TMI Blog2012 (3) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... ow in this regard and direct deletion of the said disallowance/addition by allowing the appeal of the assessee. - ITA No.09/CTK/2012 - - - Dated:- 14-3-2012 - Shri K.K.Gupta, AM, and Shri K.S.S.Prasad Rao, JM For the appellant: Shri S.C.Bhadra,AR For the respondent : Smt. Paramita Tripathy, DR ORDER Shri K.K.Gupta, AM : The assessee is in appeal against the order dt.21.11.2011 of the Commissioner of Income-tax (Appeals) for the Assessment Year 2008-09. 2. The only ground raised in this appeal is against the disallowance of expenditure of ₹39,80,990 under the head Overburden Cutting and Removal of Ore holding the same as capital in nature. 3. The undisputed facts relevant to the issue are that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the query is leveled to make systematic benches. Once the ore is found in a particular bench or a bench or a place, it has to be exposed from all sides to bring it into a shape of query making benches raging from 3.5 meters height to 6 meters height. Considering above operation, the Assessing Officer held that the expenditure incurred in the above operations is prospective expenditure within the ambit of Section 35E of the I.T.Act, 1961 and as such, capital nature, by relying on the decision in the case of Muthalah Chettair (M.L.M) v. CIT [ 101 ITR 209 (Mad)] and disallowed the claim of the assessee. Aggrieved, the assessee preferred appeal before the Commissioner of Income-tax (Appeals). 4. Before the learned CIT(A), it was contended by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (19875) 1 TC 1 and United Collieries Ltd v. Commrs. Of Inl.Rev (1929) 12 TC 1248 (C.Sess) for the proposition that the expenditure incurred for sinking new pits is of capital nature. Aggrieved, the assessee is in appeal before the Tribunal. 5. Shri S.C.Bhadra, learned AR of the assessee contended that the assessee is carrying on business of mining operation by obtaining lease of Iron Ore mines from Government of Orissa. Prior to obtaining mining lease at Bhanjpali, Koira in Sundargarh District, he applied and granted prospecting licence to prospect for Iron Ore in the land specified in the agreement with the Government of Orissa. The prospecting period was limited to two (2) years. He has furnished the copy of prospecting licence grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease is granted for a specific period. After obtaining the mining licence, forest clearance, the applicant can only start its business of mining. Nobody can start commercial production without obtaining prospecting licence and carry out the prospecting activities. The assessee is doing commercial production of Iron Ore for more than 11 years. Therefore, by no stretch of imagination, any expenditure incurred in the Assessment Year under consideration can be attributed to the prospecting activities. There were no pre-development activities in relation to prospecting any minerals apart from mining of Iron Ore. The removal of overburden is a continuous operation which is carried on simultaneously with the production of Iron Ore. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Section 35E of the I.T.Act clearly shows that expenditure which is covered by the provisions of Section 35E is only the expenditure which relates to exclusively on any operations relating to prospecting for any mineral. That means only expenditure which is covered is the one which is incurred on the operations for prospecting of any mineral. The word operation relating to prospecting , as defined in Section 35E(5) means any operation undertaken for the purposes of exploring, locating or proving deposits of any mineral, and includes any such operation which proves to be infructuous or abortive. In the instant case on hand, considering the expenditure incurred on activities as noticed earlier it can hardly be said that there were any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. On the other hand, if such an expenditure is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce profits it is a revenue expenditure. Hence the expenditure incurred in removal of overburden was of revenue nature and hence the assessee was entitled to claim deduction. 8. While sustaining the disallowance in question, the learned CIT(A) has referred to the various decisions holding that the expenditure incurred for sinking new pits is of capital nature, which decisions, in our considered view, are not all app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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