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2022 (2) TMI 314 - AT - Income TaxDeduction of the amount retained by the monitoring committee out of sale proceeds - Disallowance relating to the 15% of sale proceeds retained by monitoring committee - assessee is a partnership firm and is engaged in the business of extraction of iron ore by taking lands on lease from Government - HELD THAT:- All the amounts collected from the lessees under different categories are directed to be given to the SPV, which will 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 cannot be said that these amounts are penal in nature Tribunal in the case of NMDC Ltd [2018 (10) TMI 1120 - ITAT AHMEDABAD] came to the same conclusion by following the decision rendered by Hon'ble Kolkata High Court in the case of Shyam Sel Ltd [2016 (8) TMI 511 - CALCUTTA HIGH COURT] and State Pollution Control Board vs. Swastik Ispat (P) Ltd [2014 (1) TMI 1893 - NATIONAL GREEN TRIBUNAL, NEW DELHI] wherein identical types of payments made to remedy the river pollution caused by the parties were held to be compensatory in nature. Hence the provisions of Explanation 1 to sec.37 will not apply to these payments. Hence, these expenses are allowable as deduction u/s 37(1) of the Act. Thus we hold that the amount deducted @ 15% from the sale proceeds constitute trading receipts in the hands of the assessee, but at the same time it is allowable as deduction u/s 37(1). - Decided in favour of assessee. Compensation amount retained from sale proceeds of iron ore - assessee claimed the same as deduction in its Profit and Loss account - AO considered the same as payment of penalty and accordingly opined that the same is not allowable u/s 37(1) - HELD THAT:- We hold that the compensation amount paid by the assessee is allowable as deduction. However, we notice that, in the instant case, the assessee has not furnished break-up details of payment while the details of break-up of payments was furnished in the case of Veerabhadrappa Sangappa & Co. [2020 (12) TMI 1145 - ITAT BANGALORE] - AO also did not have occasion to examine the claim at all, since he had disallowed the entire claim. There should not be any dispute that, before applying the ratio of decision of Veerabhadrappa Sangappa & Co. (supra), it is necessary to examine break-up details vis-à-vis the decision rendered by Hon’ble Supreme Court, to determine whether this claim pertain to the year under consideration etc., i.e., the AO should satisfy himself on parity of facts and year of claim. Hence for the limited purpose of examining factual aspects and applying the ratio of the decision rendered in the case of Veerabhadrappa Sangappa & Co (supra), we restore this issue to the file of AO. Accordingly, the order passed by Ld CIT(A) on this issue is set aside. Appeal of the assessee is treated as allowed for statistical purposes.
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