Deduction under s 35E

The expenses must have been incurred wholly and exclusively for “exploring, locating or proving deposits of any minerals, and includes such operations which prove to be infructuous or abortive” in order to be eligible for amortisation of expenses under s 35E — as held by MumTrib in De Beers India Private Limited v Dy CIT — In favour of: The assessee.

The assessee, even when engaged in the business of prospecting minerals, is eligible for the amortisation of such expenses as are eligible under s 35E(2) read with s 35E(5)(a) and all other expenses are eligible for deduction as in the normal course of the computation of business income.

Business expenditure — Matching principle cannot be invoked to restrict the deductibility of a part of the expenses as a result of the expenses being too high in proportion to the quantum of expenditure; it can at best be invoked to spread over the costs over an entire period in which the revenues as a result of those costs are generated.

Decided on: 5 September 2011.