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2015 (6) TMI 36 - ITAT JABALPUR

2015 (6) TMI 36 - ITAT JABALPUR - TMI - Revision u/s 263 - assessee has claimed Overburden removal expenses (OBR) expenses as revenue nature u/s 37 (1) - Held that:- In the impugned revision proceedings, learned Commissioner started by pointing out that the AO did not realize that the matter was decided on the basis of accepting CoD verdict but the CoD itself has outlived its utility as was held by Hon’ble Supreme Court in the case of Electronics Corporation (2011 (2) TMI 3 - Supreme Court), but .....

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tirety of the case, we are of the considered view that the impugned revision order is contrary to the scheme of law, and should be quashed for this reason also.

The Assessing Officer has noted that “ it was also brought to notice of the department that departmental request for approval of the same [i.e. pursuing appeal against Overburden Removal Expenses being held to be deductible under section 37(1)] was rejected by the CoD”. It was in this backdrop and apparently with due deference .....

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possible, and desirable, view of the mater that the income tax authorities should stop making an issue of this deduction.

It is well settled in law, as held in the case of the Malabar Industrial Co Ltd Vs CIT [2000 (2) TMI 10 - SUPREME Court], that, “when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous orde .....

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unsustainable, in law and on facts, for more reasons than one - Decided in favour of assesse. - I.T.A. No. 97/Jab/2014 - Dated:- 5-5-2015 - I. C. Sudhir JM and Pramod Kumar AM,JJ. For the Appellant : C S Agarwal and H S Srivastava, Senior Advocates, along with Abhijeet Srivastava and Hemant Sidhwani For the Respondent : Abhishek Shukla along with Munmun Sharma ORDER Per Pramod Kumar AM: 1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 11th February .....

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station charges, under section 35E 2. Grievances raised by the assessee, calling into question correctness of the aforesaid revision order passed by the learned Commissioner, are as follows: 1) The Ld. Commissioner of Income Tax, Jabalpur passed the order under section 263 dated 11/02/2014 & set aside the Assessment order under section 143(3) dated 28/12/2011 & order under section 154 dated 26/07/2012 passed directing to the Assessing officer to complete the Assessment afresh in accordan .....

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law and on facts. 4) Because the order U/S 263 of the Ld. Commissioner was very injustice, to the appellant, unlawful, bad in law for void-ab-initio and liable to be quashed. 5) Because the order Under Section 263 of the Ld Commissioner was passed by ignoring the judgment of CIT Vs Leisure wear export Ltd (2010) 46 DTR (Del) 97 & Ramakant Singh Vs CIT (2011) 8 ITR Trb 403 (Pat.) 6) Because, the Ld. CIT erred in law and on facts in holding that ACIT has allowed the removal of overburden (OBR .....

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s they are prejudicial to the interest of revenue because the assessee has not claimed the same in ROI. In rectification Petition Assessee demanded appeal effect of A/Y 2004-05. For A/Y 2004-05, CIT(A) allowed the one time lease payment covered under section 35E. 8) Because, the order of the learned authorities below is arbitrary, unjust and vitiated in law as being based on assumptions suspicion, conjecture and surmises regarding the nature of overburden and its removal in rejecting the claim o .....

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) 134. After personally inspecting the actual working at site, The Cuttack Bench of the Tribunal in ITA 9/CTK/2012 Jitendra Nath Patnayak Vs JCIT Dated 14.03.2012 has also similarly held OBR as revenue expenditure. 3. Briefly stated, the relevant material facts are like this. In this case, the assessee had filed a return of income, disclosing taxable income of ₹ 3634,98,81,000, on 2nd September 2009. This return was picked up for scrutiny assessment during which the assessee was, inter ali .....

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this amount of ₹ 2,74,740.33 lakhs should be allowed for deduction. The Assessing Officer was of the view that it is of no use to make such addition in this case further so that repeated litigation can be avoided . During these assessment proceedings, the Assessing Officer first allowed a deduction of ₹ 950.82 lakhs under section 35 D in respect of onetime payment of lease rent and afforestation charges, as against the deduction of ₹ 1074.24 lakhs claimed by the assessee, but s .....

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43(3), as also the rectification order dated 26th July 2012 passed under section 154 r.w.s. 143(3), not be subjected to the revision proceedings, by stating as follows: I have examined the case records of proceedings under section 263 of the Income Tax Act, for the assessment year 2009-10 in your case. It is observed, after examination of records, as under: 1) That assessee has claimed OBR expenses as revenue nature u/s 37 (1) of the Act. 2) The Assessing Officer, in his assessment order for sai .....

