TMI Blog2014 (1) TMI 1581X X X X Extracts X X X X X X X X Extracts X X X X ..... rading activity, the expenditure would be an outgoing from the profits of the trade. The said expenditure paid by the assessee as NPV to enable the assessee to carry on its mining business is revenue in nature, which is allowable as business expenditure under section 37(1) of the Act - Decided against Revenue. - ITA No.122/Kol/2009 &ITA No.1521/Kol/2009 - - - Dated:- 27-1-2014 - Shri Mahavir Singh And Shri Abraham P. George,JJ. For the Petitioner : Shri Soumitra Choudhury, AR For the Respondent : Shri Saboorul Hasan Usmani, SR-DR ORDER Per Mahavir Singh, Judicial Member:- These two appeals by Revenue are arising out of different orders of Commissioner of Income-tax (Appeals)-V, Kolkata in appeal Nos. CIT(A)- V/Kol/237, 298/Kol/Cir-5/07-08-08-09 dated 26-11-2008 and 04-06-2009. Assessments were framed by ACIT, Circle-5 Kolkata u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide his different orders dated 31-12-2008 and 31-12-2007 for assessment years 2005-06 and 2006- 07 respectively. 2. Only common issue in these two appeals of Revenue is as regards to the order of CIT(A) in deleting the disallowance of expenses of Net Pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1991) 187 ITR 39, 49 (SC)] in the case of the assessee, which is not at all applicable. In that case the expense of shifting of Railway Track was incurred by the assessee for the smooth operation of their business." 3. At the outset, Ld. counsel for the assessee stated that the issue is squarely covered in favour of assessee and against the Revenue. Ld. counsel for the assessee drew our attention to the order of CIT(A), wherein the issue has been allowed in favour of assessee by observing vide para-5(v) as under:- "5.(v) I have carefully considered the rival submissions. During the appellate proceeding the appellant was asked to show when this mining lease were executed which gave the appellant the right to mining in the areas assigned to it? The appellant submitted the Lease Deeds wherein it is found that the lease deeds were executed in the year 1980. Since then the appellant was engaged in the mining operation as a Licensee. Thus, one thing is clear that the appellant did not get any fresh right to mining by making this payment of Rs.3,24,80,000/- under the Order of the S.C. The appellant was already running a business since 1980 and during the course of business some payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Ld. counsel for the assessee further stated that issue is covered in favour of assessee by Tribunal's decision of Co-ordinate Bench in the case of ACIT v. Rungta Sons (P) Ltd. in ITA No.933/Kol/2009 dated 05-08-2011, wherein the issue is discussed in para-12 to 15 as under:- "12, The question before us is as to whether the payment being NPV made by the assessee for obtaining forest clearance for mining on the forest area / land under the Forest (Conservation) Act, 1980 is allowable as rev expenditure or not. It is relevant to state that Hon'ble Apex Court in the case of T.N. Godavaram Thirumalpad (supra) has observed that forests are vital components to sustain life support system on the earth. Therefore, thee is an absolute need to take all precautionary measures when forest lands are sought to be directed for non-forest use. Hon'ble Apex Court stated that when forest land is used / diverted for non-forest purposes and there is consequential loss of benefits accruing from the forests, the User Agency of such land be required to compensate for the diversion. Hon'ble Apex Court observed that the User Agency be required to make payment of Net Present Value (NPV) of such diverted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable the assessee to carry on its mining activities and as such it is not a voluntary one That payment was made on the basis of direction given by the Divisional Forest Officer working in the Ministry of Environment and Forests, Government of India. Since the said payment of NPV being a statutory requirement and has to be paid by the assessee to continue to carry on its mining activities, we are of the considered view that the said payment is wholly and exclusively for the purpose of carrying on its business. Hence, incurring of such expenses should be considered as having direct nexus with the business activities of the assessee. By making this payment of NPV, the assessee has not got any fresh right to mining, but the said payment has been made to overcome any restriction or obstruction or disability that has arisen in continuing of mining business. We are of the considered view that since it is a one-time payment, it could not be considered as capital in nature. Hon'ble Apex Court has held in Empire Ju9te Company Ltd. -vs-CIT [124 ITR 1] that there may be cases where expenditure, even if incurred for obtaining an advantage of any enduring benefit, may, nonetheless, be on reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure under section 37(1) of the Act. Special Bench, ITAT, Kolkata in Peerless Securities Limited -vs- Joint Commissioner of Income Tax [93 TTJ 325 (SB)] held that if the advantage consists of merely in facilitating the assessee's trading operations or enabling the management and conduct of assessee's business to be carried on more efficiently or more profitability while leaving the fixed capital untouched, expenditure would be on revenue account, even though the advantage may endure for an indefinite future. Ahmedabad Bench, ITAT in Joint Commissioner of Income Tax -vs.- Dewerson Industries Limited [2005 TIOL 236 (AHD.)] held that payments of similar nature to Ministry of Forest and Environment, Government of Gujarat were allowable as business expenditure. ITAT, Mumbai Bench in Industrial development Bank of India -vs.- Deputy Commissioner of Income Tax [91 ITD 34] held that expenditure by assessee in accordance with statutory guidelines is allowable business expenditure. Hon'ble Calcutta High Court in CIT - vs.- Rungta Mines Pvt. Lt. [205 ITR 335] held that where a trader, in his capacity as a trader, by compulsion of statutory obligation, has to incur an expenditure as a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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