Law:

Section:

Section 35E of the Income-tax Act, 1961 - Minerals, expenditure on prospecting for, etc. - Assessment years 1998-99 and 1999-2000 - Assessee had claimed deduction of expenditure for relevant assessment year towards development and prospecting charges - Assessing Officer without referring to any provision of Act, held said expenditure to be of capital nature and disallowed same - On appeal, Commissioner (Appeals) following provision of section 35E upheld disallowance on ground that prospecting expenses had been included in expenditure of corporate plan, which was of capital nature - Tribunal upheld order of Commissioner (Appeals) - However, High Court, invoking provision of section 37(1), dismissed assessee's appeal - Whether if High Court had considered claim of assessee in light of section 35E(2), it might have arrived at a different conclusion, and, therefore, impugned was to be set aside and matter was to be remitted back to High Court for considering appeal afresh on merit - Held, yes ORDER 1. Leave granted. 2. These appeals are directed against the and order dated 3-8-2007 passed by the High Court of Judicature at Rajasthan, Jaipur Bench, Jaipur in Income-tax Appeal No. 270 of 2005 whereby and whereunder the appeal preferred by the appellant herein has been dismissed holding that no substantial question of law arose for its consideration. 3. Indisputably, the appellant is a public sector undertaking of the Government of Rajasthan. In the assessment orders in question, which are for the assessment years 1998-99 and 1999-2000 respectively, the Assessing Officer noticed the status of the appellant and proceeded to assess the returns filed by it, treating the expenditure towards development and prospecting charges amounting to Rs. 14,60,729 and Rs. 16,14,445, as against the expenditure of Rs. 33,58,241 and Rs. 53,84,505 respectively in the preceding year, as capital expenditures. The Assessing Officer opined : "The submissions of the assessee have been considered. However, from the past records of the assessee it is seen that this expenditure is held to be purely as capital expenditure and disallowed. Therefore, in view of the past history of the case, the…

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