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ssessing Officer is erroneous in so far as it is prejudicial to the interest of revenue. 4) The amortization charges allowed at ₹ 1074.24 lakhs by the Assessing Officer vide order u/s 154 dated 26/07/2012 instead of ₹ 950.82 lakhs, claimed by the assessee which renders the assessment and consequential rectification u/s 154 is erroneous in so far as it is prejudicial to the interest of revenue. 5) I, accordingly propose to revise the above said order in accordance with section 263 of .....

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n the nature of revenue expenses was reiterated. It was also submitted that all the requisite details were duly furnished at the assessment stage, and, as such, following Hon ble Delhi High Court s judgment in the case of CIT Vs Leisure Wear Export Limited [(2012) 341 ITR 166 (Del)] where the assessment order has been passed by the AO after taking into account assessee s submissions and documents furnished by him, and no material is brought on record by the CIT which shows that there was any dis .....

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ribunal) 403]. Learned Commissioner was thus urged to drop the revision proceedings. 7. None of these submissions, however, impressed the learned Commissioner. She was of the view that the appeals filed by the income tax department for the assessment years 1995-96, 1996-97 and 1997-98 were dismissed by the Tribunal for want of clearance by the CoD [Committee on Disputes, Cabinet Secretariat- as set up in pursuance of Hon ble Supreme Court s directions in the case of Oil & Natural Gas Commiss .....

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ot decided the appeals on merits of the case but simply dismissed the appeals for want of C.O.D. approval and that since the law regarding the COD has been re-called by Hon'ble Apex Court, the reasons for dismissing the appeals, i.e. non-approval of COD, stands ineffective . It was noted that the matter was pending before the Hon'ble High Court. Learned Commissioner further observed that the AO was not justified in allowing the OBR expenses as revenue expenses, without making any enquiry .....

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she was of the considered opinion that the assessment order passed by the Assessing Officer on the issue of Over Burden Removal is erroneous in so far as it is prejudicial to the interest of revenue . Learned Commissioner further observed as follows: 5.2 The contention of the assessee has been considered. Sufficient material is brought on record by this revision order in the above paragraphs which shows that there were glaring discrepancies in the orders of the AO. Further, in the instant case, .....

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2011, in the case of M/s Babjee Builders Engineers & Contractors wherein it was held that failure to conduct inquiry by itself attracts action u/s 263. Reliance in this regard is further placed in the judgment of Malabar Company 243 ITR 83 (SC), in which it was held that the order shall be subject to action u/s 263, if it is erroneous in so far as it is prejudicial to the interest of revenue. The phrase 'prejudicial to the interest of revenue' as well as 'erroneous' has been .....

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he assessee is not acceptable since the instant revision under section 263 is not based on any change of opinion. Hard facts have been brought on records in the instant revision to show that the A.O. has completely failed to appreciate the correct set of facts & legal position but also failed to make an enquiry, thus, rending the assessment order erroneous and prejudicial to revenue. Reliance is also placed on the judgment of Hon'ble HIGH COURT OF HIMACHAL PRADESH in the case of Commissi .....

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its ordinary meaning is of wide import and not confined to the loss of tax alone. If due to an erroneous order of the Assessing Officer, the revenue is loosing tax lawfully payable by a person, it should be certainly prejudicial to the interest of the revenue. 5.6 Hence this contention of the assessee company is not acceptable. 8. With these observations, she finally concluded as follows: Taking into consideration the entire facts and circumstances of the case and the legal position as discussed .....

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visions of section 263 of the Income Tax Act, 1961, hereby set aside both the orders in question for the assessment year 2009-10. The Assessing Officer is directed to complete the assessment afresh in accordance with law, keeping in view the observations made above and after affording reasonable opportunity of being heard to the assessee. 9. The assessee is aggrieved of the order so passed by the learned Commissioner and is in appeal before us. 10. We have heard the rival contentions, perused th .....

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t the decisions of the CIT(A), in confirming the stand of the Assessing Officer, has not only consciously disregarded of the stand taken by the coordinate benches of this Tribunal but he has also held these decisions to be incorrect. He has himself stated, in so many words, that he would rather respectfully disagree with the stand of the Tribunal than to follow these decisions. The binding nature of the decisions of the judicial forums is not dependent on the seal of approval by the lower judici .....

