Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (7) TMI 734 - ITAT VISAKHAPATNAMExpenditure incurred under the head land reclamation and afforestation - leased land - Held that:- The assessee by following the mercantile system of accounting has made a provisions for the expenditure to be incurred on land reclamation and afforestation on reasonable estimate basis. It is also an admitted fact that the assessee has incurred the said expenditure on every year in a systematic manner. As per the terms of lease agreement and also terms of conditions of the Government of India environment clearance letter, the assessee require to restore surface land used by it for excavating the minerals by refilling the land and make it suitable for agricultural operations. As soon as the assessee has dug the pits, he is duty bound under the contract to fill those pits before restoring the leased land to the farmers in its original shape. The moment assessee digs pits, a liability arises and he is entitled to deduction for the expenses which he is supposed to incur for filling those pits when the assessee is following a mercantile system of accounting. Therefore, we are of the view that the A.O. was not correct in holding that the expenditure claimed by the assessee under the head land reclamation and afforestation is not an allowable deduction. Considering the facts and circumstances of the case and also respectively following the decision of High Court of Rajasthan, in the case of Udaipur Mineral Development Syndicate (P) Ltd vs. DCIT (2002 (8) TMI 26 - RAJASTHAN High Court) we are of the view that the assessee is eligible for deduction towards land reclamation and afforestation expenses on accrual basis, whether or not, said expenditure is paid during the relevant financial year. The assessee has made a provision in the books of accounts based on the terms of lease agreement and also conditions stipulated by the Ministry of Forest & Ecology, Government of India on reasonable estimate basis. It is also an admitted fact that the assessee has continuously incurred the above expenditure towards the rehabilitation and reclamation programme. Therefore, we direct the A.O. to delete the additions made towards land reclamation and afforestation expenditure. - Decided in favour of assessee
|