Patnaik Minerals Pvt. Ltd, Keonjhar V. JCIT, Sambalpur

ITA 8/CTK/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58409 (ITAT-CUTTACK)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-02-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 06-01-2012
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: S C BHADRAAR
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM, AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 (ASSESSMENT YEAR 2008 - 09) PATNAIK MINERALS PVT. LTD., BONEIKALA, JODA, KEOJHAR , ORISSA PAN: AABCP 3278 P VERSUS JT. COMMISSIONER OF INCOME - TAX, RANGE 1(1), SAMBALPUR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI S.C.BHADRA,AR FOR THE RESPONDENT SMT. PARAMITA TRIPATHY, DR DATE OF HEARING : 16.2.2012 DATE OF PRONOUNCEMENT : 14.03.2012 ORDER SHRI K.K.GUPTA, AM : THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DT.24.01.2011 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE ASSESSMENT YEAR 2008 - 09. IT HAS ALSO FILED THE STAY PETITION SEEKING STAY OF RECOVERY OF THE DEMAN DED DUES FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IS AGAINST CONFIRMATION OF THE DISALLOWANCE OF EXPENDITURE UNDER THE HEAD OVERBURDEN CUTTING AND REMOVAL OF ORE AMOUNTING TO 17,75,71,809 HOLDING THE SAME AS CAPITAL IN NATURE. 3. THE UNDISPUTED FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSEE IS CARRYING ON BUSINESS OF MINING , PROCESSING AND MANUFACTURING OF SPONGE IRON . DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASS ESSEE CLAIMED EXPENSES ON ACCOUNT OF PICKING AND DRESSING CHARGES OF 17,75,71,809 INCURRED FOR CUTTING OF OVERBURDEN TO REACH THE LAYER OF IRON ORE. THE ASSESSING OFFICER ANALYZED THE VARIOUS STAGES OF THE MINING ACTIVITIES BY OBSERVING THAT IN MINING, TH E ORE DEPOSIT IS EMBEDDED IN SOIL BENEATH THE HEAVY OVERBURDEN. THE OVERBURDEN CONSISTS OF HARD STONE ON THE TOP AND SUB SEQUENTLY OVERBURDEN IN THE FORM OF SOFT STONE, EARTH AND MORUM. THE ORE ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 2 CAN BE EXPLOITED AND IT REQUIRES ENTIRE CUTTING OR OVERBURDEN F ROM THE TOP OF THE ORE BODY AND THERE AFTER WINNING THE ORES. AFTER OVERBURDEN IS BLASTED ON THE TOP IT IS LIFTED AND REMOVED TO A MARKED DUMP. IN THE PROCESS OF RAISING OF IRON ORE FURTHER SEGREGATION OF THE ORE IS DONE AND THE ORE IN THE LUMP FORM IS BRO KEN TO SIZE BEFORE BEING SHIFTED FROM THE FACES TO THE CRUSHER OR SCREEN. FOR PRODUCTION, DRILLING AND BLASTING IS EXTENSIVELY USED. FOR OVERBURDEN CUTTING, BLASTING IS REQUIRED AND THEREAFTER FOR MINERAL ORE RAISING , BLASTING IS ALSO REQUIRED. DEEP HOLES ARE MADE IN THE STRATA AND THEREAFTER THE SAME ARE BLASTED IN THE MINES. THE ORE AFTER BROKEN INTO PIECES IS SHIFTED FROM THE FACES TO A LOWER BENCH AND THERE AFTER REMOVED TO VARIOUS DUMPS. THE UN - EVEN PORTION OF THE QUERY IS LEVELED TO MAKE SYSTEMATIC BEN CHES. ONCE THE O R E IS FOUND IN A PARTICULAR BENCH OR A BENCH OR A PLACE , IT HAS TO BE EXPOSED FROM ALL SIDES TO BRING IT INTO A SHAPE OF QU AR RY MAKING BENCHES RAGING FROM 3.5 METERS HEIGHT TO 6 METERS HEIGHT. CONSIDERING ABOVE OPERATION, THE ASSESSING OFFI CER HELD THAT THE EXPENDITURE INCURRED IN THE ABOVE OPERATIONS IS PROSPECTIVE EXPENDITURE WITHIN THE AMBIT OF SECTION 35E OF THE I.T.ACT, 1961 AND AS SUCH, CAPITAL NATURE, BY RELYING ON THE DECISION IN THE CASE OF MUTHALAH CHETTAIR (M.L.M) V. CIT [ 101 IT R 209 (MAD)] AND DISALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS). 4. BEFORE THE LEARNED CIT(A), IT WAS CONTENDED BY THE ASSESSEE THAT THE WORD PROSPECTING MEANS EFFORTS OR POS SIBILITY OF FINDING MINERALS IN SOME PARTICULARS ARE. THERE IS NO RELATION OF OVERBURDEN CUTTING AND REMOVAL EXPENSES WITH THE EXPENSES RELATING TO PROSPECTING AS IT IS A POST - PROSPECTIVE ACTIVITY WHICH IS REVENUE NATURE. RELIANCE WAS PLACED ON THE DECISIO N IN THE CASE OF NEYVELI LIGNITE CORPORATION LTD., V. ASST.COMMISSIONER OF INCOME - TAX [120 TTJ 1096 AND AMALAGAMATED JAMBAD SYNDICATE PVT. LTD. V. CIT, WEST ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 3 BENGAL III (117 ITR 698). THEREFORE, THE ABOVE EXPENDITURE IS ALLOWABLE BEING REVENUE IN NATURE. TH E LEARNED CIT(A) UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER BY HOLDING THE SAME AS CAPITAL NATURE. HE RELIED ON THE DECISIONS IN THE CASE OF COLTNESS IRON CO. V. BLACK [(1881) 1 TC 287 (HL), MORANT V. WHEAT GRENVILE MINING CO. [(1984) 3 TC 298 (QB)] , IN RE, ADDILE & SONS (19875) 1 TC 1 AND UNITED COLLIERIES LTD V. COMM RS. O F INL. REV (1929) 12 TC 1248 (C.SESS) FOR THE PROPOSITION THAT THE EXPENDITURE INCURRED FOR SINKING NEW PITS IS OF CAPITAL NATURE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE T RIBUNAL. 