M/S SOVA,PANAJI vs. PR. COMMISSIONER OF INCOME TAX, PANAJI
Facts
The assessee, a partnership firm engaged in iron ore mining, filed a return declaring NIL income and claiming carried forward losses. The assessment was completed, disallowing business expenses due to no operations and taxing certain receipts as income from other sources (IOS), while allowing carried forward business losses. The PCIT initiated revisionary proceedings under Section 263, contending that the Assessing Officer erred in allowing set-off of IOS income against business losses, allowing carried forward losses, and treating stamp duty and registration fees for mining lease renewal as revenue expenditure.
Held
The Tribunal held that stamp duty for mining lease renewal is capital in nature and eligible for depreciation, while registration fees are revenue expenditure. It upheld the PCIT's revision regarding stamp duty but vacated the PCIT's actions concerning the set-off of IOS income against business losses and the denial of carried forward losses, as these issues were not properly confronted to the assessee in the show cause notice.
Key Issues
The key legal issues were whether stamp duty and registration fees for mining lease renewal are capital or revenue expenditure, and whether the PCIT had jurisdiction under Section 263 to revise the assessment regarding set-off of losses and carried forward losses without proper notice to the assessee.
Sections Cited
Section 253(1), Section 263, Section 143(3), Section 56, Section 143(2), Section 32, Section 37(1), Section 154, Section 246A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PANAJI BENCH, GOA
Before: HON’BLE SHRI PAVAN KUMAR GADALE & SHRI G. D. PADMAHSHALI
IN THE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH, GOA BEFORE HON’BLE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER ITA No. 024/PAN/2024 Assessment Years: 2018-19 M/s Sova Salgaocar Bhavan, Altinho, Panaji, Goa-403001. PAN: AACFS8862Q . . . . . . . Appellant V/s Pr. Commissioner of Income Tax, Panaji, Goa. . . . . . . . Respondent
Represented Assessee by: Mr Sukhsagar Syal [‘Ld. AR’] Revenue by: Mr M Satish [‘Ld. DR’] Date of conclusive Hearing : 05/03/2026 Date of Pronouncement : 10/03/2026 ORDER PER G. D. PADMAHSHALI; This appeal is filed u/s 253(1) of the Income-tax Act,
1961 [‘the Act’] impugns revisionary order dt.
01/12/2023 passed u/s 263 of the Act by the
Principal Commissioner of Income Tax, Panaji Goa
[‘Ld. PCIT’] which partly overturned order of
assessment dt. 16/04/2021 passed u/s 143(3) of the
ITAT-Panaji Page 1 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 Act by National Faceless e-Asstt. Centre, Delhi [‘Ld. NFeAC’] for assessment year 2018-19.[‘AY’]
Briefly stated pertinent facts arising out of the case records are that; 2.1 The assessee is a partnership firm engaged in the business of mining of iron ore minerals and allied activities. For the year under consideration the assessee filed its return on 29/09/2018 declaring ₹NIL income with a claim for carried forward [‘C/f’] of total losses of ₹44,90,40,717/- of which current year business losses including unabsorbed depreciation of ₹3,21,300/- were ₹27,38,53,538/-. The return of the assessee was selected for scrutiny by issue of notice u/s 143(2) of the Act dt. 22/09/2019 and the consequential assessment u/s 143(3) of the Act was completed wherein; (i) in the absence of business operation all expenditure incurred & claimed as deductible under the head profits & gain of business ITAT-Panaji Page 2 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 profession [‘PGBP’] were disallowed and (ii) receipt/credit representing (a) reimbursement of extraction cost incurred ₹4,42,48,443/-, (b) credit balances written off ₹14,03,127/-, (c) interest on bank deposits ₹16,39,202/- & (d) interest on tax-refund ₹52,586/- etc., were brought to tax as income from other sources u/s 56 of the Act [‘IOS’] and assessed accordingly further allowing to c/f current year business losses to the tune of ₹22,65,10,180/-
2.2 Post assessment, the assessment records were called & perused u/s 263 of the Act wherein it was unveil to the Ld. PCIT that, while framing the assessment the Ld. NFeAC erred in (i) allowing set off of income ₹4,73,43,358/-brought to tax u/h IOS against current business losses of ₹27,38,53,538/-, (ii) erred allowing c/f of balance loss ₹22,65,10,180/- and (iii) further erred in treating stamp duty payment
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M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 of ₹2025Lakhs & registration fees of ₹101.25Lakhs incurred for renewal of mining lease as revenue in nature while disallowing the same for capitalisation in absence of business operations. In view thereof by a show cause notice [‘SCN’] u/s 263 dt. 15/11/2023 was issued to the assessee. After considering the assessee’s response furnished vide letter dt. 29/11/2023, the Ld. PCIT placing reliance on ‘Assam Bengal Cement Co. Ltd. Vs CIT’ [1955, 27 ITR 34 (SC)], ‘Pingle Industries Ltd. Vs CIT’ [1960 40 ITR 67 (SC)], ‘Aditya Minerals (P) Ltd. Vs CIT’ [1999, 106 Taxman 337 (SC)], ‘Gobind Sugar Mills Ltd. Vs CIT’ [1998, 117 ITR 747 (Cal)], culminated the revisionary proceedings by directing the Ld. AO to pass a consequential order by; (i) treating sums paid on renewal of mining lease as capital in nature (ii) denying set-off of losses against IOS income and (iii) rejecting c/f of consequential business losses. ITAT-Panaji Page 4 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 3. Aggrieved by revisionary order passed u/s 263 of the Act the assessee firm is in appeal before this tribunal on following grounds; 1. On the facts and circumstances of the case and law the Ld. CIT erred in assuming jurisdiction u/s 263 of the Act
