TMI Blog2014 (7) TMI 1338X X X X Extracts X X X X X X X X Extracts X X X X ..... e no bar on allowing deduction of expenses in respect of a closed business against the income of other businesses, when it is a case of composite business Both the learned Members have also agreed that it was a case of composite business and hence the deductibility of expenses could not be marred by such considerations. It is observed that the Assessing Officer has based the disallowance of expenditure simply on the ground that it was in respect of written off amounts of a closed business and hence not deductible. In view of the above decision of the tribunal, the foundation for the AO's view, does not stand. The AO did not examine the details of such expenses as to whether these were capital or revenue. Since the stand taken by the Assessing Officer has been rejected by both the learned Members, in my considered opinion, the proper course should be to restore the matter to the file of the Assessing Officer for considering the deductibility or otherwise of such amounts as per law. It is simple and plain that the Appellate Authorities are required to adjudicate upon the orders of the authorities having original jurisdiction which appreciate the material and then decide about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned A.M. was justified in following the precedents by remitting the matter for fresh decision to be decided in conformity with the view expressed by the Tribunal for immediately two preceding assessment years. - I.T. Appeal Nos. 224 and 298 (JP.) of 2004 - - - Dated:- 22-7-2014 - R.P. TOLANI, R.K. GUPTA, MEMBERS (J), R.S. SYAL, SANJAY ARORA AND T.R. MEENA, MEMBERS (A) For the Appellant : K. Sampath and Dinesh Gupta For the Respondent : Subhash Chandra and A.K. Khandelwal ORDER 1. These are two cross appeals by assessee and department against the order of Ld. CIT(A) relating to assessment year 1998-99. In assessee's appeals three grounds of appeal have been taken. First ground is against confirming the disallowance of ₹ 1,65,50,474/- on account of prior period expenses. 2. Brief facts in this regard are discussed in the order of Ld. CIT(A) in para 2 at pages 3 4 of his order as under:-- 2. The first ground of appeal is regarding the disallowance of ₹ 1,65,50,474/- being prior period expenses. The assessee is doing the business of production of zinc, lead, and other allied products. It has been stated by the AO that the facts relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payees. (ii) Typical internal check system in operation in the company where verification takes time and therefore, crystallization of liability takes longer time. It has been stated that in the case of Instrumentation Ltd., the Hon'ble IT AT Jaipur Bench has held that in the case of multi unit companies where units and functions are geographically spread all ever the country, earlier year expenses are inevitable and they should be allowed. The assessee has also relied on the following decisions:- (a) CIT v. Nathmal Tolaram [1973] 88 ITR 234 (Gauhati) (b) Saurashtra Cement Chemical Industries Ltd. v. CIT [1994] 122 CTR 329 (Guj.) It has been stated that similar disallowance has been deleted by the ld. CIT(A) in the assessment year 1996-97, in view of the above it has been requested to delete the disallowance of ₹ 1,65,50,474/-. 3. After considering the submissions and perusing the material on record, Ld. CIT(A) confirmed the action of the Assessing Officer by observing his observations in para 2.2 at pages 4 5 as under:-- '2.21 have considered the objection of the AO and the contentions of the appellant. The appellant has claimed prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal has ignored the decision of earlier Bench of the Tribunal for assessment years 1993-94 to 1995-96. It was further submitted that from inception of the company such expenses are claimed. The nature of expenses are such which require approval of the higher authorities at various levels and whenever the approval comes, the expenses are booked at that point of time. In the present case approval came during the year under consideration and, therefore, they have claimed in the year under consideration though these expenses relate to prior period. No deduction has been claimed in the earlier year as those expenses claimed now were not approved at the relevant point of time. The assessee company was Government of India Undertaking at that point of time. Therefore, there was no intention of the assessee to evade tax. Further reliance' was placed on the written submissions placed on record. 5. On the other hand, the Ld. D/R placed reliance on the order of Assessing Officer. Further reliance was placed on the order of the Tribunal for assessment year 1997-98, copy of which is placed along with chart filed by Ld. D/R. 6. We have heard the rival submissions and considered them ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the taxation rate being the same from one year to another year, it does not make any difference whether the expenses are allowed in the year or in the earlier years. Though clearly the assessee could not be given the allowance for deduction in the year and may also have lost the benefit of claim in the earlier years as earlier years may not be pending, but it is not the case of the assessee that expenses were knowingly not charged to the accounts. The case of the assessee is that as there was a time limit for finalization of the accounts, the accounts department at the Head Office could not wait for any further for receipt or the information from the branches though it could be argued that provision could have been made but as already observed earlier, it is a case of company where the rate of taxation being the same, we hold that the expenses be allowed in the year. However, as stated above, these decisions were not taken into consideration by the Tribunal while deciding the issue due to over sight. It is further seen that various cases have been considered by the Tribunal. However, as per written submissions they were not confronted to the assessee before applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) in this respect. 10. Remaining ground in appeal of assessee is against confirming the disallowance of ₹ 304.82 lacs out of extra-ordinary items relating to amount written off as a result of closure of Degana Tungsten Mine. Bifurcation of this amount are as under:- This issue has been discussed by Ld. CIT(A) at pages 20 to 24 of his order. 11. The brief facts in this regard have been discussed by Ld. CIT(A) in para 8 and 8.1 at pages 20 to 22 are as under:-- '8. The seventh ground of appeal is regarding the disallowance out of extraordinary items. The assessee has claimed deduction of ₹ 455.68 lacs on account of extraordinary expenses (net). It has been stated by the AO that in note No. 10 in Schedule 20 of the details in this regard are mentioned as under- Extraordinary items consist of adjustment towards write off of tungsten ore ₹ 154.06 lacks, provision for fixed assets/terminal depreciation of ₹ 150.87 lakh, capital work in progress ₹ 59.36 lakh and mine development expenses ₹ 91.39 lakh consequent to approval of closure of Degnna unit by Ministry of Labour, Govt., of India vide letter No. L-43024/4/97-IR(Misc.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mehta v. CIT [1980] 126 ITR 476 (Bombay) (ii) CIT v. Gemini Cashew Sales Corp (1967) 65 ITR 643 (SC) (iii) Venkatesa Colour Works v. CIT [1977] 108 ITR 309 (Mad.) It has been stated by the AO that the assessee has added back an amount of ₹ 1,50,86,250/- against the total loss of ₹ 4,55,68,000/- in respect of provision for depreciation on fixed assets/terminal depreciation. In view of the position of law as explained in the above judgments, the AO disallowed the balance claim of ₹ 3,04,81,750/-. 8.1 During the course of appellate proceeding, it has been submitted by the appellant that it has closed down its unit at Deganna during the year after approval from Ministry of Labour Govt., of India. The facts of the closure have been discussed above. It has been stated that all the usable equipments have since been shifted to other units and necessary statutory formalities have already been initiated. The mines at that unit were to be handed over to the Govt., of Rajasthan as per applicable provisions. It has been stated that the following balances in the books of Degana unit were written off as a result of this closure and shown as extraordinary items. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of road to Hill Top and ₹ 10.65 lacs has incurred towards consultancy charges for preparing Environment Management Plan for Degana Unit. Entire expenditure has been incurred after taking over of the unit in 1991. It has been stated that closure of the unit is bona fide business decision in the interest of the company. In view of the above facts, it has been requested to allow the deduction of ₹ 304.81 lacs.' 12. After considering the submissions and perusing the material on record, the Ld. CIT(A) has rejected the claim of the assessee by giving his finding in para 8.2 at pages 22 to 24 as under:-- '8.2 I have considered the observations of the AO and the contentions of the appellant. During the year, the assessee closed down its unit at Degana after approval from Ministry of Labour, Govt., of India. In this connection, the relevant note in Directors report dated 01/09/98 is relevant. This note is again reproduced below:- Your Company had taken over Degana Tungsten Mine from the Rajasthan State Tungsten Development Corporation, a Govt., of Rajasthan Enterprise in 1991. The poor metal content, accompanied by a crash in the international price and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make a payment arises not in the course of the business, not for the purpose of carrying on the business but springs from the closure of the business it is not a properly debitable item in the profit and loss account as a revenue outgoing. In the case of the appellant, the entire mine development expenditure has been incurred in the preceding years. Further mine development expenditure and capita! work in progress are in the nature of capital expenditure, which therefore, cannot be allowed a deduction as business expenditure. In respect of tungsten ore of ₹ 154.06 lacs it has been stated by the appellant that the same formed a part of stock in the books of the company. It has only been presumed that it would not realize any value for the company. In view of the above facts and position of law the above amounts are not allowable as a deduction as a Revenue expenditure. As mentioned above in the Directors report dated 1/9/98, it has been mentioned that the mine will be handed over to Govt., of Rajasthan in due course of time as per the applicable provisions. Therefore, the concerned unit was not handed over to the Govt., of Rajasthan in the F.Y. 1997-98 relevant to A.Y. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irement Schemes because of the reason that since this unit was suffering losses therefore company thought it proper to retire some of the persons by introducing a retirement scheme. Out of 147 persons, 51 persons remained on the role and remaining were retired as per scheme. The company had made a request to the Secretary, Government of India, Ministry of Labour under section 25(o) of Industrial Disputes Act, 1947 for according permission to close the mines. Notice of the same was given. Application dated 27.4.91 was also submitted to RSEB for curtailment of power. The Administrative Ministry was apprised regarding the issue of Degana Tungsten Mine in the meeting held on 20.5.1997 and was informed that there was no possibility of economic viability of Degana Mine and recommended for closure. Various resolutions were passed. Office notes were made and whatever the expenses were incurred on this unit, they were claimed as revenue expenditure in the Profit Loss account. However, the AO made disallowances by observing that Degana Unit was a distinct business entity which stands closed down during the year by writing off of all its assets, both fixed assets and stock in trade, which c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The interconnection, inter-lacing, inter-dependence and unity work was functioned by the existence of common management, common business organization, common administration, common fund. 16.2 In the present case also all these ingredients are present as assessee company also has a composite business. 16.3 Similar view has been expressed by the Hon'ble Supreme Court in case of Produce Exchange Corporation Ltd. v. CIT [1970] 77 ITR 739. In this case the decision of Hon'ble High Court was reversed and the order of Tribunal was confirmed, who held that the share business and other business carried on by the appellant company constituted the same business within the meaning of section 24(2) as it stood before its amendment in 1955. 16.4 Similar view has been expressed in case of Standard Refinery Distillery Ltd. v. CIT (Central) [1971] 79 ITR 589 (SC). There are various other decisions also which support the case of the assessee which are B.R. Ltd. v. V.P. Gupta, CIT [1978] 113 ITR 647 (SC), CIT v. Udaipur Distillery Co. Ltd. [2004] 137 Taxman 351 (Raj.), CIT v. Udaipur Distillery Co. Ltd. [2004] 268 ITR 451/134 Taxman 616 (Raj.), Bansidhar (P.) Ltd. v. CIT [1981] 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment expenses for the first time in assessment year 1996-97 and then in assessment year 1997-98 by revising its return of those years. It has been stated by the A.O. that the mine development expenses are to be dealt with in accordance with Section 35E of the I.T. Act, 1961. As per these provisions these expenses are to be spread over for a period of 10 years from the date of commercial production which period has expired long back. It has been stated by the A.O. that as per sub-section (8) of section 35E there is a clear bar in allowing the deduction on account of Mine Development Expenses which otherwise have already been allowed in the past. It has been stated by the A.O. that in view of the above provisions deduction cannot be allowed u/s. 37 of the I.T. Act, 1961. It has been pointed out by the A.O. that since the nature of expenditure is described in Section 35E of the Act the above expenditure cannot be allowed u/s. 37(1) of the I.T. Act, 1961. In view of the above the A.O. did not allow the deduction of ₹ 6,93,35,383/-. 3.1 During the course of appellate proceedings it has been submitted by the appellant that it had incurred the following expenditure on Mine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een requested to allow the deduction of ₹ 568.07 lacs in respect of Mine Development Expenses on mines under production. In respect of mine development expenditure of ₹ 125.28 lacs. The assessee had made submissions which are similar to that made for the A.Yrs. 1996-97 and 1997-98. These have been discussed in my appellate order No. 280/IT/UDR/99-2000 dated 25.11.2003 in the case of the appellant for the A.Y. 1996-97. Therefore the same is not reproduced here. 20. After considering the submissions and the order of AO, the ld. CIT(A) gave the following finding recorded in para 3.2 at pages 7 to 10:-- 3.2 I have considered the observations of the A.O. and the contentions of the appellant. During the year under consideration the assessee has incurred the following expenditure on Mine Development. (i) ₹ 568.07 lacs on development of mines under production as mentioned in Schedule 14 relating to Manufacturing Other expenses . This has been debited to P L account. (ii) ₹ 125.28 lacs on extension of existing mines as presented in Schedule 4.1 of the annual accounts. This expenditure has been claimed in the computation of total income. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business. In my appellate order for the assessment years 1996-97 and 1997-98.1 have held the above expenditure is allowable u/s. 37(1) of the I.T. Act, 1961. In these orders it has been held that the provisions of sub-section (8) of section 35E is not relevant here. This provision prohibits claim of deduction of the same amount at two places. The appellant has not claimed this expenditure u/s. 35R. The appellant has claimed the deduction of ₹ 1,25,28,383/- which is mine development expenditure incurred during the year. As mentioned above this amount includes depreciation of ₹ 4.73 lacs. As discussed above the depreciation of ₹ 4.73 lacs included in the above expenditure is not to be allowed as a part of mine development expenditure. Therefore the expenditure of ₹ 1,20,55,383/- is allowable as a deduction u/s. 37(1) of the I.T. Act, 1961. The AO is directed to allow the deduction of mine development expenditure of ₹ 1,20,55,383/-. 21. The ld. D/R firstly placed reliance on the order of AO. It was further submitted that similar issue was involved for assessment year 1997-98. Tribunal has set aside this issue to the file of AO with direction to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial, finished goods, stores and spares and other adjustments. In Schedule 18 of the Annual Accounts the assessee has given the break up of write off and other provisions of ₹ 976.50 lacs as under. It has been stated by the AO that the position of these items is same as in last year. The assessee has added back an amount of ₹ 9,78,734/- on account of enabling assets, ₹ 73,27,489/- on account of doubtful debts and ₹ 10,74,609/- on account of loss on sale of fixed assets. It has been observed by the AO that the balance of the items which pertain to write off of various assets of the assessee were also required to be disallowed as there was no legal basis for writing off the vital inventory of the assessee in respect of raw material, finished goods, stores and spares etc. It has been stated by the AO that although the Ld. CIT(A) has allowed the assessee's claim of write off in respect of raw material, finished goods, stores and spares and debit balance in the preceding years by Hon'ble Uttarakhand High Court in the case of the above decision has not been accepted by the department and an appeal has been filed before the ITAT. The AO therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submissions and perusing the material on record, we are of the view that this matter should go back to the file of AO to pass a fresh order after considering the order of Tribunal for A.Y. 1996-97 and for A.Y. 1997-98 and all other details filed by the assessee to claim the deduction. In the order of ld. CIT(A) also nothing has been mentioned except that, similar issue has been decided by the Tribunal for A.Y. 1996-97. Each year is independent year and each year's details are to be examined independently as res judicata does not apply in Income-tax proceedings. This is a ground in respect of written off loss of stock of raw material, finished goods, stores and spares etc. These items vary from year to year and, therefore, they need scrutiny. Accordingly we set aside the order of ld. CIT(A) and restore the matter to the file of AO for passing a fresh order in the light of our above observations and after affording reasonable opportunity of being heard to the assessee. We order accordingly. 30. Ground No. 3 is against deleting disallowance of welfare expenses under section 40A(9) of ₹ 3.5 crore. 31. The brief facts discussed by ld. CIT(A) in para 5 and 5.1 at pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust etc. nor the assessee company has any control over the utilization of these funds directly or indirectly. It has been stated that the funds were exclusively paid to various bodies as per the agreement with the employees union in its business expediency to make and maintain relations with its employees. Therefore, these payments are excluded from the purview of Section 40A(9) of the I.T. Act. It has been stated that in assessee's case the Hon'ble ITAT Jodhpur Bench has allowed this ground in assessment year 1990-91. The assessee has also relied upon the decision of Madras and Hyderabad Bench of ITAT in 26ITD 413 and 45 ITD 233 respectively. It has also been submitted that the ld. QT(A) has also allowed assessee's claim in assessment years 1994-95 and 1996-97. In view of the above, it has been requested to delete the disallowance. 32. After considering the submissions, the ld. CIT(A) has given his finding in para 5.2 as under:-- '5.2 I have considered the observations of the AO and the contentions of the appellant. The Hon'ble ITAT Jaipur Bench vide its order in ITA No. 1128/JP/94 dated 24-02-1998 in the case of appellant for the assessment year 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration. We order accordingly. 36. Ground No. 4 relates to deleting addition of ₹ 60 lacs made as interest income on advances made to M/s. Bharat Gold Mines Ltd. 37. The brief facts has been discussed in para 6 and 6.1 in the order of ld. CIT(A) at pages 13 and 14 as under:-- 6. The fifth ground of appeal is regarding the addition of ₹ 60 lakhs being interest income on advance given to M/s. Bharat Gold Mines Ltd. It has been stated by the AO that the facts are as in last year. The agreement with M/s. Bharat Gold Mines Ltd. continues to be in force as far as levying of interest @ 12% is concerned. The assessee has not included this income on the ground that BGML's financial position was weak and the principle amount is in doldrums. It has been stated by the AO that the addition of interest made last year was deleted by the ld. CIT(A). However, the Department has filed an appeal against that decision. In view of the above, the AO added the accrued interest of ₹ 60 lakhs to the total income. 6.1 During the course of the appellate proceedings, it has been submitted by the appellant that the ld. CIT(A) has decided the above matter in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of interest of ₹ 3.48 crore has been assessed up to assessment year 1998-99. This fact was also not brought to the notice of the Tribunal either for assessment year 1996-97 or 1997-98. Therefore, in view of these facts and circumstances and to meet the ends of justice we restore this issue to the file of AO for passing a fresh order in the light of our above observations. 42. Ground No. 5 relates to deleting the disallowance of ₹ 1,14,16,681/- being feasibility report expenses. 43. The brief facts has been discussed by ld. CIT(A) in para 7 and 7.1 of his order at pages 14 to 16 are as under:-- 7. The sixth ground of appeal is regarding non-allowance of deduction of ₹ 1,14,16,681/- being feasibility report expenses. The assessee has claimed a deduction of ₹ 1,14,16,681/- on account of feasibility report expenses in the computation of income. It has been stated by the AO that the nature of these expenses are as under:- It has been stated by the AO that the assessee did not furnish the relevant details relating to feasibility report expenses. From whatever details furnished as mentioned above, these are not different than the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings are commercial taken up without having ascertained its technical feasibility, this may result in substantial loss in the business of the company. Therefore, the expenditure is a necessary ingredient in the profit making activity of the business of the company to carry out its business in more efficient and prudent manner. In view of the above, it has been stated that the above expenditure is allowable u/s. 37(1) of the I.T. Act, 1961. The appellant has also relied on the following decisions. (i) Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC) (ii) CIT v. Kerala State Industrial Development Corpn. Ltd. (No. 1) [1990] 182 ITR 62 (Kerala) (iii) CIT v. Indian Carbon Ltd. [1996] 221 ITR 264 (Gau.) (iv) Asiatic Oxygen Ltd. v. CIT [1991] 190 ITR 328 (Cal.) (v) CIT v. Praga Tools Ltd. [1986] 157 ITR 282 (AP.) (vi) Kesoram Industries Cotton Mills Ltd. v. CIT [1991] 191 ITR 518 (Cal.) (vii) CIT v. Sesha Sayee Bros (P.) Ltd. [1981] 127 ITR 218 (Mad.) (viii) Hindustan Aluminium Corpn. Ltd. v. CIT [1986] 159 ITR 673 (Cal.) (ix) CIT v. Graphite India Ltd. [1996] 221 ITR 420 (Cal.) (x) CIT v. Karnataka State Industrial Investment Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, these additional evidences are admitted. During the course of appellate proceedings, the appellant has submitted the details of feasibility report expenses exceeding ₹ 5.00 lacs as under:- It has been submitted by the appellant that the feasibility study or the ascertainment of the technical feasibility is essential before any process, information project, product etc. is finally proceeded with in commercial manner. If such things are commercially taken up without having ascertain its technical feasibility this may result in substantial loss in the business of the company. It has been stated by the appellant that the first item of ₹ 11,30,000/- relates to M/s. MECON which is same as in assessment year 1997-98. This has been held to be expenditure allowable u/s. 37(1) by the ld. CIT(A) in assessment year 1997-98. It has been pointed out by the appellant that item No. 2 of ₹ 74,11,505/- pertaining to M/s. Lurgi India relates to existing Roaster Plant and the feasibility study was being carried out for augmentation of plant efficiency by Oxygen enrichment. Therefore, it is not a new unit or extension of business. It has been submitted that other item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see as the assessee is an existing company in business of mining operations for last several years. (ii) For extension of existing unit (iii) For setting up of a new unit Therefore, these do not fall within the scope of Section 35D of the I.T. Act. Respectfully following the above decisions, it is held that the feasibility report expenses is allowable as a deduction u/s. 37(1) of the I.T. Act, 1961. Therefore, the AO was not justified in not allowing the deduction of ₹ 1,14,16,681/-. The AO is directed to allow the deduction of feasibility report expenses of ₹ 1,14,16,681/-.' 