THE PR COMMISSIONER OF INCOME TAX vs. M/S R PAMPAPATHY

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ITA/100001/2022HC KarnatakaKAHC02023470202129 July 2025Bench: S.SUNIL DUTT YADAV,VIJAYKUMAR A.PATIL4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court disposed of the appeal as withdrawn based on a CBDT circular regarding monetary limits for appeals. The substantial questions of law were kept open for future adjudication.

What were the facts?

The Revenue appealed against an ITAT order allowing certain amounts retained by a Monitoring Committee as business expenditure. The assessee's mining operations were reportedly stopped due to illegal activities beyond the sanctioned lease area.

What were the issues?

Whether amounts retained by a Monitoring Committee from sale proceeds, due to illegal mining, are allowable as business expenditure. Whether payments made to a Special Purpose Vehicle for illegal activities are deductible.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 260A

AI-generated summary — verify with the full judgment below

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HC-KAR NC: 2025:KHC-D:9334-DB ITA No. 100001 of 2022

IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 29TH DAY OF JULY, 2025 PRESENT THE HON'BLE MR. JUSTICE S.SUNIL DUTT YADAV AND THE HON'BLE MR. JUSTICE VIJAYKUMAR A.PATIL INCOME TAX APPEAL NO.100001 OF 2022 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX, NAVANAGAR, HUBLI.

2.

THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, FORT, BALLARI. - APPELLANTS (BY SRI. THIRUMALESH M.M. AND SMT. ROOPA R.A., ADVOCATES)

AND: M/S R. PAMPAPATHY AARPEE IRON ORE MINES, MINE OWNERS, NO.24/151, BELLARY ROAD, HOSPET-583201. PAN AACFR2571B - RESPONDENT (BY SRI. SHASHANK S. HEGDE, ADVOCATE)

THIS ITA IS FILED UNDER SECTION 260A OF THE INCOME- TAX ACT, 1961, PRAYING TO SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLANT TRIBUNAL, B-BENCH, BANGALORE, IN ITA NO.724/BANG/2018, DATED 26.02.2021 FOR THE ACADEMIC YEAR 2014-15 MARKED AS ANNEXURE-A AND CONFIRM THE ORDER DATED 25.02.2016 PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX OFFICER, CIRCLE-1, BALLARI FOR THE ASSESSMENT YEAR 2014-15 AT ANNEXURE-C & ETC.

THIS ITA COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: THE HON'BLE MR. JUSTICE S.SUNIL DUTT YADAV AND THE HON'BLE MR. JUSTICE VIJAYKUMAR A.PATIL

RAKESH S HARIHAR Digitally signed by RAKESH S HARIHAR Location: High Court of Karnataka, Dharwad Bench Date: 2025.08.04 11:44:55 +0530

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HC-KAR NC: 2025:KHC-D:9334-DB ITA No. 100001 of 2022

ORAL JUDGMENT (PER: THE HON'BLE MR. JUSTICE S.SUNIL DUTT YADAV)

The appeal has been filed under Section 260-A of the Income Tax Act challenging the order passed in I.T.A. No. 724/Bang/2018 relating to assessment year 2014-15. It is noticed that the tax effect in the appeal in terms of the memo dated 29.07.2025 is Rs.1,56,06,489/- raising the following substantial questions of law: 1. Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in law in holding that, the amount retained by the Monitoring Committee out of the sale proceeds will be allowable as a ‘Business Expenditure’ U/Sec. 37(1) of the I.T. Act despite the fact that, such retentions had been made by the Monitoring Committee on account of illegal mining activities carried by the assessee beyond the sanctioned lease area as per the lease?

2.

Whether on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in not appreciating the fundamental reason for payments made to the SPV is the illegal activities carried on by the assessee in areas beyond the sanctioned lease area and hence such payment

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HC-KAR NC: 2025:KHC-D:9334-DB ITA No. 100001 of 2022

has to be treated as payment made for infraction of law and hence cannot be allowed as deduction u/s 37(1) of the I.T. Act? 3. Whether on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in holding that, such contributions made to the special purpose vehicle are in the nature of compensation and is allowable as expenditure as without the same, the assessee could not have resumed its mining operation, despite the fact that, the mining operations had been stopped on account of serious illegal activities conducted by the assessee and accordingly such contributions were in the nature of penalty paid for such infraction of law and hence could not have been allowed as a deduction in the computation of income?

2.

Learned counsel for the appellants has filed a memo which reads as under: “That the appellant has filed the above appeal challenging the ITAT order. As per the Circular No. 09/2024 dated 17.09.2024 the above matter falls under the Below Monetary Limit, i.e., 2 crore and the tax effect is Rs.1,56,06,489/-. Hence the matter needs to be withdrawn as per the Circular.”

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HC-KAR NC: 2025:KHC-D:9334-DB ITA No. 100001 of 2022

3.

Copy of the circular dated 17.09.2024 of the Central Board of Direct Taxes is enclosed. In the light of the subject matter of the appeal being below monetary limit in terms of the Circular, the proceedings cannot be continued. Accordingly, the appeal stands disposed off.

4.

The substantial questions of law raised above are kept open to be adjudicated in appropriate proceedings.

Sd/- (S.SUNIL DUTT YADAV) JUDGE

Sd/- (VIJAYKUMAR A.PATIL) JUDGE BVV, CT:VP LIST NO.: 1 SL NO.: 49

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