The ACIT, Circle-3, Surat V. M/s. Shree Shyam Corporation, Surat

ITA 553/AHD/2009

• Counselvise Citation: 55320514 RSA 2009
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Section: 143(3); 37(1)

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' [BEFORE SHRI T K SHARMA JM] [AND SHRI A MOHAN ALANKAMONY AM] ITA NO.553/AHD/2009 (ASSESSMENT YEAR:-2005-06) THE ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-3, SURAT V/S M/S SHREE SHYAM CORPORATION, RAJ RESIDENCY, NEAR GANGESHWAR MAHADEV TEMPLE, ADAJA ROAD, SURAT PAN: AAYFS 9772 P [APPELLANT] [RESPONDENT] APPELLANT BY :- SHRI B L YADAV, DR RESPONDENT BY:- NONE DATE OF HEARING:- 24-10-2011 DATE OF PRONOUNCEMENT:- 24-10-2011 O R D E R PER T K SHARMA (JM) : THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 13-11-2008 OF THE LEARNED C OMMISSIONER OF INCOME-TAX (APPEALS)-II, SURAT [THE CIT(A)] FO R ASSESSMENT YEAR (AY) 2005-06, DELETING THE ADDITION MADE BY TH E ASSESSING OFFICER (AO) OF RS.12,50,000/- HOLDING THAT THE C ONTRAVENTION WAS NOT SOMETHING WHICH SURAT MUNICIPAL CORPORATION HAD DELETED, BUT PAID BY THE ASSESSEE UNDER THE GUJARAT REGULATION AND UNAUTHORIZED DEVELOPMENT ACT, 2001 WHICH WAS A SCHEME FOR REGULARIZATION OF UNAUTHORIZED CONSTRUCTION AND THEREBY THE PAYMENT WAS COMPENSATORY PAYMENT. 2 2 BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION. DURING THE YEAR UNDER CONSIDERATION, IT HAS ORGANIZED THE PROJECT OF RESI DENTIAL FLATS IN SHREE RAJ RESIDENCY AT ADAJAN, SURAT. FOR THE AS SESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME SHOWING TOTAL INCOME AT RS.9,90,440/- ON 31-10-2005. THE AO FRAMED THE A SSESSMENT U/S 143(3) ON 18-12-2007 WHEREIN HE DISALLOWED RS.1 2,50,000/- ON THE GROUND THAT THIS IS FINE / DEFAULT AS PER SU RAT MUNICIPAL CORPORATION RULES AND REGULATIONS. 3 ON APPEAL BEFORE THE LEARNED CIT(A), THE ASSESSEE CONTENDED THAT IMPACT FEES PAID TOWARDS THE COST OF ADDITIONAL AREA COVERED FOR THE CONSTRUCTION MADE AND THE PROJ ECT DEVELOPED BY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 37(1) OF THE INCOME- TAX ACT, 1961. THERE WAS NO PENALTY LEVIED BY SURAT MUNICIPAL CORPORATION. CONSEQUENTLY, NO DISALLOWANCE SHOULD B E MADE. 4 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN T HE IMPUGNED ORDER, THE LEARNED CIT(A) DELETED THE DISA LLOWANCE FOR THE DETAILED REASONS GIVEN IN PARAS 5 AND 5.1, WHIC H READ AS UNDER:- 5. HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY THE AO, AND THE WRITTEN SUBMISSIONS OF THE AR. FROM THE FACTS OF TH E CASE, IT IS CLEAR THAT THE IMPACT FEES AND/OR THE BALCONY COVER CHARG ES WAS PAID BY THE ASSESSEE FOR CONTRAVENING THE PLAN ORIGINALLY S ANCTIONED IN RESPECT OF THE PROJECT, NAMELY 'SHREE RAJ RESIDENCY' AT ADA JAN, SURAT WHICH WAS DEVELOPED, PROMOTED AND CONSTRUCTED BY THE ASSE SSEE. THE CONTRAVENTION WAS OF THE BY-LAWS OF THE SMC; THIS H AS BEEN ACCEPTED BY THE AO. IN THE CASE OF C/T V/S SYNDICATE BANK, 2 61 ITR 528 THE HON'BLE KARNATAKA HIGH COURT HELD THAT IF A PENALTY IS LEVIED FOR INFRACTION OF LAW THEN IT CANNOT BE ALLOWED AS DEDU CTION, HOWEVER, IF IT 3 IS IN THE NATURE OF A COMPENSATORY PAYMENT, IT MAY BE ALLOWED AS A DEDUCTION. ON THE BASIS OF SUCH OBSERVATION, THE HO N'BLE HIGH COURT SUSTAINED THE PENALTY LEVIED ON THE SAID BANK BY TH E RBI, U/S 24 OF THE RBI ACT, FOR FAILING TO MAINTAIN A PERCENTAGE OF TH E ASSET OF THE BANK IN THE MANNER PROVIDED THEREIN. HOWEVER, IN AN EARL IER CASE OF CIT, DELHI- IV V/S LOKENATH AND CO (CONSTRUCTION), THE A SSESSEE HAD VIOLATED THE SANCTIONED PLAN BY THE NDMC OF A BUILD ING OF 13 STOREYS. ACCORDING TO THE