45. The ld. D/R stated that Tribunal has set aside the issue to the file of the ld. CIT(A). The ld. CIT(A) has allowed the claim of the assessee. However, department has filed appeal against the order of ld. CIT(A) on 13.5.2010. 46. On the other hand, the ld. A/R stated that appeal of the department against the order of ld. CIT(A) who allowed the appeal after direction of the Tribunal is pending. Therefore, there is no infirmity in the order of ld. CIT(A). Accordingly the same is liable to be confirmed. 47. After considering the submissions and perusing the material on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by reduced profit of the company to the extent of ₹ 2599.76 lacs. It has been stated that the change in method of valuation which is regularly and consistently followed has not been logically explained. In view of the above the A.O. rejected the change in the method of valuation and made an addition of ₹ 2599.76 lacs. 9.1 During the course of appellate proceedings it has been submitted by the appellant that it was valuing the closing stock of its concentrates and work in progress on weighted average cost up to the year ended on 31.3.1997. However for the preparation and presentation of accounts for the year under consideration, the closing stock of concentrate (except bulk and bought out concentrates) as 31.3.1998 has been valued at cost or net realizable value whichever is lower. The said change has resulted in decrease in inventory and profit by ₹ 2599.76 lacs as disclosed in note No. 9(i) and 9(ii) in the Notes of Accounts to the Financial Statements of the company. It has been stated that the company started valuing the concentrate on weighted average cost or net realizable value for the reason that company is regularly selling concentrate in the market. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd. [1995] 215 ITR 441 (Delhi) It is stated that in these cases it has been held that irrespective of the basis adopted for valuation in the earlier years, the assessee has the option to change the method of valuation of the closing stock at cost or market price which ever is lower at any time provided the change was bona fide and followed regularly thereafter. In view of the above it has been requested to delete the addition of ₹ 2599.76 lacs. 48.2 After considering the submissions and perusing the material on record, the ld. CIT(A) allowed the issue in favour of the assessee. Following findings have been given by the ld. CIT(A) vide para 9.2 at pages 27 to 29 of his order. '9.2 I have considered the observations of the A.O. and the contentions of the appellant. During the year the appellant has changed the method of valuation of closing stock of Zinc/Lend concentrate and work in progress. In view of the above change in the method of valuation of closing stock and WIP the profit of the company has been reduced by ₹ 2599.76 lacs. In this connection in the Tax Audit Report, the Auditor has commented as under: (ii) In the following cases the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hted average cost or net realizable value for the reason that company is regularly selling concentrate in the market. Therefore it is not correct to value the same as raw material. It has been pointed out that as far as Work in Progress is concerned, the net realizable value of the final product i.e. lead ingot etc. is lower to its cost to the company. Since in such cases it is known as to what value it is going to realize it is not prudent to value the work in progress at cost. It has been pointed out by the appellant that it has determined the net realizable value of work in process as per the manner recommended by ICAI and the same is not in dispute either in Auditors Report or in the assessment order. It has been pointed out by the appellant that it is consistently following the changed method adopted by it in succeeding years. It has been stated by the appellant that the A.O. has made a reference to the order of the Ld. CIT(A) for the A.Y. 1996-97. In this regard it has been pointed out by the appellant that the order of Ld. CIT(A) has been reversed on this issue by the Hon'ble ITAT vide its order dated 24.4.02 in ITA No. 446(JP)/99 and the addition made on account of unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years 1996-97 and 1997-98 by estimating its net realizable value at the London Metallic Exchange price and not at the domestic price which was not approved by Hon'ble Supreme Court. Therefore, the facts for the assessment years 1996-97 and 1997-98 are different from the facts for the year under consideration. 48.5 After taking into consideration the orders of the AO, ld. CIT(A) and the order of the Tribunal for the assessment year 1997-98 and the decision of Hon'ble Supreme Court for the assessment year 1996-97 (supra), we found that this matter needs re-verification at the end of the AO. In the submissions of the ld. AR, it was mentioned that they have changed the method of accountancy for valuation of the closing stock from the year under consideration only and this method has been consistently followed in future year after year, whereas in the earlier year the assessee had followed the method of net realizable value at the London Metallic Exchange price and not at the domestic price and the method was not approved by the Hon'ble Supreme Court. If the same method is adopted during the year under consideration then as per the decision of Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that sales tax cannot be included in the total turnover for the purpose of calculation of deduction u/s. 80HHC. It has been stated by the appellant that the facts of the appellant's case are different from the facts of Chawringhee Sales Bureau (P) Ltd. v. CIT [1973] 87 ITR 542 (SC). In that case, the assessee had shown the sales tax collected as liability and did not include the same in the income. Hon'ble Apex Court held that the same should be included as a part of trading receipt and in case it is paid to Government, a deduction can be claimed for the same. Thus the facts and issue involved in that case were entirely different than the facts of the case of the assessee. It has been stated by the appellant that in view of the above decision of Hon'ble IT AT Jaipur Bench in the case of Wolkem India Ltd., the expression 'total turnover' will not include sales tax since the expression export turnover did not include the same. In view of the above, it has been stated that the AO was not justified in including the sales tax to the amount of total turnover for calculating the deduction u/s. 80HHC. 51. After considering the submissions, the Ld. CIT(A) allowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee as well as appeal of the department are allowed in part and partly for statistical purposes. REFERENCE UNDER SECTION 255(4) OF THE I.T. ACT, 1961 As there is a difference of opinion between us i.e. Judicial and Accountant Member, therefore, the following questions are being referred to be answered by a Third Member appointed by your Honour as per provisions of law. QUESTIONED FRAMED 1. Whether on the facts and in the circumstances of the case, the issue in respect of disallowance of ₹ 1,65,50,475/- on account of prior period expenses is liable to be restored to the file of the A.O. or liable to be confirmed? 2. Whether on the facts and in the circumstances of the case, the issue in respect of disallowance of ₹ 304.82 lacs out of extra ordinary items relating to the amount written off as a result of the closure of Degana Tungsten Mine Unit is liable to restored back to the file of the A.O. or liable to confirmed? 