9911796707
TMI Blog2018 (10) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as u/s 115JB of the Act for the relevant AYs. During the assessment proceedings u/s 143(3) of the Act, the A.O. observed that the assessee-company is carrying out mining activity in India and particularly in Karnataka and that the Hon'ble Supreme Court of India took note of the large scale illegal mining activity carried on by various companies in Karnataka at the cost or detriment of environment and delivered their judgment on 18.04.2013 levying appropriate charges on the leaseholders. A.O. also observed that the Hon'ble Supreme Court, based on the extent of illegal mining, classified the mining leases into three categories viz., Category "A", "B" and "C" and that the assessee is falling in Category-B in respect of Donimali Complex and that in their order, the Apex Court observed that before consideration of any resumption of mining operations by Category-B leaseholders, each of the lease holder must pay compensation for the areas under illegal mining pits outside the sanctioned area at the rate of Rs. 5 Crs per hectare and for illegal overburden for at the rate of Rs. 1 Cr per hectare. Further, A.O. observed that the said direction of the Apex Court was subject to the final de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owability of the expenditure claimed by the assessee towards 'Corporate Social Responsibility' (CSR) and disallowed the same on the ground that the said activities are not related to the business of the assessee. The A.O. also observed that the assessee claimed weighted deduction of 200% u/s 35(2AB) of the Act. Observing that the assesseecompany has claimed excess deduction to the tune of Rs. 2,44,71,676/- u/s 35(2AB), A.O. disallowed the claim. 6. Aggrieved, assessee preferred an appeal before the CIT(A), who partly allowed the same. Against the confirmation of the disallowance of payments made under the directions of the Hon'ble Supreme Court towards penalty / compensation and also on the disallowance of expenditure made towards Corporate Social Responsibility, the assessee is in appeal before us by raising the following grounds of appeal:- "1. The order of the CIT(A) is erroneous both on facts and in law to the extent it is the prejudicial to the interest of the assessee. 2. The Ld. CIT(A) erred in confirming the addition made by A.O. of Rs. 405,79,00,000/- by treating the amounts paid by appellant on the order of Supreme Court as penal in nature ignoring that the amount p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has paid Rs. 405.79 Crs towards contribution for the Special Purpose Vehicle (SPV) and compensation for encroachment of the mining area beyond the sanctioned lease area as per the directions of the Hon'ble Supreme Court. The assessee has filed a copy of the order of the Hon'ble Supreme Court, which is placed at pages 8 to 88 of the paper book. We find that the illegal mining activity in the State of Karnataka (in Bellary region) had come up before the Hon'ble Supreme Court of India and the Apex Court had formed a Committee viz., Central Empowered Committee (CEC) to examine and suggest the remedial action. The CEC submitted its report indicating large scale illegal mining at the cost and detriment of the environment due to which by order dated 29.07.2011 a complete ban on mining in the district of Bellary was imposed by the Hon'ble Supreme Court. Further, vide order dated 26.08.2011, the ban was extended to Tumkur and Chitradurga Districts. Thereafter, a Joint Team was constituted by the Apex Court vide its order dated 06.05.2011 to determine the boundaries of initially 117 mining leases which has subsequently extended to 166, by inclusion of Tumkur and Chitradurga Districts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Category-B" leases, M/s. S.B. Minerals (ML No. 2515), M/s. Shantalaxmi Jayram (ML No. 2553), M/s. Gavisiddeshwar Enterprises (ML No. 80) and M/s. Vibhutigudda Mines (Pvt.) Ltd. (ML No. 2469) have been assigned in "Category-B". The numbers of such leases in "Category-B" comes to 72. 30. The "Category-C" comprises of leases wherein (i) the illegal mining by way of (a) mining pits outside the sanctioned lease area have been found to be more than 10% of the lease area and/or (b) over burden/waste dumps outside the sanctioned lease areas have been found to be more than 15% of the lease areas and/or (ii) the leases found to be involved in flagrant violation of the Forest (Conservation) Act and/or found to be involved in illegal mining in other lease areas. The number of such leases comes to 49. RECOMMENDATIONS (as modified by CEC by its Report dated 13.3.2012. Items 1 to IV of the Report dated 3.2.2012 stood replaced by Items A to I of the Report dated 13.3.2012 which are reproduced below along with Items V to XIV of the initial Report dated 3.2.2012). (A) the findings of the Joint Team and as modified after careful examination by the CEC may be accepted and directed to be follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... royalty, FDT and other applicable taxes/charges; (G) The responsibility of the Monitoring Committee will be (a) to monitor the implementation of the various provisions/prescriptions of the R&R Plans, (b) to ensure strict compliance of the conditions on which the environment clearance, the approval under the Forest (Conservation) Act, 1980 and the other statutory approvals/clearances have been accorded, (c) to ensure that the mining is undertaken as per the approved Mining Plan, (d) to ensure Page 12 12 that the ceiling on annual production fixed for the lease does not exceed, (e) to ensure that the safety zone is maintained around the lease area and in respect of the clusters of mining leases around the outer boundary of such cluster of mining leases and (f) to ensure compliance of the other applicable condition/provisions. Any lease found to be operating in violation of the stipulated conditions/provisions should be liable for closure and/or termination of the lease; (H) the present Members of the Monitoring Committee should continue