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2008 (4) TMI 381 - ITAT MADRAS-CMine Development Expenditure - Applicability of section 35E - Revenue or Capital Expenditure - Expenditure incurred for removal of overburden for prospecting of minerals - Provisions of section 37(1) would then get excluded as the latter covers expenditure other than expenditure described in sections 30 to 36 of the Act? - HELD THAT:- From the facts on record it is clear that these mines were identified long back and even mining operations were started in 1957. Therefore, it cannot be said that expenditure was incurred for the purpose of identifying or prospecting the mines. We find that the Hon'ble Members of the Tribunal while adjudicating an identical issue during the AY's 1958-59 to 1960-61 has visited the mines and recorded the observations of the order of the Tribunal in the case of the same assessee. Thus, it becomes clear that removal of overburden is a continuous process while extracting lignite from the mines and by no stretch of imagination it can be said that the expenditure has been incurred for prospecting the mineral. We are unable to agree with the contention of the ld DR that s. 37 of the Act is not attracted to this extent because the same is covered between ss. 30 and 36 of the Act specifically u/s 35E of the Act. As stated s. 35E(2) applies to the expenditure which has been incurred for the purpose of prospecting of the mineral and not for the purpose of commercial production of the mineral. We are of the considered view that in this case, s. 37 would be clearly attracted since the expenditure is not of capital nature and is exclusively incurred for the purpose of business and not of personal nature. Removal of overburden, for excavating the, mineral i.e., lignite does not bring any benefit of enduring nature or any asset into existence. Once the upper crust of earth known as overburden is removed that would, go waste and lignite is excavated. No enduring benefit can be said to have arisen to the assessee by removal of such overburden. In any case, we further find that such expenditure was held to be allowable even during, the AY 1980-81 while giving direction u/s 144B of the Act i.e., after the introduction of provision of s. 35E. Further, the ld counsel for the assessee has produced by way of example the computation for the AY 1987-88 where similar expenditure was claimed and allowed. In these circumstances, we are of the view, that the expenditure for removal of overburden would not fall u/s 35E of the IT Act and thus, we quash the revisionary order passed by the CIT u/s 263 of the IT Act. In the result, the appeal filed by the assessee is allowed.
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