TMI Blog2017 (10) TMI 1585X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure - HELD THAT:- NPV to the forest department was paid on account of the judgment of the Apex Court. The lesser of the land for mining was not aware of the NPV payable to forest department at the time of obtaining the lease from the Government. It was paid on account of the judgment of the Apex Court during the pendency of the mining lease. But the amount paid under the head compensatory afforestation expenses was known to the assessee at the time of leasing of the mining land. It is compulsory for each and every user of mining land to pay the afforestation expenses to forest department to compensate the use of forest land for mining towards regeneration of forest for diversion of forest to non-forest use. Since this payment is inextricably linked to the mining rights of the assessee, this payment is of capital nature and the lower authorities have rightly treated the same accordingly. We accordingly find no infirmity in the order of CIT(Appeals). Disallowance of lease rental payments - No documentary evidence to prove that crystallization was done in the impugned assessment year - HELD THAT:- No doubt lease rent is revenue expenditure and it should be debited to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but no details in support of its claim were furnished. It is also not disputed that the assessee has purchased mines at Thailand, therefore expenditure incurred in acquiring capital asset has to be capital expenditure. The CIT(Appeals) has adjudicated the issue in detail in his order and we find no infirmity therein. Accordingly, we confirm his order. Nature of expenditure - Stamp duty for registration and processing fee of the mining lease was claimed to be revenue expenditure - HELD THAT:- We find that the lower authorities have adjudicated the issue following the judgment of Hon'ble jurisdictional High Court in the case of Hotel Rajmahal [ 1984 (3) TMI 24 - KARNATAKA HIGH COURT ]. Since the lower authorities have decided the issue following the judgment of the Hon'ble jurisdictional High Court, we find no infirmity therein. Accordingly, we confirm the order of CIT(Appeals). Disallowance of mining lease rent - DR has contended that annual lease rent is fixed at the time of granting the licence for mining - HELD THAT:- No evidence has been placed on record to demonstrate that this liability was ever disputed by the assessee. Therefore, it is to be debited to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 107.05 crores has to be made to the Conservator of Forests, Bangalore on the basis of decision of the Hon ble Supreme Court. This expenditure is non-recurring in nature and the benefit of this expenditure will be enjoyed by the assessee over several years i.e., during the entire period of lease of the mine. It was also observed by the AO that this payment of NPV is not for removal of restriction or obstruction, but to facilitate the assessee to mine during the lease period and is inextricably linked to the mining rights of the assessee. Without payment of the NPV, the assessee cannot do the mining activities. He accordingly treated the same to be capital expenditure and added back to the total income of the assessee. 4. The assessee preferred an appeal before the CIT(Appeals) with the submission that payment of NPV was made in pursuance of Supreme Court judgment by the users of forest land for non-forest purposes at the specified rates depending upon the density of the forest land with regard to the presence of flora and fauna in the course of mining activities. The payment was required to be made at the time of renewal of lease for mining. The amount payable in pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the facts of the case, contents of the assessment order, written submission of the assessee and case laws referred and relied by the AO and Assessee. The Hon'ble ITAT., B, Bench Bangalore in the case of M/s. Ramgad Minerals Mining Private Ltd., Baladota Enclave, Hospet Vs. The ACIT, Circle- 1, Bellary, it was observed that, we find force in the submission of the learned counsel that payments to the Government are to be paid once the mining lease is obtained and such payments are governed by various Acts along with the Apex Court making a ruling for State Governments to participate in the granting of mining lease by recovering compensation when their forests are uprooted. Therefore for this purpose, the funds are used for a natural regeneration which the assessee participates indirectly. Therefore at no point of time could it be said that the assessee had incurred a capital expenditure giving the assessee a benefit of enduring nature for the purpose of earning segmented income to render the same to income tax. In other words, the authorities below have not pointed out the income generated against the purported deferred revenue expenditure so proposed by them in their impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for diversion of forest to non-forest use, thus it was inextricably linked to the mining rights of the assessee. Without payment of NPV and compensatory afforestation expenses, the renewal of mining lease would not be possible. The AO Accordingly treated this expenditure as capital expenditure and disallowed the claim of the assessee. 11. The assessee preferred an appeal before the CIT(Appeals) with the submission that the nature of the payment of this compensatory afforestation expenses is also similar to payment of NPV. Therefore, the reasons given for deleting the disallowance of NPV be applied here and this payment should also be treated as revenue expenditure. 