Southwest Mining Ltd. Vs DCIT (ITAT Bangalore)
Bangalore ITAT Allows Mine Development Expenditure as Revenue Expense; Deletes Double Addition
The Bangalore ITAT held that mine development and overburden removal expenses incurred by a mining contractor are allowable as revenue expenditure under Section 37(1) and are not governed by Section 35E. The Tribunal noted that Southwest Mining Ltd. was merely a mining contractor engaged by Barmer Lignite Mining Company Ltd. and neither owned the mines nor the lignite extracted. Following its own decision in the assessee’s earlier year, the Tribunal observed that overburden removal is an integral and recurring part of the mining process and does not result in acquisition of any capital asset or enduring benefit. Therefore, the expenditure could not be forced into the amortisation provisions of Section 35E merely because it related to mining activities. The Revenue’s appeal challenging the allowance of mine development expenditure was accordingly dismissed.
In the assessee’s appeal, the Tribunal found that the CIT(A) had allowed only the net mine development expenditure of ₹5.33 crore while simultaneously confirming taxation of ₹11.09 crore received from lignite excavation during the development period. This resulted in a double addition of the same amount. Accepting the position of both parties, the Tribunal directed the Assessing Officer to delete the duplicate addition of ₹11.09 crore. Further, regarding an additional claim under Section 40(a)(ia), the Tribunal held that expenditure disallowed in an earlier year for non-deduction of TDS becomes allowable in the year in which tax is deducted and deposited. It therefore restored the matter to the Assessing Officer for verification and directed allowance of the deduction if the conditions were satisfied.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These are cross-appeals filed by both parties for assessment year 2012-13 against the order of the National Faceless Appeal Centre, Delhi, dated 25 June 2025. In that order, the assessee’s appeal against the assessment order passed under section 143(3) of the Income Tax Act, 1961, dated 27 February 2015 by the Deputy Commissioner of Income Tax, Circle 6(1)(2), Bengaluru, was partly allowed. Aggrieved by the order, both parties are in appeal.
