Stamp duty on mining lease renewal is capital expenditure for acquiring enduring lease right (capital asset), depreciable as intangible; not revenue despite form. Welfare expenses for partnership allowable if business-incidental, outside CSR rules.

ORDER

PER PAVAN KUMAR GADALE, JM:

The appeal is filed by the assesse against the order of the NFAC/CIT(A) passed u/sec143(3) and U/sec 250 of the Act. The assessee has raised the grounds of appeal challenging the order of the CIT(A) sustaining (i)the disallowance of community development and village welfare expenses and(ii) disallowance of claim of expenses on stamp duty and registration charges of mining lease.

2. The brief facts of the case are that, the assessee is a partnership firm and is engaged in the business of mining of Iron Ore extraction and selling .The assesse has filed the return of income for A.Y.2016-17 on 13.09.2016 disclosing a total loss of Rs.25,50,56,248/-.Subsequently the case was selected for scrutiny and notice U/sec 143(2) and u/sec 142(1) of the Act are issued calling for the explanations and evidences to substantiate the claims made in the return of income filed. Whereas the assessee has filed the information and details from time to time. The assessing officer on perusal of financial statements find that the assessee has offered interest on FD and IDBI bonds and set off the expenditure debited and claimed loss of Rs.25,51,92,808/-. The assessee has filed letter dated 5.10.2018 mentioning that during the previous year and past 3 years the assessee has not made any extraction or sale of iron ore on account of complete ban of mining activities as Honble Supreme Court order dated 05.12.2012.

3.Whereas the A.O find, that (i) the assessee has claimed community development and village welfare expenses of Rs.8,66,910/- and the same was not incurred for the business. The assessee has filed letter dated 10.11.2018 explaining the nature of expenses towards community welfare and development by way of supply of water to villages and transport arrangement for school children from the villages.The A.O was not satisfied with the explanations and observed that expenditure relating to corporate social responsibility(CSR) referred to in section 135 of the companies Act2013 shall not be deemed to be an expenditure incurred for the purpose of business and also the assessee has not proved that they are incurred /incidental to the business of the assessee and made disallowance of Rs.8,66,910/- (ii)the second disputed issue that the assessee has claimed expenses on stamp duty and registration charges of mining lease of Rs.9,71,25,310/-, the assessee has filed the submissions dated 16.11.2018 mentioning that such expenses are paid as part payment towards second renewal of mining lease for the period till F.Y.2026-27 and claimed entire expenditure in F.Y.2015- 16 as revenue expenditure. The A.O. was not satisfied with the explanations and relied on the judicial decisions and find that the “mining lease” right is a capital asset and transfer of such rights give rise to capital gains and such expenditure incurred for acquiring such lease hold right including expenditure towards renewal of mining lease is a capital expenditure. The A.O find that the stamp duty paid for the renewal of mining lease is towards the execution of the lease deed is a capital expenditure being the acquisition of capital asset u/sec2(14) of the Act and having enduring benefit and amortised the amount over a period of 10 years and allowed stamp duty and registration charges of mining lease to the extent of Rs.97,12,531/- for the impugned A.Y.2016-17 and balance amount of Rs.8,74,12,779/- was disallowed as capital expenditure. Similarly the A.O has made disallowance of dead rent expenses of Rs.9,62,328/- and also security charges and consultation fee of Rs.7,10,895/- and finally assessed the total loss of Rs