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him; all he, as a judicial authority, was expected to do was to loyally follow the views taken by the higher judicial forum. In this regard, we may only refer to the following observations made by Hon'ble Supreme Court in the case of Assistant Collector of Central Excise vs. Dunlop India Ltd. [(1985) 154 ITR 172 (SC)], where the Hon'ble Supreme Court itself has quoted from the decision of House of Lords as under: "We desire to add and as was said in Cassell & Co. Ltd. vs. Broom .....

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the judicial system only works if someone is allowed to have the last word, and that last word, once spoken, is loyally accepted. "...The better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the hierarchical judicial system." 14. We wish and hope that the learned CIT(A) takes note of these observations of the highest judicial forum, which binds all us under Article 141 of the Constitution of India, and, to quote the oft quoted wo .....

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e visuals in the paper book filed by the Assessing Officer, as also the benefit of presentations by the assessee on this aspect, in addition to, whatever its worth, our own research on this process. 17. Open cast coal mining, in sharp contrast with underground mining or, for that purpose, any extractive method requiring tunnelling into the earth, is a method whereby coal is extracted from an open pit after removal of the overburden i.e. surface material covering the coal. This surface material c .....

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here could be unrelated layers of soil or rocks which are required to be removed before one can reach the second or third coal seam, and because the same coal seam may be at different levels below the surface as it need not be parallel to the surface level all along. These aspects could be appreciated with the help of following diagrams: (This diagram, as shown by the appellant during the hearing, shows different coal seams and intervening layers of overburden which are required to be removed be .....

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coal and that in any given unit, the condition of removing overburden first, before extraction of coal, shall always remain unaltered, and, unless the coal is exposed, profit earning process cannot be said to have taken place . Learned Commissioner has upheld this action by observing that The appellant is having 11 projects of coal mining, which are contiguous to one another and that Therefore, the OBR in project, being contiguous to others, cannot be treated as revenue merely because the proce .....

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ure. The CIT(A) also follows the same path as he assumes that once coal seam is reached at a particular place, the overburden removal could only take place at a contiguous place in that site or, what he terms as, a contiguous project. 20. However, this fundamental factual assumption seems to be incorrect because, as the preceding discussions show, there are layers of material such as rocks and soil, between the two or more coal seams at the same place, which are required to be removed before coa .....

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extraction starts, and this approach is implicit in the accounting policy which treats the overburden removal expenses, till the point of time a mine is a development mine and the regular coal extraction on commercial basis has not yet started, as a capital expenditure. 21. The basis on which a mine is classified as a development mine or as a revenue mine has been consistent all along and has been accepted by the income tax department not only in assessment of this assessee but also in the asses .....

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(a) achieving 25% rated capacity of mine; (b) two years from the point of time of reaching the coal seam; and (c) the area becoming profit earning i.e. sale minus - entire expenditure on OBR and other expenses. This is a standard practice adopted all along and has been accepted as such. There is no good reason to disturb the well settled factual aspect which permeates from year to year and which has reached finality. It is indeed true that the principles of res judicata do not apply to the inco .....

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e absence of any change in the circumstances, the Revenue should have felt bound by the previous decisions and no attempt should have been made to reopen the question. He relied upon some authorities in support of his stand. A Full Bench of the Madras High Court considered this question in T.M.M. Sankaralinga Nadar & Bros. vs. CIT (1929) 4 ITC226. After dealing with the contention, the Full Bench expressed the following opinion : "The principle to be deducted from these two cases is tha .....

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rred to by the Full Bench was the case of Hoystead vs. Commissioner of Taxation (1926) AC 155 (PC). Speaking for the Judicial Committee, Lord Shaw stated : "Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions as to what should be a proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted litigation would have .....

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bsequent light or ingenuity might suggest some traverse which had not been taken." These observations were made in a case where taxation was in issue. This Court in Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC) stated : "At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must i .....

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case being very special, nothing should be said in a manner which would have general application. We are inclined to accept this submission and would like to state in clear terms that the decision is confined to the facts of the case and may not be treated as an authority on aspects which have been decided, (coma suppli ed by us) for general application . The stand of the revenue authorities is that the principle of consistency, which have been highlighted above, are not for general application .....

