND NOT ON THE ASSESSEE FOR VARIOUS LOCATIONS AND THAT THE OWNERSHIP OF SOME OF THESE L ANDS WAS ALSO UNDER DISPUTE. THE FACTS OF THE CASE ON THIS ISSUE ARE THAT THE SU B REGISTRAR, REVENUE DEPARTMENT, GOVERNMENT OF RAJASTHAN HAD RAISED A DE MAND OF RS. 2,11,47,269/- BEING LAND TAX UNDER RAJASTHAN FINANC E ACT, 2006 FOR THE FINANCIAL YEAR 2011-12 FOR LAND ACQUIRED FOR KAPURD I MINES IN THE NAME OF M/S RSMML. AS PER TERMS OF JV AGREEMENT, THE OBLIGATIO N TO PAY LAND TAX BEING OF THE COMPANY, THE SAME WAS ACCOUNTED FOR AND THE LEVY OF TAX DEMAND WAS CHALLENGED IN THE RAJASTHAN HIGH COURT. AS PER DIRE CTION OF THE COURT, 30% OF THE DEMAND WAS TO BE PAID AND STAY WAS GRANTED FOR THE BALANCE AND SUBSEQUENTLY THE WRIT PETITION FILED BY THE COMPANY WAS ALSO DISMISSED BY THE COURT. IN THE PRESENT PROCEEDINGS, IT IS SUBMITTED THAT AS PER THE RAJASTHAN FINANCE ACT, 2006, LAND TAX IS TO BE PAID BY THE MI NE OWNER AND LAND TAX LIABILITY OF RS. 2,11,47,269/- PERTAINING TO FINANC IAL YEAR 2011-12 IS A CRYSTALLIZED STATUTORY BUSINESS LIABILITY. IT WAS FURTHER STATED THAT THE ASSESSING OFFICERS OBSERVATIONS THAT THERE WAS DIS PUTE OF OWNERSHIP OF LAND IS ALSO NOT CORRECT AS THE NAME OF THE M/S RAJASTHAN S TATE MINES & MINERALS LTD. IS APPEARING IN REVENUE RECORDS, THE DEMAND WAS RAI SED ON IT BUT RELATED TO THE COMPANY. FURTHER, THE WRIT PETITION WAS FILED IN THE COURT BY THE COMPANY AS THE LIABILITY PERTAINS TO THE COMPANY IN TERMS O F THE IMPLEMENTATION AGREEMENT AND JOINT VENTURE AGREEMENT. IT IS SEEN THAT THE DEMAND OF RS. 63,44,181/- RELAT ING TO FINANCIAL YEAR 2011- 12 HAS BEEN PAID BY TO THE APPELLANT UNDER THE DIRE CTION OF THE HIGH COURT. FURTHER, SUBSEQUENTLY THE WRIT PETITION OF THE APPE LLANT HAS ALSO BEEN DISMISSED BY THE RAJASTHAN HIGH COURT AND THE LIABI LITY HAS BEEN CONFIRMED. IN A RECENT DECISION OF JURISDICTIONAL ITAT IN THE CASE OF ACIT, CIRCLE-1, KOTA VS. MANGALAM CEMENT LTD. 78 TAXMANN.COM 334 (JAIPUR -TRIB.) (2017) HAS HELD AS FOLLOWS:- 48 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. IT WAS SUBMITTED THAT ALL THESE STATUTORY LIABILIT IES. A STATUTORY LIABILITY IS ALLOWABLE IN THE YEAR IN WHICH IT ARISES NOTWITH STANDING THE FACT THAT IT IS DISPUTED BY THE ASSESEE AND NO ENTRIES ARE MA DE IN THE BOOKS OF ACCOUNT. HENCE, THESE PAYMENT ARE ALLOWABLE IN THE YEAR UNDER CONSIDERATION.[PARA 18.1] IT WAS FURTHER SUBMITTED THAT OTHERWISE ALSO BECAUS E OF SPECIFIC PROVISION OF SECTION 43B, SUCH STATUTORY LIABILITY ARE ALLOWABLE ON PAYMENT BASIS EVEN IF EXPENDITURE IS NOT BOOKED IN BOOKS OF ACCOUNT.