On the facts and circumstances of the case and in law, the Ld. CIT erred in holding that the order passed u/s 143(3) is erroneous insofar as it is prejudicial to the interest of the Revenue. 3. On the facts and circumstances of the case and in law, the Ld. CIT erred in holding that stamp duty fee and registration fee are capital in nature and connot be allowed as deduction under the Act. 4. The appellant craves to add, alter, amend or delete all or any other the grounds of appeal before or during the course of hearing. ITAT-Panaji Page 5 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 4. The forth ground remained jettisoned. By first two legal grounds the appellant conjointly challenged the revisionary jurisdiction and by ground number 3 it contested that sum paid for renewal of mining lease in the form of stamp duty and incidental registration charges are revenue in nature & not capital expenditure [‘capex’].
During the course of hearing, the Ld. AR Mr Syal for the benefit of rival parties candidly adverted to the recent decision in ‘M/s Bandekar Brothers Pvt. Ltd. Vs ACIT’ [2026, 183 taxmann.com 675 (Panaji)] and submitted that the issue regarding nature of sum expended/incurred on renewal of mining lease has been considered by Ld. Co-ordinate bench, which following the binding judicial precedence laid in ‘Traders and Miners Ltd. Vs CIT’ [1955, 27 ITR 341 (Pat)], ‘R.K. Palshikar (HUF) Vs CIT’ [1988, 56 CCH
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M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 217 (SC)], ‘A.R. Krishnamurthy Vs CIT’ [1989, 43 Taxman 30 (SC)], ‘Rajendra Mining Syndicate v. CIT’ [1961, 43 ITR 460 (AP)], ‘Aditya Minerals (P.) Ltd. v. CIT’ (supra) and ‘Gotan Lime Syndicate v. CIT’ [1966, 59 ITR 718 (SC)] held the sum paid in the form of ‘stamp duty’ for renewal of mining lease as ‘capital in nature’ thus eligible for depreciation as intangible assets u/s 32 of the Act and ‘registration fees’ as revenue in nature thus deductible u/s 37(1) of the Act. Without contesting but placing reliance thereon (supra), the Ld. Sayal contended that, to the extent stamp duty paid & claimed in the year under consideration and accepted by the Ld. NFeAC as ‘revenue’ can alone be treated as erroneous and thus prejudicial to the interest of the revenue. In effect to such extent the impugned revisionary order qualifies for upholding and the balance revisionary action of Ld. PCIT must be vacated as contra-legem. ITAT-Panaji Page 7 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 6. Now coming twin issue of (i) rejection to set-off IOS income against the current business losses and (ii) rejection of c/f of balance current year business losses as dilated in para 8 of the impugned order, the Ld. counsel submitted that, vide SCN dt. 15/11/2023 the assessee was called upon to explain solitary issue of expenditure incurred/paid in relation to renewal of mining lease, therefore the impugned action of (i) rejection of c/f of balance business losses to next year for set-off and (ii) denial to set off current year business losses against the income brought to tax u/h IOS were out of the scope of 263 proceeding. In support of this challenge, the Ld. AR argued that though it is settled law that, the revisionary proceeding once triggered with one issue, beyond an iota of doubt could be extended to unlimited issues thereafter and such new issues can be subjected to revision in view of the Hon’ble Apex court decision in ITAT-Panaji Page 8 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 ‘CIT Vs Amitabh Bachchan’ [2016, 69 taxmann.com 170 (SC)] but for each such new or additional issue coming to light & to the scope of 263 after the issuance of first SCN is required to be specifically & invariably be confronted to the assessee in view of the decision in ‘PCIT Vs Universal Music India (P) Ltd.’ [2023, 155 taxmann.com 230 (Bom)]. The Ld. PCIT neither confronted his proposition to reverse the set- off of IOS against the current year business losses nor the denial of c/f of such balance losses to next year. The failure of Ld. PCIT to put assessee to notice is fatal to revisionary scope & action. By the former judicial precedent (supra) both the actions of Ld. PCIT viz; (i) denial of set of current business loss against IOS income and (ii) denial of c/f of remaining current year business loss admittedly intra-jurisdictional but extra-territorial, therefore para 8 of the impugned order to the extent contrary to the law be vacated. ITAT-Panaji Page 9 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 7. To reinforce that the revisionary scope of Ld. PCIT in the present case was limited to ‘sums paid’ for renewal of mining lease the Ld. AR further stated that, impugned twin issues were even sub-judice before