DY. COMMISSIONER OF INCOME TAX vs. TIMBLO PVT. LTD., THROUGH MD

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 66 OF 2012 DY. COMMISSIONER OF INCOME TAX ... Appellant Versus TIMBLO PVT. LTD., THROUGH MD ... Respondent Ms. Asha A. Desai, Advocate for the Appellant. Shri P.J. Pardiwalla, Senior Advocate with Shri M.S. Sonak and Shri Jeetendra Supekar, Advocates for the Respondent. Coram:- S. J. VAZIFDAR & F. M. REIS, JJ. Date:- 5th November, 2012 P.C.: This is an appeal under Section 260-A of the Income Tax Act against the order of the Tribunal dated 29/02/2012 in ITA No.160/PNJ/2011 and ITA No.161/PNJ/2011 pertaining to the assessment year 2004-05 and 2006-07. The appellant seeks to raise the following questions of law:- A. Whether on the facts and circumstances of the case the Tribunal is correct in holding that the assessing officer cannot make adjustment to the addition u/s 80HHC in the assessment passed u/s 143(3) r.w.s.153A as it amounted to the review when particularly in search assessment proceedings are made u/s 153A, and the issue regarding the provisions of section 80HHC can be reviewed as the assessment made u/s 153A is a fresh assessment? B. Whether on the facts and circumstances of the case, the Tribunal erred in holding that review is not possible by relying on the decision of CIT Vs. Gokuldas reported in 333 ITR 214 (Kar) which

was on the revisionary powers of CIT u/s 263 and clearly distinguishable to the present case which was completed u/s 143(3) r.w.s. 153A? C. The Tribunal ought to have appreciated that the Explanation (baa) to section 80HHC also makes it clear that while computing 'Business Profits' the profits and gains of business as computed the head be reduced by 90% of gross hire charges and not on net hire charges. D. Whether the Tribunal is correct in law in holding that one time amount made to the forest Department towards Net Present Value (NPV) and afforestation compensation is not a capital expenditure but revenue expenditure? E. Without prejudice to the above, the Tribunal ought to have atleast held that the above said expenditure incurred by the assessee should have been treated as deferred revenue expenditure to be allowable on proportionate basis for the entire period of lease, as the lease deed with the State Government for mining activities was for more than a year and the compensation paid to the Forest Department towards afforestation is a time fee giving benefit of enduring nature in the form of a right to extract minerals over the period of lease. 2. Re-question (C): The issue is liable to be answered in favour of the assesee/respondent and against the appellant/Revenue in view of the judgment of the Supreme Court in ACG Associated Capsules Pvt. Ltd. V/s. Commissioner of Income-tax reported in (2012) 343 ITR 0089. The Supreme Court held that ninety percent of not the gross interest but only the net interest is liable to be included in the profits

of the business of the assessee as computed under the heads "Profits and gains of business or profession" while making the computation under Section 80HHC. 3. The issue raised in para 5(C) therefore is not a substantial question of law. 4. In view of the finding qua question (C) above, the questions (A) & (B) do not survive. 5. The issue raised in paragraph 5(D) is covered against the appellant and in favour of the assessee in view of the order of this Court dated 6/02/2012 in the case of The Commissioner of Income Tax V/s. Dr. Prafulla R. Hede and Anr. in TXA No.15/2012. In that appeal also the assessee was directed to pay the net present value for diversion of forest land for the purpose of mining. The Division Bench held the expenditure so incurred to be for commercial expediency and that it should therefore not be treated as expenditure of capital nature. 6. In view of this judgment question (D) does not give rise to a substantial question of law. 7. Re-question (E): The assessee follows the mercantile system. It admittedly paid the amounts in as lump sum during the relevant assessment year. There is nothing to indicate that the payment was an advance payment in respect of payments spread over the duration of the mining lease. In fact, the payments which were liable to be made in this respect were irrespective of the period of the mining lease. Nothing to the contrary has been indicated. The issue raised in paragraph 5(E) does

not raise to a substantial question of law. 8. The appeal is therefore dismissed. S. J. VAZIFDAR, J. F. M. REIS, J. NH