TMI Blog2021 (11) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... Mining Ltd [ 2020 (11) TMI 174 - ITAT BANGALORE] Payment in question cannot be regarded as the payment which is hit by explanation to section 37(1) of the Act. Revenue authorities proceeded on the basis that since the assessee did not have licence for mining and could undertake only prospecting operations, the assessee could not have incurred these expenses which are in relation to mining operations and by doing so, the assessee has violated the conditions imposed on them by the Government of Karnataka in their order dated 07.11.2012 permitting the assessee to undertake prospecting operations. The aforesaid conditions imposed in the order dated 07.11.2012 cannot be the basis to construe these expenses in question as the payment which is hit by the provisions of explanation to section 37(1) - these payments cannot be said to be the expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law. As the sequence of event would go to show that the payment in question is for the purpose of reclamation and rehabilitation of mine area and paid consequent to the directions of Hon ble Supreme Court. The expenditure in question was the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries, Government of Karnataka. In the course of assessment proceedings, the AO came across letter dated 07.11.2012 issued by the Government of Karnataka permitting the assessee to undertake prospecting operation in mining. In that letter, it has been mentioned that under no circumstances mining should be resorted to in the garb of prospecting. The AO therefore called upon the assessee to bifurcate the prospecting and mining expenses. The assessee filed the following chart bifurcating expenses pertaining Prospecting and Mining. Prospecting Expenses Mining Expenses Nature of Expense Amount (Rs.) Nature of Expense Amount (Rs.) Consumption of Diesel 82,00,235 Lease Hold Charges 14,969 Consumption of spares and others 1,01,21,266 Raising Expenses 24,832 Forest NPV barges 29,59,972 R R Work 1,08,371 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the CIT(A). The short question that arises for consideration before the Tribunal is as to whether Revenue authorities were justified in disallowing the mining expenses by invoking the provisions of explanation to section 37(1) of the Act. In this regard, it is necessary to understand the factual background with regard to the banning of mining operations by the Hon ble Supreme Court and the subsequent development that took place. 7. The Hon'ble Supreme Court by order dated 29/07/2011 passed in GOI 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. Subsequently, by order dated 26/08/2011 passed in Samaj Parivartana Samudaya vs state of Karnataka, reported in (2013) 8 SCC 209, Hon'ble Apex Court extended ban to Tumkur and Chitradurga mines, based upon a report filed by Central Empowered Committee (hereinafter referred to as CEC). Hon'ble Apex Court directed Ld. Amicus Curiae to submit quantity which could be released from existing stock of 25,000,000 Ton of iron ore, subject to reclamation and rehabilitation plans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r from any such type of abuse and destruction in future. Hon'ble Apex Court in its order dated 28.9.2012, 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 may be liable to pay additional amounts on the basis of the final determination of the national loss caused by the illegal mining and the illegal use of the land for overburden dumps, roads, offices etc. Each leaseholder, besides making payment as directed above, must give an undertaking to CEC for payment of the additional amounts, if held liable on the basis of the final determination. ............. 5.2. Guarantee money for implementation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 13/04/2012, 20/04/2012 and 04/05/2012, 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 13/04/2012, 20/04/2012 and 04/05/2012 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. 9. The learned Counsel for the assessee filed before us the following documents with a prayer to accept them as additional evidence: Particulars Page No. Filed Before AO CIT(A) Copy of R R Report dated 09.09.2012 4-122 No No Copy of CEC Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of such contribution, to understand its correct nature. Hon'ble Supreme Court observed as under: II. Guarantee money for implementation of the R R plan in the respective sanctioned lease areas. The CEC shall make an estimate of the expenses required for the full implementation of the R R plan in each of the 63 category B mines and each of the leaseholders must pay the estimated amount as guarantee for implementation of the R R plans in their respective sanctioned lease areas and in the areas where they carried on illegal mining activities or where used for illegal overburden dumps, roads, offices, etc beyond that the sanctioned lease areas. In case, any leaseholder defaults in implementation of the R R plan, it will be open to the CEC to carry out the R R plan for that leasehold through some other proper agency from the guarantee money deposited by the leaseholder. However, on the full implementation of the R R plan to the complete satisfaction of the CEC and subject to the approval by the court, the guarantee money would be refundable to the leaseholder. 8.3.2. We note that Hon'ble Supreme Court directed lease holders to give undertaking to make any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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