Ld. CIT(A) in appeal by the assessee firm. Since impugned twin issues were pending for adjudication before an authority/officer of equal rank therefore the Ld. PCIT was ceased of his jurisdiction to revise. On the direction of the bench, on the day of conclusive hearing the appellant submitted a copy of first appeal filed before Ld. CIT(A) in form No 35 u/s 246A of the Act. Same was perused and noted that the said appeal was filed by the assessee on 17/02/2024 which is much after passing of impugned order under challenge therefore former arguments advanced by the Ld. AR and plea of the appellant assessee without necessitating much deliberation thereon/therefor stands rejected at the very threshold. ITAT-Panaji Page 10 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 8. Per contra, Ld. DR Mr Satish placing reliance on the impugned order submitted that, the action of the Ld. PCIT in holding the stamp duty as capital in first place in view of the decision of this very bench to be upheld and in consequence the business loss of the current year relating thereto originally allowed by the Ld. NFeAC to be c/f to the next year for being set-off in computation-sheet to be deleted/reversed. Insofar as the balance current year business loss is concerned, such loss arising out of remaining revenue expenditure incurred & claimed in the return of income (inclusive of registration fees to be allowed by this order) can only qualify for c/f and remaining business loss (if any) should by virtue of para 8 of the impugned order be rejected for c/f.
To buttress that impugned action of the Ld. PCIT is clarificatory in nature the Ld. DR further stated
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M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 that, the direction dilated at para 8 of the impugned order was with a view to ensure that the assessee shouldn’t on one hand get expenditure capitalised for claiming depreciation and on other hand claim them doubly for c/f of loss owning to disallowance. Insofar as the denial of set-off against IOS income is concerned being ceased the matter in the assessment and concretised by revisionary action with a view to remove anomaly crept-in income computation sheet communicated to the assessee. The order giving effect [‘OGE’] passed in pursuance of impugned order has set-in-order the computation in accordance with assessment framed and direction contained in revisionary order. Since assessee claimed the computation of income as part of assessment, the Revenue equally press OGE as part of impugned order for necessary consideration & adjudication as the bench deem fit. ITAT-Panaji Page 12 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 10. We have heard the rival party’s submission & arguments, subject to rule 18 of Income Tax Appellate Rules, 1963 [‘ITAT-Rules’] perused the material placed on records and considered the facts in the light of settled position of law which were clued-up to the respective parties for their rebuttal.
Before we advance, in the larger of justice we shall first freeze the facts exercising our jurisdiction to give additional findings independent of findings rendered by tax authorities below and in doing so we place our reliance on the judgement of Hon’ble jurisdictional High Court in ‘CIT Vs Zuari Finance Ltd.’ [2004, 271 ITR 538(Bom)] further on Hon’ble Delhi High Court’s decision in the case of ‘Mathur Marketing (P) Ltd. Vs CIT’ [2018, 160 Taxmann.com 91 (Del)]. We note that, during the pendency of revisionary proceeding before the Ld. PCIT, the jurisdictional assessing officer, the
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M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 Ld. Asstt Commissioner of Income Tax Circle-1(1), Panaji Goa [‘Ld. AO’] vide notice dt. 30/11/2023 issued u/s 154 of the Act called upon the appellant to show cause as to why mistake in allowing excessive business loss of the year under consideration should not be corrected & restricted to ₹16,52,81,642/- instead of incorrect c/f of ₹22,65,10,180/- allowed in computation of income by the Ld. NFeAC. The assessee vide its reply dt. 12/12/2023 per contra requested to rectify the c/f current business loss to ₹27,38,53,538/-. Upon a specific query about the status of such rectification proceedings, the appellant submitted that same was still pending before the Ld. AO. Upon direction, the Revenue submitted a report from the Ld. AO who vide letter dt. 22/08/2025 confirmed that, in view of 263 order rejecting the business loss was passed, the appellant’s former request rendered baseless for rectification. ITAT-Panaji Page 14 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 12. Though the ground No 1 & 2 together alleged the basis, validity and legality of revisionary action u/s 263 of the Act, but the appellant after referring to the decision of Ld. Co-ordinate bench in ‘Bandekar Brothers Pvt Ltd.’ (supra) could hardly contest non- satisfaction or fulfilment of twofold condition necessary as the basis for invocation of revisionary action its legality and validity thereof. However, for the completeness of adjudication, it shall be imperative to state that, the action of the Ld. NFeAC in treating the sums paid in the form of stamp duty by the appellant firm for renewal of mining lease as revenue while disallowing in the same for capitalisation in the absence of business operation was not only grievously erroneous but also immensely prejudicial to the interest of the revenue. The aforestated treatment by the Ld. NFeAC in view of the binding judicial precedent had set a bad trend and ITAT-Panaji Page 15 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 pattern for similar assessment therefore, interference by the revisionary authority was called for and necessarily acted upon u/s 263 of the Act. The satisfaction of twin conditions essential for invocation in the present case since found satisfied therefore the impugned action of Ld. PCIT in reversing the Ld. NFeAC’s treatment finds fortified in view of the binding judicial precedence laid by the Hon’ble Supreme Court in ‘Malabar Industrial Co Ltd. Vs CIT’ [2000, 109 Taxman 66 (SC)], wherein vide para 9 of the judgement their hon’ble lordships laid that;
‘There must be some grievous error in the Order passed by the Income-tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration. In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act, and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue,’ (Emphasis supplied)
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M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 13. We also note that, before the Ld. PCIT in revisionary proceedings there was same tangible material as was available with Ld. NFeAC while framing the assessment in the appellant’s case and subsequent verification of such material revealed the absence of necessary and adequate inquiries into the nature & character of sums paid for renewal of mining lease which remained unattended by the Ld. NFeAC before disallowing them in the absence of business operations. The action of Ld. PCIT therefore also find support by negative application of decision of the Hon’ble Jurisdictional Bombay High Court in the case of ‘CIT Vs Gabriel India Ltd’ [1993, 203 ITR 108 (Bom)], wherein their hon’ble lordships at para 14 have held as under; ‘We, therefore hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue.’ (emphasis supplied) ITAT-Panaji Page 17 of 20
M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 14. In omnibus, in the light of aforestated judicial precedents we are of the considered view that, the action of Ld. PCIT in invoking the revisionary proceedings is perfectly sustainable in law, to the effect holding the order of assessment passed by the Ld. NFeAC as erroneous & prejudicial to the interest of revenue. Therefore, finding no infirmity therewith we dismiss the both the legal ground no. 1 & 2.
Now coming to ground no. 3, which challenges non-deductibility of both ‘stamp duty’ & registration fees’ under the provisions of the Act. In relation to these sums paid for renewal of mining lease we note that, the action of Ld. PCIT in treating the ‘stamp duty’ as capital in nature finds merit in view of the decision candidly referred (supra) by the appellant itself, however insofar as the ‘registration fees’ incurred/paid in relation to execution of mining lease
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M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 deed as ‘capital in nature’ finds meritless in view of our decision in ‘M/s Bandekar Brothers Pvt Ltd.’ (supra). Therefore, to this limited extent the Ld. PCIT’s action stands vacated. In result, the ground no 3 stands partly allowed.
Before we depart, we shall also deal with the concern of the appellant with regard to para 8 of the impugned order. It goes without saying that, once an item of expenditure claimed & allowed as ‘revenue’ is reversed as ‘capital’ the consequential effect thereof in law is automatic. In upshot the effect of this adjudication shall ensure that current year total business loss (including unabsorbed depreciation) returned by the appellant vide its return filed on 29/09/2018 shall on one hand be reduced by stamp duty of ₹2025Lakhs which is to be capitalised and on other hand be increased by (i) income ₹473.43Lakhs
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M/s Sova Vs PCIT ITA No. 024/PAN/2024 AY: 2018-19 brought to tax u/h IOS u/s 56 of the Act separately as per OGE passed, and further increased by (ii) consequential claim for depreciation on stamp duty capitalisation as ‘license’ being an intangible asset be granted. In directing the Revenue to allow consequential depreciation on capitalisation of ‘stamp duty’ as ‘license’ an intangible asset we place our reliance on the decision of Hon’ble Jurisdictional Bombay High Court in the case of ‘Ciba of India Ltd. Vs CIT’ [1993, 202 ITR 1 (Bom)]. The concern of the appellant about the para 8 of the impugned order stands answered accordingly. 17. In result, the appeal of the assessee is PARTLY ALLOWED in aforestated terms. In terms of rule 34 of ITAT Rules, 1963 the order pronounced in the open court on date mentioned hereinbefore.
-S/d- -S/d- PAVAN KUMAR GADALE G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER Panaji/Dt: 10th March, 2026. Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)/NFAC Concerned 4. PCIT Concerned 5. DR, ITAT, Panaji Bench, Goa 6. Guard File By Order, Sr. Private Secretary / AR ITAT, Panaji. ITAT-Panaji Page 20 of 20