BY-LAWS OF THE NDMC, THE SECOND FL OOR OF THE BUILDING COULD COVER ONLY 35%, WHILE THE ASSESSEE H AD COVERED 50%, THEREBY EXCEEDING THE PERMISSIBLE LIMIT LAID DOWN I N THE BY-LAWS. TIME FOR REVALIDATION OF THE PLAN HAVING EXPIRED, T HE ASSESSEE APPLIED FOR THE SANCTION OF A REVISED PLAN OF THE BUILDING WITH ONLY 12 STOREYS, ON THE GROUND THAT THERE HAD BEEN EXCESS CONSTRUCTI ON ON THE SECOND FLOOR. THE REVISED PLAN WAS SANCTIONED, CONDONING T HE ADDITIONAL COVERAGE AND OTHER IRREGULARITIES, ON THE CONDITION THAT THE ASSESSEE PAY AN ADHOC PENALTY OF RS.4 LAKHS. THE HON'BLE DEL HI HIGH COURT, AFFIRMING THE DECISION OF THE ITAT, HELD THAT THE S AID SUM OF RS.4 LAKHS WAS AN ALLOWABLE DEDUCTION. 5.1 THE FACTS OF OUR ASSESSEE'S CASE ARE ALMOST SIM ILAR TO THAT OF M/S LOKENATH AND CO. (SUPRA). WHAT WAS UNAUTHORIZED WAS EXTRA USE OF FSI AND COVERING OF PROJECTIONS. THUS THERE WAS ONLY A VIOLATION OF THE SANCTION, AND NOT ANY 'INFRACTION OF ANY LAW'. FURTHER, IT MUST BE ALSO APPRECIATED THAT THE CONTRAVENTION WAS NOT SOM ETHING WHICH THE SMC HAD DETECTED AND HAD LEVIED PENALTY FOR SUCH CO NTRAVENTION. IT WAS VOLUNTARILY INTIMATED TO THE SMC UNDER THE GUJA RAT REGULARIZATION OF UNAUTHORIZED DEVELOPMENT ACT, 200 1(GRUDA) WHICH WAS A SCHEME FOR REGULARIZING UNA UTHORIZED CONSTRUCTIONS. THE PAYMENT MADE FOR SUCH REGULARI ZATION WAS THEREFORE CLEARLY IN THE NATURE OF A 'COMPENSATORY PAYMENT' AS EXPLAINED BY THE HON'BLE KARNATAKA HIGH COURT IN TH E CASE OF SYNDICATE BANK (SUPRA). UNDER SUCH SCHEME, A REVISE D PLAN WOULD HAVE TO BE SUBMITTED SHOWING THE EXTRA COVERAGE AND EXTRA USE OF FSI. THE CHARGES BEING IN NATURE OF IMPACT FEES AND BAL CONY COVER CHARGES WERE LEVIED AT THE TIME OF THE REVISED PLAN BEING SANCTIONED; AS IN CASE OF LOKENATH AND CO (SUPRA). THEREFORE, I T CANNOT BE SAID THAT IT WAS A PENALTY LEVIED FOR THE INFRACTION OF ANY LAW, AS IN THE CASE OF SYNDICATE BANK. BEING IN THE NATURE OF A COMPENS ATORY PAYMENT UNDER THE SCHEME FLOATED BY THE GUJARAT GOVE RNMENT, THE FEES/CHARGES PAID BY THE ASSESSEE WAS CLEARLY ALLOW ABLE AS A PERMISSIBLE DEDUCTION. THE AO IS DIRECTED TO DELETE THE ADDITION OF' RS.12,15,000. 4 5 AGGRIEVED WITH THE ORDER OF THE LEARNED CIT(A) DE LETING THE ADDITION OF RS.12,50,000/-, THE REVENUE IS IN APPEA L BEFORE THE TRIBUNAL. DESPITE THE SERVICE OF NOTICE, NONE WAS P RESENT FROM THE SIDE OF THE ASSESSEE. WE, THEREFORE, PROCEED TO DECIDE THIS APPEAL ON THE BASIS OF SUBMISSIONS MADE BY THE LEAR NED DR AND MATERIAL AVAILABLE ON RECORD. 6 SHRI B L YADAV, LEARNED DR APPEARED ON BEHALF OF THE REVENUE AND RELYING UPON EXPLANATION TO SECTION 37( 1), HE CONTENDED THAT PENALTY / FINE PAID BY THE ASSESSEE FOR VIOLATING THE SANCTIONED PLAN IS NOT ALLOWABLE. 7 AFTER HEARING THE LEARNED DR, WE HAVE CAREFULLY G ONE THROUGH THE ORDER OF THE AUTHORITIES BELOW. FROM TH E NATURE OF PAYMENT, WE ARE CONVINCED THAT IT IS COMPENSATORY I N NATURE. THE CASE OF THE ASSESSEE IS ALMOST SIMILAR TO THAT OF M /S LOKENATH & CO. (SUPRA) WHICH HAS BEEN RELIED UPON BY THE LEARN ED CIT(A) IN THE IMPUGNED ORDER. WE, THEREFORE, UPHOLD THE ORDER OF THE LEARNED CIT(A). 8 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE COURT TODAY ON 24-10-2011 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (T K SHARMA) JUDICIAL MEMBER DATE : 24-10-2011 5 COPY OF THE ORDER FORWARDED TO: 1. M/S SHREE SHYAM CORPORATION, RAJ RESIDENCY, NE AR GANGESHWAR MAHADEV TEMPLE, ADAJA ROAD, SURAT 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -3, SURAT 3. CIT CONCERNED 4. CIT(A)-II, SURAT 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD