The Delhi High Court has nullified a reassessment order against Vedanta, ruling that the payment made for acquiring mining rights through e-auctions cannot be treated as income.
The petitioner participated in various e-auctions conducted by the Department of Mines and Geology, submitting bids totaling INR 167,75,60,000 in the financial year 2011–12.
In its Income Return, the petitioner declared a total income of INR 2248,58,57,710. Following this, both the Bombay and Madras High Courts sanctioned a merger scheme under which Sterlite Industries (India) Limited, Madras Aluminium Company Limited, and Sterlite Energy Limited were amalgamated with the petitioner (then known as Sesa Goa Limited), along with a demerger of Vedanta Aluminium Limited, with April 1, 2011, as the appointed date.
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The respondent department noted the petitioner’s income return for FY 2012–13 filed on November 27, 2012. The Assessing Officer considered information from the Karnataka Department of Mines and Geology regarding iron ore mines auctioned during FY 2011–12, which were settled in favour of the petitioner. The bid amount of INR 167,75,60,000 was deposited accordingly.
However, the department noted that the petitioner disclosed iron ore sales of INR 160,93,69,636, leading to the belief that there was a non-disclosure of income amounting to INR 6,81,90,364.
The petitioner challenged the reassessment initiated through a notice dated March 30, 2019, pertaining to the Assessment Year 2012–13.
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The petitioner argued that the sum in question was not revenue earned from the sale of iron ore and other non-ferrous metals, but rather the bid amount paid to acquire mining rights. The disclosed amount of INR 160,93,69,639 represented the correct sales and revenue from mining activities. Therefore, the assumption that INR 6,81,90,364 was undisclosed income was erroneous, and the reassessment action should be quashed.
Additionally, the petitioner, formerly known as Sesa Goa Limited and later renamed Sesa Sterlite Limited, is a company engaged in mining iron ore and non-ferrous metals, as well as power generation.
The Supreme Court had earlier imposed a ban on mining activities in several Karnataka districts and directed the Central Empowered Committee to formulate a method for selling and transporting already mined stock. A Monitoring Committee was subsequently entrusted with the task of selling and distributing this stock through e-auctions, following a Supreme Court order dated September 23, 2011.
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The Division Bench, comprising Justice Yashwant Varma and Justice Tara Vitasta Ganju, observed that the Department of Mines and Geology had merely informed the Assessing Officer (AO) about the total amount paid by the petitioner to secure mining rights through e-auctions. This amount, the court held, clearly does not qualify as the assessee’s income for the relevant year. The assessee’s income should be calculated based on the revenue generated from the sale of iron ore and other non-ferrous metals.
The Delhi High Court, in allowing the appeal, reiterated that the amount in question could not be treated as income for the relevant year. The assessee’s income should be limited to the revenue generated from the sale of iron ore and other non-ferrous metals.
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