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2020 (11) TMI 174 - AT - Income TaxDisallowance of SPV charges - Business expenditure u/s 37(1) - HELD THAT:- In the present situation, contribution towards SPV is a requirement to be incurred to continue its business activities. In our view, these payments in present case do not fall within the category of penalty. Hon’ble Supreme Court has quantified rate for the mass tort, that has occasioned due to illegalities committed in the operation of mines separately. We also note that assessee has suo moto disallowed the payments that fall within the category of penalty which has been computed in accordance with directions of Hon’ble Supreme Court (being ₹ 5 crore per hectare for area as under illegal mining pits outside sanctioned areas and ₹ 1 crore per hectare for area under illegal overburden dumps, roads, offices exception outside the sanctioned lease area). Based on above discussions and analysis, we are of opinion that contribution to SPV being 15% of sale proceeds, under category B, is an allowable expenditure for year under consideration. Assessee for assessment year 2013-14 has considered 5% expenditure pertaining to previous year. No details pertaining to previous year expenses is made available before us. Assessee has also not placed before us any documents in relation to the same. Matching principal must be followed and Income tax is a levy on income. It takes into account the point of time at which liability to tax is attracted, i.e.; accrual of income or its receipt. See CIT vs Shoorji Vallabhdas & Co [1962 (3) TMI 6 - SUPREME COURT] - 5% expenditure pertaining to previous year claimed by assessee in A. Y. 2013 – 14 cannot be considered in assessment year 2013-14. We, therefore, confirm the disallowance of the same being ₹ 184,075/- but delete the balance disallowance of ₹ 869,16,539/- out of total disallowance in that year as SPV ₹ 871,00,614/-. Guarantee money for implementation of the R&R plan in the respective sanctioned lease areas - HELD THAT:- Assessee could not have ignored the notice and that only upon making good such payments, assessee would have resumed its mining activity. Further it is noted that in the event assessee is not able to make good the full payment towards R&R plan as directed by CEC, the guarantee money paid by assessee would be forfeited to that extent. We therefore, cannot concur with the observations of the authorities below that such payment is hit by Explanation 1 to Section 37 (1). In support of the same, we refer to and rely on our observation and hold that this payment is in the nature of expenditure incurred for purposes of business, and is allowable under section 37 MAT Computation - Amount of carbon credit to be excluded for purpose of computing book profit u/s 115 JB - HELD THAT:- CIT (A) has already accepted the contention of the assessee and held that the sale of carbon Credit is a capital receipt and his finding on this aspect has attained finality because no appeal is filed by the revenue against this finding of Ld.CIT (A). Once it is accepted that the receipt in question is a capital receipt, this judgment of Hon’ble Calcutta High Court rendered in case of CIT vs. Ankit Metal & Power Ltd. [2019 (7) TMI 878 - CALCUTTA HIGH COURT] becomes applicable. Hon’ble Calcutta High Court has duly considered the judgment of Hon’ble Supreme Court rendered in case of Appollo Tyres vs. CIT [2002 (5) TMI 5 - SUPREME COURT] and held that where a receipt is not in the nature of income at all, it cannot be included in Book Profit under Section 115JB. Hence, we follow this judgment of Hon’ble Calcutta High Court rendered in the case of CIT vs. Ankit Metal & Power Ltd. (Supra) and decide this issue also in favour of the assessee in both years.
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