M/s Muneer Enterprises , Bangalore v. The Assistant Commissioner of Income Tax Circle-1 , Bellary

ITA 696/BANG/2018 | 2013-2014
Pronouncement Date: 09-03-2021 | Result: Allowed

Appeal Details

RSA Number 69621114 RSA 2018
Assessee PAN AAGFM6500R
Bench Bangalore
Appeal Number ITA 696/BANG/2018
Duration Of Justice 3 year(s) 3 day(s)
Appellant M/s Muneer Enterprises , Bangalore
Respondent The Assistant Commissioner of Income Tax Circle-1 , Bellary
Appeal Type Income Tax Appeal
Pronouncement Date 09-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 09-03-2021
Last Hearing Date 22-01-2019
First Hearing Date 04-02-2021
Assessment Year 2013-2014
Appeal Filed On 06-03-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. BEENA PILLAI JUDICIAL MEMBER ITA NO.696/BANG/2018 ASSESSMENT YEAR : 2013-14 M/S MUNEER ENTERPRISES MINE OWNERS UPSTAIRS MUNEER CARS BELLARY ROAD HOSPET-583 201. PAN AAGFM 6500 R VS. THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-1 BELLARY. APPELLANT RESPONDENT ASSESSEE BY : SHRI SHIV PRASAD REDDY ITP REVENUE BY : SHRI PRIYADARSHI MISHRA ADDL. CIT (DR) DATE OF HEARING : 04-02-2021 DATE OF PRONOUNCEMENT : 09-03-2021 ORDER PER BEENA PILLAI JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 29/12/2017 PASSED BY LEARNT CIT (A) GULBARGA FOR ASSESSMENT YEAR 2013-14 ON FOLLOWING GROUNDS OF APP EAL: 1. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GULBARGA IS NOT JUSTIFIED IN REJECTING THE CLAIM FOR EXPENDITURE AM OUNTING TO RS.51 20 653/- BEING CONTRIBUTION TO SPV A SPECIAL FUND CREATED AT THE DIRECTIONS OF APEX COURT. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GULBARGA IS NOT JUSTIFIED IN TREATING THE EXPENDITURE TOWARDS CONTR IBUTION TO SPV AS AN EXPENDITURE NOT ALLOWABLE UNDER EXPLANATION 1 TO SE CTION 37(1) OF IT ACT 1961. PAGE 2 OF 12 ITA NO.696/BANG/2018 3. THE COMMISSIONER OF INCOME-TAX (APPEALS) GULBAR GA OUGHT TO HAVE APPRECIATED THE FACT THAT THE VERY PURPOSE OF CONT RIBUTION IS AT THE DIRECTION OF APEX COURT WHICH IS SOLELY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS CARRIED ON BY THE ASSESSEE. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS) GULBAR GA OUGHT TO HAVE APPRECIATED WITH THE WRITTEN REPRESENTATIONS MADE D URING THE CORUSE OF APPEAL HEARING WHEREIN A DETAILED WRITE UP MADE AS TO HOW THE CONTRIBUTION TO SPV QUALIFIES AS AN EXPENDITURE ALL OWABLE UNDER EXPLANATION 1 TO SECTION 37(1) OF IT ACT 1961. 5. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GULBARGA HAS FAILED TO APPRECIATE THE CASES RELIED ON BY THE ASSESSING OFFICERS WAS CLEARLY DISTINGUISHED VIDE OUR WRITTEN SUBMISSION DT. 30.12 .2017. 6. ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF APPEAL MAY KINDLY BE TREATED AS GROUNDS OF APPEAL. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF EXTRACTION PROCESSING AND MANUFACTURING OF IRON ORE FOR SALE. THE ASSESSEE OWNS MINING LEASE NO. 2339/2151 MEASUR ING 36.42 HA CLASSIFIED UNDER CATEGORY B. IT HAS BEEN STATED THAT THE ONLY ISSUE THAT ARISES OUT OF THE IMPUGNED ORDER IS DISA LLOWANCE OF 15% OF SALE PROCEEDS OF IRON ORE DEDUCTED AND RETAI NED BY THE MONITORING COMMITTEE TOWARDS SPECIAL PURPOSE VEHICL E IN RESPECT OF CATEGORY B MINES. 3. DURING THE YEAR UNDER CONSIDERATION ASSESSEE DEB ITED TO THE P&L ACCOUNT SUM OF RS. 51 20 653/-BEING 15% OF TH E SALE PROCEEDS OF RS.3 41 37 680/-IS UNDER THE HEAD SOCIA L WELFARE- GOVERNMENT FUND. THE LD. AO DISALLOWED THE SAID SPV DEDUCTION BY OBSERVING AS UNDER: 2.1.8. THE MINES OPERATED BY THE APPELLANT-ASSESSE E ARE AS 'B' CATEGORY MINES. THE RELEVANT EXTRACTS FROM THE REPO RT OF THE CEC SHOWING THE CATEGORISATION OF MINES OF THE AS 'B' IS ENCLOS ED HEREWITH AS ANNEXURE- A. THE APPELLANT IS LISTED IN SERIAL NO.5 IN RESPEC T OF ITS MINING LEASE IN NO.2339/2151 CATEGORISED AS B. PAGE 3 OF 12 ITA NO.696/BANG/2018 2.1.9. DURING THE SUBJECT ASSESSMENT YEAR THE ASSE SSEE-FIRM HAD DEBITED TO P 8 L ACCOUNT AN AMOUNT OF RS.51 20 653/- BEING SAE PROCEEDS OF RS.3 41 37 688/- UNDER THE HEAD 'S OCIAL WELFARE - GOVT. FUND'. THE LEARNED AO DISALLOWED THE SAID S PV DEDUCTION IN THE IMPUGNED ASSESSMENT ORDER. OBSERVATIONS OF THE LEARNED AO. 2.1.10. THE LEARNED AO DISALLOWED THE SAID AMOUNT ( 10%/15% OF THE SALE PROCEEDS) REFERRING TO THE DECISION OF THE HON'BLE SUPREME COURT IN WP(C) NO.562 OF 2009 ORDER DATED 18-04-2 013 HOLDING THAT THE OBSERVATIONS OF THE HON'BLE SUPRE ME COURT HAVE CLEARLY INDICATED THAT THE AMOUNT OF SALE PROCEEDS DEDUCTED & RETAINED TOWARDS THE SPV ARE PENAL IN NATURE ATTRACTING EXPL ANATION- 1 U/S 37(1). THE LEARNED AC HAS ALSO OBSERVED THAT THE AMOUNTS I N QUESTION REPRESENTED INCOME ACCRUING TO THE ASSESSEE DURING THE ASSESSMENT YEAR AND ACCORDINGLY THERE WAS NO DIVERSION OF INCOME OVERRIDING TITLE. THE LEARNED AC RELIED ON THE DECISION OF THE SUPREME CO URT IN THE CASE OF CIT VS. K.C.P. LIMITED (SC) 421. THE LEARNED AG ALSO PL ACED RELIED ON THE FOLLOWING : (I). C. PADMANABHA CHATTIYAR & SONS VS. C1T182 HR 1 5 (MAD.) (II). REFORM FLOUR MILLS PVT. LTD. VS. CIT 132 ITR 184 196 (CAL) (III). CIT VS. A KRISHNASWAMY MUDALIAR & OTHERS 53 ITR 122 (SC). OBSERVATIONS OF THE LEARNED CIT(A). 2.1.11. THE LEARNED CIT(A) HAS DISMISSED THE APPEAL HOLDING THAT THE AMOUNT RETAINED WAS PENALTY IN NATURE AND AS SUCH CANNOT BE ALLOWED AS EXPENDITURE U/S 37(1). 4. AGGRIEVED BY THE ORDER OF LD. AO ASSESSEE PREFE RRED APPEAL BEFORE THE LD.CIT (A). 5. AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE I S IN APPEAL BEFORE US NOW. 6. AT THE OUTSET THE LD.AR SUBMITTED THAT THE ISSUE OF 15% OF SALE PROCEEDS REMITTED TO SPV ACCOUNT A STANDS COVE RED BY FOLLOWING DECISIONS OF COORDINATE BENCH OF THIS TRI BUNAL: (I.) M/S. VEERABHADRAPPA SANGAPPA & CO. IN ITA NO. 1 054/BANG/2019 ORDER DATED 08-12-2020. (II) M/S. RAMGAD MINERALS & MINING LTD. IN ITA NOS. 1270 & 1271/BANG/2019 ORDER DATED 04-11-2020) 7. THE LD.AR SUBMITTED THAT A CLARIFICATION WAS ISS UED BY THE DEPARTMENT OF MINES ON 08/03/2019 WHEREIN IT HAS B EEN PAGE 4 OF 12 ITA NO.696/BANG/2018 CLARIFIED THAT TRANSFER OF 10% OF SALE VALUE SHALL CONTINUE TO BE TRANSFERRED TO SPV EVEN AFTER CONDUCTING AUCTION OF THESE LEASES. HE PLACED RELIANCE ON THE SAID CLARIFICATION PLACED AT PAGE 328- 330 OF PAPER BOOK. IT WAS THUS SUBMITTED THAT IT IS A RECURRING EXPENDITURE INCURRED BY ASSESSEE AND IS ALLOWABLE A S BUSINESS EXPENDITURE. 8. ON THE CONTRARY THE LD.CIT.DR PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. 9. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SID ES IN LIGHT OF RECORDS PLACED BEFORE US. 10. IN PRESENT APPEAL ONLY ISSUE RAISED FOR OUR CO NSIDERATION IS IN RESPECT OF 15% CONTRIBUTION MADE TO SPV. FIRST O F ALL WE SUMMARISE OBJECTIONS OF LD.AO AS IN RESPECT OF SPV EXPENSES AS UNDER:- (A) THIS IS ONE OF THE OBJECTIONS OF THE LD.AO THAT THE SPV EXPENSES IS NOT ALLOWABLE BECAUSE IT IS COMPENSATIO N AND PENAL IN NATURE FOR CONTRAVENTION OF LAW AS OBSERVED BY H IM IN PARA 4.4 OF THE ASSESSMENT ORDER. (B) SECOND OBJECTION OF THE LD.AO IS CONTAINED IN P ARA 4.7 OF THE ASSESSMENT ORDER AND AS PER THE SAME THIS IS THE O BJECTION OF LD.AO THAT THE SAID SPV IS NOTHING BUT CSR EXPENSES ONLY AND THEREFORE NOT ALLOWABLE. (C) THIRD OBJECTION OF LD.AO IS ALSO CONTAINED IN P ARA 4.7 OF THE ASSESSMENT ORDER THAT SAID SPV IS NOT ALLOWABLE U/ S 37 (1) AS IT PAGE 5 OF 12 ITA NO.696/BANG/2018 WAS NOT INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS. 11. THE LD.AO OBSERVED THAT THESE SPV WERE DEDUCTE D PURSUANT TO DIRECTIONS OF HONBLE SUPREME COURT (SUPRA) BY ORDER DATED 18/04/2013 WHEREIN IT WAS DIRECTED THAT SU M SO PAID TOWARDS SPV CHARGES SHOULD BE EXHAUSTIVELY AND EXCL USIVELY USED TO UNDERTAKE SOCIO ECONOMIC AND INFRASTRUCTURE DEVELOPMENT AFFORESTATION SOIL AND BIODIVERSITY C ONVERSATION FOR ENSURING INCLUSIVE GROWTH OF THE AREA SURROUNDING M INING LEASES. 12. THE LD.AO FURTHER OBSERVED THAT THESE PAYMENTS ARE NOTHING BUT APPROPRIATION OF PROFITS EARNED BY ASSE SSEE THAT CANNOT BE SAID TO HAVE INCURRED FOR PURPOSE OF BUSI NESS OR EARNING PROFITS. ACCORDINGLY ENTIRE AMOUNT ADJUSTE D TOWARDS SPV WAS DISALLOWED BY THE LD.AO. THE LD.AO WAS OF OPINI ON THAT ENTIRE SALE PROCEEDS AS PER E AUCTION BID SHEETS/IN VOICES WERE TO BE ASSESSED AS TRADING RECEIPTS. THE AMOUNT RETAINE D BY CEC/MONITORING COMMITTEE AS PER DIRECTIONS OF HONBLE SUPREME COURT ON BEHALF OF ASSESSEE FOR SPV PURPOSES WAS ON AC COUNT OF DAMAGES AND LOSS CAUSED TO ENVIRONMENT DUE TO CONTR AVENTION OF LAW AND THEREFORE CANNOT BE ALLOWED AS DEDUCTION O UT OF SALE PROCEEDS EVEN AFTER ACCRUAL OF SUCH LIABILITY. LD. AO WAS OF OPINION THAT EVEN IN CATEGORY A MINES THERE WAS MARGINAL ILLEGALITY FOUND BY CEC BECAUSE OF WHICH 10% OF CO NTRIBUTION WAS ATTRIBUTED OUT OF SALE PROCEEDS TO THE SPV. PAGE 6 OF 12 ITA NO.696/BANG/2018 13. ON CAREFUL READING OF DECISION OF HONBLE SUPREME COURT DATED 18/04/2013 IT IS CLEAR THAT 15% CONTRIBUTION TO SPV ACCOUNT WAS GUARANTEE PAYMENT FOR IMPLEMENTING OF R & R PLAN WHICH WOULD BE DEDUCTED FROM SALE PROCEEDS. THIS WA S ONE OF THE CONDITIONS FOR RESUMING MINING OPERATIONS UNDER CAT EGORIES B. WE REFER TO AND RELY ON OBSERVATIONS BY HONBLE SUPREME COURT IN CASE OF CIT VS SITALDAS TIRATHDAS REPORTED IN (1961) 41 ITR 367. HONBLE SUPREME COURT LAYING DOWN FOLLOWING PRINCIPAL REFERRED TO VARIOUS RULINGS THAT ILLUSTRATED ASPECTS OF DIVERSI ON OF INCOME BY OVERRIDING TITLE. THESE ARE THE CASES WHICH HAVE CONSIDERED THE PROB LEM FROM VARIOUS ANGLES. SOME OF THEM APPEAR TO HAVE AP PLIED THE PRINCIPLE CORRECTLY AND SOME NOT. BUT WE DO NO T PROPOSE TO EXAMINE THE CORRECTNESS OF THE DECISIONS IN THE LIGHT OF THE FACTS IN THEM. IN OUR OPINION THE TRUE TEST IS WHE THER THE AMOUNT SOUGHT TO BE DEDUCTED IN TRUTH NEVER REACH ED THE ASSESSEE AS ITS INCOME. OBLIGATIONS NO DOUBT THER E ARE IN EVERY CASE BUT IT IS THE NATURE OF THE OBLIGATION WHICH IS THE DECISIVE FACT. THERE IS A DIFFERENCE BETWEEN AN AMO UNT WHICH A PERSON IS OBLIGED TO PAY OUT OF HIS INCOME AND AN AMOUNT WHICH BY THE NATURE OF THE OBLIGATION CANNOT BE SAI D TO BE A PART OF THE INCOME OF THE ASSESSEE. WHEREBY THE OBL IGATION INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE IT IS DEDUCTIBLE BUT WHERE THE INCOME IS REQUIRED TO BE A PPLIED TO DISCHARGE AN OBLIGATION AFTER SUCH INCOME REACHES T HE ASSESSEE THE SAME CONSEQUENCE IN LAW DOES NOT FOLLO W. IT IS THE FIRST KIND OF PAYMENT WHICH CAN TRULY BE EXCUSE D AND NOT THE SECOND. THE SECOND PAYMENT IS MERELY AN OBLIGAT ION TO PAY ANOTHER PORTION OF ONES OWN INCOME WHICH HAS B EEN RECEIVED AND ESSENCE APPLIED. THE FIRST IS A CASE I N WHICH THE INCOME NEVER REACHES THE ASSESSEE WHO EVEN IF HE WERE PAGE 7 OF 12 ITA NO.696/BANG/2018 TO COLLECT IT DOES SO NOT AS PART OF HIS INCOME B UT FOR AND ON BEHALF OF THE PERSON TO WHOM IT WAS PAYABLE. EMPHASIS SUPPLIED 14. IN THE PRESENT FACTS OF THE CASE WE NOTE THAT 15% OF SALE PROCEEDS WAS PAYABLE TO SPV ACCOUNT AFTER IT ACCRU ED TO ASSESSEE AND THE FACT THAT ASSESSEE WAS OBLIGED T O PART WITH SUCH PORTION OF INCOME BY VIRTUE OF DIRECTIONS OF HONBLE SUPREME COURT AS A PRECONDITION TO RESUME MINING OPERATIONS UNDER CATEGORY B. AT THIS JUNCTURE WE ALSO EMPHAS ISE THAT BUT FOR THE INTERVENTION BY HONBLE SUPREME COURT ASSESSEE WOULD NOT HAVE CONTRIBUTED 15% TO SPV ACCOUNT FOR IMPLEME NTATION OF RECLAMATION AND REHABILITATION SCHEME ON ITS OWN A S THERE WAS NO STATUTORY REQUIREMENT TO DO SO UNDER RELEVANT ST ATUTES THAT REGULATE MINING ACTIVITIES. 