3. Whether on the facts and in the circumstances of the case, the issue in respect of deleting the disallowance of ₹ 6,88,62,383/- being the Mine Development Expenses is liable to be deleted or to be set aside to the file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for financial years 1991-92 to 1997-98, was caused with reference to the ledger balances of RG 23A and RG 23C, and as the difference's so revealed pertained to earlier years, the corresponding amount's was debited to the account 'prior period expenses' in accounts. Does this help or assist the assessee's case? To my mind, it does just the opposite. The amount is reflected as a recoverable, i.e., as an 'asset' in accounts. The Auditor, in verification (which is usually done on a test check basis, so that it may not necessarily, and does not on account of practicability, cover all the ledger accounts every year), finding no definite basis for the same except a vague explanation from the assessee-company that the amount is as per the excise records, causes a reconciliation spanning the past few years. To find that no such value is in fact receivable or recoverable; the corresponding stores having been in fact consumed in the assessee's operations over the preceding years, i.e., as per assessee's own and relevant (excise) records. The amount is accordingly written off in accounts as a prior period expense. What more or clearer indictment of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it not a case of the same being prevented from being booked and claimed timely impending approvals from higher levels in the organizational hierarchy. The other major category (item-wise) is of expenditure of the nature discussed earlier, i.e., representing unilateral (if riot also overdue) adjustments in accounts, with the expenditure described as 'stores consumed' itself aggregating to ₹ 88.80 lacs. In fact, the argument, besides being unproved, is also mis-conceived. What value the internal controls once the expenditure stands already incurred! A financial control, to be effective, seeks to cause a proper examination, stipulating the hierarchy in the organization (suitably defined) at which it would be finally sanctioned, so that higher (again, defined) amounts are comprehensively reviewed, both in terms of being cost efficient (by ensuring competitive bargains) as also by way of cost-benefit analysis. However, once the expenditure is already incurred and the corresponding goods or services delivered, only the course as suggested by the terms of the agreement/contract would prevail, so that the stated control/post facto examination is of little value, except for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in their respect? The same only merits an outright dismissal. It is in fact also inconsistent with the assessee's plea of the liability as having not crystallized earlier, and being so only during the relevant year, i.e., the financial year 1997-98. That, in fact, represents the only window available to the assessee. But then, the same is a matter of fact, and as stated hereinbefore, not established by the assessee, and which would be required to be so for each liability separately, being independent of others. In fact, here again, it is only the disputed component or the disputed part of the liability that can be said to have 'arisen' or 'accrued' in the year of its settlement, and not the entire of it. Reference in this regard be made to the decision in the case of CIT v. Kishore Chand Shivcharan Lal [2004] 266 ITR 37/138 Taxman 256 (All.). 56.4 Continuing further, it is interesting to note that while AS-I notified u/s. 145 of the Act, so that it forms part of the income-tax law, prescribes provision for all known losses and liabilities. As such, the disputed component also stands to be provided for and claimed in the first instance itself. The cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as there is no liability in present for the said period. Reference in this context be made to the decisions in the case of Mysore Spg. Mfg. Co. Ltd. v. CIT [1966] 61 ITR 593 (Bom.) as also J.K. Woollen Mfr. (P.) Ltd. v. CIT [1967] 65 ITR 237 (All.). In absence thereof, the assessee's case is without merit; the law in the matter being abundantly clear, i.e., each year is an independent unit of assessment, so that income and expenditure of a particular year would stand to be assessed and claimed, as the case may be, for that year. The matter/issue, as afore-noted, has arisen in the assessee's case from year to year, (also refer para 1.5) 56.5 Reference to the decisions by the tribunal has been up to now scrupulously avoided in view of the inconsistency in the decisions by the tribunal, so that it became incumbent to firstly examine the issue de hors the same, i.e., on first principles. In fact, even here I find that the tribunal has for the immediately two preceding years, i.e., assessment years 1996-97 and 1997-98, rejected the assessee's claim, drawing on the same, i.e., the first principles, citing the decisions in the case of Swadeshi Cotton Flour Milk (P.) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the entire amount), both of which are missing in the present case. Thirdly, the question bears reference to 'the facts and circumstances of the case', so that the propriety of the decision by the tribunal that was under challenge had to be and was decided by the hon'ble court in the context thereof and, as such, cannot be said to lay down any law, even if it answered the same in the affirmative. Fourthly, and perhaps only for these reasons, the hon'ble court declined to answer the question referred to it, so that the very purport of the decision qua the present case is not understood and the reliance becomes misplaced. Finally, the decisions, inter alia, in the case of J.K. Woollen Manufacturers (P.) Ltd. (supra) and Escorts (Agents) (P.) Ltd. (supra), holding the decision in the case of Nagri Mills Co. Ltd. (supra) as no longer representing good law were not cited before the hon'ble court. 56.6 The impugned claim is, thus, sustainable neither on facts nor in law nor on precedence. In fact, it may be emphasized that the matter of accrual or otherwise (of an income or liability) being the matter of fact, the mere finding of fact that it has not accrued or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure. He found the reliance by the AO on the decisions in the case of Gemini Cashew Sales Corpn. (supra) and Venkatesa Colour Works (supra) as apposite, quoting from the former in his order. Further, the write off of 'mine development expenses' and 'capital work-in-progress', i.e., two of the three items comprising the impugned claim, were decidedly capital expenditure, so that the same in any case could not be allowed as regular business expenditure. As regards the claim qua tungsten ore, the third item, he observed - on the basis of the Board's report dated 1-09-1998, that the Mine had yet to be transferred to the Government of Rajasthan, i.e., as at the year-end. How could then any expenditure in its respect arise for being claimed? The claim was, thus, premature and also inchoate as it could not be presumed that no value in its respect is realizable, i.e., from the transferee. The disallowance was confirmed on this basis. Aggrieved, the assessee is in appeal. 57.2. Without doubt, prospecting for and mining of tungsten ore cannot be said to be a distinct business for a company in the business of mining of ores and production of metals and alloys, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m qua the said expenditure under the provisions of the Act, be it sec. 37(1) or even s. 28, the parameters of both of which are a matter of trite law. The nature of the expenditure, i.e., in terms of its ingredients or constituents, is not in doubt, being only as stated by the assessee, who has nowhere contended of lack of opportunity before either authority in presenting its case. Before examining the question as to whether the said expenditure stands incurred for the purpose of the assessee's business or is incidental thereto, which forms the assessee-appellant's case, it would therefore need to be seen if it is of revenue nature. This is as, if not so, it would not be deductible even if it is held as having been incurred for the purpose/s of the business. This is as capital expenditure or capital loss, though incurred for or sustained in, as the case may be, business, would not yet stand to be allowed either u/s. 37(1) or u/s. 28 of the Act. As regards 'purpose', though the assessee has not supported its case with facts and figures, as where the Degana Mines are shown to be operating at a loss, with little prospect of a turn around, no doubt has been expressed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;furniture', nor any depreciation stands claimed or allowed in its respect for