TaxTMI 
TaxTMI 
2021 (11) TMI 424
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....see 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 minin....
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....t be said that the expenditure incurred is wholly and exclusively for the advantage of the assessee's business activity. Keeping in view the above facts I unable to accept the contentions of the appellant. Therefore the Ground no. 3 of appeal is dismissed." 6. Aggrieved by the order of the CIT(A), the assessee is in appeal before the CIT(A). The short question that arises for consideration before the Tribunal is as to whether Revenue authorities were justified in disallowing the mining expenses by invoking the provisions of explanation to section 37(1) of the Act. In this regard, it is necessary to understand the factual background with regard to the banning of mining operations by the Hon'ble Supreme Court and the subsequent development that took place. 7. The Hon'ble Supreme Court by order dated 29/07/2011 passed in GOI vs. Obulapuram Mining Co. Pvt. Ltd., reported in (2011) 12 SCC 491, suspended all mining and transportation activities in area admeasuring approximately 10,868 ha, pertaining to district of Bellary. Subsequently, by order dated 26/08/2011 passed in Samaj Parivartana Samudaya vs state of Karnataka, reported in (2013) 8 SCC 209, Hon'ble Apex Court ....
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.... constituting a special purpose vehicle by State of Karnataka, to carry out highly essential comprehensive environment plans for mining impact zone, in order to restore environmental damage, caused in such area due to illegal and reckless mining on a very large scale, and to ensure that environment in such areas may not suffer from any such type of abuse and destruction in future. Hon'ble Apex Court in its order dated 28.9.2012, observed in para 5.1 to 5.4 as under: "5.1. Compensatory payment: (a) each of the leaseholders must pay compensation for the areas under illegal mining pits outside the sanctioned area, as found by the joint team (and as finally held by CEC) at the rate of Rs. 5 crores per hectare, and (b) for the areas under illegal overburden dumps, roads, offices, etc. Outside the sanctioned the lease area, as found by the joint team (as might have been finally held by CEC) at the rate of Rs. 1 crore per hectare. 5.1.1. it is made clear that the payment at the rates aforesaid is the minimum payment and each leaseholders may be liable to pay additional amounts on the basis of the final determination of the national loss caused by the illegal mining a....
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....he leaseholder concerned the balance amount, if any. It is expected that the balance amount, after making the adjustment as indicated here, would be paid to the leaseholder concerned within one month from the date of submission of authorisation and the undertaking. 5.3.2. In case of any leaseholder, if the money held on his account is not sufficient to cover the aforesaid 3 heads, he must pay the deficit within 2 months from today. 5.4. The R&R plans for the aforesaid 63 category B mines may be prepared as early as possible, as directed by orders of this court dated 13/04/2012, 20/04/2012 and 04/05/2012, and in case where the R & R plan is already prepared and ready, the leaseholder may take steps for is comprehensive implementation, both within and outside the sanctioned lease area, without any delay." 7.8.3. In aforesaid paras, Hon'ble Apex Court refers to orders dated 13/04/2012, 20/04/2012 and 04/05/2012 passed in case of State of AP vs Obulapuram Mining Co. Pvt. Ltd., reported in (2013) 8 SCC 213, (2013) 8 SCC 216 and (2013) 8 SCC 217 respectively. 9. The learned Counsel for the assessee filed before us the following documents with a prayer to accept t....
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....ion, to understand its correct nature. Hon'ble Supreme Court observed as under: "II. Guarantee money for implementation of the R&R plan in the respective sanctioned lease areas. The CEC shall make an estimate of the expenses required for the full implementation of the R&R plan in each of the 63 category B mines and each of the leaseholders must pay the estimated amount as guarantee for implementation of the R&R plans in their respective sanctioned lease areas and in the areas where they carried on illegal mining activities or where used for illegal overburden dumps, roads, offices, etc beyond that the sanctioned lease areas. In case, any leaseholder defaults in implementation of the R&R plan, it will be open to the CEC to carry out the R&R plan for that leasehold through some other proper agency from the guarantee money deposited by the leaseholder. However, on the full implementation of the R&R plan to the complete satisfaction of the CEC and subject to the approval by the court, the guarantee money would be refundable to the leaseholder." 8.3.2. We note that Hon'ble Supreme Court directed lease holders to give undertaking to make any additional payment. ....