TMI Blog2021 (7) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... nal in respect of this issue has observed as under - AR has mentioned that Hon ble Supreme Court has subsequently reduced the SPV contribution to 10% as assessee holds A Category mining lease by virtue of order dated 28/03/2011. Any reimbursements made to assessee in view of the same shall be considered in the relevant year in which such payment have been received in accordance with law. Assessee is directed to place on record relevant details and payment schedules issued by the monitoring committee in support. 20% contribution of sale proceeds retained by monitoring committee towards SPV charges claimed as expenditure - As the facts for these issues are identical with that considered by us for assessment year 2012-13, the observation hereinabove are applied mutatis mutandis. We thus hold that the 20%/10% contribution to SPV as the case may be, out of the sale proceeds is an allowable expenditure for year under consideration. - ITA No. 417/Bang/2016, ITA No.172 to 175/Bang/2019 - - - Dated:- 5-7-2021 - Shri Chandra Poojari, Accountant Member And Smt. Beena Pillai, Judicial Member For the Assessee : Shri G.S. Prashanth, C.A And Shri. Balram R Rao, Advocate. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for scrutiny and assessment was completed by the Ld.AO under section 143(3) of the Act on 28/02/2014 determining total income at ₹ 59,71,86,930/-. Ld.Pr.CIT issued show cause notice under section 263 of the Act on 25/08/2015, stating that, the Ld.AO has not applied his mind and has not properly verified the discrepancy in recording the sale transaction undertaken by assessee for year under consideration. The provisions under section 263 of the Act, was invoked by the Ld.Pr.CIT as the assessment order was erroneous and prejudicial to the interest of the revenue. Assessee in response to show cause notice filed replies and submissions, which were rejected by the Ld.Pr.CIT. The Ld.Pr.CIT was of the opinion that, assessing officer has not done any enquiry in respect of the assessment of 20% of sale proceeds retained by monitoring committee and that assessment order was passed without making proper enquiries and based on incorrect assumption of facts or on incorrect application of law or non application of mind or based on no or insufficient materials. The Ld.Pr.CIT set aside the file to the assessing officer with a direction to pass fresh assessment order in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 17. We note that the disallowance made by the Ld.AO pertains to mining activity carried on by assessee for years under consideration based on the SPV contribution by monitoring committee out of the sale proceeds. The Ld.AR has submitted that this issue is recurring in nature as assessee has to contribute the SPV against every sale as per the scheme approved by Hon ble Supreme Court in case of Samaj Parivartana Samudaya vs State of Karnataka reported in (2013) 8 SCC 209. 18. We note that this issue has been considered in the case of M/s.Ramgad Minerals and Mining Ltd., (supra) by coordinate bench of this Tribunal as under: 7.8. We have considered rival submissions in light of records placed before us. 7.8.1. Before dwelling into various issues alleged by assessee before us, it is necessary to understand observation/ directions of Hon ble Supreme Court in following decisions on mining activity; Hon'ble Supreme Court by order dated 29/7/2011 passed in GOl vs. Obulapuram Mining Co. Pvt. Ltd., reported in (2011) 12 SCC 491, suspended all mining and transportation activities in area admeasuring approximately 10,868 ha, pertaining to district of Bellary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lders to the extent of unplanned illegal mining done in their respective areas. The report suggested reclamation and rehabilitation plan by each leaseholders by constituting a special purpose vehicle by State of Karnataka, to carry out highly essential comprehensive environment plans for mining impact zone, in order to restore environmental damage, caused in such area due to illegal and reckless mining on a very large scale, and to ensure that environment in such areas may not suffer from any such type of abuse and destruction in future. Hon'ble Apex Court observed in para 5.1 to 5.4 as under: 5.1. Compensatory payment: (a) each of the leaseholders must pay compensation for the areas under illegal mining pits outside the sanctioned area, as found by the joint team (and as finally held by CEC) at the rate of ₹ 5 crores per hectare, and (b) for the areas under illegal overburden dumps, roads, offices, etc. Outside the sanctioned the lease area, as found by the joint team (as might have been finally held by CEC) at the rate of ₹ 1 crore per hectare. 5.1.1. it is made clear that the payment at the rates aforesaid is the minimum payment and each leaseholders m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risation and undertaking, CEC shall retain the amounts covering the aforesaid 3 heads and pay to the leaseholder concerned the balance amount, if any. It is expected that the balance amount, after making the adjustment as indicated here, would be paid to the leaseholder concerned within one month from the date of submission of authorisation and the undertaking. 5.3.2. In case of any leaseholder, if the money held on his account is not sufficient to cover the aforesaid 3 heads, he must pay the deficit within 2 months from today. 5.4. The R R plans for the aforesaid 63 category B mines may be prepared as early as possible, as directed by orders of this court dated 1310412012, 2010412012 and 0410512012, and in case where the R R plan is already prepared and ready, the leaseholder may take steps for is comprehensive implementation, both within and outside the sanctioned lease area, without any delay. 