WELLWORTH DEVELOPERS, MUMBAI V. ASST CIT CEN CIR 23, MUMBAI

ITA 5623/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3335 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Section: 37(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , ! '#, $ , % BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM / I.T.A. NO.5623/MUM/2014 ( $ & '& / ASSESSMENT YEAR: 2011-12) WELLWORTH DEVELOPERS COMMERZ, 3 RD FLOOR, INTERNATIONAL BUSINESS PARK, OBEROI GARDEN CITY, OFF WESTERN EXPRESS HIGHWAY, GOREGAON(E), MUMBAI - 400063 / VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 23 ROOM NO.409, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AAAFW0040N ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 28.03.2016 !' /DATE OF PRONOUNCEMENT: 01.06.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.06.2014 PASSED BY THE LEARNED COMMISSIONER OF IN COME TAX (APPEAL) 40, MUMBAI [HEREINAFTER REFERRED TO AS THE LEARNED CIT(A)] RELEVANT TO THE A.Y.2011-12. ASSESSEE BY: SHRI R. MURALIDHAR DEPARTMENT BY: SHRI S. SENTHIL KUMARAN ITA NO.5623/MUM/14 A.Y.2011-12 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED A.O. HAS ERRED IN LAW AND FACTS IN DISALLOWING PAYMENT OF BMC CHARGES OF RS.3,61,000/- BY TREATING IT AS PENAL IN NATURE AS PER EXPLANATION TO SECTION 37(1) OF THE ACT AND NOT ALLOWING SAME U/S.37(1) OF THE ACT BY IGNORING THE FACT THAT THE SAME WERE COMPENSATORY IN NATURE AND LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND NOT FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW AND THE HONORABLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAID DISALLOWANCE BY THE LEARNED A.O. 3. THE ASSESSEE FILED THE RETURN OF INCOME ON 24.09 .2011 DECLARING TOTAL INCOME TO THE TUNE OF RS.64,41,798/-. THE CA SE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S. 143(2) OF THE I NCOME TAX ACT, 1961 ( IN SHORT THE ACT) ON 11.09.2012, WHICH WAS DULY SERVED UPON THE ASSESSEE. THEREAFTER, FURTHER NOTICES U/S.142(1) O F THE ACT WERE ISSUED ON 25.06.2013 AND 08.10.2013 WHICH WERE ALSO DULY S ERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT, IT WAS FOUND THAT THE ASSESSEE HAD PAID AN AMOUNT OF RS.3,61,000/- AS PEN ALTY OR FEES TO BRIHANMUMBAI MUNICIPAL CORPORATION (BMC) DURING THE YEAR. SINCE THE SAID PENALTY WAS NOT ALLOWABLE, THEREFORE THE S AID AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE AND SUBJECTED T O TAX. FEELING AGGRIEVED WITH THIS ORDER, ASSESSEE FILED AN APPEAL BEFORE LEARNED CIT(A) AND THE LEARNED CIT(A) ALSO DISMISSED THE AP PEAL OF THE ASSESSEE BY UPHOLDING THE ACTION OF THE ASSESSING O FFICER WITH REGARD ITA NO.5623/MUM/14 A.Y.2011-12 3 TO THE ADDITION OF AN AMOUNT OF RS.3,61,000/-. TH EREAFTER THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. 4. THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.3 ,61,000/- WHICH WAS PAID AS PENALTY. THE REPRESENTATIVE OF T HE ASSESSEE HAS ARGUED THAT AN AMOUNT PAID TO BMC TO THE TUNE OF RS .3,61,000/- WAS COMPENSATORY IN NATURE THEREFORE THE SAME IS NOT LI ABLE TO BE TREATED AS PENAL IN NATURE AS PER EXPLANATION TO SECTION 37(1) OF THE ACT. IN SUPPORT OF THIS CONTENTION THE LEARNED REPRESENTATI VE OF THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE ORDER PASSED IN H IS OWN CASE DECIDED BY THE INCOME TAX APPELLATE TRIBUNAL, IN ITA NO.903 /M/2013 DATED 15.12.2014 FOR THE A.Y.2009-10. HOWEVER, ON THE OT HER HAND THE LEARNED REPRESENTATIVE OF THE DEPARTMENT RELIED UP ON THE ORDER PASSED BY THE LEARNED CIT(A). ORDER DATED 15.12.2014 PASS ED BY THE INCOME TAX APPELLATE TRIBUNAL FOR THE A.Y.2009-10 PERUSED IN WHICH THE HONBLE ITAT DID NOT CONSIDER THE SAID AMOUNT PENAL IN NATURE. SINCE IN THE ASSESSEES OWN CASE THE CO-ORDINATE BENCH OF THE ITAT HAS TAKEN THE VIEW THAT SUCH KIND OF PAYMENT BY THE AS SESSEE TO THE BMC IS NOT PANEL IN THE NATURE AND DOES NOT FALL WITHIN THE PURVIEW OF SECTION 37(1) OF THE ACT. THEREFORE IN THE SAID C IRCUMSTANCES RESPECTFULLY FOLLOWING THE JUDGMENT PASSED BY THE C O-ORDINATE BENCH, WE ARE OF THE VIEW THAT THE SAID AMOUNT HAS BEEN PA ID WHOLLY FOR THE BUSINESS PURPOSE HENCE LIABLE TO BE ALLOWED AS EXPE NDITURE. 5. ACCORDINGLY THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED. ITA NO.5623/MUM/14 A.Y.2011-12 4 ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JUNE , 2016. SD/- SD/- (B.R.BASKARAN) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 1 ST JUNE, 2016 MP MP MP MP ) * +$!', -,'! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ) / BY ORDER, - & //TRUE COPY// ./# /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI