Principal Commissioner Of Incometax, (Central), Kolkata-1 v. M/S. Rungta Sons Pvt. Ltd

OD-8 ITAT/295/2017 IA No.GA/1/2017 (Old No.GA/2836/2017) IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE PRINCIPAL COMMISSIONER OF INCOMETAX, (CENTRAL), KOLKATA-1 -Versus- M/S. RUNGTA SONS PVT. LTD. Appearance:Mr. Smarajit Roychowdhury, Adv....for the appellant. Mr. Subash Agarwal, Adv....for the respondent. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM -And- The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA Date : 10[th] December, 2021. The Court : This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 (the ‘Act’ in brevity) isdirected against the order dated 15[th] March, 2017 passed by theIncome Tax Appellate Tribunal, “C” Bench, Kolkata (the ‘Tribunal’in short) in IT(SS)A No.42/Kol/2015 for the assessment year 2011-12. The revenue has raised the following substantial questions of law for consideration: (i)Whether on the facts and circumstances of the casethe Learned Income Tax Appellate Tribunal, has erred in law in upholding the deletion of addition of Net PresentValue of Rs.12,14,61,050/- and in treating the NetPresent Value as revenue expenses whereas true nature iscapital expenditure?(ii)Whether on the facts and circumstances of the casethe Learned Income Tax Appellate Tribunal, has erred inlaw in not considering the decision of the Hon’bleSupreme Court of India in the case of Bikaner Gypsum Ltd.vs. CIT reported in [1991] 187 ITR 39 (SC) and in thecase of R.R.B. Seth Moolchand Sugam Chand vs. CITreported in [1972] 86 ITR 647 (SC)?” We have heard Mr. Smarajit Roychowdhury learned counselfor the appellant/revenue and Mr. Subash Agarwal, learned counselfor the respondent/assessee. It is not disputed before us that identical substantialquestions of law were considered by this Court in the case ofgroup company of the respondent/assessee in ITAT/133/2015 and byjudgment dated 21[st] June, 2018 the appeal filed by the revenue wasdismissed. The operative portion of the judgment reads asfollows: “Both the Commissioner (Appeals) and the AppellateTribunal have referred to a judgment reported at 107 ITR 39(Bikaner Gypsums Ltd. vs. CIT), where a similar question arose. Alicence in respect of a certain area had been granted in favourof the assessee in that case for undertaking mining operations.The railways purported to set up railway tracks and even astation on the land without reference to the assessee andunmindful of the assessee’s underground rights in respect thereof. The dispute between the assessee and the railways wasresolved upon the relevant stakeholders including the assessee,the railways and the State Government agreeing to share theadditional expenses for removing the railway station and tracksto allow the area to be mined by the assessee. The payment madeby the assessee in that case fell for consideration of theSupreme Court. The Supreme Court observed that since theassessee was entitled to carry on mining operations and suchpayment had been made for the removal of the difficulty in theassessee carrying on its business in accordance with its licence,the expenditure had to be regarded as a revenue expenditure andcould not be treated as a capital expense. The dictum in Bikaner Gypsums Ltd. is squarelyapplicable in the present case. This is not a case where theassessee, upon payment of the NPV, obtaind a fresh right toundertake any business. That right of the assessee was covered bythe licence previously granted in its favour by the State ofOdisha. The NPV payment is a king of a compensation for usingforest land for non-forest purpose pursuant to an order of theSupreme Court. The payment of the NPV in this case, like in thecase of Bikaner Gypsums Ltd., has to be regarded as a revenueexpenditure in accordance with the ration in the Bikaner GypsumsLtd. case, since it was a one-time payment made to remove anobstacle from the path of the assessee carrying on its businessoperations. The dictum in Bikaner Gypsums Ltd. is squarelyapplicable in the present case. This is not a case where theassessee, upon payment of the NPV, obtaind a fresh right toundertake any business. That right of the assessee was covered bythe licence previously granted in its favour by the State ofOdisha. The NPV payment is a king of a compensation for usingforest land for non-forest purpose pursuant to an order of theSupreme Court. The payment of the NPV in this case, like in thecase of Bikaner Gypsums Ltd., has to be regarded as a revenueexpenditure in accordance with the ration in the Bikaner GypsumsLtd. case, since it was a one-time payment made to remove anobstacle from the path of the assessee carrying on its businessoperations. On behalf of the Revenue, a judgment reported at 86 ITR647 (R.B.Seth Moolchand Sugachand v CIT) has been cited where aprospecting licence fee was found to be a capital expenditure.However, as is evident from paragraph 11 of the report, the feewas paid for obtaining a prospecting licence and it was such feethat entitled the business to be conducted in the relevant area.The distinction between the judgment in R.B.Seth MoolchandSugachand and the judgment in Bikaner Gypsums Ltd. is that inBikaner Gypsums Ltd. there was a pre-existing right and theexpenditure was incurred not to assert a new right but to exercise a pre-existing right. In the present case, it is thesame as in Bikaner Gypsums Ltd. since the mining licence waspreviously issued in favour of the assessee and the payment ofthe NPV did not extend the area of the assessee’s miningoperations, it merely removed an impediment in the carrying on ofthe operations in terms of the original licence. In R.B.Seth Moolchand Sugachand a fee was paid toobtain a prospecting licence. In other words, the right to carryon any prospecting or mining business was conditional upon thefee being paid. Even if the assessee in that case had beenconducting mining or prospecting operations prior to obtainingthe relevant licence, it was relevant licence which gave theassessee the right in respect of a particular area and that isthe distinguishing feature. For the reasons aforesaid, the concurrent findings ofthe Commissioner (Appeals) and the Appellate Tribunal based on along-standing judgment of the Supreme Court does not call for anyinterference.” Thus, following the above decision, the appeal filed bythe revenue is dismissed. In the result, the substantialquestions of law are answered against the revenue. The connected application for stay (IA No.GA/1/2017) alsostands closed. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)