TaxTMI 
TaxTMI 
2018 (10) TMI 1120
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....-15 both under the normal provisions as well as u/s 115JB of the Act for the relevant AYs. During the assessment proceedings u/s 143(3) of the Act, the A.O. observed that the assessee-company is carrying out mining activity in India and particularly in Karnataka and that the Hon'ble Supreme Court of India took note of the large scale illegal mining activity carried on by various companies in Karnataka at the cost or detriment of environment and delivered their judgment on 18.04.2013 levying appropriate charges on the leaseholders. A.O. also observed that the Hon'ble Supreme Court, based on the extent of illegal mining, classified the mining leases into three categories viz., Category "A", "B" and "C" and that the assessee is falling in Category-B in respect of Donimali Complex and that in their order, the Apex Court observed that before consideration of any resumption of mining operations by Category-B leaseholders, each of the lease holder must pay compensation for the areas under illegal mining pits outside the sanctioned area at the rate of Rs. 5 Crs per hectare and for illegal overburden for at the rate of Rs. 1 Cr per hectare. Further, A.O. observed that the said direction of ....
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....ation is not allowable. He also examined the allowability of the expenditure claimed by the assessee towards 'Corporate Social Responsibility' (CSR) and disallowed the same on the ground that the said activities are not related to the business of the assessee. The A.O. also observed that the assessee claimed weighted deduction of 200% u/s 35(2AB) of the Act. Observing that the assesseecompany has claimed excess deduction to the tune of Rs. 2,44,71,676/- u/s 35(2AB), A.O. disallowed the claim. 6. Aggrieved, assessee preferred an appeal before the CIT(A), who partly allowed the same. Against the confirmation of the disallowance of payments made under the directions of the Hon'ble Supreme Court towards penalty / compensation and also on the disallowance of expenditure made towards Corporate Social Responsibility, the assessee is in appeal before us by raising the following grounds of appeal:- "1. The order of the CIT(A) is erroneous both on facts and in law to the extent it is the prejudicial to the interest of the assessee. 2. The Ld. CIT(A) erred in confirming the addition made by A.O. of Rs. 405,79,00,000/- by treating the amounts paid by appellant on the order....
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....rtaking and is under the administrative control of the Ministry of Steel, Government of India. It is seen that the assessee has paid Rs. 405.79 Crs towards contribution for the Special Purpose Vehicle (SPV) and compensation for encroachment of the mining area beyond the sanctioned lease area as per the directions of the Hon'ble Supreme Court. The assessee has filed a copy of the order of the Hon'ble Supreme Court, which is placed at pages 8 to 88 of the paper book. We find that the illegal mining activity in the State of Karnataka (in Bellary region) had come up before the Hon'ble Supreme Court of India and the Apex Court had formed a Committee viz., Central Empowered Committee (CEC) to examine and suggest the remedial action. The CEC submitted its report indicating large scale illegal mining at the cost and detriment of the environment due to which by order dated 29.07.2011 a complete ban on mining in the district of Bellary was imposed by the Hon'ble Supreme Court. Further, vide order dated 26.08.2011, the ban was extended to Tumkur and Chitradurga Districts. Thereafter, a Joint Team was constituted by the Apex Court vide its order dated 06.05.2011 to determine the boundaries of ....
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....arnataka and Andhra Pradesh and for which survey sketches have not been finalized. For specific reasons as mentioned in the Page 9 9 statement of "Category-B" leases, M/s. S.B. Minerals (ML No. 2515), M/s. Shantalaxmi Jayram (ML No. 2553), M/s. Gavisiddeshwar Enterprises (ML No. 80) and M/s. Vibhutigudda Mines (Pvt.) Ltd. (ML No. 2469) have been assigned in "Category-B". The numbers of such leases in "Category-B" comes to 72. 30. The "Category-C" comprises of leases wherein (i) the illegal mining by way of (a) mining pits outside the sanctioned lease area have been found to be more than 10% of the lease area and/or (b) over burden/waste dumps outside the sanctioned lease areas have been found to be more than 15% of the lease areas and/or (ii) the leases found to be involved in flagrant violation of the Forest (Conservation) Act and/or found to be involved in illegal mining in other lease areas. The number of such leases comes to 49. RECOMMENDATIONS (as modified by CEC by its Report dated 13.3.2012. Items 1 to IV of the Report dated 3.2.2012 stood replaced by Items A to I of the Report dated 13.3.2012 which are reproduced below along with Items V to XIV of the init....
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.... applicable taxes) received during the e-auction may be paid by the buyer directly to the respective lease holders and the balance 10% may be deposited with the Monitoring Committee alongwith the royalty, FDT and other applicable taxes/charges; (G) The responsibility of the Monitoring Committee will be (a) to monitor the implementation of the various provisions/prescriptions of the R&R Plans, (b) to ensure strict compliance of the conditions on which the environment clearance, the approval under the Forest (Conservation) Act, 1980 and the other statutory approvals/clearances have been accorded, (c) to ensure that the mining is undertaken as per the approved Mining Plan, (d) to ensure Page 12 12 that the ceiling on annual production fixed for the lease does not exceed, (e) to ensure that the safety zone is maintained around the lease area and in respect of the clusters of mining leases around the outer boundary of such cluster of mining leases and (f) to ensure compliance of the other applicable condition/provisions. Any lease found to be operating in violation of the stipulated conditions/provisions should be liable for closure and/or termination of the lease; (H)....