7.8.3. In aforesaid paras, Hon'ble Apex Court refers to orders dated 1310412012, 2010412012 and 0410512012 passed in case of State of AP vs Obulapuram Mining Co. Pvt. Ltd., reported in (2013) 8 SCC 213, (2013) 8 SCC 216 and (2013) 8 SCC 217 respectively. 7.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orically expressed its opinion in respect of Category 'C' in para 55 as under: 55. Once the result of the survey undertaken and the boundaries of the leases determined by the joint team has been accepted by the court and the basis of categorisation of the mind has been found to be rational and constitutionally permissible it will be difficult for this court to visualise as to how the Category 'C' mines can be allowed to reopen. There is no room for compassion fervent pleas, for clemency cannot have even a persuasive value. As against the individual interest of the 49 categories see leaseholders, public interest at large would require the court to lean in favour of demonstrative in the efficacy and effectiveness of a long arm of the law. We, therefore, order for the complete closure of the Category 'C' mines and for necessary follow up action in terms of the recommendations of CEC in this regard, details of which have already been extracted in an earlier part of this order. 7.8.8. In the present case, the assessee holds lease under Category 'B'. Hon'ble Apex Court in paragraph 5.1 to 5.4(reproduced hereinabove), considers modalities of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jection of Ld.AO is also contained in para 4.9 of the assessment order for AY:2013-14 and as per the same, this is the objection of the Ld.AO that the said SPV is not allowable u/s 37 (1) as it was not incurred by the assessee wholly and exclusively for the purpose of business. (d) In para 4.8 of the assessment order for AY:2013-14, Ld.AO is stating this that SPV rate is 10% in category 'A' Mines but 15% in Category 'B' Mines and this extra 5% in Category 'B' Mines is for various violations and illegal mining and even after this observation, he finally held in the same para that whole SPV Expenses of 15% is not allowable. 7.8.10. Ld.AO observed that, these SPV were deducted pursuant to directions of Hon'ble Supreme Court (supra) by order dated 18/04/2013, wherein, it was directed that, sum so paid towards SPV charges should be exhaustively and exclusively used to undertake socio economic and infrastructure development, afforestation, soil and biodiversity conservation and for ensuring inclusive growth of the area surrounding mining leases. 7.8.11. Ld.AO further observed that these payments are nothing but appropriation of profits earned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another portion of one's own income which has been received and essence applied. The first is a case in which the income never reaches the assessee, who, even if he were to collect it, does so, not as part of his income but for and on behalf of the person to whom it was pcuiable. Emphasis Supplied 7.8.13. In the present case, we note that 15% of sale proceeds was payable to SPV account after it accrued to assessee and the fact that, assessee was obliged to part with such portion of income, by virtue of directions of Hon'ble Supreme Court, as a precondition to resume mining operations under Category 'B'. At this juncture, we also emphasise that, but for the intervention by Hon'ble Supreme Court, assessee would not have contributed 15% to SPV account for implementation of reclamation and rehabilitation scheme on its own, as there was no statutory requirement to do so under relevant statutes that regulate mining activities. 7.8.14. Hon'ble Supreme Court has been very clear regarding the types of payments that needs to be recovered from l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 19. At this juncture, we also note that assessee has considered the 20%/10% as the case may be in assessment year 2014-15 which is not in accordance with the matching principle is to be followed in Mercantile system of accounting. Admittedly, assessee follows mercantile system of accounting and therefore the entire sale proceeds needs to be accounted for the year under consideration out of which the expenditure has to be claimed in respect of the amount retained by monitoring committee. 20. In support of this we place reliance on decision by coordinate bench of this Tribunal in case of Veerbhadrappa Sangappa vs.ACIT in ITA no.1054/Bang/2014 by order dated 08/12/2020. This Tribunal in respect of this issue has observed as under: 21. The Ld.AR has mentioned that Hon ble Supreme Court has subsequently reduced the SPV contribution to 10% as assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar under consideration. Accordingly ground 2-6 raised by assessee stands allowed. 29. The Ld.AR submitted that assessee do not wish to press Ground 7 and accordingly the same is dismissed. 30. Nothing has been argued in respect of Ground No.8 raised for year under consideration and the same is dismissed. 31. Ground No.9 and 10 are general in nature and therefore do not require any adjudication. Assessment year 2015-16 32. We note that identical issue has been raised by assessee for assessment year 2012-13 being Grounds 2-5 pertaining to the 20% contribution of sale proceeds retained by monitoring committee towards SPV charges claimed as expenditure. As the facts for these issues are identical with that considered by us for assessment year 2012-13, the observation hereinabove are applied mutatis mutandis. We thus hold that the 20%/10% contribution to SPV as the case may be, out of the sale proceeds is an allowable expenditure for year under consideration. Accordingly ground 2-5 raised by assessee stands allowed. 33. The Ld.AR submitted that assessee do not wish to press Ground 6-7, and accordingly the same is dismissed. 34. Ground No.9 is general i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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