TaxTMI 
TaxTMI 
TaxTMI 
2008 (4) TMI 381
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....ctivity in relation to such mines apart from mining. It was explained that in the case of underground mines like coal mine, the overburden removal is a separate activity from mining whereas in the case of open cast mines like lignite mines, the overburden of removal was a continuous operation which is carried on side by side with the production of lignite. It was argued that the process of production of lignite and removal of overburden are interdependent and co-exist and were inalienable. Reliance was also placed on the decision of the Tribunal in the case of the same assessee for the asst. yrs. 1958-59 and 1960-61 dt. 20th April, 1966. 4. After considering the above submissions, the CIT observed that s. 35E was inserted by Taxation Laws (Amendment) Act, 1970 w.e.f. 1st April, 1971 which means that the provision was applicable from the asst. yr. 1971-72 onwards. According to him, the expenditure incurred by the assessee for removal of overburden was mine development expenditure and accordingly he held the assessment order to be erroneous insofar as it is prejudicial to the interest of the Revenue. Ultimately he directed the AO to modify the assessment order in accordance with the....
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.... paper book which is copy of the order passed by the then IAC, Range-IV under s. 144B of the Act for the asst. yr. 1980-81. He submitted that vide para 4 of this order, similar expenditure was held to be allowable despite s. 35E of the Act being on the statute book for that year. He argued that similar expenditure has been allowed in almost all the years and as a sample he referred to the copy of computation of business income for the asst. yr. 1987-88 and invited our attention to p. 7 of the paper book, wherein vide item (f), expenditure on development of mines was though capitalised but claimed as revenue expenditure and was accordingly allowed by the Department. He emphatically argued that when similar type of expenditure has been allowed in earlier years, the Department could not have disturbed that trend in this year and that too by way of a revisionary order passed under s. 263 of the Act. 7. The learned counsel for the assessee further argued that the AO has enquired about the nature of this expenditure and in this connection invited our attention to p. 3 of the paper book II where vide item No. 14, the following queries were raised: (i) details of expenditure incurred for....
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....d by the assessee on removal of overburden was clearly covered by sub-s. (2) of s. 35E of the Act. He vehemently argued that earlier decision of the Tribunal cannot be applied because s. 35E was introduced only w.e.f. the asst. yr. 1971-72 whereas the Tribunal's decision relates to the asst. yrs. 1958-59 and 1960-61. He further submitted that even if, the expenditure was allowed in earlier years without making detailed enquiries, it does not mean that the same mistake should be perpetuated permanently. He submitted that there is no question of application of s. 37 because one of the Explanations in s. 37 is that the expenditure should not be covered by the provisions of ss. 30 to 36 of the Act and since the expenditure is covered by s. 35E of the Act, it cannot be allowed under s. 37 of the IT Act. While strongly supporting the order of the CIT, he justified the disallowance of expenditure incurred on removal of overburden during the year. 10. We have considered the rival submissions carefully in the light of the material on record. The relevant provisions of s. 35E read as under: "35E. (1) Where an assessee, being an Indian Company or a person (other than a company) who is resid....
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....extensive view of landscape. (iii) a place likely to yield mineral deposits. (iv) search for mineral deposits, especially by means of drilling and excavation. Cambridge International Dictionary of English: (i) to search for gold, oil or other valuable substances on or under the surface of the earth. (ii) to prospect for oil/gold. The Chambers Dictionary: (i) a place though likely to yield a valuable mineral (mining). (ii) the yield of a test of a sample from such place. (iii) to look around, to make a search, especially for chances of mining. (iv) to explore, search, surveyor test for profitable minerals. (v) searching a district for minerals with, a view to further operations. The above meanings unambiguously show that the word prospect means, efforts or possibility of finding minerals in some particular area. From the facts on record it is clear that these mines were identified long back and even mining operations were started in 1957. Therefore, it cannot be said that expenditure was incurred for the purpose of identifying or prospecting the mines. In fact, the expenditure has been incurred on continuous basis in removal of overburden, which means the upper crust of ....
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....ial stage, has to be continuously widened. For this purpose, while on the one hand, the excavation of lignite continues, on the other hand, the excavation of the overburden also continues. Part of the overburden that is thus removed is used to fill up the pit that has been originally dug so that the land might be levelled and no permanent pits be left in the land. We actually found the work of the removal of the overburden going on simultaneously with the work of the removal of the lignite. The removal of the overburden does not stop when the stage of the winning of the lignite is reached. Until the entire area in which the lignite deposits occur is covered, and the entire lignite is won from this area, this process of removal of the overburden will continue simultaneously with the process of the removal of the lignite." Then, after analysing the whole situation and relevant industry's letter, it was observed vide para 20 of the above order as under: "20. Applying these general principles to the facts of the present case, we have no hesitation in coming to the conclusion that the expenditure in question is not a capital expenditure but a revenue expenditure. The expenditure is in....