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as clearly specified in the document and accepting the stand of the Revenue that exemption under s. 11 was subject to the provisions of ss. 60 to 63 of the Act and on the finding that the trust was revocable . Their Lordships held that, on the peculiar facts of this case, it would not really matter whether the trust was revocable or not inasmuch as, to quote the words of Their Lordships, even if the trust was revocable, the property was not to go back to the Satguru on revocation . Quite clearl .....

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xemption under section 11 and 12 will nevertheless be applicable. What has been decided in this case is the admissibility of tax exemption in the case of revocability of trust but then, as Their Lordships stated in so many words, this decision is confined to the facts of this case and is not of general application. 24. To construe this observation as diluting the general principles of consistency, as succinctly summarized by Their Lordships, is wholly fallacious. This observation is in the conte .....

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ere is, thus, no merit in the stand of the revenue that the observations made by Hon ble Supreme Court, in the context of principles of consistency and in the case of Radhasoam Satsang (supra), cannot be construed to be of general application. 26. We have also noted that while the Assessing Officer and the CIT(A) have impliedly held that a mine cannot be treated as revenue mine even after reaching 25% of rated capacity, even after two years from the point of time of touching the coal seam or eve .....

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coal from the lower seams, such expenditure will still be treated as capital expenditure. That is clearly an incongruous position and not sustainable in law. In the case of Kirkend Coal Co (supra), Hon ble Supreme Court had an occasion to adjudicate on the question as to whether or not the expenses incurred on stowing operations are capital expenses or revenue expenses. Their Lordships noted that there is a factual finding that this expenditure has been treated as revenue expenditure as "st .....

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uired to be treated as revenue expenses. Reverting to the facts of this case in this light, we find that once a mine has been treated as a revenue mine, the coal mining is clearly in progress because at least one of the three criterions has been met, i.e. reaching the coal seam over two years ago, production having reached 25% of the rated capacity or the coal extraction revenue exceeding the expenses incurred, including the overburden removal expenses. In such circumstances, clearly that coal e .....

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scope of Section 35 E. The Assessing Officer has observed that, with due deference to Hon ble ITAT judgments, it is stated that the relevance of the OBR expenses can be examined in connection with section 35E which has neither been pleaded nor considered by Hon ble bench and the CIT(A) has stated that Section 35E of the Act was introduced to deal with amortisation of expenditure on prospecting and developing of certain minerals and the very purpose of this section was to address the treatment to .....

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e and scope of Section 35 E and examine its applicability on the facts of this case. 29. Section 35 E of the Act, which was introduced by the Taxation Laws (Amendment) Act 1970 and with effect from 1st April 1971 and was amended by the Finance Act 1999 w.e.f. 1st April 2000, provides as follows: 35 E- Deduction for expenditure on prospecting, etc., for certain minerals. (1) Where an assessee, being an Indian company or a person (other than a company) who is resident in India, is engaged in any o .....

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fied in that sub-section at any time during the year of commercial production and any one or more of the four years immediately preceding that year, wholly and exclusively on any operations relating to prospecting for any mineral or group of associated minerals specified in Part A or Part B, respectively, of the Seventh Schedule or on the development of a mine or other natural deposit of any such mineral or group of associated minerals: Provided that there shall be excluded from such expenditure .....

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neral or group of associated minerals or of any rights in or over such deposits; or (iii) of a capital nature in respect of any building, machinery, plant or furniture for which allowance by way of depreciation is admissible under section 32, shall not be deemed to be expenditure incurred by the assessee for any of the purposes specified in sub-section (2). (4) The deduction to be allowed under sub-section (1) for any relevant previous year shall be- (a) an amount equal to one-tenth of the expen .....

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ore of the minerals in a group of associated minerals as aforesaid in respect of which the expenditure was incurred, whichever amount is less: Provided that the amount of the instalment relating to any relevant previous year, to the extent to which it remains unallowed, shall be carried forward and added to the instalment relating to the previous year next following and deemed to be part of that instalment, and so on, for succeeding previous years, so, however, that no part of any instalment sha .....

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pecting, commercial production of any mineral or any one or more of the minerals in a group of associated minerals specified in Part A or Part B, respectively, of the Seventh Schedule, commences; (c) "relevant previous years" means the ten previous years beginning with the year of commercial production. (6) Where the assessee is a person other than a company or a co-operative society, no deduction shall be admissible under sub-section (1) unless the accounts of the assessee for the yea .....

