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2021 (2) TMI 130 - AT - Income TaxDisallowance of SPV (Special Purpose Vehicle) Charges - Allowability of SPV Expenses - AR submitted that SPV expenses are for socio economic development of the mining area - AO invoked Explanation to section 37 (1) - HELD THAT:- We note that this issue stands squarely covered by decisions of coordinate bench of this Tribunal in case of M/s.Ramgad Minerals & Mining Ltd [2012 (1) TMI 313 - KARNATAKA HIGH COURT] and M/S VEERABHADRAPPA SANGAPPA & CO. [2020 (12) TMI 1145 - ITAT BANGALORE] - Thus we are of opinion that contribution to SPV being 15% of sale proceeds, under category B, is to be allowable expenditure for year under consideration. Disallowance of payments as penal in nature - AR emphasised that, lower authorities erred in treating said compensation as penalty and submitted that the said amount ought to have been allowed as expenditure in the hands of assessee incurred for the purpose of business - HELD THAT:- Respectfully following Hyderabad bench of Tribunal in case of NMDC Ltd [2018 (10) TMI 1120 - ITAT AHMEDABAD] the payment is compensatory in nature only as these funds are meant to be used for public purposes and the assessee could not have commenced its operations without paying the same, the same is allowable as revenue expenditure. We are therefore of the view that payment made as compensation is not hit by Explanation 1 to Section 37(1) and is an allowable expenditure. - we are of opinion that payment made as compensation is allowable expenditure for year under consideration. - Assessee appeal allowed.
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