Birla Corporation Limited, Kolkata v. DCIT, C ircle- 6, Kolkata, Kolkata

ITA 1812/KOL/2010 | 2006-2007
Pronouncement Date: 29-07-2011

Appeal Details

RSA Number 181223514 RSA 2010
Assessee PAN AABCB2075J
Bench Kolkata
Appeal Number ITA 1812/KOL/2010
Duration Of Justice 10 month(s) 7 day(s)
Appellant Birla Corporation Limited, Kolkata
Respondent DCIT, C ircle- 6, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Bench Allotted C
Tribunal Order Date 29-07-2011
Date Of Final Hearing 24-06-2011
Next Hearing Date 24-06-2011
Assessment Year 2006-2007
Appeal Filed On 22-09-2010
Judgment Text
1 B IN THE INCOME TAX APPELLATE TRIBUNAL BENCH- B KOL KATA [ . .. . . .. . !' ] BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER & SRI C.D. RAO ACCO UNTANT MEMBER # # # # / ITA NO. 1812 (KOL) OF 2010 $% &' / ASSESSMENT YEAR 2006-07 BIRLA CORPORATION LTD. KOLKATA. (PAN-AABCB2075J) DY.COMMISSIONER OF INCOME-TAX CIRCLE-6 KOLKATA. (*+ / APPELLANT ) - $ - - VERSUS - (./*+/ RESPONDENT ) # # # # / ITA NO. 1936 (KOL) OF 2010 $% &' / ASSESSMENT YEAR 2006-07 DY.COMMISSIONER OF INCOME-TAX CIRCLE-6 KOLKATA. BIRLA CORPORATION LTD. KOLKATA. (PAN-AABCB2075J) (*+ / APPELLANT ) - $ - - VERSUS - (./*+/ RESPONDENT ) FOR THE ASSESSEE : S/SRI J.P .KHAITAN & S.BHOWMICK FOR THE DEPARTMENT : SRI SUMANT SINHA !0 / ORDER ( . .. . . .. . ) !' (C.D. RAO) ACCOUNTANT MEMBER : THESE TWO APPEALS ONE FILED BY THE ASSESSEE AND OT HER FILED BY THE DEPARTMENT ARE DIRECTED AGAINST THE ORDER OF LD. C.I.T.(A)-VI KOLKATA DATED 09/7/2010 FOR ASSESSMENT YEAR 2006-07. FOR THE SAKE OF CONVENIEN CE BOTH THESE APPEALS ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO. 1936 (KOL) OF 2010 [ASSESSEES APPEAL] 2. GROUNDS NO.1 & 2 OF THE ASSESSEES APPEAL RELAT E TO DISALLOWANCE OF EXPENDITURE U/S. 14A OF I.T. ACT WHICH READ AS UNDER :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.71 37 860 ATTRIBU TABLE TO EARNING DIVIDEND INCOME FOR THE YEAR. 2 2. THAT WITHOUT PREJUDICE TO GROUND NO.1 A BOVE THOUGH PRESUMING BUT NOT ADMITTING THAT EXPENSES IF ANY INCURRED TO EARN DIVIDEND INC OME WHICH IS EXEMPT U/S. 10(34) IS NOT TO BE ALLOWED THE LEARNED CIT (APPEALS) ERR ED IN CONFIRMING THE DISALLOWANCE MADE BY THE DCIT IN A MECHANICAL MANNER BY APPLYING THE PROVISIONS OF RULE 8D WHICH ARE NOT APPLICABLE TO THE PRESENT YEAR UNDER APPEAL. 3. THE FACTS IN BRIEF IN REGARD TO THE ABOVE ISSUE ARE THAT THE A.O. OBSERVED THAT THE ASSESSEE EARNED RS.2 34 77 794/- AS DIVIDEND FR OM INVESTMENTS IN SHARES AND MUTUAL FUNDS. THE ASSESSEE CLAIMED THAT IT DID NOT INCUR ANY EXPENDITURE FOR EARNING TAX-FREE DIVIDEND INCOME. THE A.O. FOLLOWING THE DE CISION OF SPECIAL BENCH OF I.T.A.T. IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. [(2009) 312 ITR (AT) 1] DISALLOWED AN AMOUNT OF RS.71 37 860/- ON ESTIMATE BASIS AS INADMISSIBLE DEDUCTION FROM BUSINESS INCOME U/S. 14A OF THE ACT. ON APPEA L THE LD. C.I.T.(A) CONFIRMED THE DISALLOWANCE MADE BY THE A.O. 4. AT THE TIME OF HEARING BEFORE US THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF M ANUFACTURING CEMENT JUTE GOODS VINOLEUM AUTO TRIM PARTS ETC. FROM TIME TO TIME THE ASSESSEE MAKES INVESTMENTS OUT OF ITS OWN FUNDS IN SHARES OF COMPANIES AND UNITS O F MUTUAL FUNDS. THE ASSESSEE DOES NOT BORROW ANY FUNDS FOR MAKING SUCH INVESTMENTS. SUCH COMPANIES AND MUTUAL FUNDS DECLARE DIVIDENDS FROM TIME TO TIME. THE DIVIDEND IN RESPECT OF THE UNITS OF MUTUAL FUNDS IS USUALLY REINVESTED IN THE RESPECTIVE SCHEM ES WITHOUT BEING ACTUALLY RECEIVED BY THE ASSESSEE. THE DIVIDEND WARRANTS RECEIVED FROM COMPANIES ARE REQUIRED TO BE DEPOSITED IN THE ASSESSEES BANK ACCOUNT. THE ONLY ACTIVITY IN RELATION TO SUCH DIVIDEND INCOME IS DEPOSIT OF THE WARRANTS RECEIVED IN THE B ANK ACCOUNT FOR WHICH PRACTICALLY NO EXPENDITURE IS INCURRED. THE EXPENDITURE INCURRED B Y THE ASSESSEE IS FOR ITS MANUFACTURING OPERATIONS. HE ALSO CONTENDED THAT RU LE 8D OF I.T. RULES WAS INSERTED IN THE RULES ON MARCH 24 2008 PURSUANT TO SUB-SECTION (2) INSERTED IN SECTION 14A OF THE ACT WITH EFFECT FROM APRIL 1 2007 AND THE SAID PRO VISIONS CANNOT BE MADE APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. A .Y. 2006-07. REFERRING TO PAGES 126 & 127 OF THE PAPER BOOK THE LEARNED COUNSEL FURTHE R SUBMITTED THAT IN THE INSTANT CASE THERE WAS NO CHANGE IN THE SHARE INVESTMENTS OF THE ASSESSEE AND THE ONLY 3 ACTIVITY IN RELATION TO THE SHARE DIVIDEND INCOME O F RS.52 15 150/- RECEIVED BY WAY OF SIX DIVIDEND WARRANTS WAS TO DEPOSIT SUCH WARRANTS IN THE BANK ACCOUNT FOR THE PURPOSE OF ENCASHMENT. THE REST OF THE DIVIDEND INCOME OF RS.1 82 62 650/- WAS FROM MUTUAL FUND UNITS. OUT OF THE SAID AMOUNT THE SUM OF RS. 1 76 04 165/- WAS REINVESTED IN UNITS WITHOUT PHYSICALLY RECEIVING THE WARRANTS. ONLY FI VE WARRANTS FOR AN AGGREGATE SUM OF RS.6 58 485/- WERE PHYSICALLY RECEIVED AND HAD TO B E DEPOSITED IN THE BANK AND AS SUCH ACCORDING TO HIM THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE TO EARN THE EXEMPT INCOME. HOWEVER THE LEARNED COUNSEL FAIRLY ADMITTE D THAT IN THE EVENT OF ANY EXPENDITURE IS HELD TO BE DISALLOWED U/S. 14A OF TH E ACT A REASONABLE DISALLOWANCE COULD BE MADE BY THE TRIBUNAL CONSIDERING THE EMOLU MENTS OF THE EMPLOYEES INVOLVED IN MANAGING / MAINTENANCE OF THE ASSESSEES INVESTMENT PORTFOLIO. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND RELIED ON THE ORDER OF LD. C.I.T.(A) ON THIS ISSUE. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE EARNED A SUM OF RS.2 34 77 794/- AS DIVIDEND INCOME AND CLAIMED THAT IT DID NOT INCUR ANY EXPENSE FOR EARNING SUCH DIVIDEND INCOME. THE A.O. FOLLOWING THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE O F DAGA CAPITAL MANAGEMENT PVT. LTD. (SUPRA) DISALLOWED THE SUM OF RS.71 37 860/- ON EST IMATE BASIS AS INADMISSIBLE DEDUCTION FROM BUSINESS INCOME U/S. 14A OF THE ACT READ WITH RULE 8D OF THE RULES WHICH WAS DULY CONFIRMED BY THE LD. C.I.T.(A). WE F IND THAT AS PER DECISION OF HONBLE. BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCEE MFG . CO. LTD. VS. DCIT [(2010) 328 ITR 81 (BOM.)] RULE 8D IS PROSPECTIVE IN NATURE AN D IS APPLICABLE FOR AND FROM ASSESSMENT YEAR 2008-09 WHEREAS WE ARE CONCERNED W ITH ASSESSMENT YEAR 2006-07. CONSIDERING THE ABOVE SUBMISSIONS OF THE LD. COUNSE L AND AFTER PERUSING THE ORDERS OF THE AUTHORITIES BELOW WE HOLD THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED TO APPLY RULE 8D OF THE RULES FOR THE PURPOSE OF MAKING DISA LLOWANCE U/S. 14A OF THE ACT AS THE DIVIDEND INCOME SHOWN BY THE ASSESSEE OF RS.2 34 77 794/- IS EXEMPT FROM TAX U/S. 10(34) OF THE ACT. BE THAT AS IT MAY WE ARE OF TH E CONSIDERED VIEW THAT IT WILL BE REASONABLE TO MAKE DISALLOWANCE @ 1% OF THE ABOVE D IVIDEND INCOME EARNED. WE DIRECT 4 THE A.O. TO CALCULATE THE DISALLOWANCE OF EXPENDITU RE ON SUCH EXEMPT INCOME ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD ARE PARTLY ALLOWED. 7. THE LAST GROUND I.E. GROUND NO.3 OF THE ASSES SEES APPEAL READS AS UNDER :- 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE RS.949561 BEING INDUSTRIAL PROMOTION ASSISTANCE RECEIVED FROM STATE GOVERNMENT IS A CAPITAL RECEIPT AND THE LEARNED DCIT SHOULD BE DIRECTED TO EXCLUDE IT FROM THE TOTAL INCOME. 8. DURING THE COURSE OF HEARING THE LD. COUNSEL F OR THE ASSESSEE FAIRLY ADMITTED THAT THE CLAIM ON THIS ACCOUNT WAS NEITHER RAISED B EFORE THE A.O. NOR BEFORE THE LD. C.I.T.(A) AND CONTENDED THAT THIS BEING A LEGAL ISS UE THE MATTER BE SET ASIDE TO THE A.O. HE HAS ALSO FILED A PAPER BOOK SEPARATELY IN RELATION TO THE ABOVE GROUND CONTAINING 59 PAGES WHICH ARE AS UNDER :- 1. COPY OF WEST BENGAL INCENTIVE SCHEME 2000 - P AGES 1 TO 50 2. COPY OF LETTER DATED 05/5/2005 TOGETHER WITH CERTIFICATE OF REGISTRATION ISSUED BY DIRECT ORATE - PAGES 51 TO 53 OF INDUSTRIES GOVT. OF WEST BENGAL. 3. COPY OF ELIGIBILITY CERTIFICATE DATED 30/8/200 5 - PAGES 54 TO 59 ISSUED BY WBIDCL. THE LD. DEPARTMENTAL REPRESENTATIVE DID NOT OBJECT TO THE ABOVE SUBMISSION OF THE ASSESSEES LEARNED COUNSEL. 9. IN THIS CASE ORIGINAL RETURN FOR THE ASSESSMEN T YEAR UNDER CONSIDERATION WAS FILED ON 23/11/2006. REVISED RETURN WAS FILED ON 0 2/2/2007 MAKING CERTAIN FRESH CLAIM WITH REGARD TO COMPUTATION OF MAT. THE ASSESSEE RE CEIVED A SUM OF RS.9 49 561/- FROM STATE GOVERNMENT ON ACCOUNT OF INDUSTRIAL PROM OTION ASSISTANCE WHICH ACCORDING TO THE ASSESSEE WAS ITS CAPITAL RECEIPT. IT APPEA RS THAT THE ASSESSEE DID NOT CLAIM ANY DEDUCTION ON THIS ACCOUNT FROM THE TOTAL INCOME NO R IT RAISED ANY GROUND BEFORE THE LD. C.I.T.(A) CLAIMING SUCH DEDUCTION. IN THE APPEAL B EFORE THE TRIBUNAL THE ASSESSEE TOOK THIS GROUND VIDE GROUND NO.3 ABOVE BY STATING THAT IT IS A LEGAL ISSUE AND THE TRIBUNAL SHOULD ADMIT THIS GROUND FOR ADJUDICATION AS THE GR OUND RAISED WAS BONA FIDE. 9.1. HONBLE SUPREME COURT IN THE CASE OF JUTE CO RPORATION OF INDIA LTD. VS. CIT [187 ITR 688 (SC)] HAS HELD THAT THE FIRST APPELLAT E AUTHORITY CAN ADMIT AN ADDITIONAL 5 GROUND WHEN THE GROUND RAISED WAS BONA FIDE . WE FURTHER OBSERVE THAT HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT [229 ITR 383 (SC)] WHILE DEALING WITH THE POWER OF ITAT IN ADMIT TING AN ADDITIONAL GROUND HELD AS UNDER BY APPLYING THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF JUTE CORPORATION OF INDIA LTD. (SUPRA) :- UNDOUBTEDLY THE TRIBUNAL HAS THE DISCRETION TO ALL OW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIB UNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISING FR OM FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAI SED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO COR RECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. FURTHER THEIR LORDSHIPS OF HONBLE SUPREME COURT I N THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (SUPRA) AT PAGES 386 & 387 O BSERVED AS UNDER :- IN THE CASE OF JUTE CORPORATION OF INDIA LTD. V. CI T[1991] 187 ITR 688 THIS COURT WHILE DEALING WITH THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER OBSERVED THAT AN A PPELLATE AUTHORITY HAS ALL THE POWERS WHICH THE ORIGINAL AUT HORITY MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATIONS IF ANY PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION THE APPELLA TE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH THE SUBORD INATE AUTHORITY MAY HAVE IN THE MATTER. THERE IS NO GOOD REASON TO JUSTIFY