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company which is entitled to the deduction under sub-section (1) is transferred, before the expiry of the period of ten years specified in sub-section (1), to another Indian company in a scheme of amalgamation- (i) no deduction shall be admissible under sub-section (1) in the case of the amalgamating company for the previous year in which the amalgamation takes place; and (ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to .....

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ction shall, as far as may be, apply to the resulting company as they would have applied to the demerged company, if the demerger had not taken place. (8) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure specified in sub-section (2), the expenditure in respect of which is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other assessment year 30. A plain reading of this section rev .....

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the matter. 31. Section 35E (2), so far as relevant for our adjudication, provides that (a) the expenses should be incurred, after 31st March 1970, during the year of commercial production and any one or more of the four years immediately preceding that year; and (b) the expenses should be incurred wholly and exclusively on (i) any operations relating to prospecting for any mineral or group of associated minerals specified in Part A or Part B, respectively, of the Seventh Schedule; or (ii) on t .....

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lhi High Court in the case of CIT Vs ACC Rio Tinto Exploration Limited [(2010) 321 ITR 426 (Del). Their Lordships had, in this context, inter alia, observed that, Upon a plain reading of the said provisions of s. 35E, it is apparent that unless and until there is commercial production, the provisions of s. 35E (1) would be unworkable . This is equally applicable in the case of mine development as well, inasmuch it has no application in the years after the year in which commercial production star .....

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f mine development was to be given even in the years subsequent to the year in which commercial production has given, the year of commercial production would not have any relevance. As far as the fact situation that we are dealing with is concerned, it is an undisputed position that commercial production has begun in all the mines and, for this reason alone, Section 35 E would not have any application on the facts of this case. 33. As regards the limitation placed in Section 35E (8), in our humb .....

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on 35 E and the limitation under section 35E (8) has thus come into play. In any event, section 35E (8) is clearly intended to avoid a double deduction rather than restrict an otherwise admissible deduction. It is only elementary that expenditure incurred by an assessee before commencement of his business is normally not deductible, and that, in the case of units engaged in production or extraction of any minerals etc, the business cannot ordinarily be deemed to have commenced unless the commerc .....

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aws parity with Section 35D. Section 35D, as a plain reading of the section would show, comes into play in respect of eligible expenditure incurred by the assessee (i) before the commencement of his business, or (ii) after the commencement of his business in connection with the extension of his undertaking or in connection with his setting up a new unit which, as is the settled legal position, inadmissible for deduction as revenue expenses. This also indicates that Section 35 E belongs to the sa .....

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ar of incurring the expenditure. What was meant to be a concession and what was intended to confer a benefit to the assessee, if such an approach is adopted, will end up becoming a disincentive and burden to the assessee. Section 35 E, as can be seen in the stand taken by the Central Board of Direct Taxes vide circular no. 76 dated 19th March 1971, was meant to be a benefit and not a restriction on the deductions available to the assessee . While introducing this Section, the Central Board Direc .....

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dule inserted by s. 58 of the Amending Act. 49. As in the case of preliminary expenses, amortisation in respect of expenditure on prospecting for, and development of, the specified minerals, will also be allowed only in the case of Indian companies and resident assessees other than companies. The benefit of amortisation (emphasis by underlining supplied by us) will not be available to a foreign company even if such company declares its dividends in India, and regardless of the pattern of its sha .....

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ration relating to prospecting" comprises operation undertaken for the purpose of exploring, locating or proving deposits of any mineral and in particular includes any such operation which turns out to be infructuous or abortive. Where the expenditure on prospecting for, or development of, the specified minerals is wholly or partly met directly or indirectly by any other person or authority, the amortisation will be admissible only in respect of the balance, if any, of such expenditure. Fur .....

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ion of the site of the source of any of the specified minerals or groups of associated minerals or of any rights in or over such site. (2) Expenditure on the acquisition of the deposits of any of the specified minerals or groups of associated minerals or of any rights in or over suc h deposits. (3) Expenditure of a capital nature in respect of any building, machinery, plant or furniture for which allowance by way of depreciation is admissible under s. 32. 52. The amortisation of the qualifying e .....

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, the amortisation will not be allowable against any other income of the assessee. Accordingly, it has been specifically provided that where the instalment of amortisable expenditure relating to a given year cannot be wholly absorbed by the profit against which the amortisation is to be allowed, the unabsorbed amount shall be carried over to the subsequent year and added to that year's instalments and so on for succeeding previous years. Such carry over will be allowed only up to and includi .....

