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2021 (2) TMI 1145 - AT - Income TaxDeduction u/s 37(1) - addition of amount representing 15% of sale proceeds deducted by the Monitory committee from e-auction sale of mineral stock belonging to the assessee and which was contributed to Special Purpose Vehicle, as per the direction given by Hon’ble Supreme Court - HELD THAT:- It cannot be said that these amounts are penal in nature. We notice that the Hyderabad bench of 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 Kolkatta High Court in the case of Shyam Sel Ltd [2016 (8) TMI 511 - CALCUTTA HIGH COURT] 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, as held by Hyderabad bench of Tribunal in the case of NMDC Ltd [2018 (10) TMI 1120 - ITAT AHMEDABAD] these expenses are allowable as deduction u/s 37(1) of the Act. Another important point we notice is that the recommendations made by CEC for making these payments have been made for the purpose of resuming the mining operations. Hence there is merit in the submission of the ld A.R that, without making these payments, the assessee could not have resumed the mining operations. Hence, these expenses are incidental to carrying on the business and hence allowable u/s 37(1) of the Act. 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) of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue in both the years under consideration and direct the AO to delete the impugned addition in both the years. Appeals of the assessee are allowed.
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