The Tax PublishersITA Nos. 722, 723 & 724/Bang/2018
2021 TaxPub(DT) 1318 (Bang-Trib)INCOME TAX ACT, 1961
Section 37(1), Expln.
10%/ 15% of sale proceeds was payable to SPV account, after it accrued to assessee, and the fact that, assessee was obliged to part with such portion of income, by virtue of directions of Supreme Court as a precondition to resume mining operations under Categories 'A and 'B'. But, for the intervention by Supreme Court, assessee would not have contributed 10%/15% to SPV account for implementation of reclamation and rehabilitation scheme on its own, as there was no statutory requirement to do so under relevant statutes that regulate mining activities. Contributing 10%/15% to SPV account on account of Category `A'/`B' respectively, would be application of income, and, therefore, should be considered as expenditure incurred for carrying out business activity.
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Business expenditure - Special Purpose Vehicle charges being 15% of sales done through e-auction - Assessee engaged in mining activity -
Assessee engaged in mining claimed Special Purpose Vehicle charges being 15% of sales done through e-auction. The said SPV charges were deducted by Monitoring Committee and retained by Central Empower Committee (CEC) as per directions fo Supreme Court for the purpose of taking various ameliorative and mitigative measures as a compensatory payment. AO held that said payment was penal in nature and, therefore, not deductible in view of Expln. 1 to section 37(1). Held: 10%/ 15% of sale proceeds was payable to SPV account, after it accrued to assessee, and the fact that, assessee was obliged to part with such portion of income, by virtue of directions of Supreme Court as a pre-condition to resume mining operations under Category 'A and 'B'. But for the intervention by Supreme Court, assessee would not have contributed 10%/15% to SPV account for implementation of reclamation and rehabilitation scheme on its own, as there was no statutory requirement to do so under relevant statutes that regulate mining activities. Contributing 10%/15% to SPV account on account of Category `A'/`B' respectively, would be application of income, and, therefore, should be considered as expenditure incurred for carrying out business activity. Supreme Court directed CEC to refund any leftover guarantee money, after completion of implementation of R& R plan, subject to satisfaction of CEC and approval by Supreme Court. For this peculiar reason amount so contributed towards SPV being l0%/15% of sale proceeds, under category A/B, could not be treated as penal in nature. Therefore, no deduction could be disallowed.
Followed:Ashwathnarayana Singh and Co. v. Asstt. CIT ITA No.522/Bang/2019 for the assessment year 2013-14 vide Order dated 1-2-2021 : 2021 TaxPub(DT) 656 (Bang-Trib).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13 to 2014-15
IN THE ITAT, BANGALORE BENCH
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