Tribunal grants deduction under Income Tax Act, dismisses Stay Application. Corporate social responsibility not applicable.

The Tribunal allowed the appeal, granting the appellant a deduction under section 37 of the Income Tax Act for the 15% of sale proceeds retained by the monitoring committee. The Stay Application filed by the appellant was dismissed as it became infructuous. The Tribunal emphasized the compensatory nature of the payment and ruled that corporate social responsibility provisions did not apply to the appellant, a partnership firm.

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Issues Involved:
1. Applicability of "diversion of income by overriding title."
2. Right of the appellant to receive the amount retained by the monitoring committee.
3. Nature of the amount retained by the monitoring committee (penal vs. compensatory).
4. Application of corporate social responsibility (CSR) provisions to the appellant.

Issue-wise Detailed Analysis:

1. Applicability of "diversion of income by overriding title":
The appellant argued that the concept of "diversion of income by overriding title" should apply, asserting that the amount retained by the monitoring committee on the direction of the Supreme Court does not form part of its income. The Tribunal, referencing its own earlier decisions for assessment years 2013-2014 and 2014-2015, held that 15% of the sale proceeds, retained by the Central Empowered Committee (CEC), accrued to the appellant first and was then payable to the Special Purpose Vehicle (SPV) account. Thus, it was not a case of income diversion by overriding title.

2. Right of the appellant to receive the amount retained by the monitoring committee:
The appellant contended that it did not have the right to receive the amount retained by the monitoring committee. The Tribunal reiterated that the entire sale proceeds accrued to the appellant, and the retention by the CEC was a subsequent obligation. Therefore, the amount retained by the CEC was considered to have accrued to the appellant first.

3. Nature of the amount retained by the monitoring committee (penal vs. compensatory):
The appellant claimed that the amount retained was compensatory and not penal. The Tribunal, drawing from its previous rulings and the Supreme Court's directions, concluded that the 15% contribution to the SPV was compensatory in nature. It was necessary for the appellant to continue its business operations and was thus an allowable business expenditure under section 37 of the Income Tax Act. The Tribunal referenced the Supreme Court's emphasis on scientific and planned exploitation of mineral resources and the need for reclamation and rehabilitation plans, which supported the compensatory nature of the payment.

4. Application of corporate social responsibility (CSR) provisions to the appellant:
The appellant, a partnership firm, argued that it was not under any statutory obligation to comply with CSR provisions, which apply to companies. The Tribunal agreed, citing the Bangalore Bench's decision in the case of Shri B. Rudragouda v. ACIT, which held that CSR provisions under section 135 of the Companies Act, 2013, do not apply to non-corporate entities. Therefore, the expenditure incurred by the appellant towards the SPV was not CSR expenditure and was allowable as a business expense.

Conclusion:
The Tribunal allowed the appeal, holding that the appellant was entitled to a deduction under section 37 of the Income Tax Act for the 15% of sale proceeds retained by the CEC. The Stay Application filed by the appellant was dismissed as it became infructuous. The Tribunal's decision emphasized the compensatory nature of the payment and the non-applicability of CSR provisions to the appellant, a partnership firm.

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