In a recent ruling, the Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has determined that the compensation afforestation fund contributed by TATA Steel qualifies as an allowable expenditure.
Mr. Nishant Thakkar representing the assessee submitted that the assessee was engaged in the business of manufacturing and sale of iron steel products. Raw materials required for manufacturing finished goods are: coal, iron ore and other minerals. The assessee has been granted mining lease rights in the states of Jharkhand and Odisha for mining of coal, iron ore and other minerals. The mining lease areas which are covered under the forest areas are governed by statutes enacted for preservation of natural forest, management of wildlife, promotion of environmental services etc.
Further the assessee under said statutes is under obligation to contribute to the Compensatory Afforestation Fund. During the period relevant to assessment year under appeal, the assessee has contributed Rs.9, 84,356/- towards the Compensatory Afforestation Fund and has claimed the same as expenditure under Section 37(1) of the Income Tax Act, 1961.
The Dispute Resolution Panel in AY 2014-15 confirmed the addition just to keep the issue alive as the Department was contesting the issue in appeal before the High Court. In the impugned AY, the DRP upheld the findings of AO on the issue for similar reasons
The AR fairly concedes that the AO cannot consider any claim not made in the return of income/revised return of income, however, there is no impediment for the Appellate Authorities to admit fresh claim of assessee. Further pointed that in assessee’s own case in AY 2006-07 in ITA No.1447 & 1412/MUM/2012, the Tribunal in appeal arising out of revision proceedings u/s 263 of the Act has held that the expenditure towards Compensatory Afforestation Fund was allowable.
Thus, the two member bench of the tribunal comprising M. Balaganesh (Accountant member) and Vikas Aswathy (Judicial member) held that contribution towards Compensatory Afforestation Fund by the assessee during the impugned AY was allowable. Accordingly, appeal of the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