CURTAILMENT OF THE POWER OF THE APPELLATE A SSISTANT COMMISSIONER IN ENTERTAINING AN ADDITIONAL GROUND R AISED BY THE ASSESSEE IN SEEKING MODIFICATION OF THE ORDER OF AS SESSMENT PASSED BY THE INCOME-TAX OFFICER. THIS COURT FURTHE R OBSERVED THAT THERE MAY BE SEVERAL FACTORS JUSTIFYING THE RA ISING OF A NEW PLEA IN AN APPEAL AND EACH CASE HAS TO BE CONSIDERE D ON ITS OWN FACTS. THE APPELLATE ASSISTANT COMMISSIONER MUST BE SATISFIED THAT THE GROUND RAISED WAS BONA FIDE AND THAT THE S AME COULD NOT HAVE BEEN RAISED EARLIER FOR GOOD REASONS. THE APPE LLATE ASSISTANT COMMISSIONER SHOULD EXERCISE HIS DISCRETI ON IN PERMITTING OR NOT PERMITTING THE ASSESSEE TO RAISE AN ADDITIONAL GROUND IN ACCORDANCE WITH LAW AND REASON. THE SAME OBSERVATIONS WOULD APPLY TO APPEALS BEFORE THE TRIB UNAL ALSO. 9.2. WE FURTHER REFER TO THE DECISION OF HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF MAYNAK PODDAR (HUF) VS. WTO [262 ITR 633 (CAL)] WHEREIN THE ASSESSEE HAS SHOWN 6 CERTAIN ASSETS AS CHARGEABLE TO TAX BUT SUBSEQUENTL Y CLAIMED IT TO BE NOT CHARGEABLE. WHEN THE MATTER REACHED TO THE HONBLE HIGH COURT THEIR LORDSHIPS HAVE HELD THAT IF AN ASSET IS NOT CHARGEABLE TO WEALTH-TAX IN LAW IT CANNOT BE TAXED MERELY BECAUSE THE ASSESSEE HAS OFFERED THE SAME AS CHARGEABLE WEALTH FOR THE PURPOSE OF WEALTH-TAX ACT. THE RELEVANT PORTION OF THE FINDING TO QUOTE IS AS UNDER :- THE SUBJECT IS NOT TO BE TAXED UNLESS THE CHARGING PROVISION CLEARLY IMPOSES THE OBLIGATION. EQUALLY IMPORTANT I S THE RULE OF CONSTRUCTION THAT IF THE WORDS OF A STATUTE ARE PRE CISE AND UNAMBIGUOUS THEY MUST BE ACCEPTED AS DECLARING THE EXPRESS INTENTIONS OF THE LEGISLATURE. A PROPERTY WHICH IS NOT OTHERWISE TAXABLE CANNOT BECOME TAXABLE BECAUSE OF MISUNDERS TANDING OR WRONG UNDERSTANDING OF LAW BY THE ASSESSEE OR BECAU SE OF HIS ADMISSION OR ON HIS MISAPPREHENSION. IF IN LAW AN ITEM IS NOT TAXABLE NO AMOUNT OF ADMISSION OR MISAPPREHENSION CAN MAKE IT TAXABLE. (EMPHASIS SUPPLIED) 9.3. SIMILAR ISSUE HAS BEEN CONSIDERED BY THE HON BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT GAS CO. LTD. VS. JCIT [245 ITR 84 (GUJ)] WHILE DEALING WITH THE VALIDITY OF CIRCULAR NO. 549 DATED 31/10/1989 ISSUED BY CBDT DI RECTING THE A.O. THAT ASSESSED INCOME U/S. 143(3) CANNOT BE LESS THAN THE RETURNED INCOME. THE HONBLE COURT QUASHED THE ABOVE CIRCULAR BY HOLDING AS UNDER :- THAT THE CIRCULAR IN QUESTION REFERS TO ASSESSMENTS WHICH ARE TO BE MADE UNDER SECTION 143(3) OF THE ACT. THE CIRCUL AR DIRECTS THAT IN A PARTICULAR TYPE OF CASES I.E. IN SCRUTINY CA SES UNDER SECTION 143(3) OF THE ACT THE INCOME CAN NEITHER BE ASSESS ED AT A FIGURE LOWER THAN THE RETURNED INCOME NOR THE LOSS ASSESSE D AT A FIGURE HIGHER THAN THE LOSS NOR FURTHER REFUND GIVEN EXCEP T WHAT WAS DUE ON THE BASIS OF THE RETURNED INCOME. THUS BY ISSUA NCE OF THE CIRCULAR THE QUASI-JUDICIAL OFFICER IS DIRECTED TO ASSESS CASES OF PARTICULAR NATURE IN A PARTICULAR MANNER. THE ASSES SING OFFICER BEING BOUND BY IT HAD ABDICATED HIS FUNCTION AND DI D NOT ACT INDEPENDENTLY AND THEREFORE THERE WAS NO QUESTION OF ALTERNATIVE REMEDY WHICH WAS A FUTILE REMEDY. IN FA CT THE JURISDICTION HAD BEEN EXERCISED BY THE CENTRAL BOAR D OF DIRECT TAXES BY ISSUING THE CIRCULAR AND THEREFORE THE O RDER OF THE ASSESSING OFFICER WAS WITHOUT JURISDICTION. THE COU RT HAD TO EXERCISE ITS JURISDICTION UNDER ARTICLE 226. THE OR DER OF THE ASSESSING OFFICER TO THE EXTENT IT STATED THAT THE TOTAL INCOME WOULD BE THE RETURNED INCOME WAS TO BE SET ASIDE WITH A DIRECTION TO THE ASSESSING OFFICER TO MAKE ASSESSME NT WITHOUT 7 KEEPING IN MIND THE CENTRAL BOARD OF DIRECT TAXES C IRCULAR DATED OCTOBER 31 1989. 9.4. IN VIEW OF THE FACTS OF THE CASE AND LEGAL PO SITION AND RESPECTFULLY FOLLOWING THE DECISIONS REFERRED TO ABOVE WE ADMIT GROUND NO. 3 OF THE ASSESSEES APPEAL FOR ADJUDICATION. THE LD. COUNSEL HAS STATED THAT SUBS IDY RECEIVED BY THE ASSESSEE AMOUNTING TO RS.9 49 561/- FROM THE STATE GOVERNMEN T BEING INDUSTRIAL PROMOTION ASSISTANCE IS A CAPITAL RECEIPT LIABLE TO BE DEDUCT ED FROM ITS TOTAL INCOME. HE THEREFORE SUBMITTED THAT AS THE ISSUE IS A LEGAL O NE AND BONA FIDE THE MATTER MAY BE SET ASIDE TO THE A.O. AND THE LD. DEPARTMENTAL REPR ESENTATIVE DID NOT RAISE ANY OBJECTION TO THIS. WE THEREFORE RESTORE THE MATT ER RAISED IN GROUND NO. 3 ABOVE TO THE A.O. AND WE DIRECT HIM TO EXAMINE THE FACTS OF THE CASE AND THEREAFTER HE SHOULD RE-ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW AND AFTER CONSIDERING THE DOCUMENTS AS MAY BE FURNISHED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM. NEEDLESS TO MENTION THAT HE WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. THIS GROUND OF THE ASSESSEE IS THUS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1936 (KOL) OF 2010 [REVENUES APPEAL] 10. IN THE DEPARTMENTS APPEAL THE FIRST GROUND R EADS AS UNDER :- 1. THAT THE LD. CIT(A)-VI KOLKATA HAS ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF CLAIM O F DEDUCTION OF PROPORTIONATE OF LEASEHOLD LAND WRITTEN OFF OF RS.20 55 052/-. 