ORDER
V.P. Elhence, Judicial Member
1. The assessee is aggrieved of the order dated 6-11-1987 of the learned Commissioner of Income-tax (Appeals) Rajasthan II, Jaipur for the assessment year 1984-85.
2. The assessee M/s Pioneer Minerals, 65 Gopal Bari, Ajmer Road, Jaipur is a firm which derives income from the extraction of iron ores from mines, situated in Orissa. The entire supply had been made under a written agreement to the Orissa Minerals Development Co. Ltd., which is owned by the Government of Orissa. Under the head ‘Levelling and adjustment’, the assessee claimed an expenditure of Rs. 94,830 as also road repairs expenses at Rs. 1,81,600, total Rs. 2,16,430. The Income-tax Officer, however, held that these expenses were in the nature of capital expenditure. He was further of the view that under Section 35E, the assessee was entitled to deduction only to the extent of l/10th i.e. to Rs.21,643.He, therefore, disallowed the balance amount of Rs. 1,94,787. He was also influenced by the fact that in the immediately preceding year, a similar disallowance of Rs. 3,73,087 had been confirmed by the learned Commissioner (Appeals) vide his order dated 7-7-1986.
3. In appeal, before the learned Commissioner (Appeals) it was submitted that the expenses incurred were of a revenue nature and were not covered by Section 35E and that under Clause 6(c) of the Agreement with Orissa Minerals Development Co. Ltd., it was the assessee’s responsibility to do the levelling of ore loaded in wagons. Similarly, the maintenance and repairs of “Kacha” roads were said to be incidental to business and, therefore, a revenue expenditure. However the learned Commissioner (Appeals) following the order dated 27-10-1987 of the Appellate Tribunal in ITA Nos. 760 and 804/JP/86 for assessment year 1983-84 held that the expenses were properly covered by Section 35E and, therefore, the Income-tax Officer was right in disallowing Rs. 1,94,787.
4. Before us Shri O.P. Vaish, the learned counsel for the assessee submitted that actually Section 35E had no application to the case of the assessee as the assessee being a mining contractor was not working for himself, but for Orissa Minerals Development Co. Ltd. He referred to the various papers on the paper book in this regard. He also pointed out that in the assessment year 1982-83, all similar expenses had been allowed after due enquiry and that for the assessment year 1983-84, the method was not put the way it required to be put and, therefore, the decision of the Appellate Tribunal against the assessee did not come in the way of the assessee. He submitted that since the Income-tax Officer’s order for that year had been upheld on a wrong promise, the decision of the Madras High Court in the case of CIT v. L.G. Ramamurthi [1977] 110 ITR 453 did not come in the assessee’s way. Reliance was also placed by him on the decision of Bombay High Court in HA. Shah & Co. v. CIT [1956] 30 ITR 618 for the proposition that if there was an omission to consider important documents in a previous year a decision different from the one arrived at in the previous year could be arrived at in the subsequent year since the rule of res judicata was not applicable to the decisions of Income-tax authorities or Appellate Tribunal. Reliance was also placed by Shri Vaish on the decision of Special Bench in Smt. Gomti Devi Banarsi Das Vaid Charitable Trust v./TO [1985] 13ITD729(A11.) for the same proposition. On the other hand, Shri R.S. Saxena, the learned Departmental Representative strongly relied upon the orders of the Income-tax authorities as also on the order of the Appellate Tribunal for the assessment year 1983-84. He also submitted that the assessee’s miscellaneous application against the Tribunal’s order for the assessment year 1982-83 as also Reference Application under Section 256(1) was rejected. In reply Shri Vaish submitted that the assessee’s Reference Application under Section 256(2) before the Hon’ble High Court was pending. He also submitted that no reference to the Full Bench would be necessary because the material facts were not brought to the notice of the income-tax authorities and the appellate Tribunal for the preceding assessment year 1983-84 and that it was the assessee’s second year of operation and the Tribunal would not have taken the view that it took if full facts had been known.
