DCIT, SAMBALPUR vs. M/S. EAST INDIA MINERALS LTD., KEONJHAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA Nos. 31 & 32/CTK/2015 Assessment Years :2007-08 & 2010-2011

DCIT, Circle 1(1), Sambalpur Vs. M/s. East India Minerals Ltd., 3rd floor, Barbil Trade Centre, Near Bus Stand, Main Road, Barbil. PAN/GIR No. AAACE 3944 j (Appellant) .. ( Respondent)

Assessee by : NONE Revenue by : Shri D.K.Pradhan, DR

Date of Hearing : 15/06/ 2017 Date of Pronouncement : 27 /06/ 2017

O R D E R Per N.S.Saini, AM These are appeals filed by the revenue against the order of CIT(A)-

II, Bhubaneswar, dated 7.10.2014, for the assessment year 2007-08 and

dated 17.10.2014 for the assessment year 2010-2011.

for hearing and neither any adjournment was filed. Hence, we proceed to

decide the appeal of the revenue exparte qua the respondent assessee after

hearing ld D.R. and on the basis of materials available on record.

2 ITA Nos. 31 & 32/CT K/ 2015 Asse ssment Years :2 00 7-0 8 & 20 10- 201 1 3. The first common ground of appeal taken in both the appeals is that

the CIT(A) was not justified in allowing depreciation of Rs.14,05,500/- for

both the assessment years on the leasehold property only because there

was a judgment in favour of the assessee on the same matter by the ITAT,

Cuttack in an earlier assessment year ignoring that the assets were

acquired prior to 1.4.1998.

assessee has claimed Rs.14,05,550/- as depreciation on an original capital

value of Rs.2,81,10,000/- being leasehold rights on land. The depreciation

was claimed u/s.32(1) (ii) as business or commercial right from the

assessment year 2004-05 since leasehold rights valued at Rs.2,81,10,000/-

was treated by the assessee as an intangible asset. The rights were stated

as having been acquired after 1.4.1998 and the project itself bearing the

rights was commissioned on 1.9.1999. As against a normal rate of 25%

on WDV for similar assets allowed under the Income tax Act, the assessee

claimed a lower rate of 5% on Straight Line method since they had been

given the right to use the leasehold property for a period of 20 years. In

the assessment year 2008-09, the submissions of the assessee were not

accepted by the Assessing Officer and the depreciation claimed of

Rs.14,05,200/- was disallowed and added back as the assessee’s taxable

income.

assessment year 2007-08, the assessment was reopened u/s.147 of the

3 ITA Nos. 31 & 32/CT K/ 2015 Asse ssment Years :2 00 7-0 8 & 20 10- 201 1 Act and on identical issue of claim of depreciation u/s.32(1)(ii) of the Act

of Rs.14,05,500/- was disallowed. Similarly, the claim of depreciation for

the assessment year 2010-2011 was disallowed by the Assessing Officer.

observing as under:

“… It is determined that the claim of depreciation denied by the AO “was indeed the subject matter of a decision handed down for the Assessment year 2008-09 by the Jurisdictional ITAT, Cuttack Bench in the same case as that of the appellant. In adherence to this decision (ITA No.224/CTK/2012 dated 25.6.2012) that is favourable to the appellant and contains all the relevant details, I delete the disallowance of depreciation claimed of Rs.14,05,500/-. ….”

the order of the CIT(A) in allowing the claim of depreciation of the assessee

following the order of the Tribunal in the case of the assessee itself in earlier

years, he could not point any specific error in the order of the CIT(A). He

also could not bring any material on record to show that the order of the

Tribunal in the case of the assessee itself for assessment year 2008-09 was

varied in appeal by any higher forum. Hence, we find no merits in this

appeals of the revenue and, accordingly, they are dismissed.

of appeal that the CIT(A) failed to appreciate the fact that the expenses in

respect of overburden removal claimed by the assessee cannot be termed

as an operation relating to prospecting for any mineral u/s.35E.

4 ITA Nos. 31 & 32/CT K/ 2015 Asse ssment Years :2 00 7-0 8 & 20 10- 201 1 9. Brief facts of the case are that the Assessing Officer observed that

the assessee has claimed deduction of Rs.20,12,041/- under section 35E of

the Act. He referred to column 15(a) of the audit report which refers to

Annexure-A of the audit report for the relevant claim. He required the

assessee to give details of the expenditure on which it was claiming to be

subject of section 35E. The details were submitted by the assessee. He

observed that the expenditure do not fall within the scope of section

referred to and hence, cannot be accepted and disallowed deduction for

Rs.20,12,041/-.

nature of amortizations @ 1/10th of the total of prescribed expenses

incurred by an Indian resident engaged in any operations relating to

prospecting, for, or extraction or production of, any mineral, wholly and

exclusively on any operations relating to prospecting for any mineral or

group of associated minerals specified in part A or Part B, respectively, of

the Seventh Schedule or on the development of a mine or other natural

deposit of any such mineral or group of associated minerals. Any portion

thereof met directly or indirectly by any other person or authority and any

sale, salvage, compensation or insurance moneys realised by the assessee

in respect of any property or rights brought into existence as a result of the

expenditure will be excluded from the claim of expenses. He observed

that also excluded will be expenses :

“(i) on the acquisition of the site of the source of any mineral or group of associated minerals or of any rights in or over such site;

5 ITA Nos. 31 & 32/CT K/ 2015 Asse ssment Years :2 00 7-0 8 & 20 10- 201 1 (ii) on the acquist5in of the deposits of such mineral or group of associated minerals or of any rights in or over such deposits; or (iii) of a capital nature in respect of any building, machinery, plant or furniture for which allowance by way of depreciation is admissible under section 32. He, therefore, observed that it is not clear from the order of the Assessing

Officer as to which of the above exclusions were considered applicable in

the instant case by the Assessing Officer. Upon examination of column

15(a) of the audit report and the associated Annexure A provided by the

assessee, it is found that the claim of expenses u/s.35E has been made

towards the incontrovertibly applicable site and Mining Development

Operations. He observed that amortisation of expenses incurred at the

applicable rate is a genuine claim of deduction that needs to be allowed in

line with the provisions of Income tax Act. There is nothing on record to

indicate the Assessing Officer has determined that any of the actions or

claims of the assessee are contrary to or violate in any matter or do not

sufficiently adhere to the applicable statutory provisions. The impugned

order is defective on this count and the disallowance of Rs.20,12,041/- on

account of it being arbitrary, summary and completely unsubstantiated..

record, we find that the ld D.R. could not point out any specific mistake in

the order of the CIT(A). Hence, we confirm the order of the CIT(A) and

dismiss the ground of appeal of the revenue.

6 ITA Nos. 31 & 32/CT K/ 2015 Asse ssment Years :2 00 7-0 8 & 20 10- 201 1

BY ORDER,

SR.PRIVATE SECRETARY ITAT, Cuttack