Shri K.K.Gupta, AM : The assessee is in appeal on the order of the learned CIT(A) on the following grounds which read as under :

1. For that the Ld. C1T(A) erred in confirming the disallowance of depreciation on wrongful assumption of law, as well as not considering the fact that there is no bar for an assessee to claim a lower rate of depreciation as it is not prejudicial to the revenue.

2. For that the Ld. CIT(A) erred in not deleting the addition on account of donation to the tune of 17,57,464 as the said addition has been done by the Ld. AO whimsically without assigning any reasons for the same and the fact that the assessment order has to be a reasoned order.

2. Registry has informed that the assessee has filed this appeal belatedly by 12 days for which delay a condonation petition has been placed on record. The delay was due to indisposition of the professional handling the assessees case as per the Affidavit brought on record. The delay is therefore condoned and the appeal is admitted for hearing. ITA No.224/CTK/2012

3. The brief facts as have been brought on record are that the assessee carried on the activity of mining and processing of Iron Ores etc. and had disclosed an income of 47,62,66,703 and had paid tax to the tune of 16,52,66,459. That in course of scrutiny Assessment, the A.O disallowed the claim of depreciation of 14,05,500, claimed on fixed assets Land, taken on lease from OMC on the ground that the rate of depreciation so claimed is lower than the provision under Sec.32(1)(ii) of the I T Act. That the percentage so fixed for claim of Depreciation under the provision which is at the border, and Act does not permit to cross the same, and in such case the A.O have power to disallow the extra claim, but in case of the assessee, depreciation claimed at a lower side which would have no impact on Govt. revenue and the A.O is biased on the matter.

4. Aggrieved, the assessee appealed before the CIT(A) and the learned CIT(A) on the assessees contention that the lease hold rights which have been acquired on payment of 2.81 Crores related to an intangible assets u/s.32(1)(ii) of the I.T.Act was acquired by way of an agreement in 1993 being prior to the commencement of the commercial production therefore did not entitle the assessee to claim depreciation at a lower rate. He cited certain decisions not having relevance to the issue in hand insofar as he confirmed the disallowance of the claim of depreciation amounting to 14,05,500.

5. The learned Counsel for the assessee initiating his argument submitted that the facts have been misconstrued by the authorities below insofar as the assessee was holdingn license to explore a plot of land leased out to the OMDC being a Government undertaking the land belonging to the Government. The leased amount was agreed to be paid in 1993 amounting to ITA No.224/CTK/2012 2.81 Crores when actual operation of exploring the land began in 1999- 2000. The actual claim of depreciation began from Assessment Year 2003-04 when the period of lease was considered for claiming depletion in the form of depreciation @ 14,05,000. The Assessing Officer computed the same up to the impugned Assessment Year holding that a sum of 1.44 Crores remain short claimed when the assessee has chosen to spread the amount as amortized being the lease hold rights against equity held by OMDC. He tried to consider the provisions of Section 32(1)(ii) in the light of the fact whether it ought to have been amortized either u/s.35D or Section 35E which was not the case of the assessee. The agreement entered into in 1993 was as per the Government Notification handed over to the assessee in 1999 therefore could not affect the provision which explanation rather clarifies the stand taken by the assessee that the depreciation could be charged after 1999-2000 when the actual shortage of claiming of depreciation u/s.32(1)(ii) has been computed by the Assessing Officer when he held that it has been short claimed in the impugned Assessment Year. This reasoning has been taken as assessees inability to substantiate the claim which was not the case of the assessee in the first place. Depreciation is a charge to the P & L account and it has to be in accordance with the provisions of the I.T.Act when the WDV has to be considered and the depreciation has to be considered for the purpose of allowance when the asset has been put to use. The learned CIT(A) therefore erred in giving a finding that the asset acquired prior to the year 1999 could not entitle it for allowing depreciation from Assessment Year 2004-05 indicating the assessee was not entitled for claiming depreciation. He submitted that the Assessing Officer having agreed to the proposition that there was a short claim of depreciation was in a misnomer when he himself agreed that the law provided for depreciation of intangible assets beginning ITA No.224/CTK/2012 Assessment Year 1998-99. As pointed out earlier, writing off of depletion in the value of the asset is the sole prerogative of the assessee which depreciation, a name given, has to be allowed could only be charged in the P & L account could not be subjected to scrutiny for the purpose of increasing the rate of depreciation or disallowing the WDV. There is no controversy in respect to the asset being a leased hold right to excavate and explore the land which the Government owns and the land leased out to OMDC who in its turn have allowed the lessee to lease it out, by no stretch of imagination can be held to be the asset in the hands of the assessee. The lease hold rights being intangible assets were to be written off during the period of lease has been denied to the assessee unjustifiably and surmises and conjectures. This depreciation as claimed by the assessee may kindly be directed to be allowed. On the issue of direction by the learned CIT(A) totheA.O.to verify the claim of deduction/s.80G,heproduced the receipts for acknowledging donation allowable u/s.80G, which maybe allowed accordingly.

6. The learned DR supported the order of the authorities below. He submitted that intangible assets have to be recognized with the tangible assets for the purpose of claiming depreciation which has not been established or substantiated by the learned Counsel for the assessee as of now. The Assessing Officer was apprised of the fact that the depletion in the land cannot be allowed as depreciation u/s.32(1)(ii). The learned CIT(A) therefore was justified in holding a view that the claim of depreciation has not been substantiated when he cited certain ruling. The lease hold rights for prospecting are allowable as preliminary expenses u/s.35D or Section 35E which is not the case of the assessee on the facts and circumstances as brought on record. Therefore, he submitted that the action of the authorities ITA No.224/CTK/2012 below are justified in denying the claim of depreciation of 14,05,500. On the claim of deduction u/s.80G, he supported the order of the learned CIT(A).

7. We have heard the rival contentions of the parties and perused the material available on record. Considering the facts and circumstances of the case, we uphold the contention of the learned Counsel for the assessee for the simple reason that the denial of claim of depreciation has been made on misinterpretation of law and the applicability thereof. Explanation to Section 32(1)(ii) leans in favour of the assessee to the extent that it is the actual action of put to use which entitles the assessee to claim depreciation. A straight line method of claiming the writing off of lease hold rights for the period of lease cannot be denied to the assessee for the simple reason it being intangible asset has been written off which pertains to land being a intangible asset. It is nobodys case that the land either belonged to the lessee or to the Government. This simply indicates that a depletion of the land against the payment of premium it was leased has to be claimed after capitalization thereof by the assessee which is for the purpose of its main business. All expenses are incurred for the purpose of business and are incidental to the holding of rights were claimed u/s.32(1)(ii) being the license to carry out the mining therefore could not be denied insofar as the Government and the lessee are in control of the asset. The definition of depreciation therefore has been misconstrued for the purpose of allowing deduction by the Assessing Officer and the learned CIT(A) in holding a view on the promulgation of Section 32(1)(ii) with effect from the year 1998-99 which has been further amended w.e.f. Assessment Year 2003-04. In this view of the mater, we are inclined to hold that the assessee is entitled to depreciation as charged to the P & L account in accordance with its business exigencies. We direct accordingly. On the claim of deduction/s.80G, the A.O., ITA No.224/CTK/2012 is directed to verify the receipts and allow the deduction in accordance with the provisions of Income-tax Act,1961.,

8. In the result, the appeal of the assessee is allowed. Sd/- Sd/- (K.S.S.Prasad Rao) Judicial Member (K.K.Gupta) Accountant Member Date: 25.06.2012 H.K.Padhee, Senior Private Secretary. Copy of the order forwarded to :

1. The Appellant: East India Minerals Limited, Barbil Trade Centre, 3rd Floor, Main Road, Barbil 758 035 Keonjhar

2. The Respondent: Joint Commissioner of Income-tax, Range 1, Sambalpur.

3. The CIT,

4. The CIT(A),

5. The DR, Cuttack

6. Guard File (in duplicate) True Copy, By order, Senior Private Secretary. APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN

1. Date of dictation 20.6.2012..

2. Date on which the typed draft is placed before the Dictating Member 25.06.2012Other Member .

3. Date on which the approved draft comes to the Sr. P.S./P.S.

4. Date on which the fair order is placed before the Dictating Member for pronouncement....

5. Date on which the fair order comes back to the Sr. P.S./P.S .

6. Date on which the file goes to the Bench Clerk

7. Date on which the file goes to the Head Clerk ..

8. The date on which the file goes to the Assistant Registrar for signature on the order ................

9. Date of Despatch of the Order ..