any year. In fact, s. 32(1)(iii), as a reading of the said provision suggests, and which (reading) is harmonious with the other applicable provisions, is applicable only in respect of assets of an Undertaking engaged in generation and/or distribution of power, eligible for depreciation u/s. 32(1)(i); while that of other Undertakings only form part of the block of assets, entitled to depreciation u/s. 32(1)(ii). In fact, the assessee does not dispute the non-allowance of its claim for terminal depreciation (at ₹ 150.86 lacs), also forming part of its total claim for extraordinary items, which is under reference. Here it would be pertinent to state that a revenue expense would, even otherwise, i.e., irrespective and independent of the closure, stand to be deducted; the assessee having not discontinued its business. However, the claim/s under reference arises only on account of the write off, i.e., it could not have been claimed but for the write off, so that it is not revenue expenditure per se. The write off implies a loss of value, i.e., something which is perceived as of value, realizable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said cost, which represents the cost of production of the tungsten ore, i.e., as per the accounts. Could it be so, if the assessee actually expected to realize some value in its respect? Which businessman would do so, i.e., inflict self injury by not accepting what is offered to him; rather, not try to bargain for the best realization. In fact, this aspect would be valid for the other items of capital expenditure (or those held to be so) written off, and which also represent business assets of no insubstantial value, as well. The formal transfer may not have taken place, which is stated as impending the completion of the statutory formalities, and which is understandable. The question is not of the assessee's legal right on the relevant assets, but their value to it as a going concern in view of its decision to exit the said Undertaking (Degana Mines). There is nothing to show that the legal transfer of the Mines is to be at a value. In fact, where so, the assessee would not have transferred its men material to the extent these could be redeployed, to its other Units, as the realizable value from the Govt., where so, would only be on the basis of it being a going conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it no longer represents an asset of the trade or a trading asset. It is this loss in value, so that the same is rendered as of no value to the assessee, which the write off of its book value represents or signifies. The loss under reference, it may be appreciated, arises not on account of any intrinsic loss in the value of the ore (goods) or due to its market value suddenly disappearing, as where (say) they are to be discarded as being unfit for sale or processing or for safety reasons. There are examples when businesses even recall sold goods from the market in response to quality or safety concerns, either removing the defect/s or replacing them, and which may entail discarding the goods recalled as these do not meet the environmental or quality standards/specifications. But for the reason that, having decided not to operate the relevant Mines, it no longer holds any value for the assessee. Thus, though continuing to be the assessee's property, it cannot be regarded as its stock-in-trade, but as any other capital asset belonging to it. The relevant part of section 2(14) of the Act, defining capital asset, reads as under: 2. Definitions. - In this Act, unless the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed as income. As such, where the debtor fails or is incapacitated (which may be for the reason of his capital being impaired), leading to its write off in the creditor's books, it is only a recognition of the fact that the legal right, i.e., the right in law to recover the debt amount, on the basis of which the relevant amount had been considered to have accrued as income, was either incorrectly so assumed (so that the income had in fact not accrued) or has since suffered or undergone a change, so that the same (legal right) is considered as of little value to the organization, implying a business loss. A deduction, either way, ensues. From another stand point, the changed circumstances of the debtor necessitate the debt being revalued, with its realizable value warranting a write off in whole or in part and, thus, a claim as a business deduction in its respect to the creditor to that extent. In other words, the said write off (of a trade debt) is only on account of its - a current asset - revaluation, and is independent of the decision, if any, to close the business (or a unit) of which it is (or was) a part, and which (decision) would not impact the legal rights between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for transfer is a capital receipt, i.e., on capital account, its absence or inadequacy results in a loss in the revenue field? The answer could only be an emphatic no. Further, going by the assessee's argument, which is sans any legal basis, would it mean to imply that capital loss cannot arise while the assessee is in business? Or even that he has to necessarily exit the same for the loss to qualify as on capital account. The said fact, i.e., of the assessee continuing to be in business, as sought to be clarified by way of an example of the transfer being at a consideration as against nil value in case of relinquishment - which the present case is of, would, thus, be of little value or relevance. The loss on relinquishment of the erstwhile trade asset, even though arising in the course of business, is only a capital loss assessable u/s. 45 of the Act. In fact, it would lead to a corresponding capital receipt for the transferee, as where it deems it fit to operate the said Unit, and assuming it places the same or similar values on the different assets. This is as, as afore-said, the said assets constitute an essential part of the capital (both fixed and working) structure or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of write off of the assets on its books, i.e., ₹ 304.82 lacs, is in the nature of capital loss assessable u/s. 45 of the Act, and not a business loss u/s. 28, having arisen on account of relinquishment on the closure of the Mine during the relevant year. The relevant ground of the assessee is decided accordingly. 57.4 It may appear, or may well be contended, and by either party, that in deciding this ground, particularly qua the write off of tungsten ore, I have travelled outside the scope of the issue at hand. The charge would be, to my mind, not valid, both on facts and in law. On facts, the issue stands delineated only on the basis of the respective cases of both the parties (refer para 2.2 supra). Qua law, the powers of the appellate tribunal are of the widest amplitude, case law on which is legion, and for which reference, inter alia, is made to the decisions in the case of CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC) and ITO v. M.K. Mohammed Kunhi [1969] 71 ITR 815 (SC) 57.5 In result, the assessee's Ground No. 3 is dismissed, i.e., in the afore-said terms. III. Mine Development Expenses (₹ 6,88,62,383/-) 58.1 This disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 1997-98 having been dropped subsequently. While the basis for the disallowance by the AO is that these are development expenses, capital in nature, and for which the law has provided a separate allowance per section 35E of the Act, the ld. CIT(A) allowed the same on the basis that the same is for existing mining units. As regards ME D expenses, the assessee, as it appears, is not claiming the amount debited in accounts (at ₹ 214.24 lacs for the current year), i.e., to the operating statement, but that incurred during the relevant year, being at ₹ 125.29 lacs for the current year. This also explains its claim directly per the computation of income. In addition, for the current year, another sum of ₹ 91.39 lacs represents write off in respect of Degana Mines on closure of the said unit. The assessee's claim for the current year, thus, has three components. 