[PARA 18.2] THE SERVICE TAX AND LAND TAX ARE STATUTORY LIABILIT Y WHICH ARE PAID DURING THE YEAR AS PER THE ORDERS OF THE CESTAT AND RAJASTHAN HIGH COURT. THESE ARE STATUTORY LIABILITIES WHICH PERTA INS TO THE BUSINESS CARRIED ON BY THE ASSESSEE. THE ASSESSEE CANNOT BE DENIED A DEDUCTION IN RESPECT OF THESE PAYMENTS MERELY ON AC COUNT OF THE FACT THAT THESE ARE PAYMENTS IN RESPECT OF MATTER WHICH ARE CONTESTED ;BEFORE THE AUTHORITIES AND NO EXPENDITURE IS BOOK IN THE PROFIT AND LOSS ACCOUNT. IN LIGHT OF ABOVE, ORDER OF THE COMMISSIO NER (APPEALS) IS TO BE UPHELD DELETION THE DISALLOWANCE UNDER SECTION 4 3B MADE BY ASSESSING OFFICER. [PARA 20] IN VIEW OF THE DISCUSSION AS ABOVE, AND THE DECISIO N OF THE JURISDICTIONAL ITAT, THE ADDITION MADE BY THE ASSESSING OFFICER IS DELET ED. THE GROUND OF APPEAL IS ALLOWED. 14.5 THE ABOVE FINDING ON FACT IS NOT CONTROVERTED BY THE REVENUE. SINCE, THE LAND TAX IS ALLOWABLE U/S 43B OF THE ACT. THEREFOR E, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE FINDING OF THE LD. CIT(A) SAME I S HEREBY AFFIRMED. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 49 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. 15. GROUND NO. 2, IS AGAINST ALLOWING DEDUCTION OF RS. 4,70,80,000/- IN RESPECT OF MINE CLOSURE EXPENSES. 15.1 LD. D/R SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AND SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWAN CE. 15.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THIS ISSUE IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE. 15.3 WE HAVE HEARD THE RIVAL CONTENTIONS, WE FIND T HAT LD. CIT(A) HAS DECIDED THE ISSUE IN PARA 3.3. OF THE ORDER READ AS UNDER:- 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. AS NOTED, A SUM OF RS. 4,70,80,000/- WAS DEBITED TOWARD MIN CLOSURE CHARGES, WAS NOT ALL OWED BY THE ASSESSING OFFICER, AS THE SAME HAD NOT BEEN DEPOSITED TO THE MINING DEPARTMENT AND ONLY A PROVISION HAD BEEN MADE. THE ASSESSING OFFI CER, AS THE SAME HAD NOT BEEN DEPOSITED TO THE MINING DEPARTMENT AND ONLY A PROVISION HAD BEEN MADE. THE ASSESSING OFFICER FURTHER HELD THAT AS P ER THE MINE CLOSURE PLAN THE AMOUNT SO DEPOSITED IN THE ESCROW ACCOUNT IS IN TEREST BEARING AND THE INTEREST IS REALIZABLE AFTER EVERY FIVE YEARS, THER EFORE, THE SUM IS IN THE NATURE OF A DEPOSIT AND NOT EXPENDITURE, HENCE WAS NOT ALL OWABLE. IN THE PRESENT PROCEEDING, IT HAS BEEN STATED THAT AS PER GUIDELINES ISSUED BY MINISTRY OF COAL, GOVERNMENT OF INDIA, IT IS MANDAT ORY FOR ALL COAL MINE OWNERS TO PROVIDE FOR AN ANNUAL MINE CLOSURE COST A S PER THE GUIDELINES. THE LIABILITY FOR MINE CLOSURE IS AN ASCERTAINED ON AND THESE EXPENDITURES HAVE TO BE COMPULSORILY INCURRED AND ARE INCIDENTAL TO THE MINING ACTIVITY. IT WAS SUBMITTED THAT IN THE PETITION WITH RERC FOR DETERM INATION OF TRANSFER PRICE OF LIGNITE TO M/S RWPL, THE COMPONENT OF MINE CLOSURE CHARGES HAS BEEN INCLUDED AND HENCE ANY DISALLOWANCE WOULD RESULT IN DOUBLE TAXATION. IT WAS FURTHER SUBMITTED THAT PROVISIONS FOR MINE CLOSURE EXPENSES AND DEPOSITED FOR THE AMOUNT IN THE ESCROW ACCOUNT AS AN ENFORCEMENT MEASURE FOR FINANCIAL ASSURANCE ARE TWO DIFFERENT EVENTS. RELIANCE WAS P LACED ON THE DECISION OF 50 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. THE JURISDICTIONAL HIGH COURT IN THE CASE OF UDAIPU R MINE DEVELOPERS SYNDICATE PVT. LTD. VS. DCIT. IN THE ALTERNATE, IN GROUND NO . 