Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (10) TMI 1585 - AT - Income TaxNature of expenditure - Addition on account of capital expenditure being net present value paid to forest department - HELD THAT:- As payments to the Government are to be paid once the mining lease is obtained and such payments are governed by various Acts along with the Apex Court making a ruling for State Governments to participate in the granting of mining lease by recovering compensation when their forests are uprooted. Therefore for this purpose, the funds are used for a natural regeneration which the assessee participates indirectly. Therefore at no point of time could it be said that the assessee had incurred a capital expenditure giving the assessee a benefit of enduring nature for the purpose of earning segmented income to render the same to income tax - authorities below have not pointed out the income generated against the purported deferred revenue expenditure so proposed by them in their impugned orders - Decided in favour of assessee. Nature of expenses - compensatory afforestation expenses - revenue v/s capital expenditure - HELD THAT:- NPV to the forest department was paid on account of the judgment of the Apex Court. The lesser of the land for mining was not aware of the NPV payable to forest department at the time of obtaining the lease from the Government. It was paid on account of the judgment of the Apex Court during the pendency of the mining lease. But the amount paid under the head ‘compensatory afforestation expenses’ was known to the assessee at the time of leasing of the mining land. It is compulsory for each and every user of mining land to pay the afforestation expenses to forest department to compensate the use of forest land for mining towards regeneration of forest for diversion of forest to non-forest use. Since this payment is inextricably linked to the mining rights of the assessee, this payment is of capital nature and the lower authorities have rightly treated the same accordingly. We accordingly find no infirmity in the order of CIT(Appeals). Disallowance of lease rental payments - No documentary evidence to prove that crystallization was done in the impugned assessment year - HELD THAT:- No doubt lease rent is revenue expenditure and it should be debited to the account every year when it becomes due. The assessee was also asked to file some evidence in support of his contention that for certain reasons the lease rent was not paid and disputes were settled during the impugned assessment year. But no evidence was furnished on behalf of the assessee. Undisputedly lease rent is recurring expenditure and it should be paid every month. Since the assessee has been following mercantile system of accounting, the lease rental should be debited to its books of account in their respective years unless any dispute is raised. We therefore do not find any force in the contention of the assessee in the absence of any documentary evidence that crystallization was done in the impugned assessment year - CIT(Appeals) who has rightly disallowed the prior period expenses. Disallowance of provision for medical expenses - company is reimbursing the medical expenses based on the employees claim and liability against medical reimbursement accrues on submission of medical reimbursement claim by employees - HELD THAT:- Undisputedly, the payment of medical reimbursement was made on receipt of claim from the employees. The said payment can be made during the financial year. In the absence of claim, there is no ascertained liability which are to be discharged by the assessee. Therefore, we find ourselves in agreement with the order of CIT(Appeals) that liability itself is a contingent liability. Therefore the provision for contingent liability has to be disallowed. We therefore confirm the order of CIT(Appeals) as we find no error in it. Disallowance of leave travel allowance - HELD THAT:- As the claim of provision of leave travel allowance was also disallowed by the AO for the similar reasons as the payment of medical reimbursement. For the same reasons as discussed in the foregoing paragraphs, we find no infirmity in the order of CIT(Appeals) and we confirm the same. Disallowance of foreign travel expenses - Since the expenditure relating to new project on acquisition of mine is a capital expenditure and not incurred in connection with business carried on by the assessee - HELD THAT:- As we find that undisputedly the assessee has undertaken the foreign travel in connection with the purchase of mines at Thailand. The assessee claimed expenditure incurred thereon as revenue expenditure on the ground of expansion of old business, but no details in support of its claim were furnished. It is also not disputed that the assessee has purchased mines at Thailand, therefore expenditure incurred in acquiring capital asset has to be capital expenditure. The CIT(Appeals) has adjudicated the issue in detail in his order and we find no infirmity therein. Accordingly, we confirm his order. Nature of expenditure - Stamp duty for registration and processing fee of the mining lease was claimed to be revenue expenditure - HELD THAT:- We find that the lower authorities have adjudicated the issue following the judgment of Hon'ble jurisdictional High Court in the case of Hotel Rajmahal [1984 (3) TMI 24 - KARNATAKA HIGH COURT]. Since the lower authorities have decided the issue following the judgment of the Hon'ble jurisdictional High Court, we find no infirmity therein. Accordingly, we confirm the order of CIT(Appeals). Disallowance of mining lease rent - DR has contended that annual lease rent is fixed at the time of granting the licence for mining - HELD THAT:- No evidence has been placed on record to demonstrate that this liability was ever disputed by the assessee. Therefore, it is to be debited to the profit & loss account annually every year. We find no evidence on record that the liability was disputed in the earlier years and it is crystallized only in the impugned assessment year. Mere notice of demand does not demonstrate that liability was disputed in the earlier years and it is crystallized in the impugned assessment year. Therefore, we find no merit in the contentions of the assessee. Accordingly, we confirm the order of the CIT(Appeals), who has rightly disallowed the prior period expenses.
|