58.3 In respect of the assessee's claim for ME D expenses, the tribunal for the immediately preceding year (i.e., A.Y. 1997-98, in ITA No. 249/JU/2004 dated 24/7/2009), following its order for the A.Y. 1996-97 (in ITA No. 46/JU/2004 dated 30-03-2009) for ₹ 131.03 lacs (i.e., at net of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order is in its respect inconsistent, both internally as well as with that by the tribunal for the immediately preceding years, i.e., A.Ys. 1996-97 and 1997-98, and which in fact stand followed by the tribunal for other years as well. The matter is, accordingly, likewise, restored back to the file of the AO for examination of the exigibility of the said claim u/s. 35E of the Act. However, it may need to be clarified that the expenditure exigible for deduction u/s. 35E is, firstly, limited to that for prospecting (sec. 35E(2)) and, secondly, that incurred up to a maximum of four years prior to the commencement of production, besides, of course, for that year. Clearly, therefore, once the commercial production commences, there is no question of any expenditure on prospecting and, thus, any expenditure eligible for deduction u/s. 35E, being incurred. Any expenditure on further development on or extension of the said mines would necessarily have to be examined from the stand point of being either capital or revenue expenditure. Improvements in methods are intrinsic to any business, so that what is relevant is not the factum of improvement per se but whether it results in any enduri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excavation. However, why then it is not so stated in the accounts? In fact, the assessee had itself been classifying this expenditure as a capital expenditure in accounts and, further, not claiming it as a deduction up to A.Y. 1995-96, even as its mines are in commercial production since long. Perhaps, this was so as the said expenditure also includes expenditure on approach to the underground from the surface for the mining operations. But then, that by itself would not imply a 'development' per se but only a cost for continuing or sustaining mining operations, deductible u/s. 37(1) of the Act. Section 35E of the Act cannot again be said to be applicable, which is only toward prospecting, the scope of which is defined per section 35E(5) of the Act, and includes an expenditure which proves to be abortive. There are no clear findings by the first appellate authority in respect of this expenditure, and both the sides, i.e., the assessee and the Revenue, have a point. Without doubt, capital expenditure, where so, would not cease to be so where incurred in respect of a Unit in production. Capital expenditure, i.e., one which by definition yields an advantage or benefit of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 249/JU//2004, dated 24-07-2009, copy on record), and again on the same basis, i.e., the assessee being unable to substantiate its claim, drawing upon its decision for the preceding year, i.e., A.Y. 1996-97. 61.2 No improvement in its case stood made by the assessee before us, while it is clear that the basis for the order of the first appellate authority is itself misfounded; the tribunal having in fact confirmed the disallowance for A.Y. 1996-97, as also noted by it in its order for the following assessment year, i.e., AY 1997-98. No appeal number in respect of the stated tribunal's order in the assessee's case for AY 1996-97, purportedly followed by the ld. CIT(A), has been mentioned in the impugned appellate order for us to locate the same, nor has the assessee brought the same on record or clarified this aspect (which forms the sole basis on which relief has been allowed to it by the first appellate authority) before us. Further, where is the question of the tribunal deciding this matter in May, 1999 if it had already decided the same earlier, to which, assuming so, there ought to be some reference (as also the reasons leading to it coming up for adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1996-97 and 1997-98 respectively. In view of the consistent and admitted factum of payment, the details of which were not forthcoming from the assessee, he estimated the contribution for the current year at ₹ 350 lacs, and effected a disallowance in its respect u/s. 40A(9) of the Act. The ld. CIT(A), in appeal, however, deleted the same on the basis of the order by the tribunal for assessment year 1990-91 (in TTA No. 1128/JP/1994 dated 24-02-1998), reproducing there-from in his order (para 5.2), and which also adverts to similar decisions by the Madras and Hyderabad Benches of the tribunal. The basis of the AO's order is the disallowance for the preceding year, i.e., assessment years 1996-97 and 1997-98. It is, therefore, incumbent upon us to see as to how, the facts' being similar, the tribunal has adjudicated the matter for those years, i.e., for assessment years 1996-97 and 1997-98. The tribunal for the assessment year 1996-97 (in ITA No. 449/JDP/1999, dated 18-05-2009) at para 16 in para 24 has held as under: 24. Having heard the parties and on careful perusal of the record and considering the peculiar facts and circumstances of this case, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted the said addition on the basis of the order by the first appellate authority for the assessment year 1996-97 dated 30-06-1999. It is, therefore, incumbent on us to see as to how the tribunal decided this issue for that year, as well as for the intervening year, i.e., assessment year 1997-98. Its adjudication for assessment year 1996-97 is per paras 26 to 30 of its order (in ITA No. 449/JDP/1999, dated 18-05-2009), with the findings at para 30, as under, which stand followed and reproduced by the tribunal in its order for the assessment year 1997-98 (in ITA No. 249/JU/2004 dated 24/7/2009): 30. We have heard the parties and have carefully perused the material on record with reference to precedents cited at Bar. Essentially the assessee has legal right to recover the interest. When the assessee has legal right to claim, income can be said to have accrued under the mercantile system of accounting adopted by the respondent-assessee. Further more the assessee placed no material on record to show that the principal sum has become bad. We, therefore, set aside his order and allow ground in appeal. 63.2 Nothing to suggest any change in the facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who has tended to follow the precedence, even as the matter is primary factual; accrual or otherwise of income being a matter of fact, with the assessee also not presenting its case, including the facts obtaining for the relevant year. As such, it is only considered fit and proper that the matter is restored back to the file of the AO for adjudication afresh in accordance with law per a speaking order, and by allowing proper opportunity of being heard to the assessee. I decide accordingly, which would thus be an assent order; being motivated by a different set of considerations. 63.4 The assessee's reliance on the decision in the case of CIT v. Eicher Ltd. [2010] 320 ITR 410/[2009] 185 Taxman 243 (Delhi) (copy on record) is, and particularly in view of the finding that the facts of the instant case are not determinate, of no consequence. The decision reiterates the principle that income-tax is a tax on real income, so that where real income has not in fact accrued, no tax in law could be levied. That represents trite law, for which the hon'ble High Court cites the decision in the case of Godhra Electricity Co. Ltd. v. CIT [1997] 225 ITR 746/91 Taxman 351 (SC) and CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to be set aside back to the file of the Assessing Officer for fresh determination and adjudication'? 3.(a) Whether, the adjudication of the assessee's claim in respect of 'Mine Development Expenses' (for ₹ 688.62 lakhs), made in two separate sums of ₹ 568.07 lakhs and ₹ 120.55 lakhs, is, in the facts and circumstances of the case, to be made considering it as a single claim, or separately? (b) Whether, in any view of the matter, the said issue warrants being set aside back to the file of the A.O. for considering the factual aspects of the case as well as the decision by the Tribunal for the immediately two preceding years, particularly for A.Y. 1996-97 (vide order in ITA No. 46/JU/2004, dated 30.3.2009), and a decision in light thereof, as well as the law as explained by the hon'ble courts of law, as in the case of CIT v. Pioneer Minerals (supra), or warrants being allowed as claimed, i.e., under section 37(1) of the Act, in full? 4. Whether the issue qua the disallowance under section 40A(9) of the Act (at ₹ 350 lakhs) is to be set aside for passing a speaking order in accordance with law after considering the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od expenses reflected the liability incurred in earlier years but getting crystallized in the instant year. He also submitted that in some cases, the expenses could not be accounted for in the earlier year because sanctions from management were obtained late falling in the period relevant to the instant year. Relying on certain decisions, he submitted that the entire expenditure should be allowed as deduction in the instant year irrespective of the year to which it pertains. Per contra, the learned D.R. opposed the contention put forward on behalf of the assessee. He stated that the expenditure was rightly disallowed by the learned CIT(A) by following the Tribunal's orders for the A.Ys. 1996-97 and 1997-98. 