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is incurred have been audited by a chartered accountant or other person as s tated in paragraph 46 and also subject to the requirement that the assessee furnishes along with his return of income for the first year in which the amortisation is claimed, the report of such audit in a form to be prescribed for the purpose, duly signed and verified by the chartered accountant or other person setting forth such particulars as may be prescribed. 54. The amortisation under s. 35E is also available only .....

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year period will be allowed to the amalgamated company and not to the amalgamating company. 55. As under s. 35D, it has been specifically provided in s. 35E (8) that where deduction under s. 35E is claimed and allowed for any assessment year in respect of any expenditure qualifying for amortisation, the expenditure in respect of which the deduction is so allowed shall not qualify for deduction under any other provision of the Act for the same or any other assessment year. (Emphasis, by underlini .....

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n enough to decline the deduction under section 37 (1). Of course, it is besides the fact that once the commercial production had commenced in the respective mines, there was no occasion to invoke the provisions of Section 35 E in respect of any expenditure incurred in the years after the year of commercial production. 36. It has also been the stand of the revenue that judicial precedents, by the co - ordinate benches, in the earlier assessment years cannot be good law because even though the re .....

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urts above, as subsequently held by a five judge bench of Hon ble Supreme Court in the case of E lectronics Corporation of India Limited Vs Union of India [(2011) 332 ITR 58 (SC)], these judicial precedents cannot be said to be good in law. Learned senior counsel for the assessee, on the other hand, submits that these were the cases in which the permission for challenging the decisions of the coordinate benches were declined by the Committee on Disputes. He submits that the permission not being .....

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ot be revisited now. It is also pointed out that, whether the tax administration takes up the matter in further appeals before the Hon ble Courts above or not, the decisions of this Tribunal, unless reversed by higher tiers in the judicial hierarchy, continue to bind the tax authorities. The binding nature of the decisions of this Tribunal, according to the learned counsel, is not dependent on the acceptance of these decisions by the tax administration. There are well considered decisions of the .....

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ctor undertakings of the Government of India as also the various organs of the Government of India, of obtaining a prior clearance of the Committee on Disputes before pursuing intra Government litigation before the Courts and Tribunals. In this judgment, Their Lordships have, inter alia, observed as follows: ……………..The idea behind setting up of this Committee, initially, called a "High-Powered Committee" (HPC), later on called as "Committee of Se .....

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le and the object behind the aforestated orders is unexceptionable and laudatory, experience has shown that despite best efforts of the CoD, the mechanism has not achieved the results for which it was constituted and has in fact led to delays in litigation. We have already given two examples hereinabove. They indicate that on same set of facts, clearance is given in one case and refused in the other. This has led a PSU to institute a SLP in this Court on the ground of discrimination. We need not .....

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. Stakes in such cases are huge. One cannot possibly expect timely clearance by CoD. In such cases, grant of clearance to one and not to the other may result in generation of more and more litigation. The mechanism has outlived its utility. In the changed scenario indicated above, we are of the view that time has come under the above circumstances to recall the directions of this Court in its various orders reported as (i) 1995 Supp (4) SCC 541 dt. 11th Oct., 1991 (supra) (ii) (2004) 6 SCC 437 d .....

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arance, the proceedings would not be proceeded with . In the subsequent directions, referred to in this judgments, there were other procedural and peripheral issues with respect to these basic directions. Clearly, therefore, all that has changed, so far as this legal development is concerned, is that the Courts and Tribunals will not demand clearance of the CoD before proceedings with inter se litigation between the Government entities. That does not, however, mean, as rightly pointed out by the .....

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Courts or the Tribunals, as the case may be, these appeals and petitions can be pursed now notwithstanding the specific directions of the Government not to pursue the matter. Be that as it may, so far as the issue before us is concerned, it does not really matter whether the permission was not granted or permission was specifically declined and, for that reason, we need not go any further into the related facts, because a judicial ruling s binding nature remains unaffected by these administrativ .....

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our approval. 39. One of the argument before us was that a mine covers a huge area and merely because coal extraction is on, even on commercial basis, in a particular small area within this mine should not be construed to mean that overburden removal expenses from all over the mine area could be treated as revenue expenditure. 40. We are unable to find any legally sustainable merits in this objection either. The criterion on the basis which call is taken as to be whether a mine can be treated as .....

