P. Venganna Setty and Brothers Vs ACIT (ITAT Bangalore)
Facts-
In the present case appeal is preferred by the assessee against the expense of INR 13,02,180 towards reclamation and rehabilitation of mine area disallowed by the revenue.
Conclusion-
It is clear that the Hon’ble Supreme Court directed compensatory payment to be made by the lease holders of various mines for Restoration and Rehabilitation of damage to ecology owing to mining operations. It is pursuant to the aforesaid directions that the assessee had to make the aforesaid payment and this fact is not in dispute.
Held expenditure of reclamation and rehabilitation had to be allowed as a deduction under section 37(1) of the Act as expenditure incurred wholly and exclusively in connection with the business of the assessee.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal by the assessee against the order dated 27.03.2019 of CIT(A), Kalburgi, relating to Assessment Year 2014-15.
2. The only issue that arises for consideration in this appeal is as to whether Revenue authorities were justified in disallowing a sum of Rs.13,02,180/-being expenses incurred by the assessee towards reclamation and rehabilitation of mine area.
3. The assessee is a partnership firm and is in the business of extraction and sale of run-of-mines (ROM), service in respect of rising of mining of ROM and generation and sale of electricity from wind turbine generator. In the course of assessment proceedings under section 143(3) of the Act, the AO noticed that the assessee had claimed a sum of Rs.2,35,03,176/- under the head “mining and raising expenses”. It is an admitted position that the assessee was in the business of mining since 1952 and had a licence for carrying out mining operations. In 1992, the mining licence was renewed for 20 years. The assessee made an application for renewal of the mining lease on 29.04.2011. The Hon’ble Supreme Court in its order dated 29.07.2011 passed in the case of GoI Vs. Obulapuram Mining Company Pvt. Ltd., (2011) 12 SCC 491 suspended all mining and transportation activities in the district of Bellary. The assessee could not therefore get renewal of its licence for mining activity. However, it had a licence for prospecting operation w.e.f. 07.11.2011. The Assessee’s lease of land over which it had mining rights, stood extended up to 31.3.2020 vide order No.C1 10 MMM dated 31.1.2017 of the Department of Commerce & 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.