67. Before proceeding to deal with the matter, it is necessary to point out that section 255(4) of the Act deals with the situation when there is difference in opinion on any point or points between the Members of a bench. In such a case, the Members state point on which they differ by referring the matter to the President of the Tribunal for hearing on such point(s) by one or more of the other Members of the Tribunal. This sub-section further provides that such point or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch payment is made. It further observed that even if the expenses pertain to the preceding years but liability is crystallized in the current year, then the amount has to be allowed as deduction. It further held that if, however, the expenditure relates to the preceding year and simply payment is made in this year, that would not bring the case within the concept of accrual of liability expenses. That is how the matter was restored by the Tribunal to the Assessing Officer for taking a fresh decision in the light of the above directions after allowing due opportunity of being heard to the assessee. When I examine the Tribunal order for A.Ys. 1996-97 and 1997-98, it is seen that the disallowance has been made by considering the details of such expenses. The tribunal has considered the details of such expenses and then decided against the assessee. Since the Assessing Officer in the instant year did not examine the details of such expenses and simply disallowed by relying on the Tribunal orders for the A.Ys. 1996-97 and 1997-98, the view taken by the learned CIT(A) for sustaining such disallowance, cannot be accepted. In my considered opinion, the deductibility of expenses needs to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or otherwise of such expenses. On the other hand, the learned A.M. also concurred with the view taken by the learned J.M. that there can be no question of denying deduction of expenses of a closed business against the income of the other businesses, when both the businesses form part of a composite business. He, however, examined the details of such extraordinary items and came to the conclusion that it was in the nature of capital loss assessable u/s. 45 of the Act. That is how, the ground taken by the assessee was dismissed. 72. After considering the rival submissions and perusing the relevant material on record, it is observed that both the learned Members have agreed on the point than there can be no bar on allowing deduction of expenses in respect of a closed business against the income of other businesses, when it is a case of composite business Both the learned Members have also agreed that it was a case of composite business and hence the deductibility of expenses could not be marred by such considerations. It is observed that the Assessing Officer has based the disallowance of expenditure simply on the ground that it was in respect of written off amounts of a closed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e's case was covered u/s. 37(1) of the Act in so far as expenditure on mine under production at ₹ 568.07 lacs was concerned. As regards the remaining amount of ₹ 125.38 lacs, the learned CIT(A) held that this included a sum of ₹ 4.73 lacs towards depreciation which could not be allowed deduction. He, therefore, allowed deduction of the second component for a sum of ₹ 120.55 lacs. The learned J.M. upheld the view taken by the learned CIT(A) by relying on the decision taken by the Tribunal for the A.Y. 1996-97. However, the learned A.M. restored the question of deduction amounting to ₹ 568.07 lacs to the learned CIT(A) and the remaining deduction of ₹ 120.56 lacs to the Assessing Officer for deciding it in conformity with the decision taken by the Tribunal for the A.Y. 1996-97. 75. I have heard the rival submissions and perused the relevant material on record. It is observed that the learned J.M. has relied on the order passed by the Tribunal for the A.Y. 1996-97 in deleting the addition. However, on perusal of the Tribunal order for A.Y. 1996-97, it is seen that the Tribunal did not delete the disallowance as made by the Assessing Officer b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh decision in conformity with the view taken by the tribunal for such years. 78. After considering the rival submissions and perusing the relevant material on record, I find that the Tribunal for the immediately two preceding assessment years has restored the matter with the necessary direction. It is also seen that such disallowance came up for consideration by the Hon'ble High Court in assessee's own case for A.Y. 1994-95. The Hon'ble High Court also remitted the matter for fresh consideration. In view of the fact, that the Hon'ble High Court for the A.Y. 1994-95 and the Tribunal for the A.Ys. 1996-97 and 1997-98 have sent the matter back, I am of the considered opinion that the learned A.M. was justified in following the precedents by remitting the matter for fresh decision to be decided in conformity with the view expressed by the Tribunal for immediately two preceding assessment years. I therefore, agree with the view taken by the learned A.M. and hold that the learned CIT(A) was not justified in deleting the disallowance of ₹ 3.50 crores made by the Assessing Officer U/s. 40A(9) of the Act. 79. The Registry of the Tribunal is directed to list t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,99,76,000/- made on account of under valuation of stock of Zinc Concentrate, ignoring the facts and other material brought on record by the A.O. 7. directing to adopt the gross turn over for 80HHC purposes after deducting the sales tax payable, ignoring the ratio of judgment laid down by the Apex Court in the case of Sinclair Murray Co. (P.) Ltd. v. CIT [1974] 97 ITR 615. B. That the appellant craves to add, amend, alter, delete or modify any or all the above grounds of appeal before or at the time of hearing. 81. The case was heard by this Bench and draft order was finalized by the learned Judicial Member on 12/07/2012 and was sent for approval of the learned Accountant Member but the learned Accountant Member dissented from the order of the learned Judicial Member and passed a separate order on 17/10/ 2012 and finally difference of opinion were arise between them on following grounds of appeal. (i) Prior period expenses from assessee's appeal. (ii) Disallowance of extraordinary items from assessee's appeal. (iii) Mine Development Expenses from Revenue's appeal, (iv) Welfare expenses U/s. 40A(9) of the IT Act from the Revenue's appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of 'Extraordinary Items', made at ₹ 304.82 lakhs? (b) Whether the assessee's said claim can, in any case, be decided on the basis of the material on record, or is required to be set aside back to the file of the Assessing Officer for fresh determination and adjudication? 3. (a) Whether, the adjudication of the assessee's claim in respect of 'Mine Development Expenses' (for ₹ 688.62 lakhs), made in two separate sums of ₹ 568.07 lakhs and ₹ 120.55 lakhs, is, in the facts and circumstances of the case, to be made considering it as a single claim, or separately? (b) Whether, in any view of the matter, the said issue warrants being set aside back to the file of the A.O. for considering the factual aspects of the case as well as the decision by the Tribunal for the immediately two preceding years, particularly for A.Y. 1996-97 (vide order in ITA No. 46/JU/2004, dated 30.3.2009), and a decision in light thereof, as well as the law as explained by the Hon'ble courts of law, as in the case of CIT v. Pioneer Minerals [1992] 107 CTR (Raj.) 230, or warrants being allowed as claimed, i.e. under section 37(1) of the Act, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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