11. THE A.O. OBSERVED THAT THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER APPEAL MADE A CLAIM OF RS.20 55 052/- OF AMORTIZATION BENE FIT ON EXPENDITURE ON ACQUISITION OF LAND FOR MINING OF RAW MATERIAL OR CEMENT PRODUCTIO N. THE CONTENTION OF THE ASSESSEE THAT IN EARLIER YEARS THE LD. C.I.T.(A) HAS HELD TH E ASSESSEES CLAIM AS LEGITIMATE WAS NOT ACCEPTED BY THE A.O. AS ACCORDING TO HIM THE ISSU E IS NOW SETTLED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ENTERPRISING E NTERPRISES VS. DCIT [293 ITR 437 (SC)]. HE THEREFORE DENIED THE CLAIM OF THE ASSESSEE AND ADDED BACK RS. 20 55 052/- TO THE TOTAL INCOME OF THE ASSESSEE. 8 12. BEFORE THE LD. C.I.T.(A) ON APPEAL IT WAS SU BMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE IS RESTRICTING ITS CLAIM FOR DEDU CTION TO RS.19 38 232/- COMPRISING RS.14 98 353/- RELATING TO THE ASSESSEES SATNA CEM ENT WORKS AND RS.4 39 679/- RELATING TO ITS BIRLA CEMENT WORKS BEING COMPENSAT ION PAID IN CONNECTION WITH THE MINING ACTIVITY FOR OBTAINING LIMESTONE USED AS RAW MATERIAL FOR MANUFACTURE OF CEMENT. THE SUBMISSIONS PUT FORWARD ON BEHALF OF THE ASSESS EE HAVE BEEN QUOTED AT PAGES 3 TO 5 OF THE APPELLATE ORDER. AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE PERUSING THE ORDER OF A.O. AND OTHER EVIDENCES PLACED BEFORE HIM THE LD. C.I.T.(A) DELETED THE DISALLOWANCE MADE BY THE A.O. AND ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER :- I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLA NT AND ALSO THE ORDER OF THE A.O. AS SEEN FROM THE LEASE AGREEMENT BETWEEN THE RAJAST HAN GOVERNMENT AND THE APPELLANT COMPANY LAND SITUATED AT CHITTORGARH VIL LAGE OF AN AREA OF 9.99 SQ. KM WAS GIVEN AS LEASE TO THE APPELLANT. LIBERTY AND POWER WAS GIVEN TO ENTER UPON THE LAND AND USE THE SURFACE OF THE ALLOTTED LAND FOR THE PU RPOSE OF STACKING HEAPING STORING OR DEPOSITING THEREIN ANY PRODUCE OF THE MINES ETC. FOR ALL THESE ACTIVITIES THE APPELLANT WAS PAYING RENT/ROYALTY WHICH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE LEARNED A.R. ARGUED THAT APPELLANT WAS FOLLOWI NG THE PRACTICE OF CLAIMING THE AMOUNT OF COMPENSATION PROPORTIONATELY OVER THE PER IOD OF THE MINING LEASE IN ORDER TO AVOID ANY DISTORTION DUE TO CLAIM OF THE ENTIRE AMOUNT OF COMPENSATION IN THE YEAR OF PAYMENT. IN PART THREE OF THE LEASE AGREEMENT P AGE 5 IT IS MENTIONED BEFORE USING FOR SURFACE OPERATIONS ANY LAND WHICH HAS NOT ALREADY BEEN USED FOR SUCH OPERATIONS THE LESSEE SHALL GIVE TO COLLECTOR OF T HE DISTRICT TWO CALENDAR MONTHS PREVIOUS NOTICE IN WRITING SPECIFYING THE LAND PROP OSED TO BE SO USED AND THE PURPOSE FOR WHICH THE SAME IS REQUIRED AND THE SAID LAND SH ALL NOT BE SO USED IF OBJECTION IS ISSUED BY THE COLLECTOR WITHIN TWO MONTHS AFTER THE RECEIPT BY HIM OF SUCH NOTICE UNLESS THE OBJECTION SO STATED SHALL ON REFERENCE T O THE STATE GOVERNMENT BE ANNULLED OR WAIVED. THE LD. A.R ARGUED THAT FROM T IME TO TIME DEPENDING ON THE NECESSITY OF THE COMPANY TO FACILITATE THE CARRYING ON OF ITS BUSINESS AND FOR EXECUTION OF THE LEASE HOLD AGREEMENT THE COMPANY W AS APPROACHING THE COLLECTOR OF THE DISTRICT FOR PERMISSION FOR USING THE LAND WHIC H WAS NOT USED FOR OPERATIONS. THE COLLECTOR FOLLOWING THE LAND REVENUE ACT 1956 USED TO PASS THE ORDER DETERMINING THE COMPENSATION AS PER THE MARKET RATE AND WOULD G IVE PERMISSION FOR USING THE LAND. THE APPELLANT WAS ASKED TO FILE ALL SUCH ORDERS O F THE COLLECTOR GIVING PERMISSION FOR USAGE OF LAND BY THE APPELLANT AFTER PAYING COMPENSATION. I HAVE ALSO GONE THROUGH THE RAJASTHAN LAND REVENUE ACT. ACCORD ING TO SECTION 89(2) THE RIGHT TO ALL MINES AND QUARRIES INCLUDES THE RIGHT OF ACC ESS OF LAND FOR THE PURPOSE OF MINING AND QUARRYING AND THE RIGHT TO OCCUPY SUCH O THER LAND AS MAY BE NECESSARY FOR PURPOSES SUBSIDIARY THERE TO INCLUDING THE ERECTIO N OF OFFICES WORKMENS DWELLINGS 9 AND MACHINERY THE STAKING OF MINERALS AND DEPOSIT OF REFUSE THE CONSTRUCTION OF ROADS RAILWAYS OR TRAMLINES AND ANY OTHER PURPOSES WHICH THE STATE GOVT. MAY DECLARE SUBSIDIARY TO MINING AND QUARRYING. ACCORD ING TO SECTION 89(4) IF IN THE EXERCISE OF THE RIGHT HEREIN REFERRED TO OVER ANY L AND THE RIGHTS OF ANY PERSON ARE INFRINGED BY THE OCCUPATION OR DISTURBANCE OF THE S URFACE OF SUCH LAND THE STATE GOVERNMENT OR ITS ASSIGNEE SHALL PAY TO SUCH PERSON S COMPENSATION FOR SUCH INFRINGEMENT AND THE AMOUNT OF SUCH COMPENSATION SH ALL BE CALCULATED BY THE COLLECTOR OR IF HIS AWARD IS NOT ACCEPTED BY THE CIVIL COURT AS NEARLY AS MY BE IN ACCORDANCE WITH THE PROVISIONS OF THE RAJASTHAN LAN D ACQUISITION ACT 1953. AS SEEN FROM THE DETAILS FILED BEFORE ME THE APPELLANT HAS APPLIED TO THE COLLECTOR FOR PERMISSION TO USE THE LAND FOR BUSINESS PURPOSES AN D PAYED COMPENSATION AS PER THE COLLECTOR ORDER. THE COLLECTOR ORDERS FILED BEFORE ME FROM 1995 TO 2005 SHOW THAT COMPENSATION WAS PAID FOR DIFFERENT USE OF THE LAND . IN SOME OF THE CASES IT IS FOR CONSTRUCTION OF ROPEWAY FOR CONSTRUCTION OF ROADS AND OTHER SUBSIDIARY ACTIVITIES OF MINING. IN THE COLLECTOR ORDER IT IS ALSO MENTIO NED THAT THE LAND WILL BE VESTED WITH THE GOVT. AFTER THE MINING LEASE PERIOD EXPIRE S. THE COMPENSATION WAS NOT PAID IN THE F.Y 1999-2000 SINCE THERE WAS NO REQUIREMEN T OF LAND. HENCE THESE PAYMENTS ARE FOR ACRE BY ACRE IN RESPECT OF THE DAMAGE CAUSE D FOR LETTING DOWN THE SURFACE OF THE LAND. THE COMPENSATION WAS PAID FOR THE DAMA GE CAUSED ON THE INFRINGEMENT OF RIGHT OF THE LAND OWNER AND IT HAS NO RELEVANCE OR ANY DIRECT LINK TO THE AMOUNT OF MINERAL EXCAVATED OR REMOVED ON ACCOUNT OF MINING. IT WAS PAID ON THE BASIS OF COMMERCIAL EXPEDIENCY AND NOT FOR GETTING SOME ADDI TIONAL CAPITAL ASSET OR EVEN AN ENDURING BENEFIT. AS SEEN FROM FACTS OF THE CASE TH E APPELLANT HAS NOT INCURRED THIS EXPENDITURE FOR ACQUIRING LEASE HOLD RIGHT TO EXTRA CT MINERALS. THE A.O WITHOUT GOING INTO THE FACTS FOLLOWING THE JUDGEMENT OF T HE HONBLE SUPREME COURT IN ENTERPRISING ENTERPRISES VS DEPUTY COMMISSIONER (20 07) 293 ITR 437 DISALLOWED THE PROPORTIONATE COMPENSATION AMOUNT CLAIMED BY TH E APPELLANT. THE APEX COURT IN THE ABOVE CASE HELD THAT PROPORTIONATE LEASE RENT P AID BY THE MINING LESSEE FOR ACQUIRING LEASE HOLD RIGHT FOR EXTRACTING MINERALS FROM MINERAL BEARING LAND IS A CAPITAL EXPENDITURE. THE QUESTION BEFORE THE APEX C OURT WAS WHETHER THE LEASE RENT PAID BY THE MINING LESSEE FOR ACQUIRING LEASEHOLD R IGHT FOR EXTRACTING MINERALS FROM MINERAL BEARING LAND WOULD BE A CAPITAL OR REVENUE EXPENDITURE. I HAVE ALSO GONE THROUGH THE JUDGEMENT OF THE HONBLE MADRAS HIGH CO URT IN THE CASE OF ENTERPRISING ENTERPRISES V DY.COMMISSIONER OF INCOME TAX [2004] 268 ITR 95. IN THIS CASE THE MAIN ISSUE WAS QUARRY LEASE RENT PAID TO THE GOVERN MENT FOR ACQUIRING THE RIGHT TO EXCAVATE THE GRANITE ON LEASE FOR TEN YEARS IS CAPI TAL OR REVENUE EXPENDITURE. THE FACTS OF THIS CASE DIFFER FROM THE FACTS OF THE APP ELLANTS CASE. THE APPELLANT HAS NOT PAID ANY LEASE RENTAL FOR ACQUIRING THE RIGHT T O EXPLOIT THE MINERALS. THE COMPENSATION WAS PAID FOR THE DAMAGE CAUSED ON THE INFRINGEMENT OF RIGHT OF THE LAND OWNER. AS PER THE REQUIREMENT /NECESSITY YOU G O TO THE COLLECTOR AND YOU PAY THE PERSONS WHOSE PROPERTY IS DAMAGED ON THE SURFAC E EACH TIME YOU CAUSE THE DAMAGE IS A DEDUCTION AND A REVENUE EXPENSE IN MY O PINION. THE PAYMENTS ARE PROGRESSIVELY DISTRIBUTED AS THEY WORK AS THEY PROCEED YEAR BY YEAR GOING ON WITH THEIR WORK. THE PAYMENTS ARE IN THE NATURE OF INCIDENTAL EXPENDITURE AS YOU GO ALONG TO ENABLE THE APPELLANT TO CONDUCT THE MINE AND THE 10 BUSINESS OPERATIONS. IN MY OPINION AFTER EXAMINATI ON OF ALL THE FACTS THE PAYMENT OF COMPENSATION TO PERSONS WHOSE RIGHTS ARE INFRING ED BY THE MINING ACTIVITY IS REVENUE IN NATURE. THIS GROUND OF APPEAL IS ALLOWED . 13. THE LEARNED COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE LD. C.I.T.(A) AND SUBMITTED THAT FOR OBTAINING LIMESTONE WHICH IS THE MAIN RAW MATERIAL FOR MANUFACTURE OF CEMENT THE ASSESSEE IS REQUIRED TO PAY RENT/ROY ALTY TO THE STATE GOVERNMENT IN TERMS OF THE MINING LEASE. SUCH RENT/ROYALTY PAID T O THE STATE GOVERNMENT IS DEBITED TO THE P/L ACCOUNT. IN TERMS OF THE MINING LEASE AN D REQUIREMENT OF THE RELEVANT STATE LAND REVENUE LAW IN ADDITION TO THE RENT/ROYALTY THE ASSESSEE IS ALSO REQUIRED TO PAY COMPENSATION AS DETERMINED BY THE LOCAL AUTHORITY/C OURT TO THE PERSONS WHOSE RIGHTS ARE INFRINGED BECAUSE OF THE MINING ACTIVITY. NO I NTEREST IN LAND IS ACQUIRED BY PAYMENT OF SUCH COMPENSATION. COMPENSATION HAS TO BE PAID IN ORDER TO OBTAIN THE RAW MATERIAL FOR THE ASSESSEES BUSINESS THEREBY FACILITATING T HE CARRYING ON OF ITS BUSINESS. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSE HAS BEEN FOLLOWING THE PRACTICE OF CLAIMING THE AMOUNT OF COMPENSATION PROPORTIONATELY OVER TH E PERIOD OF THE MINING LEASE IN ORDER TO AVOID ANY DISTORTION DUE TO CLAIM OF THE ENTIRE AMOUNT OF COMPENSATION IN THE YEAR OF PAYMENT. HE FURTHER SUBMITTED THAT THE ASS ESSEES SATNA CEMENT WORKS IS LOCATED IN MADHYA PRADESH AND BIRLA CEMENT WORKS IS LOCATED AT CHITTORGARH IN RAJASTHAN. COPIES OF STATEMENTS REGARDING COMPENSA TION WRITTEN OFF TOGETHER WITH COMPENSATION ORDERS RELATING TO ASSESSEES UNITS AT SATNA CEMENT WORKS AND BIRLA CEMENT WORKS HAVE BEEN FILED AT PAGES 129 TO 166 AN D 167 TO 268 OF THE PAPER BOOK RESPECTIVELY. THE MATERIAL PROVISIONS OF THE STATE LAW ARE SECTION 89 OF THE RAJASTHAN LAND REVENUE ACT 1956 AND SECTION 247 OF THE MADHY A PRADESH LAND REVENUE CODE 1959. BOTH THE SAID SECTIONS PROVIDE THAT THE RIGH T TO ALL MINERALS MINES AND QUARRIES INCLUDING THE RIGHT OF ACCESS TO LAND FOR THE PURPO SE OF MINING AND QUARRYING AND THE RIGHT TO OCCUPY SUCH OTHER LAND AS MAY BE NECESSARY FOR PURPOSES SUBSIDIARY THERETO SHALL VEST IN THE STATE GOVERNMENT. IF THE STATE GO VERNMENT ASSIGNS TO ANY PERSON ITS RIGHTS OVER ANY MINERALS MINES OR QUARRIES IT CAN DELEGATE ITS AFORESAID POWERS TO THE PERSON TO WHOM THE RIGHT HAS BEEN ASSIGNED FOR PROP ER ENJOYMENT OF SUCH RIGHTS. HE REFERRED TO SUB-SECTION (4) OF SECTION 89 OF THE RA JASTHAN LAND REVENUE ACT 1956 AND 11 SUB-SECTION (4) OF SECTION 247 OF THE MADHYA PRADES H LAND REVENUE CODE 1959 WHICH ARE IN SIMILAR TERMS. SUB-SECTION (4) OF SECTION 89 OF THE RAJASTHAN ACT IS REPRODUCED HEREUNDER : (4) IF IN THE EXERCISE OF THE RIGHT HEREIN REFE RRED TO OVER ANY LAND THE RIGHTS OF ANY PERSONS ARE INFRINGED BY THE OCCUPATION OR DISTURBANCE OF THE SURFACE OF SUCH LAND THE STATE GOVERNMENT OR ITS ASSIGNEE SH ALL PAY TO SUCH PERSONS COMPENSATION FOR SUCH INFRINGEMENT AND THE AMOUNT OF SUCH COMPENSATION SHALL BE CALCULATED BY THE COLLECTOR OR IF HIS AWARD IS N OT ACCEPTED BY THE CIVIL COURT AS NEARLY AS MAY BE IN ACCORDANCE WITH THE PROVISIONS OF THE RAJASTHAN LAND ACQUISITION ACT 1953 (RAJASTHAN ACT XXIV OF 195 3). THE LEARNED COUNSEL FURTHER SUBMITTED THAT PAYMENT OF THE COMPENSATION AS AFORESAID DOES NOT RESULT IN ACQUISITION OF ANY INTEREST IN L AND BY THE ASSESSEE. THE ORDER DETERMINING THE COMPENSATION SPECIFICALLY PROVIDES THAT NO OWNERSHIP RIGHT WILL BE CREATED ON THE LAND. ACCORDING TO HIM FURTHER COM PENSATION HAS TO BE PAID IN ORDER TO OBTAIN RAW MATERIAL FOR THE ASSESSEES BUSINESS AND THEREBY FACILITATE THE CARRYING ON OF ITS BUSINESS. SUCH CLAIM FOR DEDUCTION OF COMPE NSATION ON PROPORTIONATE BASIS WAS ALLOWED IN THE ASSESSEES ASSESSMENTS TILL ASSESSME NT YEAR 1999-2000. DEDUCTION WAS ALLOWED IN THE ORIGINAL ASSESSMENT FOR THE ASSESSME NT YEARS 2000-01 AND 2001-02. THE ALLOWANCE MADE FOR THE ASSESSMENT YEAR 2000-01 WAS SOUGHT TO BE WITHDRAWN IN PROCEEDINGS U/S. 263 OF THE ACT BUT THE TRIBUNAL BY ITS ORDER DATED 24/03/2006 SET ASIDE THE ORDER PASSED U/S. 263 OF THE ACT. A COPY OF THIS ORDER OF THE TRIBUNAL IS PLACED AT PAGES 57 TO 67 OF THE PAPER BOOK. THE AL LOWANCE MADE FOR THE ASSESSMENT YEAR 2001-02 WAS SOUGHT TO BE WITHDRAWN BY REOPENIN G THE ASSESSMENT U/S. 147 OF THE ACT BUT SUCH REOPENING WAS NOT UPHELD UPTO THE STA GE OF THE TRIBUNAL. THE DISALLOWANCE MADE IN THE REGULAR ASSESSMENT FOR THE ASSESSMENT Y EAR 2002-03 WAS SET ASIDE BY THE TRIBUNAL BY ITS ORDER DATED 17/11/2006. A COPY OF THE SAID ORDER IS FILED AT PAGES 68 TO 76 OF THE PAPER BOOK. THE LEARNED COUNSEL FURTHER BROUGHT TO OUR NOTICE THAT THE DEPARTMENTS APPEAL U/S. 260A OF THE ACT BEING ITA NO. 482 OF 2 007 DIRECTED AGAINST THE ORDER DATED 24/03/2006 OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2000-01 WAS REJECTED ON THE GROUND OF DELAY BY THE HONBLE CALCUTTA HIGH CO URT ON 16/08/2007. A COPY OF THE 12 SAID JUDGMENT IS PLACED AT PAGES 77 TO 79 OF THE PA PER BOOK. HE FURTHER STATED THAT IN THE APPEAL PREFERRED BY THE REVENUE U/S. 260A OF TH E ACT FOR THE ASSESSMENT YEAR 2002-03 IN RESPECT OF THE ORDER OF THE TRIBUNAL DAT ED 17/11/2006 (COPY PLACED AT PAGES 80 TO 87 OF THE PAPER BOOK) THOUGH A GROUND WAS TAKEN AGAINST THE RELIEF GRANTED BY THE TRIBUNAL WITH REGARD TO PROPORTIONAT E DEDUCTION OF COMPENSATION SUCH GROUND WAS NOT ADMITTED BY THE HONBLE CALCUTTA HIG H COURT BY ITS ORDER DATED 22/6/2007 IN ITA NO.233 OF 2007. A COPY OF THE SAI D JUDGMENT IS PLACED AT PAGES 88 TO 90 OF THE PAPER BOOK. WITH REGARD TO THE CLAIM FOR PROPORTIONATE DEDUCTION OF COMPENSATION THE LD. C.I.T.(A) BY HIS COMMON ORDER DATED 25/06/2008 FOR THE ASSESSMENT YEARS 2003-04 TO 2005-06 GRANTED RELIEF TO THE ASSESSEE FOLLOWING THE ORDER DATED 17/11/2006 OF THE TRIBUNAL FOR THE AS SESSMENT YEAR 2002-03. A COPY OF THE SAID ORDER OF LD. C.I.T.(A) DATED 25/06/2008 HA S BEEN FILED AT PAGES 91 TO 108 OF THE PAPER BOOK. THE TRIBUNAL HOWEVER BY AN ORDER DATED 27/05/2009 IN ITA NO.1818 TO 1820/KOL/2008 REMANDED THE MATTER TO THE A.O. OB SERVING THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ENTERPRISING E NTERPRISES (SUPRA) WAS NOT AVAILABLE WHEN THE ASSESSMENTS FOR THE ASSESSMENT YEARS 20 00-01 AND 2002-03 WERE DECIDED AND THAT CONTRADICTORY FACTS WERE CLAIMED BY THE RI VAL PARTIES AND THE TRIBUNAL COULD NOT RECORD ANY FINDING OF FACT IN THE ABSENCE OF RELEVANT MATERIAL. A COPY OF THE SAID ORDER OF THE TRIBUNAL DATED 27/05/2009 IS PLACED AT PAGES 109 TO 121 OF THE PAPER BOOK. IT WAS FURTHER STATED BY THE LEARNED COUNSEL THAT AGAINST THE SAID ORDER DATED 27/05/2009 PASSED BY THE TRIBUNAL THE ASSESSEE HAS PREFERRED AN APPEAL U/S. 260A OF THE ACT BEFORE THE HONBLE CALCUTTA HIGH COURT BE ING ITA NO.282 OF 2009. A COPY OF THE SAID APPEAL IS PLACED AT PAGES 122 & 123 OF THE PAPER BOOK. THE SAID APPEAL WAS ADMITTED BY THE HONBLE HIGH COURT ON 27/11/2009 I NTER ALIA ON THE FOLLOWING QUESTION: WHETHER THE LEARNED TRIBUNAL WAS JUSTIFIED IN R EMANDING FOR RENDERING FRESH DECISION AFTER HAVING DECIDED THE MATTER BY THE TR IBUNAL PREVIOUSLY WITH REGARD TO THE CLAIM OF THE ASSESSEE RELATING TO PROPORTIONATE DEDUCTION OF COMPENSATION PAID IN CONNECTION WITH MINING ACTIVITY FOR OBTAINING RAW MATERIAL LIMESTONE TO THE ASSESSING OFFICER? 13 SUBSEQUENTLY BY AN ORDER DATED 04/12/2009 THE HON BLE CALCUTTA HIGH COURT GRANTED STAY OF OPERATION OF THE ORDER DATED 27/05/2009 PAS SED BY THE TRIBUNAL IN SO FAR AS IT RELATED TO REMAND OF THE ISSUE RELATING TO DEDUCTIO N OF PROPORTIONATE COMPENSATION. A COPY OF THE SAID ORDER IS FILED AT PAGES 124 & 125 OF THE PAPER BOOK. IN THE ABOVE BACKGROUND OF THE CASE THE LEARNED C OUNSEL SUBMITTED THAT THE CLAIM FOR PROPORTIONATE DEDUCTION OF COMPENSATION P AID IS CONCLUDED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBUNAL FOR THE ASSE SSMENT YEARS 2000-01 AND 2002-03 WHICH HAVE ATTAINED FINALITY. THE JUDGMENT OF THE H ONBLE SUPREME COURT IN ENTERPRISING ENTERPRISES VS. DCIT (SUPRA) MERELY AF FIRMED THE DECISION OF THE HONBLE MADRAS HIGH COURT IN (2004) 268 ITR 95 (MAD). THE SAID JUDGMENT OF THE HONBLE MADRAS HIGH COURT WAS DULY CONSIDERED BY THE TRIBUN AL IN DECIDING THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 2000-01. THE HONBLE SUPREM E COURT IN THE CASE OF ENTERPRISING ENTERPRISES (SUPRA) HELD THAT ROYALTY OR RENT WAS REVENUE EXPENDITURE BUT WHERE THE ENTIRE AMOUNT OF LEASE WAS PAID EITHER AT A TIME OR IN INSTALMENTS IT WOULD BE A CAPITAL EXPENDITURE. IN THE SAID CASE THE HONB LE SUPREME COURT WAS CONCERNED WITH PROPORTIONATE LEASE RENT PAID BY THE MINING LESSEE FOR ACQUIRING LEASEHOLD RIGHT FOR EXTRACTING MINERALS. IN THE INSTANT CASE THE LEAR NED COUNSEL SUBMITTED THERE IS NO DISPUTE THAT THE RENT/ROYALTY PAID BY THE ASSESSEE TO THE STATE GOVERNMENT IS REVENUE EXPENDITURE. THE DISPUTE HEREIN IS WITH REGARD TO C OMPENSATION PAID BY THE ASSESSEEE TO THE PERSONS WHOSE RIGHTS ARE INFRINGED BECAUSE O F THE MINING ACTIVITY IN TERMS OF THE STATE LAND REVENUE LAW WHICH DOES NOT RESULT IN AC QUISITION OF ANY INTEREST IN THE LAND BY THE ASSESSEE. THE PAYMENT FOR MINING THE RAW MA TERIAL BY WAY RENT/ROYALTY BEING UNDISPUTEDLY REVENUE EXPENDITURE PAYMENT OF COMPEN SATION TO PERSONS WHOSE RIGHTS ARE INFRINGED BY THE MINING ACTIVITY CANNOT BUT H AVE THE SAME CHARACTER AND SUBMITTED THAT THE ASSESSEE IS ENTITLED TO DEDUCTION OF THE P ROPORTIONATE COMPENSATION AMOUNTING OF RS.19 38 032/-. IN ADDITION TO ABOVE THE LEARN ED COUNSEL ALSO RELIED ON THE JUDGMENT DATED 14 TH AND 15 TH MARCH 1932 OF HIGH COURT OF JUSTICE (KINGS BENCH DIVISION) IN THE MATTERS OF OGRADY (H.M. INSPECTOR OF TAXES) VS. BU LLCROFT MAIN COLLIERIES LTD. & O GRADY (H.M. INSPECTOR OF TAXES) VS. MARKHAM MAIN C OLLIERY LTD. A COPY OF THE SAID 14 JUDGMENT HAS BEEN FILED BEFORE US AT THE TIME OF HE ARING WHICH IS PLACED ON RECORD. HE THEREFORE SUBMITTED THAT THE ORDER OF THE LD. C.I.T.(A) ON THIS ISSUE BE UPHELD. 14. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE HONBLE SUPREME COURT IN THE CASE OF ENTERPRISING ENTERPRISES VS. D CIT (SUPRA) AND CONTENDED THAT THE ORDER OF LD. C.I.T.(A) BE REVERSED ON THE ISSUE. 15. WE HAVE HEARD THE PARTIES AND PERUSED THE MATE RIAL PLACED ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ELABORATED THE FACTS OF THE CASE MAKING REFERENCE OF SEVERAL DECISIONS OF TRIBUNAL AND HONBLE SUPREM E COURT AND HIGH COURTS. AFTER CAREFUL CONSIDERATION OF THE SAME AND EVIDENCES FIL ED ON RECORD AND IN THE PAPER BOOK WE FIND THAT THE ASSESSEE IS REQUIRED TO PAY COMPEN SATION AS DETERMINED BY THE LOCAL AUTHORITY/COURT TO THE PERSONS WHOSE RIGHTS ARE INF RINGED BECAUSE OF THE MINING ACTIVITY. WE ALSO OBSERVE THAT LD. C.I.T.(A) HAS P ROPERLY ANALYZED THE FACTS OF THE PRESENT CASE AND DISTINGUISHED THE FACTS DECIDED BY THE HONBLE APEX COURT IN THE CASE OF ENTERPRISING ENTERPRISES VS. DCIT (SUPRA) AND TH EN ONLY HAS COME TO A CONCLUSION THAT THE COMPENSATION WAS PAID FOR THE DAMAGED CAUS ED ON THE INFRINGEMENT OF RIGHT OF THE LAND OWNER. HE HAS ALSO ANALYZED THAT THE PAYM ENTS ARE PROGRESSIVELY DISTRIBUTED AS THEY WORK AS THEY PROCEED YEAR BY YEAR GOING O N WITH THEIR WORK AND THE PAYMENTS ARE IN THE NATURE OF INCIDENTAL EXPENDITURE TO COND UCT THE MINE AND THE BUSINESS OPERATIONS. HE THEREFORE HELD THAT THE PAYMENT O F COMPENSATION TO PERSONS WHOSE RIGHTS ARE INFRINGED BY THE MINING ACTIVITY IS REVE NUE IN NATURE. WE THEREFORE FIND NO INFIRMITY IN THE ORDER OF THE LD. C.I.T.(A) ON THIS ISSUE AND CONFIRMED THE SAME. GROUND NO. 1 OF THE REVENUES APPEAL IS THUS DISMISSED. 16. GROUND NO.2 OF THE REVENUES APPEAL READS AS U NDER :- 2. THAT THE LD. CIT(A)-VI KOLKATA HAS ERRED IN LA W AS WELL AS ON FACTS BY DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF SALES T AX SUBSIDY RECEIVED BY THE ASSESSEE AS REVENUE INCOME OF RS.18 18 46 419/-. 17. AT THE TIME OF HEARING BEFORE US IT WAS POIN TED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE TWO DECISIONS OF I.T.A.T. A BENCH KOLKATA IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03 VIDE ORDER DATED 17/11/2006 ITA NO.1502/KOL/2006 (COPY FILED AT PAGES 68 TO 76 OF THE 15 PAPER BOOK) AND FOR ASSESSMENT YEARS 2003-04 TO 200 5-06 VIDE ORDER DATED 25/6/2008 ITA NOS.1818 TO 1820/KOL/2008 (COPY FILE D AT PAGES 91 TO 108 OF THE PAPER BOOK). HE STATED THAT THE FACTS BEING IDENTI CAL THE ABOVE DECISIONS OF I.T.A.T. WOULD BE SQUARELY APPLICABLE. 18. THE LD. DEPARTMENTAL REPRESENTATIVE WAS FAIR E NOUGH TO ACCEPT THAT THE FACTS OF THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE F ACTS INVOLVED DURING ASSESSMENT YEARS 2002-03 TO 2005-06. HE HOWEVER POINTED OUT THAT THE REVENUE HAS NOT ACCEPTED THE ORDERS OF ITAT FOR THESE YEARS AND HAS FILED APPEALS U/S.260A BEFORE THE HONBLE CALCUTTA HIGH COURT. 19. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IALS PLACED BEFORE US. SINCE THE FACTS OF THE ASSESSMENT YEAR UNDER CONSIDERATIO N ARE IDENTICAL TO THOSE OF ASSESSMENT YEARS 2002-03 TO 2004-05 WE RESPECTFULL Y FOLLOWING THE ABOVE DECISIONS OF I.T.A.T. IN ASSESSEES OWN CASE UPHOLD THE ORDER OF THE LD. C.I.T.(A) ON THIS POINT AND REJECT GROUND NO. 2 OF THE REVENUES APPEAL. 20. GROUND NO.3 OF THE REVENUES APPEAL READS AS U NDER :- 3. THAT THE LD. CIT(A)-VI KOLKATA HAS ERRED IN LA W AS WELL AS ON FACTS BY DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF PROFIT ON SALE OF PLANT AND MACHINERY OF CLOSED DOWN UNIT FOR RS.2 41 44 000/-. 21. THE ABOVE GROUND IS AGAINST NOT TREATING THE A CCOUNTING PROFIT OF RS.2 41 44 000/- FROM SALE OF CERTAIN DEPRECIABLE F IXED ASSETS AS REVENUE RECEIPT CHARGEABLE TO TAX. BUT THE ASSESSEE HAD REDUCED THE SALE PROCEEDS FROM THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AND CLAIMED DEPRE CIATION ON SUCH REDUCED WRITTEN DOWN VALUE. IN THE ASSESSMENT FOR THE YEAR UNDER C ONSIDERATION THE AO DID NOT ACCEPT SUCH TREATMENT ON THE GROUND THAT THE ASSETS IN QUE STION WERE EARMARKED FOR DISPOSAL IN THE PRECEDING YEAR AND THE ASSESSEE IN ITS ACCOU NTS HAD TRANSFERRED SUCH ASSETS FROM THE HEADING OF FIXED ASSETS TO CURRENT ASSETS. WHILE TAXING THE SAID ACCOUNTING PROFIT OF RS.2 41 44 000/- AS REVENUE RECEIPT THE A.O. ALLOWED DEPRECIATION ON THE WRITTEN DOWN VALUE WITHOUT DEDUCTING THERE FROM THE SALE PROCEEDS. ON APPEAL THE LD. C.I.T.(A) DIRECTED THE A.O. TO REDUCE THE SALE PROC EEDS FROM THE WRITTEN DOWN VALUE 16 AND ALLOW DEPRECIATION ON REDUCED WRITTEN DOWN VALU E AND THUS ALLOWED THE GROUND OF THE ASSESSEE. 22. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE A.O. WHEREAS THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A.O. WAS NOT JUSTIFIED IN HOLDING THAT THE ASSETS IN QUESTION WERE NOT PART OF ASSETS USED IN THE ASSESSEES BUSINESS. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAV ING SOLD OFF SOME OF ITS DEPRECIABLE ASSETS OUT OF ITS BLOCK OF ASSETS IN TERMS OF SECTI ON 43(6)(C)(I)(B) OF THE ACT THE CONSIDERATION RECEIVED UPON SUCH SALE WAS THEREFORE REDUCED FROM THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS. THE ASSESSEE MADE TH E ACCOUNTING ENTRY IN THE PRECEDING YEAR TRANSFERRING SUCH DEPRECIABLE ASSETS FROM THE HEADING OF FIXED ASSETS TO A SEPARATE HEADING OTHER CURRENT ASSETS WITH THE DE SCRIPTION FIXED ASSETS HELD FOR DISPOSAL IN ACCORDANCE WITH THE REQUIREMENTS OF AC COUNTING STANDARD 10. THE ASSESSEE HAD USED THE ASSETS IN QUESTION FOR PART O F THE PRECEDING FINANCIAL YEAR 2004- 05. IN THAT YEAR THE ASSESSEE CLOSED ITS UNIT IN QUESTION WHICH HAD BECOME UNVIABLE FOR THE HEALTH OF ITS BUSINESS AS A WHOLE AND IT WA S DECIDED TO SELL THE ASSETS IN QUESTION. HE FURTHER SUBMITTED THAT THE ACTION OF THE A.O. IS CONTRARY TO THE STATUTORY PROVISIONS AND CANNOT BE SUSTAINED. THE A.O. SHOULD HAVE REDUCED THE SALE PROCEEDS FROM THE WRITTEN DOWN VALUE AND ALLOWED DE PRECIATION ON SUCH REDUCED WRITTEN DOWN VALUE. HE THEREFORE URGED FOR UPHOLDING THE ORDER OF LD. C.I.T.(A) ON THIS ISSUE. 23. WE HAVE HEARD THE PARTIES AND PERUSED THE MATE RIAL PLACED ON RECORD. SECTION 43(6)(C)(I)(B) SPECIFICALLY REQUIRES THE REDUCTION OF THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS BY THE MONEYS PAYABLE IN RESPECT OF ANY A SSET FALLING WITHIN THAT BLOCK WHICH IS SOLD DURING THE PREVIOUS YEAR. WE FIND THAT TH E LD. C.I.T.(A) DISCUSSED THE FACTS AND LEGAL POSITION IN THIS REGARD BY OBSERVING AS UNDER :- I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLAN T AND ALSO THE ORDER OF THE A.O. THE ACCOUNTING TREATMENT CANNOT EFFECT THE OPERATIO N OF THE STATUTORY PROVISIONS CONTAINED IN SECTION 43(6) OF THE ACT. THE LD. A.R. ARGUED THAT FOR ACCOUNTING PURPOSE AS PER ACCOUNTING STANDARD 10 SOME ASSETS W ERE TRANSFERRED FROM HEADING OF FIXED ASSETS TO A SEPARATE HEADING OTHER CURREN T ASSETS WITH A DESCRIPTION FIXED ASSETS HELD FOR DISPOSAL. HOWEVER FOR INCO ME TAX PURPOSES THE BLOCK OF ASSETS CONCEPT WAS FOLLOWED AS PER STATUTORY PROVIS IONS. AS PER PROVISIONS OF 17 SECTION 43(6)(C)(I)(B) THE A.O. IS DIRECTED TO RED UCE THE SALE PROCEEDS FROM THE WRITTEN DOWN VALUE AND ALLOW DEPRECIATION ON REDUCE D WRITTEN DOWN VALUE. THE GROUND OF APPEAL IS ALLOWED . FROM THE ABOVE IT IS EVIDENT THAT THE LD. C.I.T.(A ) HAS POINTED OUT THAT THE ACCOUNTING TREATMENT CANNOT EFFECT THE OPERATION OF THE STATUTORY PROVISIONS CONTAINED IN SECTION 43(6) OF I.T. ACT AND FOR INCOME-TAX PUR POSES THE BLOCK OF ASSETS CONCEPT WAS FOLLOWED AS PER STATUTORY PROVISIONS. CONSIDER ING THE TOTALITY OF THE ABOVE FACTS AND LEGAL POSITION WE DO NOT FIND ANY JUSTIFICATIO N TO INTERFERE WITH THE FINDINGS OF THE LD. C.I.T.(A) IN THIS REGARD. THE SAME IS SUSTAINE D AND THE GROUND NO.3 OF THE REVENUES APPEAL IS REJECTED. 24. IN THE RESULT ASSESSEES APPEAL IS ALLOWED IN PART AND THE APPEAL OF THE REVENUE IS DISMISSED. !0 '1! 2 1$ 3 4 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 29.7. 2011. SD/- SD/- ( ) ( . .. . . .. . ) !' (MAHAVIR SINGH) JUDICIAL MEMBER (C.D. RA O) ACCOUNTANT MEMBER ( (( ( ' ' ' ') )) ) DATE: 29-07-2011 !0 5 .6 7!6&8- COPY OF THE ORDER FORWARDED TO: 1. *+ / THE APPELLANT : BIRLA CORPORATION LTD. 9/1 R.N.MUKHERJEE ROAD KOLKATA-700 001. 2 ./*+ / THE RESPONDENT : D.C.I.T. CIRCLE-6 KOLKATA. 3. 0$ () : THE CIT(A)-VI KOLKATA. 4. 0$/ THE C.I.T. KOL - 5 <3 .$ / DR ITAT KOLKATA BENCHES KOLKATA 6 GUARD FILE . /6 ./ TRUE COPY !0$1/ BY ORDER (DKP) = > / DY/ASSTT. REGISTRAR .