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TMI Blog2018 (6) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... g the depreciation of Rs. 6,37,034/- on the compensation paid by the assessee to the land owner for the purpose of mining without appreciating the fact that such payment does not fall under the definition on intangible assets as defined u/s 32(1)(ii). 2(b) On the facts and circumstances of the case and in law, the L d. CIT(A) erred that relying the ratio laid down in the case of ONGC Videsh Ltd. 37 SOT 97. Without appreciating the fact that the facts of present case is entirely different that the facts in the case on ONGC Videsh Ltd. 3(a) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 70,50,772/- being Royalty paid in financial year 2001-02 and therefore the same was allowable deduction in Assessment Year 2002-03 u/s. 43B and not in A. Y. 2003-04 which is under consideration. 3(b) On the facts and circumstances of the case and in law, the L d. Cl T(A) erred in deleting the disallowance of Rs. 70,50,772/- being the royalty paid stating that it was the advance payment made in March, 2002 and allowable in the year i.e. A. Y. 2003-04 in which it was debited in the books of accounts. 4. On the facts and the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th has been calculated by the C.A./Auditor based on the debit balances against the investment made by it. The financial statements show that there was a regular and clear connection with the assessee's business in as far as there was regular financial activity among the principal and subsidiary and accordingly, the transaction of the loss on investment is also covered by the case law cited by the appellant. The investment was nothing but a measure of commercial expediency to further business objectives and accordingly based on the valuation with which the A.O did not find any fault, the loss was rightly claimed by the appellant company on sale of investment. Reference can also be made to the judgment of the Hon'ble Supreme Court in the case of Patnaik & Co. Ltd. v. CIT [1986] 161 ITR 365/27 Taxman 287 where the Hon'ble Apex court held that- In the present case, there was nothing to show that there was any reason for the assessee to hold on the investment in the loan indefinitely. There was no enduring advantage. Thus, the investment did not bring in an asset of a capital nature and the loss suffered by the asse.ssee was a revenue loss and not a capital loss. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of explanation to section 73 of the Act and also not genuine. The Ld. CIT(A) treated the same as normal business loss by relying on the decision of Hon'ble Supreme Court in the case of Patnaik & Co. Ltd. v. CIT (supra) and also CIT vs. Investa Industrial Corporation Ltd. (1979) 119 ITR 380 (Bom.-HC). We find merit in the arguments of the Ld. A.R. that the said is not a speculative loss in terms of explanation to section 73 of the Act as the assessee is not engaged in the sale and purchase of shares of other companies which is a prerequisite for application of explanation to section 73 of the Act. The case of the assessee is squarely covered by the decision of Hon'ble Calcutta High Court in the case of Standipack (P.) Ltd. vs. CIT (supra) wherein it has been held that only the loss resulting from the activity of sale and purchase of shares of other companies which is a part of the business of the assessee could be treated as speculation loss. In other words, the condition for attracting the said provision is that a part of the business of the company must relate to purchase and sale of shares but it is not the case we are dealing with. We, therefore, do not find any infirmity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the other hand, argued that the compensation paid by the assessee to acquire mining rights has not resulted in the acquisition of any fixed assets as the assessee has not acquired any ownership in the said land but a limited mining rights were acquired for carrying on mining activities for which the compensation was paid to the land owners. The Ld. A.R. submitted that in the earlier years the entire such payment on account of compensation for acquiring mining rights in the land were claimed as revenue expenditure but the same was disallowed by the department and thereafter the assessee started claiming depreciation on the same. The Ld. A.R. contended that this depreciation has been claimed on the opening WDV which is coming from the earlier years. The Ld. A.R. relied on the decision of Hon'ble Delhi High Court in the case of Areva T AND D India Ltd. vs. DCIT & CIT vs. Jai Parabolic Spring Ltd. (2012) 345 ITR 421 (Delhi). The Ld. A.R. submitted that the principle of ejusdem generis provides that where there are general words following particular and specific words, the meaning of the latter words shall be confined to things of the same kind. The Ld. Counsel contended that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accordingly we uphold the order of Ld. CIT(A) on this issue by dismissing the ground of Revenue. 16. The issue raised in ground No.3 is against the deletion of addition of Rs. 70,50,772/- by Ld. CIT(A) being royalty paid in financial year 2001-02. The facts in brief are that during the assessment proceedings, the AO noted that assessee has paid lease rental advance in March 2002 for the next financial year commencing from 01.04.2002 to 31.03.2003 which was wrongly observed and mentioned by the AO that no royalty shown as advance and the AO noticed during the assessment proceedings that the following amounts were charged to the P & L account which were paid in the month of March 2002 on various dates. The AO observed that it was not possible to verify the advance royalty paid from the records and had it been advanced it could have been shown as advance royalty paid and duly mentioned as advance paid. The Ld. CIT(A) allowed the appeal of the assessee by giving a detailed finding that Rs. 70,50,772/- was paid in the month of March as advance rent for the next financial year and was claimed accordingly in the next year. The Ld. CIT(A) also relied on the decision of ITAT Chandigarh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the year which was duly replied by the assessee by submitting that the said loss/gain is beyond the control of the assessee and is attributable to several factors such as moisture in cotton, quality of raw material and the quality of trash in the cotton. The AO did not accept the contentions of the assessee and disallowed the same on the reasoning that in the earlier year the assessee had visible gain and added a sum of Rs. 74,57,220/- to the income of the assessee. 22. The Ld. CIT(A) allowed the appeal of the assessee by observing and noting that the AO has failed to bring any evidence on record that assessee has suppressed the stock or made sales out of books of accounts and has not disapproved the basis of loss as put forwarded by the assessee. The Ld. CIT(A) also noted that merely on the basis that assessee has made some invisible gain in the earlier year the current year loss could not be disallowed and no adverse inference can be withdrawn. Therefore, the Ld. CIT(A) deleted the addition of Rs. 74,57,220/-. 23. The Ld. D.R. vehemently submitted before us that Ld. CIT(A) has grossly erred by directing the AO to delete the disallowance without giving any concrete findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Revenue. 25. Having heard the rival submissions of both the parties and perusing the material on record we find that assessee is engaged in the business of mining and textile manufacturing. We note that the percentage of yield and invisible wastage depend on several factors as has been mentioned hereinabove such as quality of cotton, fly generated during manufacturing process, moisture contents in the cotton etc. and the percentage of invisible waste cannot be standardized as the inputs in the textile division depends on the various factors. The first appellate authority has considered all the aspect connected with this issue and only thereafter reached a finding that the AO has not brought anything on record to disprove the claim of the assessee. Similarly, the AO has not pointed out any defects and deficiencies in the books of account and simply relying on the percentage of invisible gain in the earlier year disallowed the invisible waste during the year which is not correct and can not be sustained. In view of these facts, we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground raised by the Revenue. 26. In the result, appeal of the Revenue is dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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