Calcutta High Court
Tax vs M/S. Rungta Sons Pvt. Ltd on 10 December, 2021
OD-8
ITAT/295/2017
IA No.GA/1/2017 (Old No.GA/2836/2017)
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction (Income Tax)
ORIGINAL SIDE
PRINCIPAL COMMISSIONER OF INCOME
TAX, (CENTRAL), KOLKATA-1
-Versus-
M/S. RUNGTA SONS PVT. LTD.
Appearance:
Mr. Smarajit Roychowdhury, Adv.
...for the appellant.
Mr. Subash Agarwal, Adv.
...for the respondent.
BEFORE:
The Hon'ble JUSTICE T.S. SIVAGNANAM
-And-
The Hon'ble JUSTICE HIRANMAY BHATTACHARYYA
Date : 10th December, 2021.
The Court : This appeal filed by the revenue under
Section 260A of the Income Tax Act, 1961 (the 'Act' in brevity) is
directed against the order dated 15th March, 2017 passed by the
Income Tax Appellate Tribunal, "C" Bench, Kolkata (the 'Tribunal'
in short) in IT(SS)A No.42/Kol/2015 for the assessment year 2011-
12.
The revenue has raised the following substantial
questions of law for consideration:
(i) Whether on the facts and circumstances of the case
the Learned Income Tax Appellate Tribunal, has erred in
law in upholding the deletion of addition of Net Present
Value of Rs.12,14,61,050/- and in treating the Net
Present Value as revenue expenses whereas true nature is
capital expenditure?
(ii) Whether on the facts and circumstances of the case
the Learned Income Tax Appellate Tribunal, has erred in
law in not considering the decision of the Hon'ble
Supreme Court of India in the case of Bikaner Gypsum Ltd.
vs. CIT reported in [1991] 187 ITR 39 (SC) and in the
case of R.R.B. Seth Moolchand Sugam Chand vs. CIT
reported in [1972] 86 ITR 647 (SC)?"
We have heard Mr. Smarajit Roychowdhury learned counsel
for the appellant/revenue and Mr. Subash Agarwal, learned counsel
for the respondent/assessee.
It is not disputed before us that identical substantial
questions of law were considered by this Court in the case of
group company of the respondent/assessee in ITAT/133/2015 and by
judgment dated 21st June, 2018 the appeal filed by the revenue was
dismissed. The operative portion of the judgment reads as
follows:
"Both the Commissioner (Appeals) and the Appellate
Tribunal have referred to a judgment reported at 107 ITR 39
(Bikaner Gypsums Ltd. vs. CIT), where a similar question arose. A
licence in respect of a certain area had been granted in favour
of the assessee in that case for undertaking mining operations.
The railways purported to set up railway tracks and even a
station on the land without reference to the assessee and
unmindful of the assessee's underground rights in respect
thereof. The dispute between the assessee and the railways was
resolved upon the relevant stakeholders including the assessee,
the railways and the State Government agreeing to share the
additional expenses for removing the railway station and tracks
to allow the area to be mined by the assessee. The payment made
by the assessee in that case fell for consideration of the
Supreme Court. The Supreme Court observed that since the
assessee was entitled to carry on mining operations and such
payment had been made for the removal of the difficulty in the
assessee carrying on its business in accordance with its licence,
the expenditure had to be regarded as a revenue expenditure and
could not be treated as a capital expense.
The dictum in Bikaner Gypsums Ltd. is squarely
applicable in the present case. This is not a case where the
assessee, upon payment of the NPV, obtaind a fresh right to
undertake any business. That right of the assessee was covered by
the licence previously granted in its favour by the State of
Odisha. The NPV payment is a king of a compensation for using
forest land for non-forest purpose pursuant to an order of the
Supreme Court. The payment of the NPV in this case, like in the
case of Bikaner Gypsums Ltd., has to be regarded as a revenue
expenditure in accordance with the ration in the Bikaner Gypsums
Ltd. case, since it was a one-time payment made to remove an
obstacle from the path of the assessee carrying on its business
operations.
On behalf of the Revenue, a judgment reported at 86 ITR
647 (R.B.Seth Moolchand Sugachand v CIT) has been cited where a
prospecting licence fee was found to be a capital expenditure.
However, as is evident from paragraph 11 of the report, the fee
was paid for obtaining a prospecting licence and it was such fee
that entitled the business to be conducted in the relevant area.
The distinction between the judgment in R.B.Seth Moolchand
Sugachand and the judgment in Bikaner Gypsums Ltd. is that in
Bikaner Gypsums Ltd. there was a pre-existing right and the
expenditure was incurred not to assert a new right but to
exercise a pre-existing right. In the present case, it is the
same as in Bikaner Gypsums Ltd. since the mining licence was
previously issued in favour of the assessee and the payment of
the NPV did not extend the area of the assessee's mining
operations, it merely removed an impediment in the carrying on of
the operations in terms of the original licence.
In R.B.Seth Moolchand Sugachand a fee was paid to
obtain a prospecting licence. In other words, the right to carry
on any prospecting or mining business was conditional upon the
fee being paid. Even if the assessee in that case had been
conducting mining or prospecting operations prior to obtaining
the relevant licence, it was relevant licence which gave the
assessee the right in respect of a particular area and that is
the distinguishing feature.
For the reasons aforesaid, the concurrent findings of
the Commissioner (Appeals) and the Appellate Tribunal based on a
long-standing judgment of the Supreme Court does not call for any
interference."
Thus, following the above decision, the appeal filed by
the revenue is dismissed. In the result, the substantial
questions of law are answered against the revenue.
The connected application for stay (IA No.GA/1/2017) also
stands closed.
(T.S. SIVAGNANAM, J.)
(HIRANMAY BHATTACHARYYA, J.)
A/s./S.Das
