Dy. Commissioner Of Income Tax v. Timblo Pvt. Ltd., Through Md

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 66 OF 2012 DY. COMMISSIONER OF INCOME TAX Versus TIMBLO PVT. LTD., THROUGH MD ... Appellant... Respondent Ms. Asha A. Desai, Advocate for the Appellant.Shri P.J. Pardiwalla, Senior Advocate with Shri M.S. Sonak and ShriJeetendra Supekar, Advocates for the Respondent. P.C.: -Coram:S. J. VAZIFDAR &F. M. REIS, JJ.-Date:5th November, 2012 This is an appeal under Section 260-A of the Income Tax Actagainst the order of the Tribunal dated 29/02/2012 in ITANo.160/PNJ/2011 and ITA No.161/PNJ/2011 pertaining to theassessment year 2004-05 and 2006-07. The appellant seeks to raisethe following questions of law:- A. Whether on the facts and circumstances of the case theTribunal is correct in holding that the assessing officer cannot makeadjustment to the addition u/s 80HHC in the assessment passed u/s143(3) r.w.s.153A as it amounted to the review when particularly insearch assessment proceedings are made u/s 153A, and the issueregarding the provisions of section 80HHC can be reviewed as theassessment made u/s 153A is a fresh assessment? B. Whether on the facts and circumstances of the case, theTribunal erred in holding that review is not possible by relying on thedecision of CIT Vs. Gokuldas reported in 333 ITR 214 (Kar) which was on the revisionary powers of CIT u/s 263 and clearlydistinguishable 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 thehead be reduced by 90% of gross hire charges and not on net hirecharges. D. Whether the Tribunal is correct in law in holding that one timeamount made to the forest Department towards Net Present Value(NPV) and afforestation compensation is not a capital expenditurebut revenue expenditure? E. Without prejudice to the above, the Tribunal ought to haveatleast held that the above said expenditure incurred by the assesseeshould have been treated as deferred revenue expenditure to beallowable on proportionate basis for the entire period of lease, as thelease deed with the State Government for mining activities was formore than a year and the compensation paid to the Forest Departmenttowards afforestation is a time fee giving benefit of enduring naturein 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 theassesee/respondent and against the appellant/Revenue in view of thejudgment of the Supreme Court in ACG Associated Capsules Pvt.Ltd. V/s. Commissioner of Income-tax reported in (2012) 343 ITR0089. The Supreme Court held that ninety percent of not the grossinterest but only the net interest is liable to be included in the profits of the business of the assessee as computed under the heads "Profitsand gains of business or profession" while making the computationunder Section 80HHC. 3. The issue raised in para 5(C) therefore is not a substantialquestion 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 theappellant and in favour of the assessee in view of the order of thisCourt dated 6/02/2012 in the case of The Commissioner of IncomeTax V/s. Dr. Prafulla R. Hede and Anr. in TXA No.15/2012. In thatappeal also the assessee was directed to pay the net present value fordiversion of forest land for the purpose of mining. The DivisionBench held the expenditure so incurred to be for commercialexpediency and that it should therefore not be treated as expenditureof capital nature. 6. In view of this judgment question (D) does not give rise to asubstantial question of law. 7. Re-question (E): 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 theappellant and in favour of the assessee in view of the order of thisCourt dated 6/02/2012 in the case of The Commissioner of IncomeTax V/s. Dr. Prafulla R. Hede and Anr. in TXA No.15/2012. In thatappeal also the assessee was directed to pay the net present value fordiversion of forest land for the purpose of mining. The DivisionBench held the expenditure so incurred to be for commercialexpediency and that it should therefore not be treated as expenditureof capital nature. 6. In view of this judgment question (D) does not give rise to asubstantial question of law. 7. Re-question (E): The assessee follows the mercantile system. It admittedly paid theamounts in as lump sum during the relevant assessment year. Thereis nothing to indicate that the payment was an advance payment inrespect of payments spread over the duration of the mining lease. Infact, the payments which were liable to be made in this respect wereirrespective of the period of the mining lease. Nothing to thecontrary 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. NH F. M. REIS, J.