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| The Tax Publishers2020 TaxPub(DT) 4559 (Bang-Trib) INCOME TAX ACT, 1961
Section 37(1), Expln. 1
15% of sale proceeds was payable to SPV account after it accrued to assessee and 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 'B'. Accordinlgy, payments did not fall within the category of penalty and Explanation 1 to section 37(1) did not get attracted.
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Business Expenditure - Applicability of Expln. 1 to section 37(1) - Contribution made towards special purpose vehicle (SPV) in terms of directions of Supreme Court as a pre-condition to continue business activities -
Assessee company was engaged in the business of extraction of iron ore, processing the iron ore and trading in same. It claimed deduction of amount contributed towards special purpose vehicle (SPV). AO denied deduction holding that amount contributed towards SPV was hit by Explanation 1 to section 37(1).Held: 15% of sale proceeds was payable to SPV account after it accrued to assessee and 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 'B'. Accordinlgy, payments did not fall within the category of penalty and Explanation 1 to section 37(1) did not get attracted. Therefore, disallowance made by AO was not justified.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2013-14 & 2014-15
INCOME TAX ACT, 1961
Section 37(1), Expln. 1
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