Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (8) TMI 1672 - AT - Income TaxRevision u/s 263 - AO while passing the impugned order has not disallowed the amount paid by the assessee towards 'Compounding Fine' and penalty to the Bangalore Mahanagar Palike and claimed it as an allowable expenditure in its profit & loss account under the name "Building Approval Fees" - CIT was of the view that as this amount represented the compounding fine and penalty, it is not allowable for a deduction as per explanation below sec. 37(1) - HELD THAT:- It is fact that at the time of approval, the corporation and the builders aware that it is not possible to complete the project as per the proposed plan as there are certain adjustments need to be made at the time of actual execution. As long the actual completion of the projects are within the parameters of approval, the corporation/approving authorities permit the projects as approved with the nominal fine or compounding fee. This is the reason, the corporation has the clause intact in the rules books. If the projects are illegal, which is an offence and cannot be cured, the whole project cannot be approved by the approving authorities, as the same is subject matter of public safety. The penalty can be classified as two types; one charged for violation of law in the nature of offence, which cannot be pardoned by compounding and the second is charged for violation of certain rules which are not in the nature of offences and can be cured by compounding. In the case of housing/commercial projects, the corporation aware that there will be certain deviations at the time of approval and no project can be completed without any deviation. The question is, the extent of deviation. In case it is within the permissible limits, the approving authorities, allow with compounding the deviation by levying compounding fees. In the given case, the project was completed and the deviations are within the limits, for which the Bangalore Mahanagar Palike has approved the project by compounding fees, which is not in the nature of offence nor prohibition of any law. Hence, it is allowable u/s 37(1) of the Act. Adjustment proposed by the CIT will have impact on the tax credit available to the assessee in the subsequent AY. Hence, this ground is dismissed. Since there is no impact on the original assessment, the proceedings u/s 263 is quashed.
|