The Income Tax Appellate Tribunal (ITAT), Bangalore Bench ruled that 15% contribution to Special Purpose Vehicle (SPV) retained by the monitoring committee to be treated as business expenditure.
The Assessee, M/s Muneer Enterprises is a partnership firm engaged in the business of extraction, processing and manufacturing of iron ore for sale. The assessee owns mining lease classified under category B. It has been stated that the only issue that arises out of the impugned order is disallowance of 15% of sale proceeds of iron ore deducted and retained by the monitoring committee towards special purpose vehicles in respect of category B mines.
The assessee debited the P&L account sum of Rs. 51,20,653 being 15% of the sale proceeds of Rs.3,41,37,680 is under the head social welfare- government fund. The AO disallowed the said SPV deduction.
The AO observed that, these SPV were deducted pursuant to directions of Hon’ble Supreme Court (supra) by order dated 18/04/2013, wherein, it was directed that, sum so paid towards SPV charges should be exhaustively and exclusively used to undertake socio economic and infrastructure development, afforestation, soil and biodiversity conservation for ensuring inclusive growth of the area surrounding mining leases.
The assessee submitted that a clarification was issued by the Department of mines on March 8, 2019, wherein it has been clarified that transfer of 10% of sale value shall continue to be transferred to SPV even after conducting auction of these leases. It was thus submitted that it is a recurring expenditure incurred by assessee and is allowable as business expenditure.
The coram of Chandra Poojari and Beena Pillai while rejecting the observation of the lower authority held that 15% contribution to SPV retained by the monitoring committee on behalf of assessee deserves to be treated as business expenditure for the year under consideration.
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