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TMI Blog2025 (5) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the order of the National e-Assessment Centre, Delhi (in short, 'the A.O.') passed under section passed under section 143(3) read with section 143(3A) read with section 143(3B) of the Act, date of order 05/04/2021. 2. The brief facts of the case are that the assessee-company is engaged in the business of road construction for government authorities such as the Municipal Corporation of Greater Mumbai (MCGM), Navi Mumbai Municipal Corporation (NMMC), and the Mumbai Metropolitan Region Development Authority (MMRDA). During the course of execution of such contracts, various departments/authorities deducted certain amounts from the assessee's bills, classifying them as "penalties" for reasons including, but not limited to, non-deployment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee preferred an appeal before the Ld.CIT(A), who upheld the order of the Ld. AO. Being further aggrieved, the assessee has preferred the present appeal before this Tribunal. 3. During the course of hearing, the Ld. AR submitted a Paper Book comprising pages 1 to 30, which was taken on record. The Ld. AR referred to pages 1-2 of the APB which contain a summary of the so-called "penalty" payments made to MCGM and other authorities, such as HPCL, as well as certain payments made through credit card and towards car insurance. A portion of the amount was recovered from employees' salaries. The total expenditure incurred towards penalty and late fee was Rs. 44,95,698/-, out of which Rs. 2,50,839/- was recovered from employees, and the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Upon considering the submissions of both parties, we find that the expenses incurred by the assessee towards penalty and late fees do not constitute an infraction of law. Rather, such payments arose from contractual terms in the normal course of business and were intended to preserve and facilitate business relationships with government entities. The Coordinate Benches of the Tribunal, in the cases cited above, Mahavir Multitrade (P) Ltd (supra), Farseen Rubber Industries Ltd (supra), and Ripley & Co Ltd (supra) have consistently held that such payments do not attract disallowance under Explanation 1 to Section 37(1) of the Act. Accordingly, we are of the view that the disallowance made by the Ld. AO under Section 37(1), amounting to Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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