D.b. Income Tax Appeal v. M/S Raj State Mines And Mineral Ltd., C-89

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 147 / 2015Principal Commissioner of Income Tax-II, New Central revenueBuilding, Statue Circle, Jaipur (Raj.) ----Appellant Versus M/S Raj State Mines And Mineral Ltd., C-89-90, Lal Kothi Scheme,Jaipur. PIN/GIR No.AAACR7857H ----Respondent _____________________________________________________ For Appellant(s) : Mr. Aditya Vijay & Mr. Narendra BhatiFor Respondent(s) : Ms. Archana for Mr. Sanjay Jhanwar _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERIHON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 12/10/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal of the department as well as cross-objections of the assessee. 2.This court while admitting the appeal on 21.07.2017framed following substantial questions of law: “1. Whether on the facts and circumstances of thecase, the Tribunal was justified in holding theexpenses claimed as compensation for rockphosphate of Rs.9,83,22,430/- as revenueexpenditure, inspite of the fact that the assessee byvirtue of said expenditure has acquired benefits ofenduring nature and were thus, not allowable asrevenue expenditure? 2. Whether on the facts and circumstances of thecase, the Tribunal was justified in holding thecompensation of Rs.1,27,07,572/- paid to landowners/ farmers for using their land for extraction ofminerals, as revenue expenditure, inspite of the factthat the assessee by virtue of said expenditure hasacquired right of enduring nature and were thus, notallowable as revenue expenditure? 3. Whether on the facts and circumstances of the case, the Tribunal was justified in deleting thedisallowance of Rs.10,00,000/- contributed by theassessee to State Renewal Fund, which wasdisallowed by the Assessing Officer as the same wasmerely an application of fund and not anexpenditure? 4. Whether on the facts and circumstances of thecase, the Tribunal was justified in upholding thedeletion of disallowance of expenses ofRs.10,72,500/-, claimed on account of contributionto Social Welfare activities, despite the fact that thesame was not incurred for the purposes of businessas required under Section 37(1) of the Act? “ 3. Counsel for respondent contended that the issue is now covered by the decision of this court in the case of D.B. IncomeTax Appeal No.33/2007 CIT Jaipur vs. M/s Rajasthan State Mines& Mi, decided on 30.05.2017 wherein while considering the issues, this court in Paragraph 4 to 7, observed as under:- “4. Counsel for the department has contended thatthe tribunal has committed error in passing thejudgment and the issue is required to be answeredin favour of the Department. 5. Counsel for the respondent-assessee has reliedupon the following decision of this court:- 5.1. In CIT vs. Rajasthan Mines & Minerals Ltd.D.B. ITA No.107/2004 decided on 17.1.2017wherein it has been observed as under:- “It is not in dispute that the issue is raised inthis appeal is squarely covered by the DivisionBench judgment of this Court in D.B. IncomeTax Reference No.1/2000 (CIT, Jaipur vs.Rajasthan State Mines & Minerals Ltd.) decidedon 15.9.2016 wherein it has been held asunder:- "Taking into consideration the factinitially the Corporation has not accepted theliability, therefore, the observations which aremade by the Tribunal for the year 1991-92 werein the peculiar facts where the liability was notaccepted but subsequently for the year 1992-93, the Corporation has accepted the liabilitywhich was shown in the books of account and inview of the matter additions made by the “It is not in dispute that the issue is raised inthis appeal is squarely covered by the DivisionBench judgment of this Court in D.B. IncomeTax Reference No.1/2000 (CIT, Jaipur vs.Rajasthan State Mines & Minerals Ltd.) decidedon 15.9.2016 wherein it has been held asunder:- "Taking into consideration the factinitially the Corporation has not accepted theliability, therefore, the observations which aremade by the Tribunal for the year 1991-92 werein the peculiar facts where the liability was notaccepted but subsequently for the year 1992-93, the Corporation has accepted the liabilitywhich was shown in the books of account and inview of the matter additions made by the tribunal for the relevant year would not beapplicable in the changed circumstances. Since,they accepted the liability, the resolution whichis sought to be passed on 28.8.1992 wasadministrative formality but for the Income-taxpurpose it is shown in the books of accountmercantile system, therefore, though the pointraised by Mr. Singhi is remained an academicissue but facts and law in mercantile systemwhich is debited for the relevant year i.e. 1992-93. On first point, the contentions raised by Mr.Singhi has a doubt but in view of theconsideration by us the relevant year debitedentry in the books of account for the year 1992-93, therefore, resolution is passed subsequentlybut since it was mercantile system for the year1992-93, it will come into force. The contentionwhich has been raised by Mr. Singhi is requiredto be accepted, it can only be one time revenueexpenditure and subsequent claim of theassessee will not be acceptable and if his claimis made and accepted, it will be for thedepartment to recover the tax from theassessee. In that view of the matter, the issue isanswered in favour of the assessee and againstthe Department for the revenue expenses(Rs.2,96,000/-) of year 1992-93 only one time.” 5.2. In CIT vs. Rajasthan Mines & Minerals Ltd.D.B. Income Tax Reference 1/2000 decided on15.9.2016 wherein similar view was taken. 5.3. In Rajasthan State Mineral DevelopmentCorporation, Jaipur vs. Dy. Commissioner ofIncome Tax, Jaipur decided on 14.12.2016 whereinit has been observed as under:- Taking into consideration the observations whichare made by this court in earlier judgment of thesame assessee in para no. 11 & 13 holding asunder:- He relied upon the decision of Hon'bleSupreme Court in the case of Alembic ChemicalWorks Co. Ltd. vs. Commissioner of Income Tax,reported in (1989) 177 ITR 0377 and Empire JuteCo. Ltd. vs. Commissioner of Income Tax,reported in (1980) 124 ITR 0001 and contendedthat under mercantile system, the expenses wereshown in the year 1992-93 and even whileassessment order was passed for the year 1991-92, the assessee was made clear that he isaccepting the liability and he further contendedthat he will not make payment which was madeby the State Government for the expenditureincurred for the survey which is being done.Therefore, the Corporation had no other option to make payment which has no capital value. Takinginto consideration the fact initially the Corporationhas not accepted the liability, therefore, theobservations which are made by the Tribunal forthe year 1991-92 were in the peculiar facts wherethe liability was not accepted but subsequentlyfor the year 1992-93, the Corporation hasaccepted the liability which was shown in thebooks of account and in view of the matteradditions made by the tribunal for the relevantyear would not be applicable in the changedcircumstances. Since, they accepted the liability,the resolution which is sought to be passed on28.8.1992 was administrative formality but forthe Income-tax purpose it is shown in the booksof account mercantile system, therefore, thoughthe point raised by Mr. Singhi is remained anacademic issue but facts and law in mercantilesystem which is debited for the relevant year i.e.1992-93. It is thus very clear that the surveyexpenses are almost identical and hence requiredto be allowed as revenue expenses. In view of theobservations made by the Supreme Court in theJudgment of Empire Jute Co. Ltd. vs.Commissioner of Income Tax (Supra), we are ofthe opinion that the expenses which gives fruitfulresult require to be done according to thenecessity of relevant time and development withthe nature of expenses. 6. We have heard counsel for the parties. 7. In view of the above, the issues are answeredin favour of the assesee and against thedepartment. It is held that the expenses incurredare revenue expenditure and not capitalexpenditure.” 4.In that view of the matter, the issues are answered in favour of assessee against the department. 5.The appeal stands dismissed. (VIJAY KUMAR VYAS)J. (K.S.JHAVERI)J.