5. We have considered the rival submissions as also the decisions referred to above. The assessment year 1984-85 is the assessee’s third year of operation. The assessee is a registered partnership firm, constituted under a deed of partnership dated 10-6-1981. The Orissa Minerals Development Co. Ltd. (OMDC for short) is an undertaking of SAIL a wholly owned Government of India Undertaking which has been granted mining of iron and manganese ore. It has its registered office at Calcutta and other offices at various sites including one at Thakurani Mines. OMDC had floated a tender dated 11-5-1981 for mining of iron lump at Thakurani Mines. In pursuance to the said tender, the assessee had entered into a contract with M/s OMDC on 18-9-81 to work as a raising and transportation contractor. The assessee had to raise iron ore, remove the rejects and transport the ore from Thakurani Mines, PO Thakurani via Barbil, Distt. Kconjhar, Orissa to rail-head. Thus the contract was confined to limited operations like raising, excavating, removal of rejects and transportation, thereby establishing the relationship of principal and contractor between OMDC and the assessee. Clause 1 of the contract defined the nature of work as mentioned above and also specified the tenure of the contracts as commencing from 1-6-1981 for two years. Clauses 2,4 & 5 laid down specifications for quality control in respect of size, chemical-composition, moisture and physical appearance about the mineral being excavated and raised. Under Clause 6, the assessee was to provide its own machines for drilling of holes in accordance with the directions of the Chief Supdt. of OMDC. The Clause 6(c) provided that the loading in the wagons was to be done by OMDC, but levelling and adjustment of ores into wagons was to be done by the assessee in terms of capacity of the wagons loaded as prescribed by the railways. The said clause also made the assessee responsible for the clearance of railway track at Thakurani siding. The failure on the part of the assessee to discharge the above obligation was liable to result in compensation being paid to OMDC in respect of expenses for levelling and adjustment by way of recovery from the bills. Clause 7 required the assessee to maintain the roads and pathways within quarries from pit mouth to rail heads to ensure smooth transportation of the ores excavated and the lorries carrying such goods. Clause 31 obliged the assessee to maintain all land, building, roads and other property belonging to OMDC during the subsistence of the contract and restoration of the same in good condition to OMDC upon completion of the contract. Under clause 38 the assessee could not engage any new workman without the written approval of the Chief Superintendent of OMDC. The contract, therefore, clearly shows that the assessee was not the owner or lessee of the mines as the right, title, ownership and interest in the mines and the sale proceeds of the iron ore continued to be vested in OMDC. The prospecting licence for the purposes of the contract was to be utilised by the OMDC. The assessee had nothing to do with the material raised/mined under the said contract. The management and control of the mines and mining operations was entirely in the hands of OMDC. The assessee had started its operations, on 17-6-1981 and, therefore, there was no scope for carrying out any capital activity, i.e., levelling and adjustment or repairing of roads. The proceeds received by the assessee from 1-6-1981 to31-3-1982 on account of the performances of the aforesaid contract become liable to be taxed first of all for the assessment year 1982-83. In that year, the assessee had made detailed enquiries vide its letter dated 9-1-1984 and all expenses were allowed after due enquiry in the assessment order. However, in the subsequent assessment year 1983-84, the Income-tax Officer does not appear to have raised any specific queries in relation to the expenditure incurred by the assessee under the heads “levelling and adjustment” and “road repairing” although the Income-tax Officer raised various other points vide order sheet entry dated 9-10-1985. However, the Income-tax Officer added the aforesaid expenses treating them as of a capital nature. The assessment order dated 24-3-1986 refers in this connection (pages 57 to 61 of the assessee’s paper book). The learned Commissioner (Appeals) also vide his order dated 7-7-1986. (copy at pages 66 and 67 of the assessee’s paper book) did not accept the assessee’s submission made on the basis of the decision of the Calcutta High Court in the case of Hindusthan Aluminium Corporation Ltd. v. CIT [1986] 159 ITR 673 saying that that case related to the assessment year 1963-64 whereas Section 35E had been brought on the statute book with effect from 1-4-1971 and that the facts of that case did not tally with the facts of the assessee’s case. In appeal also when the matter came up to the Appellate Tribunal, the Appellate Tribunal observed as follows in para 12 of its order dated 27-10-1987 in ITA Nos. 760, 804, 770 and 771/JP/86 :
We have heard the rival submissions. Section 35E nowhere provides like Section 35B wherein there is a clear intention of the legislature that in case of export, there will be a weighted deduction, i.e., one and one-third times of the amount of expenditure. But that type of expression has not been used in Section 35E. Therefore, we do not agree with Shri Palta that the assessee is entitled to one and one-tenth times of expenditure incurred for levelling and developing the roads. Now the limited issue remains for our consideration is whether this can be claimed as revenue expenses. Section 35E is a specific section for mining operations and when the case of the assessee is covered by a specific provision of the Act, we have no need to go to the general section. The expenses on levelling and development of roads for new mines are nothing but expenses for prospecting or extraction or production of minerals, i.e., Iron ore. Therefore, in our view there is no infirmity in the order of the Commissioner (Appeals). The disallowance made by the CIT(A) is confirmed. The assessee is only entitled to 1/l0th of the expenditure incurred on levelling and development of roads.