12. The CIT(Appeals) re-examined the issue in the light of assessee s contentions and has confirmed the disallowance having observed that payment is made by each of the user of the forest land for mining towards regeneration of forest for diversion of forest to non-forest use. Thus, it was inextricably linked to mining rights of the appellant. Without payment of compensatory afforestation expenses, the renewal of mining lease would not be possible. The assessee has made the payment for continuing his right of minin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 187.50/hectare as supervision charges to the forest department. The lease rental is payable annually. For actual usage of land, royalty is paid based on tonnage of ore mined and sold. Thus the lease rental becomes a fixed expenditure (the amount varying depending on the rates applied on the land allotted to the lease holder). The assessee claimed it to be revenue expenditure and claimed an expenditure of ₹ 3,10,63,145 on this account. Major part of lease relate to 1994 to 2006 not relevant to impugned assessment year i.e., AY 2007-08. The lease rent relatable to AY 2007-08 is only ₹ 33,11,699. Considering this, balance amount of ₹ 2,77,51,446 not relatable to impugned assessment year, the AO disallowed the same. 17. Aggrieved, the assessee has preferred an appeal before the CIT(Appeals) with the submission that the AO has failed to appreciate that the demand was raised only in the relevant year in which it got crystallized in accordance with the Government notification. Before the CIT(Appeals) the assessee has admitted that the demand stood vacated by the judgment of the High Court and therefore the same would be amenable to section 41(1) of the Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed under mercantile system of accounting as held by the Hon'ble Supreme Court in the case of Bharat Earth Movers Ltd. vs. CIT, 245 ITR 428 (SC). 4. The learned CIT (Appeals) ought to have allowed the foreign travel expenses to the tune of ₹ 38,05,986/ - as the expenditure was in the course of business and for the purpose of business and also for the expansion of the business and accordingly liable to be allowed in full as revenue expenditure. 5. The learned CIT (Appeals) ought to have allowed stamp fee for registration and processing fee of the mining lease amounting to ₹ 24,82,670/ - since the expenditure incurred was in the course of business and no new capital asset has emerged on account of the expenditure. 6. The learned CIT (Appeals) ought to have followed the ratio laid down by the Hon'ble Supreme Court in Empire Jute Co.Ltd vs. CIT, 124 ITR 1 (SC) and allowed the stamp fee for registration and processing fee incurred in full. 7. The learned CIT (Appeals) ought to have allowed the mining lease rent to the tune of ₹ 21,81,32,476 / - since the expenditure having got crystallized during the relevant assessment year, the same was requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontingent liability cannot be allowed as an expenditure u/s. 37 of the Act and placed reliance upon the judgment of the Hon ble Supreme Court in the case of Indian Molasses Co. (P) Ltd. v. CIT, 37 ITR 66 (SC) and the judgment of the Hon ble Bombay High Court in the case of CIT v. Kesar Sugar Works Ltd., 239 ITR 398. The AO accordingly disallowed the provision of ₹ 30,01,400 made towards medical liability for future claim and added to the total income of the assessee. 23. Aggrieved, the assessee preferred an appeal and filed written submissions before the CIT(Appeals). The CIT(Appeals) re-examined the claim of assessee and was not convinced with the contention of the assessee and he accordingly confirmed the order of AO, having observed that payment was not merely contingent but the liability itself was also contingent. 24. Aggrieved, the assessee has preferred an appeal before the Tribunal reiterating its contentions as raised before the CIT(Appeals). Before the CIT(Appeals), though the assessee has contended that it has paid fringe benefit tax on these payments, but no evidence has been filed in this regard. Undisputedly, the payment of medical reimbursement was made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has purchased mines at Thailand, therefore expenditure incurred in acquiring capital asset has to be capital expenditure. The CIT(Appeals) has adjudicated the issue in detail in his order and we find no infirmity therein. Accordingly, we confirm his order. 30. Apropos ground No.5 6, it is noticed that stamp duty for registration and processing fee of the mining lease was claimed to be revenue expenditure by the assessee, but the AO treated the same to be capital expenditure having relied upon the Hon'ble jurisdictional High Court in the case of Hotel Rajmahal v. CIT, 152 ITR 218. 31. Aggrieved the assessee preferred appeal before the CIT(Appeals), but the CIT(Appeals) has following the judgment of Hon'ble jurisdictional High Court confirmed the order of AO as mining lease was obtained for 20 years and the expenditure incurred relating to obtaining mining lease is of capital nature. 32. Now the assessee is before us and reiterated its contentions as raised before the CIT(Appeals). 33. The ld. DR, besides placing reliance upon the order of CIT(Appeals) has contended that whatever expenditure is incurred by way of licence fees or registration charge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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