TMI Blog2008 (9) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 3,00,52,260 was filed on22nd Oct., 2001. The assessee is engaged in the business of prospecting and exploring ores and minerals. In this year, the assessee company changed its accounting policy in respect of expenditure incurred on its activities. Such expenditure was being capitalized earlier, but in this year the expenditure was charged to P L a/c. It was explained that the assessee is engaged in exploring and prospecting of ores and minerals, but was not engaged in mining thereof. All the projects were at initial stages and it could not be said that ores and minerals will definitely be found. In other words, none of the projects had reached the stage of commercial exploitation. Therefore, the company decided to change the accountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the assessee is not engaged in the mining activities, but only in prospecting and exploring activities which were high risk activities with long gestation period. The whole of the expenditure is funded from the capital provided by the parent company. With this money the assessee company runs various exploration programmes in various parts ofIndia. Substantial expenditure has been incurred on the projects. Since the business of the assessee is of prospecting and exploring ores and minerals, the business has already commenced and this fact has not been challenged by the Revenue in past. The reasons for change in the accounting policy made by the assessee, submitted before the AO, were reiterated. It was further pointed out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-(i) it results in preparation of more appropriate financial statements or their presentation; (ii) facilitate true and fair representation of state of affairs of the business; (iii) it has been followed consistently in subsequent years. Applying these tests, she came to the conclusion that these tests are satisfied and, therefore, it was held that the assessee was justified in changing its accounting policy. 3. Before us, the learned Departmental Representative referred to the findings of the AO and the learned CIT(A). It was argued that the change was not bona fide as it was primarily undertaken to frustrate the provisions contained in s. 35E of the Act. In reply, the case of the learned counsel was that the assessee was not engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials including but not limited to gold, silver, diamonds, precious stones, and other stones, aluminium, titanium, iron ore, coal, mica, apalite, chrome, copper, gypsum, lead, manganese, molybdenum, nickel, platinum, uranium, rutile, sulphur, tin, zinc, zircon, bauxite, tungsten, sands, stones, soils, chalk, clay, china-clay, bentonite, boryles, calcite, lignite, rockphosphate, brimstone, brine vanadium, sulphate and other base and precious materials and to hold prospecting licenses and any other licenses required for the abovementioned activities and to sell or otherwise transfer any of these licenses and all related data, information and technology and physical assets. 2. To act as consultants/advisors, experts and technical collabo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmenced. This conclusion gets further strength from the approval of the Government of India, which abundantly makes it clear that the approval is granted only for prospecting and for actual mining the company will have to seek further approval of the FIPB/Government. It was clarified by the learned counsel that no further approval has been taken by the assessee from FIPB/Government for carrying out mining activities. Thus, the main stay of the case of the AO does not exist, which was to the effect that the assessee has not commenced business and, therefore, the expenses cannot be charged to P L a/c. Coming to the provision contained in s. 35E, sub-s. (2) provides that the expenditure referred to in sub-s. (1) is that incurred by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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