INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability - Environmental expenses - Assessee engaged in business of mining

Assessee-company was engaged in business of mining. It claimed expenditure towards environmental expenses. AO disallowed the same for the reason that there was stoppage of assessee's business and hence, there was no mining operation. Accordingly, the said expenditure could not be said to have been incurred wholly and exclusively for the purpose of business. Further, CIT(A) held that there was no closure of assessee's business but only a temporary lull in its mining activity. He further held that the expenditure incurred was essentially to plant trees and saplings, which was required to maintain eco system near the vicinity of the mine of the assessee. However, he disallowed 50% of the total expenditure, since the assessee did not furnish any evidence in the form of number of plants purchased, nature of saplings used and the extent to which the areas were planted, etc. Held: CIT(A) disallowed 50% of environmental expenses because the assessee could not produce entire proof with regard to incurring of said expenses. Further, even before the Tribunal, the assessee did not produce any material detailing how it had incurred such expenditure. Further, the AO also did not have an occasion to examine in detail the evidence produced as regards incurring of said expenses, since at the threshold itself the AO held that the assessee closed its business and the expenditure claimed as deduction was not for the purpose of business. Therefore, the issue was remanded to the AO to examine the same afresh and the assessee was directed to produce details in respect of such expenditure.

Distinguished:CIT & Anr. v. Blend Well Bottles (P) Ltd. (2010) 328 ITR 18 (Karn) : 2010 TaxPub(DT) 1537 (Karn-HC) CIT v. Anita Jain (2009) 182 Taxman 173 Delhi HC : 2009 TaxPub(DT) 1351 (Del-HC)

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 37(1)

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