SALGAONKAR MINING INDUSTRIES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under S. 256(1) of the IT Act, 1961, the Tribunal has referred the following question of law to this Court for opinion at the instance of the assessee :

(2.) THIS reference pertains to the asst. year 1978 79. The assessee was engaged in the business of screening iron ore, sale of iron ore, making provision for truck transport and barge transport. On 14th July, 1975, the assessee entered into an agreement with one Mr. Babul Naik Tari, who was the owner of a mining concession of iron ore, viz., "Chormola", for raising iron ore from the said mine. On 14th Dec., 1975, the assessee entered into another agreement with one Mr. Zacaria Antao, who was also the owner of a mining concession of iron ore, viz., "Irnqui", for extraction of iron ore from the above mine. The assessee did not operate the said two mines in the previous year relevant to the asst. year 1977 78 as also in the previous year relevant to the asst. year 1978 79. The previous year of the assessee for the asst. year 1978 79 was the year which ended on 30th June, 1977. In its assessment for the asst. year 1978 79, the assessee claimed deduction of a sum of Rs. 1,50,500, out of which a sum of Rs. 42,000 pertained to liquidated damages paid to Mr. Zacaria Antao and Rs. 50,000 paid to Mr. Babul Naik Tari for non operation of the mines in the previous year relevant to the asst. year 1978 79, a sum of Rs. 21,000 and Rs. 37,500 being a provision for the period from 1st Jan., 1976 to 30th June, 1976, and 1st Oct., 1975 to 30th June, 1976, respectively, towards the dead rent or liquidated damages payable to the above two persons. The claim for deduction of Rs. 21,000 and Rs. 37,500 was rejected by the ITO on the ground that the said provision was not relatable to the previous year relevant to the assessment year under consideration. So far as the claim of Rs. 92,000, which pertained to the previous year relevant to the assessment year which is the subject matter of this reference is concerned, the ITO rejected the claim of the assessee for deduction on the ground that the payment was a payment of capital nature. The ITO completed the assessment under the directions of the IAC under S. 144B of the Act. The above finding of the ITO was confirmed by the CIT(A) and by the Tribunal. Aggrieved by the same, the assessee is in reference before us.

(3.) IN view of the above, we answer the question referred to us in the affirmative and in favour of the Revenue.