TMI Blog2014 (8) TMI 1112X X X X Extracts X X X X X X X X Extracts X X X X ..... ble based on the facts of the case, contents of the assessment order and written submissions furnished by the assessee. He has also not discussed as to how the assessee could have raised an alternative claim before him, when all along he had made the claim before the AO u/s 35E of the Act. We are therefore, of the opinion, the matter needs a fresh look by the CIT(A). We therefore, set aside the order of the learned CIT(A) on this aspect and remit the issue back to the learned CT(A) for disposal in accordance with law. Addition made to the closing stock - Held that:- There is no dispute that unprocessed lumps and fines were valued by the assessee at ₹ 50-/ per MT, whereas the AO considered the whole of the stock as processed and valued it at ₹ 390/- per MT. Rate of ₹ 390/-per MT was arrived by the AO by adding expenditure in the nature of afforestation expenses, mines office expenses,, road maintenance charges, repairs and maintenance, plot transportation and loading charges as part of the cost. There is nothing on record to show how the assessee had worked out the value of ₹ 50/- per MT for the sub-grade Iron Ore. Addition made by the AO was not only on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ird parties and did not in any way cure, complete or perfect the mining lease. The assessee pointed out that lease was given to it by the Department of Mines and Geology in the year 2006. Reliance was placed by the assessee on the decision of the Hon ble Apex Court in the case of Dalmia Jain Co., Ltd., Vs CIT 81 ITR 754(SC). Assessee also brought to the notice of the AO the relief and prayers made by the parties in their writs. As per the assessee it was only to resist the proceedings that it incurred legal expenditure. Reliance was also placed on the decision of the Hon ble Apex Court in the case of Sree Meenakshi Mills Ltd., Vs CIT 63 ITR 207(SC). 5. However, AO was not impressed by the above submissions. According to him, legal expenditure incurred by the assessee was for protecting the source of income and not for protecting or defending the business interest. According to him, legal expenditure which were incurred for the purpose of curing, completing and perfecting mining lease granted through lease deed vide no.ML2516 dated 14-03-2006 had to be construed as a capital outgo. The AO also held facts of the two decisions of the Apex Court mentioned above, relied on by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only trying to defend its position. It was only protecting its rights, which was already there and no new rights were created. Reliance was once again placed on the decision of the Apex Court in the case of Dalmia Jain Co., supra. 9. We have perused the orders and heard the rival contentions. There is no dispute that expenditure incurred for defending Writ Petitions filed by the third parties in which the grant of mining lease to the assessee by the Government was challenged. It is also not disputed that the lease of the mines were granted to the assessee in the year 2006, and it had started commercial production, from that year itself. Thus, in our opinion, assesseee was only protecting a right which it was already enjoying under the mining lease. It had a turnover of ₹ 41.30Crores in the previous year relevant to assessment year 2008-09 with a net profit of ₹ 20.02 Crores from mining business. Thus, the assessee was already exploiting the mining lease and doing business by virtue of the lease. The litigation expenditure incurred by the assessee to defend the suits did not in any way create a new asset nor help in improving the lease in such a manner so as to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st was made in the year 2004 and it had not resulted in acquisition of any capital asset. In the grounds raised before the CIT(A) assessee had assailed the disallowance of claim u/s 35E of the IT Act, 1961 alone. However, it seems it had also alternatively pleaded for allowing the claim u/s 37(1) as well. For this, assessee relied on a decision of the Kolkata Bench of the Tribunal in the case of Rungta Sons (P)Ltd., Vs Dept, of IT in ITA No.933/Kol/2009 dated 05-08-2011. As per the assessee in the above decision, it was held by the said Bench that the NPV payment to forest department was allowable as business expenditure. Learned CIT(A) accepting the plea of the assessee allowed the claim. 13. Now before us, learned DR strongly assailing the order of the CIT(A) submitted that the assessee s claim before the AO was under section 35E of the IT Act, 1961 and not under section 37(1) of the IT Act, 1961. It had never made a claim before the AO that the expenditure was allowable at one go. Even if it was so allowable it should have made the claim in the year in which it had paid the amount and not in a gradated manner in a subsequent year. By making a 1/10th claim, assessee had itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the learned CIT(A). Along with this we are also considering the cross appeal of the assessee which also dwells on the same issue. 17. Facts apropos this issue are that the closing stock of Iron Ore as per the books of accounts was 40,596 MT. However, the closing stock as per the return filed by the assessee before the Director of Mines Geology was 45,728 MT. There was a difference of 5132 MT. Explanation of the assessee was sought by the AO. Assessee stated that the dispatch particulars were approximately mentioned in the returns filed before the Director of Mines Geology. As per the assessee the returns filed before IBM alone could be considered as final. 18. The AO also sought details of the valuation of closing stock. Details furnished by the assessee read as under; Quantity(MT) Cost per MT Amount(Rs.) Lumps processed 5000 350 17,50,000 Lumps unprocessed 6304 50 3,15,000 Fines processed 15000 350 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., 188 ITR 144. 20. Learned CIT(A) was partly appreciative of the above contentions. According to him, asseseee was following a consistent method of valuation and the AO ought not have disturbed such a method. As per the CIT(A) when assesee applied same principles for valuing opening stock and closing stock and this method was applied consistently, there was no reason to disturb such method. He held that there was no defect in the method followed by the assessee. However, according to him, valuation of sub-grade Iron Ore at ₹ 50 per MT was abysmally low. He substituted this with ₹ 80/- per ton. But for this, he deleted the addition made by the AO. 21. Now before us, revenue is challenging the deletion of disallowance, whereas assessee in its cross objection is challenging the enhancement of value of sub-grade Iron Ore from ₹ 50.per ton to ₹ 80 per ton. Assessee is also aggrieved that learned CIT(A) did not address the issue regarding difference in quantity of stock. 22. Learned DR is support of revenue s grounds submitted that there was no basis for the assessee to fix ₹ 50/- per MT as against the cost of unprocessed ore, when there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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