15. HONBLE SUPREME COURT HAS BEEN VERY CLEAR REGARDING THE TYPES OF PAYMENTS THAT NEEDS TO BE RECOVERED FROM L ESSEES UNDER CATAGORE B FROM THE SALE PROCEEDS AS WELL AS OTH ERWISE. ALL THE PAYMENTS FORMS PART OF R&R PLAN FOR RECOUPING AND REHABILITATING THE ENVIRONMENT. CERTAIN PAYMENTS AR E ONE TIME PAYMENT AND SOME OTHERS ARE RECURRING DEPENDING UPO N THE SALE OF IRON ORE SOLD IN THE NAME OF EACH LICENSEE OR DE PENDING ON THE NEED FOR REHABILITATION. 16. IN OUR VIEW CONTRIBUTING 15% TO SPV ACCOUNT ON ACCOUNT OF CATEGORY B WOULD BE APPLICATION OF INCOME AND T HEREFORE SHOULD BE CONSIDERED AS EXPENDITURE INCURRED FOR CA RRYING OUT ITS PAGE 8 OF 12 ITA NO.696/BANG/2018 BUSINESS ACTIVITY. THIS WE HOLD SO FOR THE REASON THAT CONTRIBUTIONS DETERMINED BY HONBLE SUPREME COURT ARE IN THE NATURE OF GUARANTEE PAYMENT NECESSARY FOR RESUMING MINING ACTIVITY. WE ALSO NOTE THAT ALLEGED SUM IN THESE G ROUNDS ARE FOR IMPLEMENTATION OF R&R PLANS IN RESPECTIVE SANCTIONE D LEASE AREA HELD BY ASSESSEE WHERE ILLEGAL MINING ACTIVITIES O R WHICH WERE USED FOR ILLEGAL OVERBURDEN DUMPS ROADS OFFICES E TC. BEYOND SANCTIONED LEASE AREA WERE CARRIED OUT. HERE WE AL SO NOTE THAT HONBLE SUPREME COURT DIRECTED CEC TO REFUND ANY LEFTOVER GUARANTEE MONEY AFTER COMPLETION OF IMPLEMENTATION OF R& R PLAN SUBJECT TO SATISFACTION OF CEC AND APPROVAL BY HONBLE SUPREME COURT . FOR THIS PECULIAR REASON AMOUNT SO CONTRIBUTED TOWARDS SPV BEING 15% OF SALE PROCEEDS UNDER CATEG ORY B CANNOT BE TREATED AS PENAL IN NATURE. WE THEREFORE REJECT OBSERVATIONS OF AUTHORITIES BELOW THAT SUCH SUM HA VING CONTRIBUTED BY ASSESSEE FALL WITHIN AMBIT OF EXPLAN ATION TO SECTION 37 (1) OF THE ACT. 17. THE DECISIONS RELIED UPON BY LD. CIT (A) HAS AL SO BEEN PERUSED BY US. WE NOTE THAT THOSE DECISIONS DEAL WI TH EXPENSES WHICH ARE IN THE NATURE OF PENALTY. IN THE PRESENT SITUATION CONTRIBUTION TOWARDS SPV IS A REQUIREMENT TO BE INC URRED TO CARRY CONTINUE ITS BUSINESS ACTIVITIES. IN OUR VIEW THES E PAYMENTS IN PRESENT FACTS DO NOT FALL WITHIN THE CATEGORY OF PE NALTY. 