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2024 (2) TMI 923 - AT - Income TaxNature of expenditure - Mine Development Expenditure - Addition u/s 35E or 37(1) - Assessee contended that Section 35E is applicable only when the assessee is owner of mines and / or in the business of prospecting of minerals and it is neither owns the mines nor is in business of prospecting of minerals, hence, Section 35E of the Act is not Applicable - CIT(A) observed that the expenditure incurred by Assessee on removal of overburden is held to be a Revenue expenditure and not capital expenditure HELD THAT:- Deduction u/s 37(1) could not be declined on the ground that the expenditure in question was eligible for deduction u/s 35E. The deduction u/s 35E is normally available in respect of the expenditure which is not eligible for deduction u/s 37 (1) and just because the deduction u/s 35E may be available in respect of an expenditure, even if that be so, cannot be reason enough to decline the deduction u/s 37 Of course, it is besides the fact that once the commercial production had commenced in the respective mines, there was no occasion to invoke the provisions of Section 35E in respect of any expenditure incurred in the years after the year of commercial production. Assessee company cannot be called as a Mining Company as stipulated u/s 35E of the Act. As such, the impugned expenditure incurred by assessee cannot fall u/s 35E of the Act and it should be allowed u/s 37 of the Act. As per the accounting policy of the company vide Note no 1.17 of notes to accounts the Assessee Company amortizes the Mining development expenditure in proportion of quantity of lignite mined vis-a-vis the total minable reserves. However, such amortization is not permissible under the Income Tax Act, 1961. It is now well settled that revenue expenditure is allowable in entirety in the year in which it is incurred though it is written off in the books over a period of year - treatment of any particular expenditure/income in the accounts has no bearing on the allowance or otherwise under the Act. Accordingly, the Assessee Company has claimed the said expenditure in the current year in which such expenditure is incurred u/s 37 of the Act. The accounts and accounting policies disclosed by assessee is under Company Act and for the purpose of computation of income of the assessee, which should be governed by Income Tax Act not under Company Act. AO is not justified in holding that since the assessee has disclosed the accounting policies and its income to be recognized as per accounting policies disclosed in the financial statements is not justified. In other words, the accounting of the assessee is governed by Section 145 of the Act. If there is deviation from the method of accounting as per section 145 of the Act, the ld. AO should tinker the same. On the other hand, the ld. AO cannot rest upon the computing the income of the assessee under Company Act. In view of this, we uphold the order of ld. CIT(A) on this issue and dismiss the revenue’s appeal.
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