2021 (7) TMI 284 - AT - Income Tax

Tribunal allows appeals on delay, SPV contributions, dismisses other grounds

M/s Balasubba Settey & Son Versus The Principal Commissioner of Income-Tax, Gulbarga. ACIT, Circle-1, Bellary.

M/s Balasubba Settey & Son Versus The Principal Commissioner of Income-Tax, Gulbarga. ACIT, Circle-1, Bellary. - TMI Issues Involved:1. Condonation of delay in filing appeals.2. Validity of the order passed under Section 263 of the Income Tax Act.3. Disallowance of 20% contribution of sale proceeds retained by the monitoring committee towards SPV charges.4. Disallowance of sundry expenses and CSR activity expenses.5. Applicability of the decision in the case of M/s. Ramgad Minerals and Mining Ltd.Detailed Analysis:1. Condonation of Delay in Filing Appeals:The tribunal noted a 4-day delay in filing the appeals by the assessee. The delay was attributed to the preoccupation of the assessee’s counsel. The tribunal condoned the delay, stating that the delay could not be attributed to the assessee and allowed the application for condonation of delay to render substantial justice.2. Validity of the Order Passed Under Section 263:The Principal Commissioner of Income Tax (Pr.CIT) issued a show cause notice under Section 263, citing that the Assessing Officer (AO) did not properly verify discrepancies in the sale transactions. The Pr.CIT considered the assessment order erroneous and prejudicial to the revenue interest. Despite the assessee's submissions, the Pr.CIT set aside the file to the AO for passing a fresh assessment order after proper verification. The assessee appealed against this order, but the tribunal did not find the need to adjudicate this appeal as the matter became academic in nature due to considerations on merits.3. Disallowance of 20% Contribution of Sale Proceeds Retained by Monitoring Committee Towards SPV Charges:The AO disallowed the 20% contribution of sale proceeds retained by the monitoring committee, which the assessee claimed as an expenditure. The AO considered these contributions as not incurred wholly and exclusively for business purposes and treated them as penal in nature. The tribunal, however, referred to the Supreme Court's directions in the case of Samaj Parivartana Samudaya vs. State of Karnataka, which mandated these contributions for environmental reclamation and rehabilitation. The tribunal concluded that these contributions were necessary for resuming mining operations and were not penal in nature. Thus, the tribunal held that the 20%/10% contribution to SPV out of the sale proceeds is an allowable expenditure for the relevant assessment years.4. Disallowance of Sundry Expenses and CSR Activity Expenses:The AO disallowed sundry and CSR activity expenses due to lack of documentary evidence. The tribunal upheld the AO's disallowance of CSR expenses, agreeing that they were not allowable under Section 37 of the Act. However, the tribunal did not provide a specific ruling on the sundry expenses disallowance in this summary.5. Applicability of the Decision in the Case of M/s. Ramgad Minerals and Mining Ltd.:The tribunal noted that the issues raised by the assessee were covered by the decision in the case of M/s. Ramgad Minerals and Mining Ltd. The tribunal applied the observations from this case, which clarified that contributions to SPV were necessary for environmental rehabilitation and were thus allowable expenditures. The tribunal consistently applied this precedent across the assessment years under consideration, allowing the assessee's claims for SPV contributions.Conclusion:The tribunal allowed the appeals partly, condoning the delay in filing, and held that the contributions to SPV were allowable expenditures. The tribunal dismissed grounds unrelated to the CIT(A)'s order or those not argued by the assessee. The appeals for the assessment years 2012-13, 2013-14, 2014-15, and 2015-16 were thus partly allowed.