Tribunal rulings on surface rights, interest deduction, and more; remand for verification.

M/s Barmer Lignite Mining Corp. Ltd. Versus Deputy Commissioner of Income Tax, Circle-6, Jaipur And Vice-Versa

M/s Barmer Lignite Mining Corp. Ltd. Versus Deputy Commissioner of Income Tax, Circle-6, Jaipur And Vice-Versa - Tmi Issues Involved:
1. Taxation of interest receipt credited to Capital Work in Process (CWIP).
2. Deduction of interest expenses against interest income.
3. Disallowance of Corporate Social Responsibility (CSR) expenses.
4. Amortization of surface rights.
5. Depreciation on surface rights as intangible assets.
6. Deduction under section 35E of the Income Tax Act.
7. Depreciation on intangible assets in the nature of business rights.
8. Addition of land tax paid.
9. Deduction of mine closure expenses.

Issue-wise Detailed Analysis:

1. Taxation of Interest Receipt Credited to CWIP:
The assessee argued that interest receipts should not be taxed as income from other sources but should be reduced from the cost of the project, citing the Supreme Court decision in CIT Vs. Bokaro Steels Ltd. The Tribunal, however, upheld the AO's addition based on the Supreme Court ruling in Tuticorin Alkali Chemicals & Fertilizers Ltd., confirming the interest income as taxable under "income from other sources."

2. Deduction of Interest Expenses Against Interest Income:
The assessee claimed that interest expenses incurred should be allowed as a deduction under Section 57 of the Act. The Tribunal remanded this issue back to the AO for verification of the direct nexus between the interest expenses and the interest income earned.

3. Disallowance of CSR Expenses:
The assessee contended that CSR expenses were mandatory as per the Ministry of Environment & Forests and should be allowed as business expenses. The Tribunal upheld the AO's disallowance, stating that the provision for CSR expenses was not based on past experience and was not scientifically deduced.

4. Amortization of Surface Rights:
The assessee claimed amortization of surface rights expenses over the lease period of 30 years. The Tribunal remanded the issue back to the AO for verification, directing the AO to ascertain whether RSMML had claimed similar expenses and to decide accordingly based on the law and case precedents.

5. Depreciation on Surface Rights as Intangible Assets:
The Tribunal found that the nature of the rights acquired by the assessee needed further verification. The issue was remanded to the AO to verify whether the rights acquired could be classified as know-how or other business or commercial rights of similar nature, and if so, to allow depreciation accordingly.

6. Deduction Under Section 35E:
The Tribunal did not address this issue in detail as it was not pressed by the assessee during the hearing.

7. Depreciation on Intangible Assets in the Nature of Business Rights:
The assessee argued that the rights acquired from RSMML were intangible assets eligible for depreciation. The Tribunal remanded the issue back to the AO to verify the nature of the rights and to allow depreciation if the rights were found to be intangible assets as defined under Section 32(1)(ii).

8. Addition of Land Tax Paid:
The Tribunal upheld the CIT(A)'s decision to allow the deduction of land tax paid, stating that the liability was crystallized and paid under the direction of the High Court, making it allowable under Section 43B of the Act.

9. Deduction of Mine Closure Expenses:
The Tribunal upheld the CIT(A)'s decision to allow the deduction of mine closure expenses, following the jurisdictional ITAT's decision in the case of Rajasthan State Mines & Minerals Ltd., which held that mine closure expenses are ascertainable liabilities and allowable under Section 37(1) of the Act.

Conclusion:
The Tribunal partly allowed the assessee's appeal for statistical purposes and dismissed the Revenue's appeal. The issues of amortization of surface rights, deduction of interest expenses, and depreciation on intangible assets were remanded to the AO for further verification and decision in accordance with the law. The Tribunal upheld the CIT(A)'s decisions on the addition of land tax paid and deduction of mine closure expenses.