New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (7) TMI 734 - ITAT VISAKHAPATNAM

2016 (7) TMI 734 - ITAT VISAKHAPATNAM - TMI - Expenditure 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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) L .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 - I.T.A.No.621/Vizag/2014 - Dated:- 10-6-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant by : Shri V. Sesha Giri Vara Prasad, AR For The Respondent : Shri M.N. Murthy Naik,D .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

The return of income was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called as the Act ). Subsequently, the case has been selected for scrutiny and accordingly, notices u/s 143(2) and 142(1) of the Act were issued. In response to notices, the authorized representative of the assessee appeared from time to time and furnished books of accounts, bills vouchers and other documents. During the course of assessment proceedings, the A.O. noticed that the assessee has claimed an amount .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ss of mining has taken 206 acres of land on lease situated in Belgundi Village of Belgaum district of Karnataka state from various farmers for a period of 20 years. As per the agreement entered into with the farmers, the land used for mining should be refilled and handed over back to the farmers for the purpose of agricultural operations. Therefore, he had made adequate provisions in the books of accounts to meet the expenditure towards land filling and other charges on reasonable estimate based .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee held that the expenditure incurred by the assessee under the head land reclamation and afforestation has no proximity/nexus with the business operations of the assessee. Afforestation is the process of establishing a forest on land that is not a forest, or has not been a forest for a long time by planting trees or their seeds. Reclamation is a process of reclaiming or regaining. The assessee has coined the name in such a way that it suits to the permissible modes of expenditure, but actu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts have held that the development expenses including prospecting and boring expenses on a mine land cannot be allowed to be amortized because such expenses are of capital nature. With these observations disallowed the expenditure claimed by the assessee under the head land reclamation and afforestation and added back to the total income of the assessee. 4. Aggrieved by the assessment order the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tal clearance letter issued by the Ministry of Environment and Forest, Government of India, the assessee needs to undertake a reclamation programme of the 30.53 Hectares of mined out area and the land used for mining should be refilled. As per the permission granted by the Government of India, the assessee should top soil with adequate measures at earmarked site and also it should be used for reclamation and rehabilitation of the mined out areas. The assessee further submitted that since he is f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g that the expenditure incurred by the assessee is in the nature of capital expenditure, though the assessee categorically proved that the expenditure is incurred towards earning of the income and hence it should be allowed as revenue expenditure. 5. The CIT(A) after considering the explanations furnished by the assessee, held that from the perusal of the environment clearance letter it is evident that the assessee is required to incur certain expenditure towards land reclamation and afforestati .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

evidence to show that any land reclamation or afforestation expenses were incurred during the subject year in relation thereto. With these observations confirmed the additions made by the A.O. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 6. The Ld. A.R. for the assessee submitted that the Ld. CIT(A) erred in confirming the disallowance of ₹ 49,14,000/-, though assessee proved that the said expenditure is incurred in relation to earning of income. The A.R. further su .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ltural operations. The assessee following mercantile system of accounting has made necessary provisions in the books of accounts towards expenditure to be incurred for land reclamation and afforestation charges. The A.O. without appreciating the facts simply disallowed the expenditure. The A.R. further submitted that the assessee has incurred a sum of ₹ 17,00,243/- out of the total provision of ₹ 49,14,000/- during the period under consideration, and the remaining amount could not be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and made a provision in the books of accounts. He also proved that the said expenditure has been incurred as and when the mining activity is completed. Therefore, the A.O. was not correct in disallowing the said expenditure. 7. On the other hand, the Ld. D.R. strongly supported the order passed by the Ld. CIT(A). 8. We have heard both the parties and perused the materials available on record. The A.O. disallowed the land reclamation and afforestation expenditure of ₹ 49,14,000/- for the r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e and cannot be allowed as deduction. The CIT(A) has accepted that the expenditure incurred by the assessee is not a capital expenditure, however, held that the assessee has made a mere provision in the books of accounts, therefore, a provision in the books of accounts is not an allowable deduction while computing the income under the head profits & gains of business or profession. 9. It is the contention of the assessee that it has made a provision in the books of accounts towards expenditu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ver back to the farmers for agricultural operations. The assessee also refers to the environment clearance letter issued by the Ministry of Forest and Ecology, Government of India, where it stipulates the assessee to reclaim and rehabilitate the land used for mining purposes. As per the terms of environment clearance letter and lease agreement with the farmers, the assessee needs to incur certain expenditure towards land afforestation and reclamation therefore, made a provision in the respective .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reclamation and afforestation by making a provision in the books of accounts is allowable deduction while computing the income under the head profits & gains of business or profession? It is an admitted fact that when you follow the mercantile system of accounting, assessee needs to made a provision in the books of accounts towards all related expenditure whether or not paid during the same financial year. The only requirement is that the assessee needs to make a provision with a reasonable .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and afforestation as per the terms of lease agreement with the farmers. The environment clearance letter issued by the Government of India also put a condition on the assessee that assessee should undertake a rehabilitation and reclamation programme and compliance report should be submitted to the Ministry of Environment and Forest on yearly basis. The assessee by following the mercantile system of accounting has made a provisions for the expenditure to be incurred on land reclamation and affor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 all .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ction of expenses which he has supposed to incur for filling those pits, as assessee is following mercantile system of accounting, he can claim expenses incurred as soon as he dug the pits. The relevant portion of the order is reproduced hereunder: Considering the clause in the agreement, i.e., as far as possible the lessee shall restore the surface land so used to its original condition, the moment assessee digs pits, he is bound under the agreement to fill those pits and liability does accrue .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version