Income Tax Appellate Tribunal - Panji
Gangadhar Narsingdas Agrawal(Huf), ... vs Department Of Income Tax on 20 March, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
PANAJI BENCH, PANAJI
BEFORE SHRI P. K. BANSAL, HON'BLE ACCOUNTANT MEMBER
AND SHRI D.T. GARASIA, HON'BLE JUDICIAL MEMBER
ITA No. 426/PNJ/2013
(Assessment Year-2009-10)
The Assistant Commissioner of Vs. Shri Gangadhar Narsingdas
Income Tax, Circle-1, Margao, Goa Agrawal (HUF), Anand Bhuvan,
(Appellant) Station Road, Margao-Goa.
PAN:AABHG4804R
(Respondent)
Appellant by : Smt. Sonal Sonkavde Ld. DR.
Respondent by : Shri Mohan B. Pyati, CA.
Date of Hearing : 20/03/2014
Date of Pronouncement : 09/05/2014
ORDER
PER: D.T. GARASIA This appeal has been filed by the department against the order of CIT(A), Bangalore, order dated 11th October 2013 for the Assessment Year 2009-10.
2. The following grounds are raised in this appeal read as under:
"1. The order of ld. CIT(A)-VI, Bangalore is opposed to law and fact of the case.
2. The ld. CIT(A)-VI, Bangalore has erred in treating a sum of Rs. 1,44,51,897/- paid to Deputy Conservator of Forest towards compensatory aforestation charges for the degraded forest land as Revenue expenditure as against the capital expenditure and deleted the addition made by the AO.
3. The appellant craves leave to add, amend or alter any of the grounds of appeal either before or at the time of hearing."
3. The short facts of the case are that the assessee is in business of iron ore mining and power generation through wind mills. The assessee has claimed expenditure of Rs.1,44,51,897/- towards payment made by the assessee to Dy.
2. ITA No. 426/PNJ/2013(A.Y 2009-10) ACIT vs. Shri Gangadhar Narsingdas Agrawal (HUF) Conservator of Forests, Goa as compensatory aforestation charges over the degraded Forest Land. The AO was of the view that it is a capital expenditure and he has treated this expenditure as a capital expenditure. The assessee has claimed before the AO he has paid the said sum in compliance with the order of Supreme Court dated 04.01.2008 as compensatory aforestation charges for carrying out mining activities without the approval under the Forest Conservator Act 1980. Therefore, it must be treated as revenue expenditure. The AO has treat this as a revenue expenditure.
4. The matter carried to CIT and CIT has allowed the appeal by observing as under:
"4. During the course of appeal, the appellant has reiterated its stand taken before the Assessing Officer. The appellant has also produced before me, the orders of Hon'ble High Court of Bombay at Goa in Tax Appeal No.66 of 2012 in the case of DCIT vs Timblo Pvt Ltd and Tax Appeal No.15 of 2012 in the case of CIT vs Dr Prafull R Hede and Anr.
5. In the said order, i.e. in the High Court of Bombay at Goa, in the case of DCIT vs Timblo Pvt Ltd, in Tax Appeal No.66 of 2012, a similar issue was before the Hon'ble Court with regard to payment of net present value by the mining lessees and the Court has held that :-
"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 6.022012 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 asexpenditure of capital nature."
In the referred order of Hon'ble High Court i.e. the High Court of Bombay at Goa, in Tax Appeal No.15 of 2012 in the case of CIT vs Dr Prafull R Hede and Anr., the Hon'ble Court while deciding the issue held that "We agree with them and we are of the opinion that they do not give rise to any question of law, requiring interference by this Court in its appellate powers. The expenditure so incurred i for commercial expediency and should not be treated as expenditure of capital nature."
In view of the above orders of the Hon'ble High Court, both being of the jurisdictional High Court with respect to the cases pertaining to Goa, the payment on net present value as aforestation charges in respect of the mining lessees already obtained has been decided and is a covered issue and treated as revenue expenditure.
3. ITA No. 426/PNJ/2013(A.Y 2009-10) ACIT vs. Shri Gangadhar Narsingdas Agrawal (HUF) Following the same, in this case also, the expenditure of 1,44,51,897/- is held as revenue expenditure and is allowed."
5. We have heard the rival contention of both the parties. Looking to the facts and circumstances of the case, we find that the assessee has paid the 'compensation' for use of forest area for mining. Forest are/land used by assessee is a capital asset and anything paid for acquiring a capital asset is capital expenditure and not a revenue expenditure. But in this case the assessee has not acquired any capital asset but assessee has paid the amount of compensation for carrying out mining activities and the assessee has paid compensation as charges for degrading the forest land and the expenditure is incurred wholly and exclusively for the purpose of mining business and same has been treated as revenue expenditure by CIT(A). We find that similar issue has come up before Hon'ble Bombay High Court in the case of Deputy Commissioner of Income Tax vs. Timblo Pvt. Ltd. in Tax Appeal No. 66/2012 wherein the question No. D which read as under:
"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 aforestation compensation is not a capital expenditure but revenue expenditure?´ Wherein the Hon'ble High Court has decided this issue by observing as under:
"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."
From this above decision of Hon'ble Bombay High Court, we are of the view that Commissioner of Income Tax is justified in holding the payment on net present value as aforestation charges in respect of the mining lessees already
4. ITA No. 426/PNJ/2013(A.Y 2009-10) ACIT vs. Shri Gangadhar Narsingdas Agrawal (HUF) obtained has been decided and is treated as revenue expenditure. Therefore, we respectfully following the same, dismiss the departments appeal.
6. In the result, appeal of the department is dismissed.
Order pronounced in the open Court on 9.5.2014.
Sd/- Sd/-
(P.K. BANSAL) (D.T. GARASIA)
Accountant Member Judicial Member
Place : PANAJI / GOA
Dated : 9.5.2014
P.S.- *PK*
Copy to :
(1) Appellant
(2) Respondent
(3) CIT concerned
(4) CIT(A) concerned
(5) D.R
(6) Guard file
True copy,
By order