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....undary is decided and thereafter the individual leases should be dealt with depending upon the level of the illegality found; and v) Out of the sale proceeds of the existing stock of the mining leases, after deducting : a) The penalty/compensation payable; b) Estimated cost of the implementation of the R& R Plan; and c) 10% of the sale proceeds to be retained by the Monitoring Committee for being transferred to the SPV d) The balance amount, if any, may be allowed to be disbursed to the respective lessees. ................. ................. (ii) Conditions which have been suggested for opening of Category 'A' mines and additionally the R& R Plans for Category 'B' mines 43. The conditions subject to which Category 'A' and 'B' mines are to be reopened and the R&R Plans that have been recommended as a precondition for reopening of Category 'B' mines are essentially steps to ensure scientific and planned exploitation of the scarce mineral resources of the country. The details of the preconditions and the R&R plans have already been noticed and would not require a repetition. Suffice it would be to say that such recommendations are wholesome....
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.... P. Balasubbasetty & Sons Ballary A 08.09.2011 2502 44.11 0.18 0.41 0.29 0.66 0.69 1.16 11 Mysore Minerals Ltd (Timmappanagudi) Ballary A 08.09.2011 2805 136.97 0.00 1.82 1.33 1.78 3.60 12 M. Srinivasulu Ballary A 08.09.2011 2552 134.00 0.00 0.00 0.99 0.99 13 Zeenath Transport Co Ballary A 08.09.2011 2547 50.00 0.22 0.44 0.51 1.02 1.59 2.32 14 Varalakshmi Mining Co Ballary A 08.09.2011 2611 10.66 0.00 0.16 1.50 0.71 0.87 15 HP Manjunath Ballary A 08.09.2011 699 3.03 0.07 2.31 0.00 0.00 0.14 0.21 16 National Minieral Development Corporation Ballary A 08.09.2011 2396 608.00 1.19 0.20 1.65 0.27 49.49 52.33 17 Sandur Magenese & Iron Ores Ltd Ballary A 10.11.2011 2580 1,863.02 3.97 0.21 0.78 0.04 35.89 40.64 18 G J Kumar Chitra durga A 13.10.2011 2499 1.34 ....
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....Kumar Chitra durga A 13.10.2011 2499 1.34 0.00 0.00 0.16 0.16 19 E. Ramamurthy ( R Praveen Chandra) Chitra durga A 13.10.2011 2294 42.60 0.00 0.32 0.75 2.53 2.85 20 Mineral Enterprises Ltd Chitra durga A 24.01.2012 2348 103.81 3.13 3.13 21 Karnataka Limpo Tumk ur A 10.11.2011 2028 16.19 0.17 1.05 0.12 0.74 1.02 1.31 Total (2 mining leases) 4,118.78 6.23 0.15 6.88 0.17 141.94 155.0 5 been marginal illegalities committed by the assessee and the compensation / penalty as directed by the Hon'ble Supreme Court is only to compensate the Government for the loss of revenue from such mining or marginal illegalities and not as a penalty. Though the nomenclature given is "penalty" it is not for infraction or violation of any law to hold it to be punitive in nature, as presumed by the Assessing Officer. Learned Counsel for the Assessee placed reliance on various case law, particularly the decision of the Coordinate Bench of the ITAT, Kolkata in the case of Essel Mining & Industries Ltd vs. Addl. CIT (ITA No. 352/Kol/2011 and others, dated 20.05.2016); ACIT vs. Freegade & Co. Ltd (ITA No.934/Kol/2009, dated 05.08.2011) and also the decision of the Hon'ble Calcutta High Court in the case of Shya....
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....he mining activity by Categories 'A' & 'B' companies is to not to punish the companies for any violation of law but is to ensure scientific and planned exploitation of mineral resources in India. Further the Hon'ble Supreme Court had directed as under:- "(X) Out of the 20% of sale proceeds retained by the Monitoring Committee in respect of the cleared mining leases falling in "Category- A", 10% of the sale proceeds may be transferred to the SPV while the balance 10% of the sale proceeds may be reimbursed to the respective lessees. In respect of the mining leases falling in "Category-B", after deducting the penalty / compensation, the estimated cost of the implementation of the R & R Plan, and 10% of the sale proceeds to be retained for being transferred to the SPV, the balance amount, if any may be reimbursed to the respective lessees;" The fact that the compensation is proportionate to area of illegal mining outside the leased area and that the assessee has paid the proportionate compensation for mining in the areas outside the sanctioned area allotted to it and that 10% of sum is to be transferred to SPV and the balance 10% is to be reimbursed to the respective lessee....
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....he decision of the Tribunal for granting relief to the assessee and it has not been brought to our notice that the orders of the ITAT are suspended or set-aside by the Hon'ble High Court. In view of the same, we see no reason to interfere with the orders of the CIT(A) on the issues, who has followed the orders of the ITAT on the same issues. Accordingly, the Revenue's appeal for the A.Y. 2013-14 is dismissed. ITA No.1823/H/2017 (A.Y.: 2014-15) (By Assessee) 19. In this appeal, assessee has raised the following grounds of appeal:- "1. The order of the CIT(A) is erroneous both on facts and in law to the extent it is the prejudicial to the interest of the assessee. 2. The Ld. CIT(A) erred in confirming the addition made by A.O. of Rs. 285,46,00,000/- by treating the amounts paid by appellant on the order of Supreme Court as penal in nature ignoring that the amount paid is compensatory in nature and paid excessively for the purpose of business. 3. The Ld. CIT(A) erred by stating that "appellant has not furnished any further evidence of proof to counter the findings of Assessing Officer" ignoring that the appellant has given detailed explanation....