TaxTMI 
TaxTMI 
2010 (1) TMI 39
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....y ground taken by the revenue in this appeal before the Tribunal was that the Commissioner of Income Tax (Appeals) had erred in deleting the addition of Rs 1,61,80,156/- made by the Assessing Officer inasmuch as according to the revenue the Commissioner of Income Tax (Appeals) had not appreciated the provisions contained in Section 35 E of the Act which, according to the revenue, were clearly applicable. Thus, the entire controversy before us is limited to the question of applicability of Section 35E of the Income Tax Act, 1961 (hereinafter referred to as the said Act'). 3. The facts are that the assessee, which is a company engaged in the business of prospecting and exploring ores and minerals, had filed a return declaring a loss of Rs ....
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....imed as business losses which are allowed to be carried forward for 8 years. Therefore, the change in accounting policy is a colourable device to understate the income tax liability of the assessee company because if the accounting policy is not changed, the expenses incurred more than 4 years prior to year of commercial production will be a dead loss for the company. (v) Regarding the revenue source of the company, the assessee has replied that it can generate revenue on two counts, namely, sale/disposal of data collected and preferential right for mining. It is thus very clear that at this stage the company has not reached at a stage where any revenue can be generated, it is in a stage of exploration only where it is looking for the mines....
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....tones, aluminum, titanium, iron ore, coal, mica, apalite, chrome, copper, gypsum, lead manganese, molybdenum, nickel, platinum, uranium, rutile, sulphur, tin, zinc, zircon, bauxite, tungsten, sands, stones, soils, chalk, clay, china-clay, bentonite, boryles, calcite, lignite, rockphosphate, brimstone, brine vanadium, sulphate and other base and precious materials and to hold prospecting licenses and any other licenses required for the above mentioned activities and to sell or otherwise transfer any of these licenses and all related data, information and technology and physical assets. 2. To act as consultants/ advisors, experts and technical collaborators to render technical and consultancy services in all area of prospecting, exploring ....
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.... based purely on the facts of the present case. 8. With regard to the applicability of the provisions of Section 35E, the Tribunal came to the conclusion that unless and until there is commercial production, the said provisions would not apply. Section 35 E(1) and (2) read as under:- 35E. (1) Where an assessee, being an Indian company or a person (other than a company) who is resident in India, is engaged in any operations relating to prospecting for, or extraction or production of, any mineral and incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2), the assessee shall, in accordance with and subject to the provisions of this section, be allowed for each one of the relevant previous years a deductio....
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....ed minerals specified in Part A or Part B, respectively, of the Seventh Schedule, commences; (c) relevant previous years means the ten previous years beginning with the year of commercial production. Upon a plain reading of the said provisions of Section 35E, it is apparent that unless and until there is commercial production, the provisions of Section 35E (1) would be unworkable. The expression year of commercial production referred to in Section 35E (2) is defined in Section 35E(5) (b) to mean the previous year in which as a result of any operation relating to prospecting, commercial production of any mineral or any or more of the minerals commences. Thus, unless and until there is actual commercial production, the phrase year of comme....