HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR (1) D.B. Income Tax Appeal No. 33 / 2007 C I T Jaipur ----Appellant Versus M/S Rajasthan State Mines & Mi ----Respondent (2) D.B. Income Tax Appeal No. 362 / 2008 Commissioner Of Income Tax Jai ----Appellant Versus Rajasthan State Mines And Mine ----Respondent (3) D.B. Income Tax Appeal No. 651 / 2009 C I T Jaipur ----Appellant Versus Raj State Mines & Minerals Ltd ----Respondent (4) D.B. Income Tax Appeal No. 653 / 2009 C I T Jaipur ----Appellant Versus Raj State Mines & Minerals ----Respondent (5) D.B. Income Tax Appeal No. 32 / 2011 C I T Jaipur ----Appellant Versus (2 of 10) [ ITA-33/2007] Raj State Mines And Minerals Ltd ----Respondent (6) D.B. Income Tax Appeal No. 92 / 2012 C I T Jaipur ----Appellant Versus Raj State Mines And Minerals Ltd ----Respondent (7) D.B. Income Tax Appeal No. 229 / 2012 C I T- Jaipur ----Appellant Versus Raj State Mines And Minerals Ltd ----Respondent (8) D.B. Income Tax Appeal No.63/2010 C I T- Jaipur ----Appellant Versus Raj State Mines And Minerals Ltd ----Respondent For Appellant(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Judgment 30/05/2017 (3 of 10) [ ITA-33/2007] 1. In all these appeals common question of law and facts are involved and they are filed against same assessee hence are decided by this common judgment. 2. By way of these appeals, department has challenged judgment and order of tribunal whereby tribunal has partly allowed appeal filed by department. 3. This court while admitting appeals framed following substantial questions of law:- Appeal No.33/2007 1. Whether in facts and circumstances of case and in law, ITAT was justified in allowing sum of Rs. 9,32,46,265/- as business expenditure? Appeal No.362/2008 1. Whether in facts and circumstances of case, ITAT has not acted perversely in restricting disallowance to extent of Rs. 118081/- out of Rs. 10159107/- as capital expenditure when entire amount was used for making new mines workable and to deprive benefit of enduring nature? Appeal No.651/2009 1. whether on facts and circumstances of case, Tribunal was justified in holding mine development expenditure, of not only Rs. 43,08,120/- which was not allowed by CIT(A), but also Rs. 9,36,820/- which was disallowed by CIT(A), ignoring provisions of section 37(1) of Act, 1961, and inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 2. whether on facts and circumstances of case, Tribunal was justified in holding mine development expenditure of Rs. 52,44,940/- as (4 of 10) [ ITA-33/2007] revenue expenditure, ignoring provisions of section 37(1) of Act, 1961, and inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 3. whether on facts and circumstances of case, Tribunal was justified in holding compensation of Rs. 17,72,915/- paid to land owners for acquiring mineral from land, as revenue expenditure, ignoring provisions of section 37(1) of Act, 1961, and inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 4. whether on facts and circumstances of case, Tribunal was justified in holding expenditure incurred for acquiring mining rights at Hanumangarh of Rs. 6,04,874/- as revenue expenditure, ignoring provisions of section 37(1) of Act, 1961, and inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 5. whether on facts and circumstances of case, Tribunal was justified in holding consultancy charges of Rs. 10,143,603/- as revenue expenditure, out of which expenditure of Rs. 9,02,000/- was even disallowed by CIT(A), ignoring provisions of section 37(1) of Act, 1961, and inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? Appeal No.653/2009 (1) Whether on facts and circumstances of case, Tribunal was justified in holding mine development expenditure of Rs.89,58,545/- as revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? (2) Whether on facts and circumstances of case, Tribunal was justified in holding compensation of Rs.51,32,840/-, paid to land owners from acquiring mineral from land, as revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired right of enduring nature and were thus, not (5 of 10) [ ITA-33/2007] allowable as revenue expenditure? (3) Whether on facts and circumstances of case, Tribunal was justified in holding expenditure incurred for search and development of Rs.6,04,874/-, as revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired right of enduring nature and were thus, not allowable as revenue expenditure? Appeal No.63/2010 1. whether on facts and