for a period of next two years; and (I) in the larger public interest the mining operations in the two leases of M/s. NMDC may be permitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble; b) Estimated cost of the implementation of the R& R Plan; and c) 10% of the sale proceeds to be retained by the Monitoring Committee for being transferred to the SPV d) The balance amount, if any, may be allowed to be disbursed to the respective lessees. ................. ................. (ii) Conditions which have been suggested for opening of Category 'A' mines and additionally the R& R Plans for Category 'B' mines 43. The conditions subject to which Category 'A' and 'B' mines are to be reopened and the R&R Plans that have been recommended as a precondition for reopening of Category 'B' mines are essentially steps to ensure scientific and planned exploitation of the scarce mineral resources of the country. The details of the preconditions and the R&R plans have already been noticed and would not require a repetition. Suffice it would be to say that such recommendations are wholesome and in the interest not only of the environment and ecology but the mining industry as a whole so as to enable the industry to run in a more organized, planned and disciplined manner. FIMI was actively associated in the framing of the guidelines and the preparation of the R&R Plans. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 0.71 0.87 15 HP Manjunath Ballary A 08.09.2011 699 3.03 0.07 2.31 0.00 0.00 0.14 0.21 16 National Minieral Development Corporation Ballary A 08.09.2011 2396 608.00 1.19 0.20 1.65 0.27 49.49 52.33 17 Sandur Magenese & Iron Ores Ltd Ballary A 10.11.2011 2580 1,863.02 3.97 0.21 0.78 0.04 35.89 40.64 18 G J Kumar Chitra durga A 13.10.2011 2499 1.34 0.00 0.00 0.16 0.16 19 E. Ramamurthy ( R Praveen Chandra) Chitra durga A 13.10.2011 2294 42.60 0.00 0.32 0.75 2.53 2.85 20 Mineral Enterprises Ltd Chitra durga A 24.01.2012 2348 103.81 3.13 3.13 21 Karnataka Limpo Tumk ur A 10.11.2011 2028 16.19 0.17 1.05 0.12 0.74 1.02 1.31 Total (2 mining leases) 4,118.78 6.23 0.15 6.88 0.17 141.94 155.05 10. Thus, from the table reproduced above, it is seen that the assessee has been classified as Category-'A' whereas the Assessing Officer has considered the assessee as Category-'B' company. The Hon'ble Supreme Court has clearly ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Coordinate Bench of the ITAT, Kolkata in the case of Essel Mining & Industries Ltd vs. Addl. CIT (ITA No. 352/Kol/2011 and others, dated 20.05.2016); ACIT vs. Freegade & Co. Ltd (ITA No.934/Kol/2009, dated 05.08.2011) and also the decision of the Hon'ble Calcutta High Court in the case of Shyam Sel Ltd vs. DCIT (72 Taxmann.com 105) (Cal.). On going through the said decisions, we find that the Hon'ble Calcutta High Court has considered the case of an assessee who failed to install Pollution Control Device within factory premise within prescribed time and that the assessee had to pay Rs. 12.50 lakh for compensating damage to environment and the same was recovered by State Pollution Control Board on the principle of 'polluter pays' and the A.O. had treated it as penalty and did not allow the same as business expenditure. The Hon'ble High Court had taken note of the fact that the assessee's business was not illegal and that compensation was paid because of its failure to install pollution control device within prescribed time and therefore, such payment was undoubtedly for the purpose of business and in consequence of business carried on by the assessee and was thus cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to area of illegal mining outside the leased area and that the assessee has paid the proportionate compensation for mining in the areas outside the sanctioned area allotted to it and that 10% of sum is to be transferred to SPV and the balance 10% is to be reimbursed to the respective lessees, according to us, proves that it is a payment made as 'compensation' for extra mining, without which the assessee could not have resumed its activities. Therefore, we are inclined to accept the contention of the assessee that it is compensatory in nature and is a 'business expenditure' and is allowable u/s 37(1) of the Act. Thus, Grounds No.2 and 3 raised by the assessee are allowed. 12. As regards the Ground no.4, against the disallowance of expenditure incurred towards Corporate Social Responsibility (CSR), we find that the Assessing Officer has disallowed the same observing that the expenditure claimed by the assessee is in the nature of 'donations' and therefore held that it is not a 'business expenditure' and is not allowable as a deduction u/s 37(1) of the Act. The CIT(A) considered the direction of the ITAT for the A.Y. 2009-10 and A.O. was directed to examine the nature of expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id excessively for the purpose of business. 3. The Ld. CIT(A) erred by stating that "appellant has not furnished any further evidence of proof to counter the findings of Assessing Officer" ignoring that the appellant has given detailed explanation along with the relevant documents in support of its claim. 4. The Ld. CIT(A) erred in confirming the addition of CSR to the extent of capital in nature as interpreted, incurred wholly and exclusively for the purpose of the business and claimed as deduction u/s 37(1) of the I.T. Act. Expenditure incurred is not a capital expenditure for NMDC since it is not capitalized in the books of account. 5. the Ld. CIT(A) erred in confirming the addition of Rs. 1,85,00,000/- towards interest on income tax on the basis that the same has not been crystallised during this assessment year." 20. From the above grounds of appeal, we find that Grounds No.2 and 3 are similar to that of the Grounds No. 2 and 3 raised by the assessee for the A.Y. 2013-14, which are adjudicated in the above paras of this order. For the detailed reasons given above, the Grounds No.2 and 3 raised by the assessee for the A.Y. 2014-15 are allowed. 21. Further, we find t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
