Forest clearance payments treated as revenue expenditure where they only remove an obstruction to existing mining operations.

Payments made as net present value for diversion of forest land and as contribution to a Regional Wild Life Management Plan were treated as revenue expenditure allowable under section 37(1). The expenditure was incurred to satisfy forest clearance conditions and merely removed an obstruction to the continuation of existing mining operations; it did not confer any fresh mining right or extend an existing right. Following its earlier decision on identical facts, the Tribunal applied the same treatment and allowed the deduction.

---

---

Issues: Whether the amounts paid towards net present value for diversion of forest land and contribution for the Regional Wild Life Management Plan were revenue expenditure allowable as business expenditure under section 37(1) of the Income-tax Act, 1961, or capital expenditure.

Analysis: The payment was made in pursuance of the forest clearance conditions and did not confer any fresh mining right or extension of an existing right. The assessee was already carrying on mining operations, and the expenditure was incurred to remove a restriction or obstruction in the continuance of that business. The Tribunal also followed the earlier decision in an identical matter, where such expenditure was held to be revenue in nature and allowable under section 37(1).

Conclusion: The expenditure was held to be revenue expenditure and allowable as business expenditure under section 37(1); the Revenue's challenge failed.

---