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2010 (1) TMI 223 - HC - Income TaxBusiness Expenditure- The assessee is a private limited company carrying on business activity as a developer and builder. For the assessment year 2005-06, the assessee had claimed certain amounts as deductible business expenditure under section 37 of the Income-tax Act, 1961, the amount which had been paid by way of regularisation fee for the deviations that had been indulged in by the assessee while constructing a structure and for having violated the sanctioned plan, in terms of the building bye-laws, which had been approved by the municipal authorities, in terms of the provisions of the Karnataka Municipal Corporations Act, 1976, and the Bangalore Mahanagara Palike Building bye-laws. The claim of the assessee was disallowed by the Assessing Officer. Held that- dismissing the appeal, that the language of section 483 of the Karnataka Municipal Corporation Act, 1976, made it clear that it was an amount paid to compound an offence. The amount paid for compounding an offence is inevitably a penalty in terms of section 483 itself and the mere fact that it had been described as compounding fee could not, in any way alter the character of the payment. The amount was not deductible.
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