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2014 (1) TMI 1515 - AT - Income TaxExpenses as NPV of compensation paid to the Forest Department for utilization of forest land for non-forest purpose - Held that:- Decision on T.N. Godavaram Thirumalpad –vs.- Union of India [2005 (9) TMI 591 - SUPREME COURT] followed - Though NPV payment is a one-time payment, the same was not made to acquire any asset - Forests are vital components to sustain life support system on the earth - There is an absolute need to take all precautionary measures when forest lands are sought to be directed for non-forest use - The User Agency be required to make payment of Net Present Value (NPV) of such diverted land so as to utilize the amounts so received for getting back in long run the benefits which are lost by such diversion - The Ministry of Environment and Forests formulated a scheme providing that whenever any permission is granted for change of use of forest land for non-forest purposes, there should be compensatory afforestation - The responsibility of the same should be that of user agency - The money so received towards NPV should be used for natural assisted re-generation, forest management, protection, infrastructure development, wildlife protection and management, supply of wood and other forest produce saving devices and other allied activities. Such payments of NPV as compensation were levied for rendering service which the state considers beneficial in public interest - It is a fee which falls in entries 47 of List-III of 7th Schedule of the Constitution - The fund set up is a part of economic and social planning which comes within Entry 23 of List III and the charge which is levied for that purpose would come under Entry 47 of List III - Levy of NPV is a fee that means every mining agency using and converting forest land to non-forest purpose has to pay a fee for continuing carrying on of the business. The said payment is not a voluntary one and it is a payment on the basis of the direction given by the Government of India, Ministry of Mines, under which the assessee-company comes - When a payment is made as per specific direction of Government of India, it is in the business interest of the assessee-company - This payment is a statutory requirement and the expenditure has been considered wholly and exclusively for the purpose of business and has got a direct connection with the business activity of the Company - The same was allowable as business expenditure under section 37(1) of the Act – Decided against Revenue.
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