5. SHRI S.C.BHADRA, LEARNED AR OF THE ASSESSEE CONTENDED THAT THE ASSESSEE IS CARRYING ON BUSINESS OF MINING OPERATION BY TAKING OVER THE MINING LEASE OF M/S.BANSIDHAR PATNAIK, AS A GOING CONCERN. THE MINING LEASE WAS TRANSFERRED TO THE ASSESSEE O N 13.11.1990 AND AGAIN THE MINING LEASE RENEWED FOR THE 3 RD TIME ON 19.6.1998 FOR ANOTHER 20 YEA RS HE HAS FURNISHED THE DEED OF TRANSFER PLACED AT PAGES 47 TO 51 OF THE PAPER BOOK AND COPY OF RENEWAL OF MINING LEASE, PLACED AT PAGE 52 TO 56 OF THE PAPER B OOK. BASING ON THESE DOCUMENTS, THE LEARNED AR OF THE ASSESSEE CONTENDED THAT THE ASSESSEE CARRIED COMMERCIAL PRODUCTION OF IRON ORE CONTINUOUSLY FOR LAST 51 YEA RS IN VIEW OF THE ABOVE, HE CONTENDED THAT W HEN THE MINING LEASE IS CONTINUING AND THE OPERATIO N IS GOING ON FOR LAST 51 YEARS , THE QUESTION OF PROSPECTING AS CONTAINED IN SECTION 35 (E) OF INCOME TAX ACT DOES NOT ARISE. HE FURTHER SUBMITTED THAT A S PER THE MINING REGULATION , ANY PERSON CAN APPLY FOR MINING LEASE BY SIMPLY MAKING A REQUEST TO THE GO VERNMENT. AFTER CONSIDERING HIS APPLICATION, GOVERNMENT ISSUES PROSPECTING LICENCE IN GENERAL FOR TWO (2) YEARS TO E XPLORE THE AVAILABILITY OF LRON/ MANGANESE ORE, IN THAT PARTICULAR AREA AND THE ESTIMATED QUANTITY OF MINERAL CONTAINED IN THAT AREA. IF THE PROSPECTING IS SUCCESSFULLY DONE, THEN THE APPLICANT PREPARES MINING ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 4 PLANS WITH THE HELP OF THE APPROVED CONSULTANTS AND SUBMITS THE SAME TO THE GOVERNMENT, ALONG WITH THE APPLICATION TO GRANT MINING LEASE. AFTER COMPLETION OF SO MANY FORMALITIES, THE MINI NG LEASE IS GRANTED FOR A SPECIFIC PERIOD. AFTER OBTAIN ING THE MINING LICENCE, FOREST CL EARANCE, THE APPLICANT CAN ONLY START ITS BUSINESS OF MINING. NO BODY CAN START COMMERCIAL PRODUCTION WITHOUT OBTAINING PROSPECTING LICENCE AND CARRY OUT THE PROSPECTING ACTIVITIES. THE ASSESSEE IS DOING COMMERCIAL PRODUCTION OF IRON ORE FOR MORE THAN 51 YEA S THEREFORE, BY NO STRETCH OF IMAGINATION, ANY EXPENDITURE INCURRED IN THE ASSESSMENT YEAR UNDER CONSIDERATION CAN BE ATTRIBUTED TO THE PROSPECTING ACTIVITIES. T HERE W ERE NO PRE - DEVELOPMENT ACTIVITIES IN RELATION TO PROSPECTING ANY MINERALS APART FROM MINING OF IRON ORE. THE REMOVAL OF OVERBURDEN IS A CONTINUOUS OPERATION WHICH IS CARRIED ON SIMULTANEOUSLY WITH THE PRODUCTION OF IRON ORE. THEREFORE, THE AUTHORITIES BELO W ERRED IN HOLDING THE OVERBURDEN REMOVAL CHARGES OF 17,75,71,809 AS CAPITAL NATURE AND THUS DISALLOWED THE CLAIM OF THE ASSESSEE. HE, THEREFORE, PRAYED TO SET ASIDE THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES AND TO ALLOW THE CLAIM OF THE ASSESSEE. 6. S MT.PARAMITA TRIPATHY, LEARNED CIT - DR, ON THE OTHER HAND, SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(A). RELYING ON THE DECISIONS, AS RELIED ON BY THE LEARNED CIT(A), SHE CONTENDED THAT THE EXPENDITURE INCURRED FOR SINKING NEW PITS IS OF CAPITAL NATURE AND THEREFORE, THE DISALLOWANCE AS CONFIRMED BY THE LEARNED CIT(A) IS JUSTIFIED, WHICH NEEDS NO INTERFERENCE . 