Sri P. Abubakar, Hospet v. DCIT, Bellary

ITA 725/BANG/2009 | 2006-2007
Pronouncement Date: 22-01-2010 | Result: Allowed

Appeal Details

RSA Number 72521114 RSA 2009
Bench Bangalore
Appeal Number ITA 725/BANG/2009
Duration Of Justice 6 month(s) 1 day(s)
Appellant Sri P. Abubakar, Hospet
Respondent DCIT, Bellary
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 22-01-2010
Date Of Final Hearing 13-01-2010
Next Hearing Date 13-01-2010
Assessment Year 2006-2007
Appeal Filed On 21-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO. 725/BANG/2009 ASSESSMENT YEAR : 2006-07 SHRI P. ABUBAKAR MINE OWNER 5 TH CROSS M.J. NAGAR DAM ROAD HOSPET 583 203. : APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX CIRCLE 1 BELLARY. : RESPONDENT APPELLANT BY : SHRI S. PARTHASARATHI RESPONDENT BY : SMT. SWATI S. PATIL O R D E R PER K.P.T. THANGAL VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS FOR THE ASSESSMENT YEAR 2006-07. 2. GROUND NOS. 2 TO 4 BY THE ASSESSEE IS AGAINST TH E ORDER OF THE CIT(APPEALS) IN CONFIRMING THE FINDINGS OF THE ASSE SSING OFFICER HOLDING THE EXPENDITURE INCURRED TOWARDS COMPENSATORY AFFORESTA TION MANAGEMENT AND PLANNING AGENCY (CAMPA) AS CAPITAL EXPENDITURE. ACCORDING TO THE ITA NO.725/BANG/09 PAGE 2 OF 5 ASSESSEE THE CIT(APPEALS) HAS NOT APPRECIATED THE FACTS IN THE RIGHT PERSPECTIVE. 3. FACTS LEADING TO THE DISPUTE BRIEFLY ARE AS UNDE R. ASSESSEE FILED THE RETURN OF INCOME ON 31.10.06 DECLARING INCOME AT RS .79 72 878. THE RETURN WAS PROCESSED U/S. 143(1) ON 30.3.07. THERE WAS A SEARCH ACTION U/S. 133A ON 9.10.07 IN THE BUSINESS PREMISES OF THE ASS ESSEE. AS A CONSEQUENCE OF THE SEARCH IT WAS FOUND THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THEREFORE ASSESSMENT WAS REO PENED BY ISSUING NOTICE U/S. 148 ON 3.12.07. 4. ASSESSEE IS OWNING MINES HAVING 15 HECTARES OF L EASED AREA SINCE 1994 STARTED EXPLORING THE MINES DURING THE ASSESS MENT YEAR 2003-04. WHILE FRAMING THE ASSESSMENT ORDER AO NOTICED ASSE SSEE DEBITED AN AMOUNT OF RS.84 80 000 TO THE PROFIT & LOSS ACCOUNT UNDER THE HEAD NET PRESENT VALUE. IT WAS PAID TO FOREST DEPARTMENT FO R TRANSFER TO COMPENSATORY AFFORESTATION MANAGEMENT AND PLANNING AGENCY (CAMPA). THE PAYMENT IS MADE BY EVERY SUCH USER TOWARDS REGE NERATION OF FOREST FOR DIVERSION OF FOREST TO NON-FOREST USE. ASSESSEE WA S ASKED TO EXPLAIN WHY THIS EXPENDITURE SHOULD NOT BE TREATED AS CAPITAL E XPENDITURE. ASSESSEE STATED THAT THE EXPENDITURE WAS INCURRED FOR REMOVI NG CERTAIN RESTRICTIONS TO CARRY ON ITS BUSINESS AND AS SUCH THE PAYMENT SHOUL D BE TREATED AS REVENUE IN NATURE AND ALLOWABLE U/S. 37. 5. AO DID NOT AGREE WITH THE ABOVE CONTENTION OF TH E ASSESSEE FOR THE REASON THAT IT IS ONE TIME LUMPSUM PAYMENT MADE TO THE CONSERVATOR OF FOREST ON THE BASIS OF THE DECISION OF THE HONBLE SUPREME COURT. IT IS NON- RECURRING IN NATURE AND THE BENEFIT ASSESSEE ENJOYS WILL BE ENDURING I.E. AS ITA NO.725/BANG/09 PAGE 3 OF 5 LONG AS THE LEASE PERIOD EXPIRES. HE FURTHER HELD IT IS NOT FOR REMOVING ANY RESTRICTIONS OR OBSTRUCTIONS BUT TO FACILITATE THE ASSESSEE TO MINE DURING THE LEASE PERIOD AND IS INEXTRICABLY LINKED TO THE MINI NG RIGHTS. WITHOUT THIS PAYMENT ASSESSEE CANNOT DO THE MINING ACTIVITIES. HENCE HE TREATED THIS AS CAPITAL EXPENDITURE. 