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have neither suggested any alternative criterion, which will be appropriate on the facts of this case, nor have they have demonstrated that the facts implicit in their stand actually exist. As a matter of fact, the apprehensions of the Assessing Officer seem to be purely hypothetical and in the realm of conjectures and surmises inasmuch as not one instance is shown in which the overburden removal expenses, booked in the accounts as revenue expenditure, actually pertain to removal of overburden o .....

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ses as we have discussed earlier, that a part of the overburden removal expenses is admittedly revenue expenditure, but if we have to uphold the stand of the authorities below, entire overburden removal expenses is required to be treated as capital expenditure eligible only for amortization under section 35D. In any case, there is nothing on record to establish, or even suggest, that expenses incurred on removal of overburden at the surface level, which were capital expenditure in nature, have b .....

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ifficult to understand, much less approve, the line of reasoning adopted by the authorities below. The expenditure of ₹ 1,234.20 lakhs was incurred in assessment year 20004-05 but then what is being claimed now is only 1/10th of the said expenditure amortized under section 35E. The deduction under section 35E, by no stretch of logic, is dependent on the expenses having been incurred in the relevant previous year. Learned CIT(A) was completely at sea in mixing up the deduction under section .....

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ization of eligible expenditure which was originally incurred in the assessment year 2004-05. Merely because the expense was originally incurred in the previous year relevant to the assessment year 2004-05, as long as it is otherwise eligible for amortization under section 35E, the deduction under section 35E to the amount so amortized cannot be declined. 53. In view of the above discussions, as also bearing in mind entirety of the case, we see no legally sustainable merits in the impugned disal .....

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enue deduction under section 37(1). Nothing, therefore, really turns on the amortized expenditure being capital in nature. It was not the issue before the Tribunal as to whether the expenses in question could be amortized under section 35E, which was the issue before the AO in this case, and, therefore, this Tribunal decision could not have had any impact on the issue. 13. When there are decisions of the coordinate benches, on both of these issues and in favour of the assessee, the order of the .....

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ent rectification, is made in haste, without making necessary enquiries warranted and also not appreciating the correct set of facts as discussed above . However, while holding so, learned Commissioner has not realized that the assessee was never put to notice about learned Commissioner s opinion that the impugned assessment was made in haste and without making necessary enquiries, and, as such, it was not open for her to revise the assessment order on that issue. No doubt, as held by Hon ble De .....

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r inquiry and it is not that the each and everything coming up before the Assessing Officer must be subjected to thorough and detailed inquiry. As Hon ble Delhi High Court has observed in the case of the Gee Vee Enterprises (supra), It is his (AO s) duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry (emphasis by underlining supplied by us) . There is nothing on the facts of this case which should necessarily provoke .....

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evision as well. A co-ordinate bench of this Tribunal, in the case of Synergy Entrepreneur Solutions Pvt Ltd Vs DCIT [(2011) 13 ITR Tribunal 377 (Mum)], had an occasion to deal with a somewhat similar situation. That case a case in which in the show cause notice, learned Commissioner held that the loss brought forward could not be set off against profits of the current year, but when the Commissioner was to pass the final revision order, he simply held that the matter is required to be examined .....

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ns drawn in the revision proceedings are different from the reasons for revision proceedings set out in the show-cause notice-extracts from which are set out in the revision order itself. It is important to note the shifting stand of the CIT so far as reasons for subjecting the as sessment order to revision proceedings. At p. 1, in fifth sentence of the impugned revision order, learned CIT notes that that "on perusal of assessment record, it was noticed that assessment order was erroneous i .....

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in as much as show-cause notice states that "as per the provisions of s. 73 of the IT Act, any loss computed in respect of speculation business carried on by the assessee shall not be set off except against profits and gains of another speculation business", and, "therefore you (the assessee) are not allowed to adjust the speculation loss". The showcause notice, therefore, clearly refers to declining what the CIT perceives as a set off of speculation loss against business pr .....

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profits or loss, the assessment order is set aside with a direction to obtain complete details and conduct necessary enquiries and examine the same for the assessment year under consideration. The AO shall provide adequate opportunity to the assessee before passing the assessment order." 5. It is thus clear that there has been shift in the stand of the CIT on whether it was a fit case for revision on the ground that the assessee was not eligible for set off of losses on speculative transac .....

