INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Contribution to SPV as per direction given by Supreme Court - Assessee engaged in the business of extraction of iron ore -

Assessee a partnership-firm engaged in the business of extraction of iron ore by taking lease of lands from government claimed deduction of amount representing 15% of sale proceeds deducted by Monitory Committee frm e-auction sale of mineral stock belonging to assessee and which was contributed to Special Purpose Vehicle, as per direction given by Supreme Court. AO denied deduction in view of Explanation to section 37(1). Held: Amounts collected from lessees under different categories were directed to be given to the SPV, which would in turn take various types of ameliorative and mitigative steps in the interest not only of the environment and ecology but the mining industry as a whole so as to enable the industry to run in a more organized, planned and disciplined manner. Under these set of facts, it could not be said that these amounts were penal in nature without making these payments, assessee could not have resumed the mining operations. These expenses were incidental to carrying on business and hence, allowable under section 37(1).

Followed:NMDC Limited v. Asstt. CIT 2018 TaxPub(DT) 8040 (Hyd-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14 & 2014-15

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