3, IT WAS STATED THAT SINCE MINE CLOSURE CHARGES ATTRIBUTABLE TO CLOSING STOCK OF LIGNITE, TO THE EXTENT OF RS. 72,12,891/- HAVE BEEN INCLUDED IN THE VALUE OF CLOSING STOCK, THE SAME SHOULD BE REDUCED FROM THE MINE CLOSURE CHARGES DIS ALLOWED. IDENTICAL ISSUE AROSE IN CASE OF M/S RAJASTHAN STAT E MINES & MINERAL LTD. VS. ACIT, CIRCLE-6, JAIPUR IN ITA NO. 144/JP/2014 AND 1 24/JP/2014 DATED 12.02.2016 AND THE RELEVANT PORTION OF THE ORDER IS AS FOLLOWS: 30.3 WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED T HE MATERIAL ON RECORD. IN OUR VIEW, ONCE ASSESSEE WHETHER PRIVATE OR GOVERNMENT TAKE ON LEASE A MINE, ITS CLOSURES IS INEVITABLE. A MINE CANNOT BE PERMITTED TO BE EXPLOITED INFINITELY AND INDEFINITE LY. IN OUR VIEW, ONE THE MINE IS EXPLOITED, ITS CLOSURE AND REHABILITATI ON IS NECESSARY. IN OUR VIEW, THE MINISTRY OF COAL, GOVERNMENT OF INDIA HAD PROVIDED STRUCTURED PROGRAMMED/GUIDELINES FOR CLOSURE OF MIN ES. IN OUR OPINION, THE VIEW EXPRESSED BY THE AO AND LD. CIT(A ) IS CONTRARY TO LAW AND WE DISAGREE WITH THE VIEW OF THE AUTHORITIE S BELOW THAT THE LIABILITY IS A CONTINGENT LIABILITY AND IS NOT ASCE RTAINABLE LIABILITY. THE GUIDELINES LAID DOWN BY THE COAL MINISTRY, HAS ELAB ORATELY GIVEN THE CHARGE TO QUANTIFY THE LIABILITY AND THE MANNER IN WHICH THE AMOUNT IS REQUIRED TO BE SPENT FOR CLOSURE OF THE MINES AND F OR RESTORING THE ECOLOGICAL BALANCE AND ENVIRONMENT PROTECTION. TH EREFORE, TO SAY THAT THE LIABILITY IS MERELY A CONTINGENT AND HAS TO BE ARISES, IN OUR VIEW IS PREPOSTEROUS AND WITHOUT ANY MERIT. THE PROVISIONS ARE REQUIRED TO BE MADE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. SINC E THE AMOUNT IS ASCERTAINABLE AND DISCERNABLE TO BE SPENT ON THE CL OSURE OF THE MINES, IN VIEW OF THE FORMULA GIVEN BY THE MINISTRY OF COA L, THEREFORE, IN OUR VIEW THE LIABILITY IS NOT A CONTINGENT LIABILITY AN D IS REQUIRED TO BE MADE PROVISION IN PRESENT AND IS REQUIRED TO BE SPENT IN A FUTURE DATE. THE JUDGMENT REFERRED BY THE LD. A/R FOR THE ASSESSEE I N THE MATTER OF KEDARNATH JUTE MFG CO. LTD. (SUPRA) AND ALSO IN THE MATTER OF ROTORK 51 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. CONTROLS INDIA PVT. LTD. (SUPRA) ARE SQUARELY APPLI CABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 30.4 WHEN THE ABOVE PRINCIPLES ARE APPLIED TO THE F ACTS OF THE PRESENT CASE IT CAN BE PROGRESSIVE OR CONTINGENT MI NE CLOSURE PLAN AND FINAL MINE CLOSURE PLANT. THE ASSESSEE HAS OPERATI NG LIGNITE MINES AT HIRAL, NAGOR AND SONARI. AS A RESULT OF THE MINE C LOSURE PLANS ISSUED BY THE GOVERNMENT OF INDIA THE ASESSEE HAS AN PRESE NT OBLIGATION TO PROVIDE FOR THE EXPENDITURE WHICH IT HAVE TO FUND O N CLOSURE OF THE MINES AND THUS IT HAS A PRESENT OBLIGATION AS A RES ULT OF THE PAST EVENTS, IT IS CERTAIN THAT AN OUTFLOW OF RESOURCES WOULD BE REQUIRED TO SETTLE THE OBLIGATION AND A RELIABLE ESTIMATE CAN B E MADE OF THE AMOUNT OF THE OBLIGATION