circumstances of case, Tribunal was justified in holding compensation paid to State Government for Rock Phosphate of Rs. 10,41,80,594/- as revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 2. whether on facts and circumstances of case, Tribunal was justified in holding mine development expenditure, of not only Rs. 43,08,120/- which was not allowed by CIT(A), but also Rs. 9,36,820/- which was disallowed by CIT(A), inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 3. whether on facts and circumstances of case, Tribunal was justified in holding mine development expenditure of Rs. 52,44,940/- as revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 4. whether on facts and circumstances of case, Tribunal was justified in holding consultancy charges of Rs. 10,13,603/- as revenue expenditure of Rs. 9,02,000/- was even disallowed by CIT(A), inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? Appeal No.32/2011 1. whether Tribunal as well as CIT (A) were justified in holding expenses claimed as (6 of 10) [ ITA-33/2007] compensation for rock phosphate of Rs. 11,16,66,232/- as revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 2. whether Tribunal as well as CIT (A) were justified in holding expenses claimed as payment for development charges of Rs. 20,13,21,623/- paid to State Government for extracting gypsum and limestone is revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 3. whether on facts and circumstances of case, Tribunal was justified in holding compensation of Rs. 90,44,431/- paid to land owners/farmers for using their land for extraction of minerals, as revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired right of enduring nature and were thus, not allowable as revenue expenditure? 4. whether Tribunal as well as CIT (A) were justified in deleting disallowance of Rs. 10,00,000/- contributed by assessee to State Renewal Fund, which was disallowed by Assessing Officer as same was merely application of fund and not expenditure? Appeal No.92/2012 1. whether Tribunal as well as CIT (A) were justified in holding expenses claimed as compensation for rock phosphate of Rs. 11,50,27,957/- as revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 2. whether Tribunal as well as CIT (A) were justified in holding expenses claimed as payment for development charges of Rs. 20,52,27,181/- paid to State Government for extracting gypsum and limestone is revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 3. whether Tribunal as well as CIT (A) were justified in holding expenses claimed as compensation for Rs. 914,19,192/- paid to land (7 of 10) [ ITA-33/2007] owners/farmers for using their land for extraction of minerals, as revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired benefits of enduring nature and were thus, not allowable as revenue expenditure? 4. whether Tribunal as well as CIT (A) were justified in deleting disallowance of Rs. 10,00,000/- contributed by assessee to State Renewal Fund, which was disallowed by Assessing Officer as same was merely application of fund and not expenditure? 5. whether Tribunal as well as CIT (A) were justified in allowing expenditure of Rs. 33,66,708.50 u/s 35E of Act ignoring that same was neither expenditure for exploring not prospecting mines or minerals as required u/s 35E, but was loss suffered by assessee on account of stopping of mines, due to heavy watershed? Appeal No. 229/12 1. whether on facts and circumstances of case, Tribunal was justified in holding compensation of Rs. 66,18,737/- paid to land owners/farmers for using their land for extraction of minerals, as revenue expenditure, inspite of fact that assessee by virtue of said expenditure has acquired right of enduring nature and were thus, not allowable as revenue expenditure? 2. whether Tribunal as well as CIT (A) were justified in deleting disallowance of Rs. 10,00,000/- contributed by assessee to State Renewal Fund, which was disallowed by Assessing Officer as same was merely application of fund and not expenditure? 4. Counsel for department has contended that tribunal has committed error in passing judgment and issue is required to be answered in favour of Department. 