ITAT:Expenses towards Reclamation and Rehabilitation of Mine Area allowable as Deduction

The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that the expenses towards reclamation and rehabilitation of mine area shall be allowable as a deduction under 37 of the Income Tax Act, 1961.

Facts of the case:-

The assessee is a partnership firm and is in the business of extraction and sale of run-of-mines (ROM), service in respect of rising of mining of ROM and generation and sale of electricity from a wind turbine generator. The assessee, for the relevant year, claimed expenses under the head “mining and raising expenses”. However, the Assessing Officer denied the expenses by observing that since the assessee is not permitted for Mining, the expenditure claimed by the assessee as Mining expenses cannot be deemed to have been incurred for the purpose of business.


While allowing the arguments of the assessee, Tribunal Vice President N V Vasudevan and Accountant Member Chandra Poojariheld that the conditions imposed in the order dated 07.11.2012 cannot be the basis to construe these expenses in question as the payment which is hit by the provisions of explanation to section 37(1) of the Act.

“In other words, these payments cannot be said to be the expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law. As the sequence of event would go to show that the payment in question is for the purpose of reclamation and rehabilitation of mine area and paid consequent to the directions of Hon’ble Supreme Court,” the Tribunal said.

“We, therefore, hold that the expenditure in question was the revenue expenditure and had to be allowed as a deduction under section 37(1) of the Act as expenditure incurred wholly and exclusively in connection with the business of the assessee. In this regard, that the AO has not doubted the claim of the assessee that the payment in question has been made towards reclamation and rehabilitation of mines. In these circumstances, we direct that the deduction claimed should be allowed,” the Tribunal added. 

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