The Appellate Tribunal viewed it as a claim for weighted deduction and holding that since Section 35E was a specific provision having a bearing upon the matter, the claim could not be allowed as a revenue expenditure.
6. For the assessment year 1985-86, it appears that the Commissioner (Appeals) vide his order dated 31-3-1989 (copy at pages 73-91) accepted the assessee’s submission though the Department is stated to be in appeal before the Tribunal against the same. Likewise, the learned Commissioner (Appeals) vide his order dated 30-7-1989 decided the matter for the assessment year 1986-87 also in favour of the assessee (Copy of order at pages 92 to 95). In the case of L.G. Ramamurthy {supra) the following observations appear at page 466 :
… still the position is that the succeeding Tribunal must refer to the facts which were before the former Tribunal, but which were not taken into account by that Tribunal and must observe that if those facts had been taken into account by the former Tribunal, the former Tribunal itself would have come to a different conclusion. Such a statement in the order of the succeeding Tribunal is required in the interest of comity of judicial precedents as well as in the maintenance of judicial decorum and decency. Otherwise, it will lead to an assumed superiority on the part of the succeeding Tribunal as if it had discovered something which had escaped the attention of the former Tribunal and it alone was able to find out the truth, while the former Tribunal was not able to do so.
In the light of the above observations even the decision in the case of L.G. Ramamurthy (supra) permits a departure if there are fresh facts or if the true facts had not been noticed. There need not be new facts. In the case of H.A. Shah & Co. (supra) it was held that if the Tribunal failed to take into consideration material facts, facts which had a considerable bearing upon the ultimate decision and if the second Tribunal was satisfied that the decision was arrived at because of the failure to take into consideration these material facts and that if these material facts had been taken into consideration, the decision would have been different, then the second Tribunal would be to the same position in revise the earlier decision as if fresh facts had been placed before it. We have been at pains to read through the decisions in these two cases and we are of the clear view that the exceptional circumstances in which a departure could be made from the decision of the Tribunal in the earlier year do clearly exist for the assessment year in question. As we have already pointed out, the matter had been seen by the Assessing Officer himself in the proper prospective for the first year, i.e., the assessment year 1982-83 when he accepted the assessee’s claims. No doubt in some measure the assessee itself contributed to the confusion because forum after forum, error of prospective in the claim or its consideration, should not have been allowed to be perpetrated. Section 35E refers to an Indian Company being engaged in any operations relating to prospecting for or extraction or production of any mineral. Since the assessee was acting for and on behalf of OMDC and was only a Mining Contractor, the provisions of Section 35E were attracted in the case of OMDC but not in the case of the assessee. This is the basic fact which had not been highlighted for the assessment year 1983-84 on account of which not only the decision went against the assessee but also the miscellaneous application and the reference went against the assessee. The question of there being capital expenditure did not arise on the part of the assessee. The expenditure incurred by the assessee was not an expenditure relating to prospecting within the meaning of Section 35E. The assessed contract also is stated to have come to an end on 31-12-1987 after a few renewals. OMDC has been there for a long time and the mine is also old and as already stated above, the assessee is merely a labour mining contractor working for the assessee. Therefore, the facts, claim as well as law had not been put in the proper prospective for the assessment year 1983-84 and material facts were neither noticed by the income-tax authorities nor highlighted before the Appellate Tribunal. Had the correct facts been brought to its notice, the decision would not have been otherwise. We were told by Shri Vaish that for the assessment year 1983-84, the tender or agreement have not been filed and that is the reason why the decision in the case of Hindusthan Aluminium Corporation (supra) was also not appreciated by the learned Commissioner (Appeals). We are, therefore, clearly of the view that the decision in the case of L.G. Ramamurthi (supra) on the decision of the Tribunal for the assessment year 1983-84 would not come in the way of the assessee and that since the quantum or details of expenses have not been disputed, the amount of Rs. 1,94,787 by way of cost of levelling of wagons and repairs to road was fully allowable to the assessee as a business expenditure. We hold accordingly. Having regard to the view which we have taken, the question of referring the matter to the Special Bench also does not arise.
7 to 13. [These paras are not reproduced here as they involve minor issues.]