6. AGGRIEVED BY THE ABOVE ORDER THE ASSESSEE APPRO ACHED THE FIRST APPELLATE AUTHORITY. FOR THE PROPOSITION THAT THIS IS AN ALLOWABLE EXPENDITURE U/S. 37 THE ASSESSEE RELIED ON THE FOL LOWING DECISIONS: (1) DALMIA JAIN & CO. V. CIT 81 ITR 754 (SC) (2) CIT V. ASSOCIATED CEMENT CO. 172 ITR 257 (SC) (3) BIKANER GYPSUM LTD. V. CIT 187 ITR 39 (SC) 7. THE CIT(APPEALS) NOTED THAT LOOKING TO THE DEFAC ING OF HILLS AND NATURAL BEAUTY OF MOTHER EARTH HONBLE SUPREME COU RT HAS DECIDED AND DIRECTED FOREST AUTHORITIES TO FORM A FUND CALLED C AMPA TO WHICH THE MINE OWNERS HAD TO CONTRIBUTE. THUS HE FOUND THE TOTAL PLAN IS CONNECTED WITH CAPITAL ASSET OF MINE OWNERS THAT IS MINING SITE H ENCE HE HELD THE FACTS IN INSTANT CASE OF THE ASSESSEE AND THE CASE OF DALMIA JAIN & CO. (SUPRA) ARE DISTINGUISHABLE. THE EXPENDITURE IS RELATED TO CAP ITAL AND THEREFORE IT IS CAPITAL IN NATURE. WHILE COMING TO THIS CONCLUSION HE FURTHER NOTED THAT IF OUTGOING IS RELATED TO PROFIT MAKING PROCESS IT IS A REVENUE EXPENDITURE BUT IF IT GOES TOWARDS THE CAPITAL IT IS CAPITAL EXPEND ITURE. HE FURTHER HELD IF OUTFLOW IS CONDITION PRECEDENT TO CARRY ON BUSINESS BUT NOT OF GETTING THE RIGHT OF CAPITAL ASSET THEN IT IS REVENUE EXPENDIT URE. THE OUTGOING IS TOWARDS CARRYING ON OF MINING OPERATIONS BUT NOT AF FECTING OR PUTTING ANY ITA NO.725/BANG/09 PAGE 4 OF 5 RESTRICTION ON SALE OR PRODUCE OF APPELLANT. HE HE LD THEN IT WILL NOT BE IMPROVING THE TRADING FACILITY OR EFFICIENCY OF THE BUSINESS. IT IS INTRINSICALLY RELATED TO CAPITAL ASSET AND THEREFORE IT IS CAPITA L EXPENDITURE. 8. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. IT WAS CONTENDED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. RAMGAD MINERALS & MINING PVT. LTD. V. ACIT BELLARY IN ITA NO.1012/BANG/08 BY ORDER DATED 9.409. THE LD. CIT(DR) ALSO CONCEDED A S SUCH. THE TRIBUNAL HELD THAT BY VIRTUE OF VARIOUS ACTS ALONG WITH DIRE CTION OF THE HONBLE SUPREME COURT MAKING THE RULING IS BINDING. THE GO VERNMENT CRATED A BODY TO RECOVER FROM THE AFFORESTATION BECAUSE OF U PROOTING OF THE TREES AS A RESULT OF MINING ACTIVITIES TO WHICH THE ASSESSE E WAS TO CONTRIBUTE BY WAY OF A FUND. IT IS DIFFICULT TO HOLD THAT THIS CONTR IBUTION IS ACTUALLY A PART OF ROYALTY AND THEREFORE FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE CITED SUPRA WE ALLOW THE APPEAL BY THE ASSESSEE. 9. IN THE RESULT THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JANUARY 2010. SD/- SD/- (A. MOHAN ALANKAMONY ) ( K.P.T. THANGAL) ACCOUNTANT MEMBER VICE PRESID ENT BANGALORE DATED THE 22 ND JANUARY 2010. DS/- ITA NO.725/BANG/09 PAGE 5 OF 5 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.