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f a Co-ordinate Bench in the case of Maxpak Investment Ltd. vs. Asstt. CIT (2006) 104 TTJ (Del) 881 : (2007) 13 SOT 67 (Del) which, inter alia, observes as follows: "………….In CIT vs. G.K. Kabra (1995) 125 CTR (AP) 55 : (1995) 211 ITR 336 (AP) the Andhra Pradesh High Court was dealing with an application seeking reference under s. 256(2), inter alia of the following question : Whether, on the facts and in the circumstances of the case, the Tribunal was correct in h .....

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. In other words, it is necessary for the Commissioner to point out the exact error in the order which he proposes to revise so that the assessee would have an adequate opportunity of meeting the error before the final order is made. (Emphasis, italicsed in print, supplied) In the case before the High Court, the show-cause notice referred to two issues to which the assessee had given satisfactory replies. No action was taken under s. 263 in respect of these two issues. However, in the said order .....

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phasis, italicsed in print, supplied) 10. The ratio of the decision, clear from the above observation, is that if a ground of revision is not mentioned in the show-cause notice issued under s. 263, that ground cannot be made the basis of the order passed under the section, for the simple reason that the assessee would have had no opportunity to meet the point. ……… ……. 11. The other judgment which supports the case of the assessee is that of the Punjab & Har .....

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oned in the deed of partnership. The Tribunal set aside the order of the CIT but while doing so observed that there was a change in the number of partners from 10 to 11 which fact had not been taken into account by the AO when he granted registration for the firm for the asst. yr. 1966-67 and thus the grant of registration was erroneous. On the basis of this observation it was argued before the High Court on behalf of the Revenue that the Tribunal ought to have sustained the order of the CIT on .....

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er hearing the assessee in pursuance of the notice issued by him under s. 263(1) of the Act, he is not satisfied, he may pass the necessary orders. Of course, the order thus passed will contain the grounds for holding the order of the ITO to be erroneous, as contemplated under s. 263(1) of the Act. . . . The Tribunal cannot uphold the order of the CIT on any other ground which, in its opinion, was available to the CIT as well. If the Tribunal is allowed to find out the ground available to the CI .....

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ers thereunder in accordance with law. If the grounds which were available to him at the time of the passing of the order do not find a mention in his order appealed against, then it will be deemed that he rejected those grounds for the purpose of any action under s. 263(1) of the Act. In this situation, the Tribunal, while hearing an appeal filed by the assessee, cannot substitute the grounds which the CIT himself did not think proper to form the basis of his order. We respectfully understand t .....

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the order passed by the AO was erroneous insofar as it is prejudicial to the interests of the Revenue. …………………." 15. We are in considered agreement with the views so expressed by the coordinate benches and we adopt these views. When we examine the facts of this case in the light of the legal position so set out, we find that in the impugned revision proceedings, learned Commissioner started by pointing out that the AO did not realize that th .....

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is altogether a different reason from a claim having been allowed on the basis of CoD decision which is no longer legally valid. In view of the above discussions, as also bearing in mind entirety of the case, we are of the considered view that the impugned revision order is contrary to the scheme of law, and should be quashed for this reason also. 16. There is, however, one more reason on account of which the impugned revision order must be quashed. 17. The reason is this. The Assessing Officer .....

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p in the Cabinet Secretariat under directions of Hon ble Supreme Court, decides that admissibility of deduction in respect of overburden removal expenses need not be carried to the judicial forums and the income tax department should not agitate its grievance against its admissibility, it is certainly a possible, and desirable, view of the mater that the income tax authorities should stop making an issue of this deduction. In our considered view, the requirement of CoD clearance has been now dis .....

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nd clearance of the CoD before proceedings with inter se litigation between the Government entities. That does not, however, mean, as rightly pointed out by the learned counsel, that in the cases in which the CoD was of the considered view that the inter se litigation between the Government entities should not be pursued, that decisions has no effect on the parties before the CoD. In our considered view, Hon ble Supreme Court s decision in the case of Electronics Corporation of India Ltd (supra) .....

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s. The Committee on Disputes is a high powered committee in the Government and its decisions, as is our considered view, bind the Government entities. It cannot be open, in our opinion, to the Central Board of Direct Taxes to say that it can disregard the views of a committee set up as part of the Cabinet Secretariat. 17. Viewed thus, even after Hon ble Supreme Court s decision in the case of Electronics Corporation (supra), where Committee on Disputes in the Cabinet Secretariat has taken a cons .....

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