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2014 (8) TMI 1112 - AT - Income TaxDisallowance of legal fee - Held that:- The assessee was already exploiting the mining lease and doing business by virtue of the lease. The litigation expenditure incurred by the assessee to defend the suits did not in any way create a new asset nor help in improving the lease in such a manner so as to give it an advantage which was in the capital field. Hon’ble Apex Court in the case of Sree Meenakshi Mill Ltd. [1966 (9) TMI 34 - SUPREME Court] has clearly held that taxability of expenditure must depend on the purpose of the legal proceeding, in relation to the business and cannot be computed by the final outcome of the proceedings. We are therefore, of the opinion that the CIT(A) was justified in holding that the expenses of litigation expenses are revenue in nature. Claim of mines development expenditure - Held that:- CIT(A) had not looked into the aspect whether expenditure having been incurred long back, could be allowed on a piecemeal basis in subsequent years. He has simply mentioned that the assessee’s ground of appeal was allowable based on the facts of the case, contents of the assessment order and written submissions furnished by the assessee. He has also not discussed as to how the assessee could have raised an alternative claim before him, when all along he had made the claim before the AO u/s 35E of the Act. We are therefore, of the opinion, the matter needs a fresh look by the CIT(A). We therefore, set aside the order of the learned CIT(A) on this aspect and remit the issue back to the learned CT(A) for disposal in accordance with law. Addition made to the closing stock - Held that:- There is no dispute that unprocessed lumps and fines were valued by the assessee at ₹ 50-/ per MT, whereas the AO considered the whole of the stock as processed and valued it at ₹ 390/- per MT. Rate of ₹ 390/-per MT was arrived by the AO by adding expenditure in the nature of afforestation expenses, mines office expenses,, road maintenance charges, repairs and maintenance, plot transportation and loading charges as part of the cost. There is nothing on record to show how the assessee had worked out the value of ₹ 50/- per MT for the sub-grade Iron Ore. Addition made by the AO was not only on account of difference in valuation but also for difference in quantity. Learned CIT(A) deleted the whole of the disallowance except for enhancing the value of the sub-grade Iron Ore in stock from 50/- per MT to ₹ 80/- per MT. No reason has been given by him for enhancing the value and no finding has been given as to whether there indeed was any substandard stock. He has also not addressed the issue regarding difference in closing stock quantity, vis-à-vis what was returned by the assessee. In other words, learned CIT(A) in our opinion, has not properly adjudicated the issue regarding the addition made to the closing stock. We are therefore, of the opinion that the matter requires a fresh look by the CIT(A)
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