5. Counsel for respondent-assessee has relied upon following decision of this court:- 5.1. In CIT vs. Rajasthan Mines & Minerals Ltd. D.B. ITA (8 of 10) [ ITA-33/2007] No.107/2004 decided on 17.1.2017 wherein it has been observed as under:- It is not in dispute that issue is raised in this appeal is squarely covered by Division Bench judgment of this Court in D.B. Income Tax Reference No.1/2000 (CIT, Jaipur vs. Rajasthan State Mines & Minerals Ltd.) decided on 15.9.2016 wherein it has been held as under:- "Taking into consideration fact initially Corporation has not accepted liability, therefore, observations which are made by Tribunal for year 1991-92 were in peculiar facts where liability was not accepted but subsequently for year 1992-93, Corporation has accepted liability which was shown in books of account and in view of matter additions made by tribunal for relevant year would not be applicable in changed circumstances. Since, they accepted liability, resolution which is sought to be passed on 28.8.1992 was administrative formality but for Income-tax purpose it is shown in books of account mercantile system, therefore, though point raised by Mr. Singhi is remained academic issue but facts and law in mercantile system which is debited for relevant year i.e. 1992-93. On first point, contentions raised by Mr. Singhi has doubt but in view of consideration by us relevant year debited entry in books of account for year 1992-93, therefore, resolution is passed subsequently but since it was mercantile system for year 1992-93, it will come into force. contention which has been raised by Mr. Singhi is required to be accepted, it can only be one time revenue expenditure and subsequent claim of assessee will not be acceptable and if his claim is made and accepted, it will be for department to recover tax from assessee. In that view of matter, issue is answered in favour of assessee and against Department for revenue expenses (Rs.2,96,000/-) of year 1992-93 only one time. 5.2. In CIT vs. Rajasthan Mines & Minerals Ltd. D.B. Income Tax Reference 1/2000 decided on 15.9.2016 wherein similar view was taken. (9 of 10) [ ITA-33/2007] 5.3. In Rajasthan State Mineral Development Corporation, Jaipur vs. Dy. Commissioner of Income Tax, Jaipur decided on 14.12.2016 wherein it has been observed as under:- Taking into consideration observations which are made by this court in earlier judgment of same assessee in para no. 11 & 13 holding as under:- He relied upon decision of Hon'ble Supreme Court in case of Alembic Chemical Works Co. Ltd. vs. Commissioner of Income Tax, reported in (1989) 177 ITR 0377 and Empire Jute Co. Ltd. vs. Commissioner of Income Tax, reported in (1980) 124 ITR 0001 and contended that under mercantile system, expenses were shown in year 1992-93 and even while assessment order was passed for year 1991-92, assessee was made clear that he is accepting liability and he further contended that he will not make payment which was made by State Government for expenditure incurred for survey which is being done. Therefore, Corporation had no other option to make payment which has no capital value. Taking into consideration fact initially Corporation has not accepted liability, therefore, observations which are made by Tribunal for year 1991-92 were in peculiar facts where liability was not accepted but subsequently for year 1992-93, Corporation has accepted liability which was shown in books of account and in view of matter additions made by tribunal for relevant year would not be applicable in changed circumstances. Since, they accepted liability, resolution which is sought to be passed on 28.8.1992 was administrative formality but for Income-tax purpose it is shown in books of account mercantile system, therefore, though point raised by Mr. Singhi is remained academic issue but facts and law in mercantile system which is debited for relevant year i.e. 1992-93. It is thus very clear that survey expenses are almost identical and hence required to be allowed as revenue expenses. (10 of 10) [ ITA-33/2007] In view of observations made by Supreme Court in Judgment of Empire Jute Co. Ltd. vs. Commissioner of Income Tax (Supra), we are of opinion that expenses which gives fruitful result require to be done according to necessity of relevant time and development with nature of expenses. 6. We have heard counsel for parties. 7. In view of above, issues are answered in favour of assesee and against department. It is held that expenses incurred are revenue expenditure and not capital expenditure. 8. appeals stands dismissed. copy of this judgment be placed in each file. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. BM Gandhi/3,5,7,8,9,12,14 & 15 CIT, Jaipur v. Raj State Mines & Minerals Ltd