7. HEARD BOTH THE PARTIES AND CAREFULLY PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAS HELD THE EXPENDITURE IN QUESTION AS I NCURRED IN OPERATION RELATING TO PROSPECTING MINES WITHIN THE AMBIT OF DEFINITION OF SECTION 35E OF THE I.T.ACT,1961. OPERATION RELATING TO PROSPECTING HAS BEEN DEFINED IN SECTION 35E(5) MEANS ANY OPERATION UNDERTAKEN FOR THE PURPOSES OF EXPLORING, LOCAT ING OR PROVING DEPOSITS OF ANY ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 5 MINERAL AND INCLUDES ANY SUCH OPERATION WHICH PROVES TO BE INFRUCTUOUS OR ABORTIVE. FROM THE UNDISPUTED FACTS AS NOTICED EARLIER, WE FIND THAT THE ASSESSEE IS CARRYING ON BUSINESS OF MINING OPERATION CONTINUOUSLY FOR LAS T 51 YEA S A PLAIN READING OF THE PROVISIONS CONTAINED IN SECTION 35E OF THE I.T.ACT CLEARLY SHOWS THAT EXPENDITURE WHICH IS COVERED BY THE PROVISIONS OF SECTION 35E IS ONLY THE EXPENDITURE WHICH RELATES TO EXCLUSIVELY ON ANY OPERATIONS RELATING TO PROSPECTING FOR ANY MINERAL. THAT MEANS ONLY EXPENDITURE WHICH IS COVERED IS THE ONE WHICH IS INCURRED ON THE OPERATIONS FOR PROSPECTING OF ANY MINERAL. THE WORD OPERATION RELATING TO PROSPECTING , AS DEFINED IN SECTION 35E(5) MEANS ANY OPERATION UNDERTAKEN FOR THE P URPOSES OF EXPLORING, LOCATING OR PROVING DEPOSITS OF ANY MINERAL, AND INCLUDES ANY SUCH OPERATION WHICH PROVES TO BE INFRUCTUOUS OR ABORTIVE . IN THE INSTANT CASE ON HAND, CONSIDERING THE EXPENDITURE INCURRED ON ACTIVITIES AS NOTICED EARLIER IT CAN HARDLY BE SAID THAT THERE WERE ANY PRE - DEVELOPMENT ACTIVITIES IN RELATION TO PROSPECTING ANY MINERALS APART FROM MINING OF IRON ORE. THE EXPENDITURE IN QUESTION ON ACCOUNT REMOVAL OF OVERBURDEN IS A CONTINUOUS OPERATION WHICH IS CARRIED ON SIMULTANEOUSLY WITH THE PRODUCTION OF IRON ORE AND AS SUCH, WE ARE OF THE CONSIDERED VIEW THAT THE PROVISION OF SECTION 35E IS NOT APPLICABLE TO THE INSTANT CASE. WE FIND SUPPORT FROM THE DECISION OF ITAT, CHENNAI BENCH IN THE CASE OF NEYVELI LIGNITE CORPORATION LTD., V. ACIT (2 009) 120 TTJ (CHENNAI ) 1096, RELIED ON BY THE ASSESSEE . WE ALSO FIND SUPPORT FROM THE DECISION IN THE CASE OF CIT V. AMALGAMATED JAMBAD SUYNDICATE PVT. LTD., (1979) 117 ITR 698 (CAL) , WHEREIN, HONBLE CALCUTTA HIGH C O URT, BY APPLYING THE DECISION IN THE CA SE OF ASSAM BENGAL CEMENT CO. LTD. VS. CIT (1955) 27 ITR 34 (SC) , HELD THAT THE REMOVAL OF OVERBURDEN AND THE WINNING OF COAL WERE BOTH CONTINUOUS PROCESSES AND WERE BEING CARRIED ON SIMULTANEOUSLY FROM YEAR TO YEAR. THE REMOVAL OF OVERBURDEN CANNOT BE COM PARED TO THE ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 6 OPENING OF A NEW PIT. ONCE A PIT IS OPENED THE SAME CONFERS A PERMANENT BENEFIT ON THE MINE AND CAN BE USED FOR WINNING COAL AT DIFFERENT SEAMS AND FOR THE PURPOSE OF REACHING NEW SEAMS. THE OVERBURDEN RESTING ON THE SURFACE OF A PARTICULAR AR EA, IF REMOVED COULD ENABLE THE COMPANY ONLY TO REACH THE COAL UNDER THAT AND NOT ANY FURTHER. IF ANY FURTHER SURFACE HAD TO BE EXPOSED, FURTHER OVERBURDEN HAD TO BE REMOVED. IF THE EXPENDITURE IS MADE FOR ACQUIRING OR BRINGING INTO EXISTENCE AN ASSET OR A DVANTAGE FOR THE ENDURING BENEFIT OF THE BUSINESS IT IS PROPERLY ATTRIBUTABLE TO CAPITAL AND IS OF THE NATURE OF CAPITAL EXPENDITURE. ON THE OTHER HAND, IF SUCH AN EXPENDITURE IS MADE NOT FOR THE PURPOSE OF BRINGING INTO EXISTENCE ANY SUCH ASSET OR ADVANTA GE BUT FOR RUNNING THE BUSINESS OR WORKING IT WITH A VIEW TO PRODUCE PROFITS IT IS A REVENUE EXPENDITURE. HENCE THE EXPENDITURE INCURRED IN REMOVAL OF OVERBURDEN WAS OF REVENUE NATURE AND HENCE THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION. 8. WHILE SUSTAIN ING THE DISALLOWANCE IN QUESTION, THE LEARNED CIT(A) HAS REFERRED TO THE VARIOUS DECISIONS HOLDING THAT THE EXPENDITURE INCURRED FOR SINKING NEW PITS IS OF CAPITAL NATURE , WHICH DECISIONS, IN OUR CONSIDERED VIEW, ARE NOT ALL APPLICABLE TO THE FACTS OF THE INSTANT CASE SINCE REMOVAL OF THE OVERBURDEN, AS IN THE INSTANT CASE ON HAND, IS NOT SIMILAR TO THE SINKING NEW PITS. 9. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE REMOVAL OF OVERBURDEN IS BEING A CONTINUOUS PROCESS WHILE EXTRACTING TH E OR ES, BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT THE EXPENDITURE HAS BEEN INCURRED FOR PROSPECTING THE MINERAL OR FOR SINKING NEW PITS AS CONSIDERED BY THE ASSESSING OFFICER AND THE LEARNED CIT(A) RESPECTIVELY. THEREFORE, THE ADDITION OF 17,75,71,809 ON ACCOUNT OF OVERBURDEN REMOVAL CHARGES MADE DISALLOWING THE CLAIM OF THE ASSESSEE IS NOT JUSTIFIED. WE, THEREFORE, SET ASIDE ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 7 THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD AND DIRECT DELETION OF THE AFORE SAID DISALLOWANCE/ADDITION BY ALLOWIN G THE GROUND RAISED BY THE ASSESSEE. 10. THE NEXT ISSUE IS AGAINST CONFIRMATION OF THE DISALLOWANCE OF INTEREST AMOUNTING TO 2,44,31,579 U/S.14A OF THE I.T.ACT,1961. 11. THE RELEVANT FACTS AS SUMMARIZED BY THE LEARNED CIT(A) IN HIS ORDER VIDE PARAGRAPH 4.3. ARE THAT THE AO F OUND THAT THE ASSESSEE WAS IN RECEI PT OF DIVIDEND OF 6,18,43,009 WHICH IS EXEMPT FROM TAX. THE ASSESSEE COMPANY HAS SECURED LOANS OF 147,0 1,09,667 AS ON 31.3.2008 AND 105,29,54,231 AS ON 31.3.2007. BANK INTEREST OF 149,944,286 WAS INCURRED AND CHARGED TO PROFIT FOR THE PREVIOUS YEAR 20 07 - 08. INVESTMENT IN SHARES AS ON 31.3.2008 AND 31,3.2007 WERE 16,19,37,453 AND 75,29,30 RESPECTIVELY AND INVESTMENT IN MUTUAL FUNDS AS ON 31.3.2008 AND 31.3.2007 WERE 205,51,25,879 AND 57,64,54,848 RESPECTIVE LY. THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 14A SHALL NOT BE INVOKED AS LOAN FUNDS FROM VARIOUS BANK ACCOUNTS WERE UTILIZED IN INVESTMENT IN SHARES AND UNITS AND INCOME O F DIVIDEND GENERATED THERE FROM IS CLAIMED AS EXE MPT. THE ASSESSEE SUBMITTED THAT THE ASSESSEE C OMPANY OBTAINED TERM LOANS AND UTILIZED IT FOR SPECIFIC AND PARTICULAR PURPOSES . THE FUNDS TAKEN FROM LOANS HAVE NOT BEEN INVESTED AND THE DIVIDEND HAS NOT BEEN EARNED FROM SUCH INVESTMENT. THE INVESTMENTS HAVE BEEN MADE OUT OF SURPLUS I.E. INTERNAL ACCRUA L OF THE COMPANY AND RE - INVESTMENT OF THE DIVIDENDS AND OTHER INCOME ARISING OUT OF THOSE INVESTMENT S . IN THIS CONTEXT, THE ASSESSEE FLIED BEFORE THE AO STATEMENT SHOWING THE DETAILS OF INTEREST PAID FOR THE TERM LOANS OBT AINED THROUGH THE BA NK ACCOUNTS OF ABN AMRO BANK, HDFC BANK AND 1CICI BANK. TO VERIFY IT, THE TRANSACTION STATEMENT WAS OBTAINED BY THE AO FROM HDFC ASSET MANAGEMENT COMPANY LTD. T HE ASSESSEE HAS BEEN UTILIZING THE BANK ACCOUNT ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 8 02432320000194 WITH HDFC AND 53L 1)276 FOR HIS INVESTMENT IN UNITS OF HIJFC MUTUAL FUNDS. ALSO ACCOUNT STATEMENT OF SUNDARAM MUTUAL FUND REVEALS UTILIZATION OF BANK ACC OUNT CA 5340276 WITH THE ROYAL B ANK OF SCOTLAND FOR THE PURPOSE OF TRANSACTION IN RESPECT OF THE UNITS. THIS IS ALSO ACCEPTED POSITION VIDE ORDER SHE ET NOTING, IN RESPECT OF THE B ANK LOANS FROM THE AFORESAID BA NK ACCOUNTS, THE ASSESSEE HAD TO PAY CONSIDERABLE A MOUNT OF INTEREST. ALSO THE AO F OUND THAT THERE IS EVIDENCE ON RECORD THAT VARIOUS PAYMENTS TOWARDS INVESTMENTS IN UNITS AND SHARES WERE MADE FR OM THESE BANKS. FOR EXAMPLE, TRANSACTION DETAILS FOR THE PERIOD 01.01.2007 TO 31.3.2008 IN RESPECT OF INVESTMENT IN HDFC MUTUAL FUND THROUGH PORT FOLIO MANAGER, HDFC ASSET MANAGEMENT COMPANY LTD. WAS COLLECTED DIRECT FROM THE SAID PORTFOLIO MANAGER BY ISSU ING NOTICE U/S.133(6). IT REVEALS THAT A NUMBER OF INVESTMENTS WERE MADE FROM THE BANK A/C. NO.02432 320000194 WITH THE HDFC BANK, BI SRA ROAD, ROURKELA, ORISSA WHILE THE INTEREST PAYMENT DURING THE PREVIOUS YEAR ON THIS BANK ACCOUNT AMOUNTS TO 4,49,68,991. THE SAID TRANSACTION STATEMENT ALSO REFLECTS INVESTMENT MADE IN THE MUTUAL FUNDS FROM THE BANK A/C. NO.000005340276 WITH THE AB N AMRO BANK AND THE INTEREST DEBITED IN THE P & L A/C. IN RESPECT OF THIS BANK ACCOUNT IS AMOUNTING TO 4,66,10,163 AND THE ASSESSEE HAS CLAIMED THE ENTIRE INTEREST ON THESE BANK ACCOUNTS AND OTHER BANK ACCOUNTS FUNDS OF WHICH WERE UT ILI ZED FOR INVESTMENT IN UNITS AND SHARES. THE AO REFERRED TO RULE 8D(2)(I) WHICH HAS APPLICATION FOR INDIRECT INVESTMENT. THE AO CAME TO A FINDING THAT THE CONDITION FOR DISALLOWANCE U/S.14A IS FULFILLED IN THIS CASE IN AS MUCH AS INCURRING OF EXPENDITURE ON ACCOUNT OF BANK INTEREST IS INDIRECTLY RELATED TO THE INVESTMENT GENERATING SUCH DIVIDEND INCOME WHICH IS EXEMPTED INCOME. ACCORDINGL Y, A PART OF THE INTEREST CLAIMED IN RESPECT OF BANK ACCOUNTS, THE FUNDS OF WHICH ARE UTILIZED FOR INVESTMENT IN SHARES AND MUTUAL FUNDS ARE TO ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 9 BE DISALLOWED. IN THE PROCESS OF COMPUTATION OF SUCH DISALLOWABLE AMOUNT, THE A0 OBSERVED THAT ONLY THE INTEREST OF THE BANK ACCOUNT WHICH WERE RELATED TO THE INVESTMENT IN THE UNITS ARE TAKEN INTO CONSIDERATION. THE AO MADE A COMPUTATION OF ADDITION OF 2,49,31,579 U/S.14A OF THE I.T.ACT,1961. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS). 12. BEFORE THE LEARNED CIT(A) IT WAS CONTENDED BY THE ASSESSEE THAT THE ASSESSEE OBTAINED TERM LOANS FOR ITS WIND MILLS AND PURC HASE OF MACHINERIES AND EQUIPMENTS FOR ITS BUSINESS PURPOSES. THE BANK S AND FINANCIAL INSTITUTIONS ARE DIRECTLY DISBURSING THE LOAN AMOUNT TO THE SUPPLIERS AND VENDORS INSTEAD OF TO THE ASSESSEE. THE LOANS ARE ONLY UTILIZED FOR SPECIFIC PURPOSES AND INTERE ST ON THESE TERM LOANS ARE CLEARLY ATTRIBUTED TO THEIR RESPECTIVE PURPOSES. THE COMPANY HAS MADE INVESTMENTS IN SHARES AND MUTUAL FUNDS OUT OF ITS SURPLUS I.E. INTERNAL ACCRUAL OF THE COMPANY AND RE - INVESTMENT OF DIVIDENDS AND OTHER INCOME ARISING OUT OF T HESE INVESTMENTS. HE FILED A STATEMENT SHOWING THE RESERVE AND SURPLUS OF THE ASSESSEE TO COVER THE INVESTMENTS. HE ALSO PLACED RELIANCE ON THE DECISION ON THE CASE OF CIT V . GUJRAT POWER CORPOR ATION LTD. ITA NO.1587 OF 2009 (GUJARAT HIGH COURT) , GODREJ IN DUSTRIES LTD. V. DCIT, ITA NO. 1090/MUM/09 (1TAT MUMBA I BENCH), DCI TV. MAHARASTRA SEAMLESS LTD., ITA NO.4063 OF 2006 (ITAT DELHI B BENCH) AND DCIT V. JINDAL PHOTO LTD. ITA NO.4539/DEL/ 2010 (ITAT DELHI BENCH). IT WAS THUS SUBMITTED THAT THE DISALLOWANCE OF PROPORTIONATE E XPENSES AS COMPUTED UNDER RULE 8 D TOWARDS EARNING OF EXEMPTED INCOME BY THE AO WAS UNJUSTIFIED. THE LEARNED CIT(A) QUOTED THE OBSERVATION OF THE ASSESSING OFFICER AT PAGES 8 - 9 OF THE ASSESSMENT OR DER AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER , IN A VERY CRYPTIC MANNER, OBSERVING IN HIS ORDER AS UNDER : ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 10 IN VIEW OF THE SPECIFIC NATURE OF TRANSACTIONS DELIBERATED HEREIN ABOVE, THE CASE OF THE APPELLANT IS DISTINGUISHABLE FROM THE CASES REFERRED BY THE LEARNED A/R. THE SPECIFIC FINDING OF THE AO IS TENABLE THEN THE GENERAL PROPOSITION FORWARDED BY THE LEARNED A.R. THE ADDITION OF 2,49,31,579 MADE BY THE A.O. IS THUS CONFIRMED . 13. THE LEARNED AR OF THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW AND CONTEN DED THAT THE LEARNED CIT(A) HAS MORE ARBITRARILY CONFIRMED THE DISALLOWANCE OF INTEREST AMOUNTING TO 2,44,31,579 U/S 14A OF THE I.T. ACT, ON THE GROUND THAT THE SAME ARE UTILIZED FOR EARNING EXEMPTED INCOME. HE SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCE S OF THE CASE, THE LOANS ARE AVAILED FOR A SPECIFIC PURPOSE AND UTILIZED FOR THE SAID PURPOSE. VIDE SANCTION LETTER FOR EXAMPLE ABN AMRO CONTAINED IN PAGE 118 TO 121 OF PB HAS GRANTED LOAN OF 53.50 CRORES FOR ACQUISITION OF WIND ENERGY GENERATORS (WTGS) A ND CLAUSE 6(II) THEREOF SPECIFIED THAT DISBURSAL OF LOAN TO BE MADE DIRECTLY IN FAVOUR OF VENDOR (ENERCON INDIA LIMITED) BASED ON ORIGINAL INVOICE. ALMOST ALL THE LOANS ARE DIRECTLY DISBURSED TO THE SUPPLIER BY THE BANK/FINANCIAL INSTITUTION. THE INVESTMEN T IN SHARES AND MUTUAL FUNDS ARE MADE OUT OF SURPLUS AND INTERNAL ACCRUALS OF THE COMPANY. THE COMPANY HAS SUFFICIENT BALANCE / FUNDS IN ITS RESERVE AND SURPLUS AS INTERNAL ACCRUALS, THE SAME ARE BEING REGULARLY INVESTED IN DIFFERENT AVENUES. MERELY BECAUS E THE PAYMENT TOWARDS INTEREST AND THE INVESTMENT HAS BEEN MADE FROM SAME BANK ACCOUNTS DOES NOT AMOUNT TO CONCLUDE THAT THE LOANS WERE UTILIZED FOR MAKING INVESTMENT OF SHARES AND MUTUAL FUNDS. THE LEARNED AR OF THE ASSESSEE DREW OUR ATTENTION TO PAGE 87 OF THE PAPER BOOK WHICH CONTAINS CASH FLOW STATEMENT FROM OPERATING ACTIVITIES FROM APRIL, 2007 TO MARCH, 2008 AND ALSO THE SAME CONTAINS THE FIGURE OF THE PRECEDING YEAR. THE NET CASH FROM THE OPERATING ACTIVITIES CONTAINED IN CASH FLOW STATEMENT FOR THE FINANCIAL YEAR 2007 - 08 RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 11 AMOUNTS TO 315,37,40,046 OUT OF WHICH INVESTMENT MADE DURING THE YEAR AMOUNTS TO 155,98,52,874. HE FURTHER DREW OUR ATTENTION TO PAGE 101 OF THE PAPER BOOK WHICH CONTAINS SCHEDUL E F SHOWING INVESTMENT AS ON 31ST MACH, 2008. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE TOTAL INVESTMENT AS PER THE BALANCE SHEET AND SCHEDULE, AMOUNTS TO 223,05,63,332 (155,98,52,874 + 67,07,10,458.00). THEREFORE, ALL THE INVESTMENTS ARE MADE OUT OF OPERATING PROFIT AS PER THE CASH FLOW STATEMENT FOR THE YEAR 2007 - 08 AND ACCUMULATED AS PER CASH FLOW FROM OPERATION UP TO THE PRECEDING YEAR I.E., 31.3.2007. THE LEARNED AR OF THE ASSESSEE BY REFERRING TO VARIOUS PAGES OF THE PAPER BOOK HAS DRAWN THE FOLLOWING CHART SHOWING THE INVESTMENT FROM OPERATING PROFIT FOR THE PRECEDING YEAR YEAR OF CASH FLOW STATEMENT OPERATING PROFIT NET OPERATING PROFIT (IN ) INVESTMENT MADE (IN ) PAGE NO. OF PAPER BOOK 31.03.2008 353,18,79,195.00 315,37,40,046.00 155,98,52,874.00 87 31.03.2007 165,67,92,736.00 201,15,72,979.00 30,77,95,353.00 90 31.03.2006 89,74,60,570.00 74,40,49,308.00 20,00, 79,854.00 93 31.03.2005 49,95,91,590.00 23,53,74,686.00 10,93,35,251.00 96 UPTO3L.03.2004 5,35,00,000.00 104 TOTAL INVESTMENT 223.05,63.332.00 THE OPENING INVESTMENT DETAILS ARE 1,35,000.00 BEING SHARE S IN BANSPANI IRON LTD., AND 4,00,00,000.00 BEING SHARE S IN ORION ISPAT LTD. FROM THE ABOVE, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE NET OPERATING PROFIT AND ITS APPLICATION, IF CORROBORATED WOULD SHOW THAT ALL THE INVESTMENTS ARE MADE OUT OF CASH AVAILABLE FROM OPERATION AND NOT FROM LOAN FUND. THE LEARNED AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT WHEN THE EXEMPTED INCOME E ARNED OUT OF INVESTMENTS MADE FROM THE SURPLUS AND LOAN FUNDS ARE UTILIZED FOR THE PURPOSE FOR WHICH IT HAS BEEN BORROW ED, THE QUESTION OF DISALLOWANCE DOES NOT ARISE. THE LEARNED AR OF THE ASSESSEE RELIED ON THE DECISIONS OF GUJARAT HIGH COURT IN THE CASE OF CIT V. GUJARAT POWER ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 12 CORPORATION LTD IN TAX APPEAL NO.1587 OF 2009 DT.28.3.2011 (COPY PLACED AT PAGE 132 TO135 OF T HE PB), THE DECISION OF ITAT, MUMBAI BENCHES G IN THE CASE OF M/S.GODREJ INDUSTRIES LTD., V. DCIT IN ITA NO.1090/MUM/2009 DT.8.10.2010 (COPY PLACED AT PAGE S 136 - 143 OF PB) , THE DECISION OF ITAT, DELHI BENCH DT.23.9.2011, IN THE CASE OF DCIT V. JINDAL PHO TO LIMITED IN ITA NO.814/DEL/2011 AND C.O.NO.91/DEL/2011 FILED BY THE ASSESSEE (COPY PLACED AT PAGES 144 - 151), THE DECISION OF ITAT, DELHI B BENCH IN THE CASE OF DCIT V. M/S.MAHARASHTRA SEAMLESS LTD IN ITA NO.4063/DEL/2006 DT.16.12.2010 (COPY PLACED AT PAGES 152 - 161), THE DECISION OF ITAT, DELHI G BENCH IN THE CASE OF DCIT V. JINDAL PHOTO LIMITED IN ITA NO.4539/DEL/2010 DT.22.12.2010 (COPY PLACED AT PAGES 162 - 168) AND THE DECISION OF ITAT, MUMBAI BENCH C IN THE CASE OF M/S.GODREJ AGROVET LTD., V. A SST.COMMISSIONER OF INCOME TAX IN ITA NO.1629/M/2009 DT.17.09.2010 (COPY PLACED AT PAGES 169 - 177 OF THE PB). 14. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES BELOW. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOT H THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE AUTHORITIES BELOW HAVE DISALLOWED THE CLAIM OF DEDUCTION OF INTEREST ON THE BORROWED FUNDS IN VIEW O F PROVISIONS CONTAINED IN SECTION 14A OF THE ACT ON THE FINDING THAT THE INVEST MENTS HAD BEEN MADE OUT OF THE BORROWED FUNDS. BUT IT IS CONTENTION OF THE ASSESSEE RIGHT FROM THE BEGINNING THAT THE INVESTMENTS WERE MADE NOT OUT OF BORROWED FUNDS BUT ALL THE INVESTMENTS WERE MADE OUT OF OPERATING PROFIT AS PER THE CASH FLOW STATEMENT F OR THE ASSESSMENT YEAR 20076 - 08 AND ACCUMULATED AS PER CASH FLOW FROM OPERATION UP TO 31.3.2007, WHICH ARE DULY DEMONSTRATED BEFORE US FROM WHICH THE CONTENTION OF THE ASSESSEE IS TRUE INASMUCH A S THE ASSESSEE COMPANY HAD SUFFICIENT BALANCE/FUNDS IN ITS RE SERVE AND SURPLUS AS INTERNAL ACCRUALS AND THE SAME WERE BEING REGULARLY ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 13 INVESTED IN DIFFERENT AVENUES. FURTHER, THE ASSESSEE HAS DEMONSTRATED SO AS ESTABLISH THE FACT THAT THE LOANS ARE AVAILED FOR A SPECIFIC PURPOSE AND UTILIZED FOR THE SAID PURPOSE AND ALMOST ALL THE LOANS ARE DIRECTLY DISBURSED TO THE SUPPLIER BY THE BANK/FINANCIAL INSTITUTIONS, WHICH COULD NOT BE NEGATED BY THE LEARNED DR BEFORE US. AS IT APPEARS, THE DEPARTMENTAL AUTHORITIES