PIONEER MINERALS vs COMMISSIONER OF INCOME TAX.

BY THE COURT :

The Income Tax Appellate Tribunal, Jaipur, vide order dt. 2nd September, 1988 rejected the application moved by the assessee under s. 256(1) of the IT Act, the assessee prayed that the following questions may be framed and the matter may be referred to the High Court for determination in the points of law :

Whether the learned Tribunal was right in law in holding that a sum of Rs. 2,35,491.17 being expenses for levelling and adjustment of iron ore incurred by the assessee and debited by the assessee to the account "levelling and adjustment expenses" was not of revenue nature but was capital expenditure ?

Whether, the learned Tribunal was right in law in holding that a sum of Rs. 1,79,050 being expenses for repairing of roads and debited to the account "Road Repairing A/c was not of revenue nature but was capital expenditure ?

Whether, the learned Tribunal was right on facts and had material to hold that the impugned expenditure was expense on levelling and development of roads for new mines particularly when the assessee firm does not own any mines and had taken only a contract to execute works for excating, sizing, sorting of iron ore at Thakurani Mines and transport the same for delivery at stock pile at Thakurani railway siding in terms of agreement dated 18th September, 1981 between Orissa Minerals Development Company Ltd. (Now a Government Undertaking) and the assessee firm ?

Whether, the order of the learned Tribunal is not perverse and is not vitiated for arriving at wrong findings ?

Whether, the learned Tribunal was right in law in holding that the assessee firm is entitled to deduction under s. 35E at 1/10th of the expenses of 4,14,541.00 ?

The petitioner has moved this application now under s. 256(2) of the IT Act and prayed therein that the Tribunal may be directed to draw the statement of the case and refer the questions of law as referred to in the application.

Mr. Kasliwal appearing on behalf of the assessee, has invited our attention to the agreement, which has been executed between the assessee and the Orissa Mineral Development Company Ltd. Under the terms of the agreement the assessee is a contractor and he has to execute the work for excavating, sizing, sorting of iron ore at Thakurani Mines and transport the same for delivery at stock pile at Thakurani railway siding.

The main contention of the assessee is that the Tribunal has held that in applying the provisions of s. 35E of the IT Act, according to the petitioner, s. 37 of the Act applies.

It is not in dispute that the petitioner is performing the job of excavating, sizing, sorting of iron ore. Thus, the petitioner assessee purchases iron ore and transports the same at the railway side. Sec. 35E(1) of the IT Act provides that the person who is engaged in any operation relating to prospecting, extraction or production of any mineral, falls within the purview of cl. (E). Admittedly, the assessee is engaged in the extraction and production of the minerals. The second is that he must incur the liability after 31st day of March, 1970. Admittedly, this is a case of 31st day of March, 1970. The petitioner entitled to 1/10th of the amount in such contingencies.

Learned counsel for the assessee has emphasized that a proviso which provides that there shall be excluded such expenditure or any portion thereof which is met directly or indirectly by any other person or authority. The expenditure incurred by the present petitioner is not met directly or indirectly by any other person or authority. It is incurred by him and credited and debited in his account. It is not a case that it is credited and debited in the account of the other persons. We are of the view that s. 35E of the Act applies.

We will also like to refer to s. 37 of the IT Act. This section excludes all types of expenditure which fall within the purview of ss. 30 to 36 of the Act. Thus, s. 37 also does not apply. If any expenditure falls within both the sections then s. 35E will apply. We are of the view that Tribunal has rightly rejected the application of the petitioner under s. 256(1) of the IT Act and the petitioner has not succeeded in making out any case.

In the result, this application under s. 256(2) for making a reference is rejected.