WHICH IS MENTIONED DIN THE SE GUIDELINES. THEREFORE, ACCORDING TO THE MATCHING CONCEPT ALSO W HEN THE REVENUE FROM THE MINING ACTIVITY OF THESE MINES HAS BEEN RE COGNIZED IN INCOME, THE CO TO BE INCURRED TO EARN SUCH REVENUE HAS TO B E PROVIDED FOR. IN THESE CIRCUMSTANCES AND THE LEGAL POSITION, EVEN IF EXPENDITURE IS NT ACTUALLY INCURRED IN THE YEAR UNDER CONSIDERATION B UT THERE IS AN OBLIGATION ON THE ASSESSEE TO INCUR THE EXPENDITURE OF WHICH A RELIABLE ESTIMATE CAN BE MADE HAS TO BE ALLOWED A DEDUCTION. IN THE ASSESSEES CASE ALSO IT IS CERTAIN THAT ASSESSEE HA S TO INCUR THE EXPENDITURE ON CLOSURE OF MINE AND FOR WHICH A RELI ABLE ESTIMATE HAS BEEN MADE AND THEREFORE THE PROVISION MADE FOR MINE CLOSURE EXPENSES IS ALLOWABLE U/S 37(1) OF THE ACT. 30.5 FURTHER, THE JUDGMENT IN THE MATTER OF BHARAT EARTH MOVERS LTD. V. CIT, 112 TAXMAN 61 (SC) AND CALCUTTA COMPANY LTD ., 37 ITR ARE APPLICABLE. BESIDES, IN THE SAID JUDGMENT IT WAS C ATEGORICALLY HELD THAT THE MINES CLOSURE LIABILITY IS A ASCERTAINED LIABIL ITY NOTWITHSTANDING PRINCIPLE AS WELL AS THE MERCANTILE SYSTEM OF ACCOU NTING, THE LIABILITY IS APPLICABLE IN PRINCIPLE UNDER SECTION 37 OF THE ACT . IN VIEW OF THE ABOVE, THE GROUND OF THE ASSESSEE IS ALLOWED AND TH E ASSESSING OFFICER 52 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. IS DIRECTED TO GIVE THE BENEFIT OF DEDUCTION OF RS. 2,94,04,000/- TOWARDS MINES CLOSURES EXPENSES IN THE A.Y. 2010-11 . IN VIEW OF THE DISCUSSION AS ABOVE, AND THE FINDING OF THE JURISDICTIONAL ITAT, ON THIS ISSUE, THE ADDITION MADE UNDER THIS HEAD IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 15.4 LD. CIT(A) HAS FOLLOWED THE DECISION OF THE CO -ORDINATE BENCH RENDERED IN THE CASE OF M/S RAJASTHAN MINES AND MINERAL LTD. VS. ACIT IN IT A NO. 144/JP/2014 & 214/JP/2014 DT. 12.02.2016. 15.5 THE REVENUE HAS NOT PLACED ANY CONTRARY BINDIN G PRECEDENTS. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE FINDING OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED. THIS GROUND OF REVENUES APPEAL IS DISMI SSED. 16. GROUND NO. 3, IS GENERAL IN NATURE NEEDS NO SEPARATE ADJUDICATIO N. 17. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 510/JP/2017 IS DISMISSED. 18. IN THE COMBINED RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 534/JP/2017 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND APPEAL O F THE REVENUE IN ITA NO. 510/JP/2017 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, THE 12TH DAY OCTOBER 2017. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 12/10/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S BARMER LIGNITE MINING CO. LT D. 2. THE RESPONDENT- DCIT, CIRCLE-6, JAIPUR. 53 ITA NO. 534 & 510/JP/2017. M/S BARMER LIGNITE MININING CO. LTD., JAIPUR. 3. THE CIT, 4. THE CIT (A) 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 534 & 510/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR
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