HAVE HELD THE INVESTMENTS FROM OUT OF BORROWED FUNDS MERELY BECAUSE THE PAYMENT TOW ARDS INTEREST AND INVESTMENT HAS BEEN MADE FROM SAME BANK ACCOUNTS. IN OUR CONSIDERED VIEW, THIS CANNOT BE A REASON TO CONCLUDE THAT THE LOANS WERE UTILISED FOR MAKING INVESTM ENT IN SHARES AND MUTUAL FUNDS, WHEN THE ASSESSEE HAD SUF FICIENT FUNDS IN ITS RESERVE AND SURPLUS AS INTERNAL ACCRUALS SO AS TO MAKE INVESTMENTS TO EARN EXEMPTED INCOME. THEREFORE, WHEN THE AMOUNT INVESTED IN TAX FREE SECURITIES ARE NOT FROM LOAN OBTAINED FROM BANKS, AS CLEARLY DEMONSTRATED BY THE ASSESSEE, IN O UR CONSIDERED VIEW, NO PORTION OF INTEREST PAID DURING THE YEAR CAN BE ALLOCATED TO THE TAX FREE INCOME RECEIVED. IN THE CASE OF CIT V. GUJARAT POWER CORPORATION LTD (SUPRA), THE ASSESSEE HAD DEMONSTRATED THAT IT HAD OTHER SOURCES OF INVESTMENT AND THAT T HEREFORE, ACCORDING TO THE ASSESSEE NO PART OF THE BORROWED FUND COULD BE STATED TO HAVE BEEN DIVERTED TO EARN TAX FREE INCOME. CONSIDERING THIS ASPECT OF THE CASE, HONBLE GUJARAT HIGH COURT HAS HELD .. WHEN CIT(APPEALS) AND TRIBUNAL BOTH ON FACTS IN THE PRESENT CASE FOUND THAT THE ASSESSEE DID NOT INVEST BORROWED FUND FOR EARNING INTEREST FREE INCOME, WE ARE OF THE VIEW THAT NOT APPLYING PROVISION OF SECTION 14 OF THE ACT FOR TAXING SUCH INTEREST WAS JUSTIFIED. ON THE FINDING THAT SUFFICIENT EVIDENCE WAS BROUGHT ON RECORD BY THE ASSESSEE COMPANY TO ESTABLISH THAT INVESTMENT IN SHARES WAS MADE BY IT OUT OF ITS OWN FUNDS AND THE BORROWED FUNDS WERE ENTIRELY UTILISED FOR THE PURPOSE OF ITS BUSINESS, ITAT, MUMBAI BENCH IN THE CASE OF M/S.GODREJ INDUSTRIES LTD., V. DCIT IN ITA NO.1090/MUM/09 (SUPRA) HAS DELETED THE ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 14 ADDITION MADE U/S.14A OF THE I.T.ACT. ON THE FINDING THAT THE ASSESSEE HAD MAINTAINED THAT THE INTEREST EXPENDITURE WAS INCURRED IN RESPECT OF THE BORROWING ON CASH CREDIT LIMITS UTILISED FOR NOR MAL BUSINESS PURPOSES OF THE ASSESSEE AND THAT NO PART OF THE BORROWED FUNDS HAD BEEN UTILISED BY THE ASSESSEE FOR MAKING INVESTMENT IN THE TAX FREE BONDS BUT THE INVESTMENT IN THE TAX FREE BONDS WERE OUT OF THE ASSESSES OWN FUNDS AVAILABLE TO IT, ITAT, D ELHI BENCH - B IN THE CASE OF DCIT V. M/S.MAHARASTHRA SEAMLESS LTD IN ITA NO.4063/DEL.2006 (SUPRA) HAS UPHELD THE ORDER OF THE LEARNED CIT(A) DELETING THE ADDITION MADE U/S.14A OF THE I.T.ACT AND HAS DISMISSED THE APPEAL OF THE REVENUE. ON VERY MUCH SIMILAR SITUATION, ITAT, MUMBAI BENCH - G IN THE CASE OF GODREJ AGROVET LTD., V. ASST.COMMISSIONER OF INCOME - TAX IN ITA NO.1629/MUM/2009 (SUPRA) DELETED THE ADDITION MADE U/S.14A. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE IN THE LIGHT O F THE ABOVE DECISIONS, WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION MADE U/S.14A IS NOT JUSTIFIED. WE MAY ALSO MENTION THAT IN IDENTICAL FACTS AND CIRCUMSTANCES, THE LEARNED CIT(A) IN THE CASE OF BANSPANI IRON ORE LTD IN ITA NO.0180/ 2010 - 11 DT.21.12.201 1 HAD CONSIDERED SUCH DISALLOWANCE OF EXPENDITURE BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 14A UNCALLED FOR AND UNJUSTIFIED. WE, THEREFORE, DELETE THE SAME AND ALLOW THE GROUND OF THE ASSESSEE RAISED IN THIS REGARD. 16. THE LAST ISSUE RELAT ES TO CONFIRMATION OF DISALLOW ANCE OF EXPENDITURE OF 6,00,000 UNDER THE HEAD AMORTIZATION OF LEASE RENT BY TREATING THE SAME AS CONSIDERATION FOR THE LEASE AND IS FOR THE ACQUISITION OF THE CAPITAL ASSET. 17. THE RELEVANT FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER FOUND THE ASSESSEE TO HAVE CLAIMED AMORTIZATION OF 6,00,000 ON ACCOUNT OF COST OF LEASE HOLD LAND AT DHULE, MAHARASTHRA. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEES ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 15 LEASE HOLD RIGHT TO LAND IS A FIXED ASSET AS COVERED IN THE TAX AUDIT REPORT IN RESPECT OF WHICH NO ALLOWANCE OF DEPRECIATION IS PRESCRIBED BY THE I.T.ACT. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE OF 6,00,000 ON ACCOUNT OF LEASEHOLD LAND. ON APPEAL, THE LEARNED CIT(A) HELD THAT TH E AMOUNT PAID AS CONSIDERATION FOR OBTAINING THE LEASE (AS OPPOSED TO WHAT IS PAID AS RENT AND/OR HIRE) IS FOR THE ACQUISITION OF A CAPITAL ASSET WHICH ENABLES THE LESSEE TO CARRY ON ITS BUSINESS. IT IS A CAPITAL EXPENDITURE. IT CANNOT BE SPLIT UP INTO THE NUMBER OF YEARS OF THE DURATION OF THE LEASE IN ORDER TO CLAIM A PROPORTIONATE FRACTION AS REVENUE EXPENDITURE EACH YEAR. HE, THEREFORE, CONFIRMED THE DISALLOWANCE OF AMORTIZATION OF LEASE LAND AMOUNTING TO 6,00,000. HE RELIED ON THE DECISIONS OF HONBLE MADRAS HIGH COURT RENDERED IN THE CASE OF RAMKRISHNA & CO. V. CIT (1973) 88 ITR 406 (MAD) AND GREEN V. FAVOURITE CINEMAS LTD (1930) 15 TC 390 (KB). 18. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE - COMPANY HAS TAKEN LEASE OF LAND F OR USE BY SELLING UP A WIND PLANT FOR USE FOR 30 YEARS AND MADE LUMPSUM PAYMENT OF 1 .80 CRORES AND ACCORDINGLY WRITTEN OFF / AMORTIZED 6.00 LAKH EACH YEAR. THE LEARNED ASSESSING OFFICER TREATED THE SAME AS CAPITAL EXPENDITURE. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) T REATED THE SAME AS CAPITAL EXPENDITURE, RELYING UPON THE DECISION OF RAMAKRISHNA & CO. VS. CIT. 88 ITR AND GREEN V. FAVOURITE CINEMAS LTD. (1930) 15 TC 390. IN THE CASE OF RAMAKRISHNA & CO. , WHERE ONE K VISWANATHANHAD TAKEN ON LEASE OF A CINEMA THEATRE BUILDING ON MONTHLY RENT BASIS. HE ASSIGNED HIS RIGHT, TITLE AND INTEREST TO M/ S RAMAKRISHNA & CO., ON C ONSIDERATION OF 1 .00 LAKH AND CONTINUES TO PAY THE RENT TO THE ORIGINAL OWNER OF THE THEATRE. THIS CASE IS CLEARLY DISTINGUISHABLE FROM THE CASE OF THE ASSESSEE . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS RELIED UPON THE ENGLISH CASE DECISION OF GREEN V. FAVOURITE CINEMAS LTD. , (1930) 15 ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 16 TC 390 (KB) QUOTED IN THE CASE OF JACK SON VS. LASKERS HOME FURNITURE (COPY PLACED AT PA GE S - 182 TO 185 OF THE PAPER BOOK ) . IN OF THE SAID DECISION , IT IS MENTIONED THAT IN THE SERIES OF LICENSES WERE GRANTED BY THE LICENSING AUTHORITY ON SUCCESSIVE OCCASION FOR A PERIODS OF THREE YEARS AND A LUMP SUM FOR THE MONOPOLY VALUE WAS FIXED IN RESPE CT OF EACH PERIOD OF THREE YEARS. ON THE OTHER HAND, THE PAYMENTS OF THE LUMP SUMS WERE ALLOWED BY THE LICENSING AUTHORITY TO BE SPREAD OVER THE THREE YEARS IN EACH CASE, AND IT WAS CLAIMED THAT THOSE SUM WERE DEDUCTIBLE AS EXPENSES FOR TRADING ATTRIBUTABL E TO THE TRADING OPERATIONS OF THE LICENSEE AND DEDUCTIBLE FROM HIS PROFIT. AS PER THE ABOVE DECISION, LUMP SUM PAYMENT WAS ALLOWED TO BE SPREAD OVER THE PERIOD OF LICENCE/LEASE, WHICH IS SIMILAR TO THE CASE OF THE ASSESSEE AND AS SUCH, THE AMORTIZATION OF THE LUMP SUM PAYMENT FOR 30 YEARS MAY BE ALLOWED, SINCE THE BENEFIT OF LEASE IS ENJOYED FOR EACH YEAR DURING THE TOTAL LEASE PERIOD. 18. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD . AS RIGHTLY POINTED OUT BY THE ASSESSEE THE LEASE RENT HAS BEEN PAID IN ADVANCE FOR THE LEASE PERIOD AND IT CANNOT BE SAID THAT AFTER THE LEASE IS OVER THE ASSET WILL BELONG TO THE ASSESSEE. THE LU MP SUM PAYMENT IS BEING CLAIMED AS REVENUE EXPENDITURE BY ARITHMETICALLY SPREADING THE LUMP SUM PAYMENT OVER THE PERIOD OF LEASE. THE LEARNED CIT(A) HAS MISINTERPRETED THE FACTS ON THIS ISSUE AS BROUGHT ON RECORD BY THE ASSESSING OFFICER . THE CONTENTION O F THE LEARNED COUNSEL IS CORRECT THAT A CLAIM HAS TO BE ALLOWED IN ACCORDANCE WITH THE BUSINESS TRANSACTION DULY DOCUMENTED AND ACCEPTABLE TO BOTH THE PARTIES. THE OWNERSHIP OF LAND VESTS WITH GOVT. OF MAHARASHTRA AND THE USE HAS BEEN CLAIMED AS REVENUE EX PENDITURE NOT DEPRECIATION IN ITA NO.008/CTK/2012 AND STAY PETITIONNO.01/CTK/2012 17 ACCORDANCE WITH THE PROVISIONS OF THE INCOME - TAX ACT. WE SEE NO REASON FOR ITS DISALLOWANCE. THEREFORE, THE SAME IS DIRECTED TO BE DELETED. 20. SINCE WE HAVE DISPOSED OF THE APPEAL, THE STAY PETITION FILED BY THE ASSESSEE BECO MES INFRUCTUOUS AND THERE IS REJECTED AS SUCH. S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 14.03.2012 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLAN T: PATNAIK MINERALS PVT. LTD., BONEIKALA, JODA, KEOJHAR, ORISSA 2. THE RESPONDENT: JT. COMMISSIONER OF INCOME - TAX, RANGE 1(1), SAMBALPUR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.