18. WE NOTE THAT IDENTICAL ISSUE HAS BEEN CONSIDERE D AND DECIDED IN THE LIGHT OF OBSERVATIONS BY HONBLE SUPREME COURT IN PAGE 9 OF 12 ITA NO.696/BANG/2018 CASE OF REFERRED BY THE LD.AR MENTIONED HEREIN ABOV E. FOR SAKE OF CONVENIENCE WE REPRODUCE THE OBSERVATIONS OF THIS TRIBUNAL IN CASE OF VEERBHADRAPPA SANGAPPA (SUPRA) AS UNDER: 8.12.3. ON CAREFUL READING OF DECISION OF HONBLE SUPREME COURT DATED 18/04/2013 IT IS CLEAR THAT 10%/15% CONTRIBUTION T O SPV ACCOUNT WAS GUARANTEE PAYMENT FOR IMPLEMENTING OF R & R PLAN W HICH WOULD BE DEDUCTED FROM SALE PROCEEDS. THIS WAS ONE OF THE CO NDITIONS FOR RESUMING MINING OPERATIONS UNDER CATEGORIES A AND B RESPECTIVELY. IN THIS BACKGROUND WE ONCE AGAIN REFER TO AND RELY ON OBSERVATIONS BY HONBLE SUPREME COURT IN CASE OF CIT VS SITALDAS TI RATHDAS (SUPRA). HONBLE SUPREME COURT LAYING DOWN FOLLOWING PRINCIP AL REFERRED TO VARIOUS RULINGS THAT ILLUSTRATED ASPECTS OF DIVERSI ON OF INCOME BY OVERRIDING TITLE. THESE ARE THE CASES WHICH HAVE CONSIDERED THE PROB LEM FROM VARIOUS ANGLES. SOME OF THEM APPEAR TO HAVE APPLIED THE PRI NCIPLE CORRECTLY AND SOME NOT. BUT WE DO NOT PROPOSE TO EXAMINE THE COR RECTNESS OF THE DECISIONS IN THE LIGHT OF THE FACTS IN THEM. IN OUR OPINION THE TRUE TEST IS WHETHER THE AMOUNT SOUGHT TO BE DEDUCTED IN TRUTH NEVER REACHED THE ASSESSEE AS ITS INCOME. OBLIGATIONS NO DOUBT THER E ARE IN EVERY CASE BUT IT IS THE NATURE OF THE OBLIGATION WHICH IS THE DECISIVE FACT. THERE IS A DIFFERENCE BETWEEN AN AMOUNT WHICH A PERSON IS OBLI GED TO PAY OUT OF HIS INCOME AND AN AMOUNT WHICH BY THE NATURE OF THE OBL IGATION CANNOT BE SAID TO BE A PART OF THE INCOME OF THE ASSESSEE. WH EREBY THE OBLIGATION INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE IT IS DEDUCTIBLE BUT WHERE THE INCOME IS REQUIRED TO BE APPLIED TO DISCH ARGE AN OBLIGATION AFTER SUCH INCOME REACHES THE ASSESSEE THE SAME CON SEQUENCE IN LAW DOES NOT FOLLOW. IT IS THE FIRST KIND OF PAYMENT WH ICH CAN TRULY BE EXCUSED AND NOT THE SECOND. THE SECOND PAYMENT IS MERELY AN OBLIGATION TO PAY ANOTHER PORTION OF ONES OWN INCOME WHICH HAS BEEN RECEIVED AND ESSENCE APPLIED. THE FIRST IS A CASE IN WHICH THE I NCOME NEVER REACHES THE ASSESSEE WHO EVEN IF HE WERE TO COLLECT IT D OES SO NOT AS PART OF HIS INCOME BUT FOR AND ON BEHALF OF THE PERSON TO WHOM IT WAS PAYABLE. EMPHASIS SUPPLIED 8.12.4. APPLYING THIN LINE OF DIFFERENCE INTERPRETED BY HO NBLE SUPREME COURT TO PRESENT FACTS WE ARE OF THE OPINION THAT CONTRIBUTION TO SPV ACCOUNT CANNOT BE CONSIDERED TO BE DIVERSION OF IN COME. THIS IS BECAUSE WE HAVE ALREADY HELD WHILE DECIDING GROUND 2.1 AND 2.2 HEREINABOVE THAT ENTIRE SALE PROCEEDS ACCRUED TO A SSESSEE AND IT IS ONLY DUE TO DIRECTION OF HONBLE SUPREME COURT THAT SUCH AMOUNT WAS CONTRIBUTED TO SPV ACCOUNT FOR WHICH ASSESSEE WAS TO AUTHORISE CEC/MC IN RELEVANT PARAGRAPH 11(III) REFERE TO AND RELIED BY LD.CIT DR. 8.12.5. IN THE PRESENT FACTS OF THE CASE WE NOTE THAT 10%/ 15% OF SALE PROCEEDS WAS PAYABLE TO SPV ACCOUNT AFTER IT ACCRU ED TO ASSESSEE AND PAGE 10 OF 12 ITA NO.696/BANG/2018 THE FACT THAT ASSESSEE WAS OBLIGED TO PART WITH SU CH PORTION OF INCOME BY VIRTUE OF DIRECTIONS OF HONBLE SUPREME COURT A S A PRECONDITION TO RESUME MINING OPERATIONS UNDER CATEGORY A AND B. AT THIS JUNCTURE WE ALSO EMPHASISE THAT BUT FOR THE INTERVENTION BY HONBLE SUPREME COURT ASSESSEE WOULD NOT HAVE CONTRIBUTED 10%/15% TO SPV ACCOUNT FOR IMPLEMENTATION OF RECLAMATION AND REHABILITATIO N SCHEME ON ITS OWN AS THERE WAS NO STATUTORY REQUIREMENT TO DO SO UNDE R RELEVANT STATUTES THAT REGULATE MINING ACTIVITIES. 8.12.6. IN OUR VIEW CONTRIBUTING 10%/15% TO SPV ACCOUNT ON ACCOUNT OF CATEGORY A/ B RESPECTIVELY WOULD BE APPLICATIO N OF INCOME AND THEREFORE SHOULD BE CONSIDERED AS EXPENDITURE INCUR RED FOR CARRYING OUT ITS BUSINESS ACTIVITY. THIS WE HOLD SO FOR THE REA SON THAT CONTRIBUTIONS DETERMINED BY HONBLE SUPREME COURT ARE IN THE NATU RE OF GUARANTEE PAYMENT NECESSARY FOR RESUMING MINING ACTIVITY. WE ALSO NOTE THAT ALLEGED SUM IN THESE GROUNDS ARE FOR IMPLEMENTATION OF R&R PLANS IN RESPECTIVE SANCTIONED LEASE AREAS HELD BY ASSESSEE WHERE ILLEGAL MINING ACTIVITIES OR WHICH WERE USED FOR ILLEGAL OV ERBURDEN DUMPS ROADS OFFICES ETC. BEYOND SANCTIONED LEASE AREA W ERE CARRIED OUT. HERE WE ALSO NOTE THAT HONBLE SUPREME COURT DIRE CTED CEC TO REFUND ANY LEFTOVER GUARANTEE MONEY AFTER COMPLETION OF I MPLEMENTATION OF R& R PLAN SUBJECT TO SATISFACTION OF CEC AND APPROVAL BY HONBLE SUPREME COURT. FOR THIS PECULIAR REASON AMOUNT SO CONTRIBUT ED TOWARDS SPV BEING 10%/15% OF SALE PROCEEDS UNDER CATEGORY A/B CANNOT BE TREATED AS PENAL IN NATURE. WE THEREFORE REJECT O BSERVATIONS OF AUTHORITIES BELOW THAT SUCH SUM HAVING CONTRIBUTED BY ASSESSEE DO NOT FALL WITHIN AMBIT OF EXPLANATION TO SECTION 37 (1) OF THE ACT. 8.12.7. BASED ON ABOVE DISCUSSIONS AND ANALYSIS WE ARE OF OPINION THAT CONTRIBUTION TO SPV BEING 10%/15% OF SALE PROC EEDS UNDER CATEGORY A/B IS TO BE ALLOWABLE EXPENDITURE FOR YE AR UNDER CONSIDERATION. 19. FACTS LEADING TO THE DISALLOWANCE IS IN THE PRE SENT CASE IS SIMILAR AND IDENTICAL TO THE FACTS IN THE CASE OF V EERBHADRAPPA SANGAPPA & CO. (SUPRA) WE NOTE THAT SAME IS THE VI EW TAKEN BY CO-ORDINATE BENCH IN CASE OF M/S RAMGAD MINERALS & MINING LTD. (SUPRA). 20. RESPECTFULLY FOLLOWING THE VIEW TAKEN IN ABOVE DECISIONS AND BASED ON THE ABOVE DISCUSSIONS AND ANALYSIS WE ARE OF THE OPINION THAT 15% CONTRIBUTION TO SPV RETAINED BY TH E MONITORING PAGE 11 OF 12 ITA NO.696/BANG/2018 COMMITTEE ON BEHALF OF ASSESSEE DESERVES TO BE TREA TED AS BUSINESS EXPENDITURE FOR THE YEAR UNDER CONSIDERATI ON. ACCORDINGLY GROUNDS RAISED BY ASSESSEE STANDS ALLOW ED. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH 2021 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE DATED THE 9 TH MARCH 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE