The Assessing Officer found that the assessee company acquires land from government for exploration of coal out of the designated allotment of land. The assessee claimed before the Assessing Officer that the amount paid for the lease land are the commercial assets of the company. The price paid is actually for purchase of a mining right which is a capital expenditure. The Assessing Officer also noted that in the preceding year, such a claim has been disallowed by the CIT(A)and the Tribunal. Therefore, the Assessing officer did not accept the claim of the assessee and disallowed Rs. 1769.58 lakhs.
On appeal, the CIT(A) following the decision dated 12.9.2011 of the Tribunal in assessee’s own case in ITA No. 226,227/CTK/2009, 456,457 & 458/CTK/2010 and No. 50,51,52 & 53/CTK/2011, has confirmed the addition. Consequently, the depreciation claimed by the assessee was also disallowed by the CIT(A).
Held by ITAT
Both the parties agreed before us that the above issues are covered by the decision of this Tribunal in assessee’s own case for the assessment year 2008-09 in ITA No. 73/CTK/2012 order dated 3.1.2018. The findings portions are as under:
“45. Ld D.R. objected to the admission of additional grounds on the ground that the grounds have to be dismissed as the lease hold rights are not eligible for depreciation u/s.32(1)(ii) of the Act considering it as intangible asset. He referred to the decision of Hon’ble High Court of Bombay in the case of CIT vs. Techno Shares Stocks Ltd., 225 CTR 337 (Bom), wherein, it has been held that the depreciation under section 32 is restricted to the tangible/intangible assets which are specifically enumerated therein and depreciation is not allowable on all tangible/intangible assets. He also referred to the decision of ITAT Mumbai Benches in the case of Dabur India ltd. vs ACIT, 159 TTJ 563 (Mumbai), wherein also, it was held that the tenancy rights cannot be construed as intangible assets falling within meaning Explanation to section 32(1) and, therefore, there is no question of allowing depreciation on said rights.
46. We find that the assessee has raised these additional grounds as per the direction of Hon’ble High Court of Orissa, Cuttack in W.P (C) No. 24 of 2013 and Misc. Case No. 5716 of 2013 order dated 20.3.2013. In view of above, we admit these additional grounds for our consideration.
47. On merits also, we find force in the submission of ld D.R. that the depreciation is not allowable u/s.32(1)(iii) of the Act in respect of intangible assets, which is supported by judicial pronouncements cited above. In view of above, we dismiss these grounds filed by the assessee.”
Accordingly, we hold that the lease hold rights are not eligible for depreciation u/s.32(1)(ii) of the Act considering it as intangible asset and, hence, dismiss this ground of appeal of the assessee.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
These are cross appeals filed by the assessee and the revenue against the order of the CIT(A)-Berhampur dated 11.3.2013 for the assessment year 2009-2010.
2. First, we take up the appeal of the assessee in ITA No.325/CTK/2013:
3. The assessee is a Government of India Enterprises and engaged in exploration, prospecting, development and administration of collieries & production of coal and filed its return of income on 23.9.2009 with total income of Rs.275926.69 lakhs and also revised return was filed on 29.7.2010 and return of income was processed u/s.143(1) of the Act and case was selected for scrutiny under CASS method and notices u/s.142(1) and 143(2) were issued and served on the assessee. The assessee filed various documents and case was discussed and thereafter the Assessing Officer completed the assessment u/s.143(3) of the Act dated 30.12.2011.
4. Ground Nos. 1 & 2 of appeal are general in nature and hence, requires no separate adjudication by us.
5. Ground No. 3(1) relates to confirmation of addition on account of “donation and subscription”.
6. The Assessing Officer found that the assessee has claimed Rs. 15.67 lakhs as donation & subscription. The Assessing Officer following the order of the Tribunal in the case of the assessee for the assessment year 2005-06 to 2007-08 allowed the expenditure of Rs. 3.86 lakhs incurred under the instructions of Government authorities and also which are covered under the provisions of section 80G of the Act and disallowed the claim of Rs. 3.79 lakhs and added to the income of the assessee.
7. On appeal, the CIT(A) confirmed the action of the Assessing Officer.
8. Before us, ld A.R. of the assessee submitted that the expenditure is incurred wholly and exclusively for the purposes of business. He submitted that since the assessee is a public sector undertaking, has undertaken number of development work in and around its peripheral area to fulfil its social obligation and in the process made donations and further details of expenditure were duly furnished before the Assessing Officer. Ld A.R. relied on the decision of the Tribunal in assessee’s own case for the assessment year 2008-09 order dated 3.1.2018 in ITA No.73/CTK/2012.
9. Contra, ld D.R. supported the order of the CIT(A).
10. We have heard the rival submissions and perused the order of the Tribunal in assessee’s own case for assessment year 2008-09 (supra). We find the Tribunal has deleted the addition. The relevant portion of the findings of the Tribunal are as under:
“24. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. We find that the Assessing Officer has disallowed the expenditure claimed under the head “donation and subscription” on the ground that the assessee failed to furnished any evidence before the Assessing Officer as called for. On appeal, the CIT(A) following the order of the Tribunal for the assessment years 1999-2000, 2000-2001, 2001-02 and 2002-03 has directed the Assessing Officer to allow such expenditure where the assessee has been able to establish relation over the expenditure of the assessee company. As regards to donation which are eligible for deduction u/s. 80G, the Assessing Officer shall allow the same on submission of the evidence of exemption u/s.80G.
25. We find that the assessee has paid an amount of 2.81 lakhs towards donations and Rs. 2.43.958 towards subscription to different concerns as mentioned in para 21 of this order. The major amounts are paid to Government institutions headed by Government officials like District Magistrate and other Government officials where the assessee company has major business operations. As regards the subscriptions, the details furnished by the assessee are in the nature of annual membership, etc. The Tribunal in the assessment years 1999-2000, 2000-2001, 2001-02 and 2002-03 has directed the Assessing Officer to allow such expenditure where the assessee has been able to establish relation over the expenditure of the assessee company. As regards to donation which are eligible for deduction u/s. 80G, the Assessing Officer shall allow the same on submission of the evidence of exemption u/s.80G. But in the present year under consideration, the ld A.R. submitted that there is no such donation which is eligible for deduction u/s.80G. We considering the facts and submissions, set aside the orders of lower authorities and direct the Assessing Officer to allow deduction of Rs.5.25 lakhs made under the head “donation and subscription” and allow this ground of appeal of the assessee.
11. In the present case in hand, the assessee has filed details of donation covered u/s.80G of the Act, which are relied by the Assessing Officer in assessment order and the Assessing has granted relief available under 80G being 50%, which is not disputed and made dis allowance of balance claim and other claims and we consider the facts and restrict the dis allowance to the extent of Rs. 3.69 lakhs and partly allowed the ground of appeal of the assessee.
12. Ground No.3(2) relates to confirmation of dis allowance of 288.10 lakhs incurred for CMPDIL expenses.
13. The Assessing Officer noticed that the assessee has incurred expenditure of Rs. 480.40 lakhs under the head “”CMPDIL expenses” appearing in the annual report under schedule 12(B). The Assessing Officer disallowed Rs.288.10 lakhs considering the same as capital expenditure as this amount was spent on contractual survey paid to M/s. RITES for the purpose of railway lines is not eligible for deduction u/s.37(1) of the Act.
14. On appeal, the CIT(A) confirmed the action of the Assessing Officer with a rider that the said expenditure is to be allowed as per provisions of section 35E of the Act.
15. Ld A.R. of the assessee submitted that the expenditure actually relates to CMPDIL (the proper head of Account being “004959”) and was incurred for the cost of preparation of pre- feasibility report, Environment Management Plan (EMP), Environment Impact Assessment (EIA) Report etc for the preparation of expansion Project Report which is in the nature of normal revenue expenditure to be allowed u/s. 37 (1). Ld A.R. submitted the details of such expenditure as below:
All expenses relates to CMPDIL
