THIS APPEAL COMING ON FOR ADMISSEON. THIS DAY. D.V.
SHYLENDRA IE{UMAR.J.. DELIVERED THE FOLl.O'WlN(}:
JUDGMENT
The assessee is a private limited
business activity as a developer and = 2
assessment year 2005–O6, assessee
amounts as deductible busine’ss”~e;-cpenditure
37 of the Income Tax Act: the paid
by way of regularisation that had been
indulged in by the_”assessee”‘vvhiiejeons~’tr]isting a structure
and for having’ plan. in terms of the
Building been approved by the
municipal autlhqrilties, in “terms of the provisions of the
Vj’l'{ar.riate1..l<c'ai..,'Municipal'Corporations Act, 1976 and Bangalore
i\/iaha:1aga'.rfa«._P'ali'1<e}~Buiiding Bye–iaws.
Tiiehvelairn of the assessee was disallowed by the
Officer, the amount claimed by way of expenditure
the head "Project Expenditure", which was nothing but
egampound fee paid to Bangalore Mahanagara Palike towards
~
3
regularisation of deviations in construct.ion was about
Rs.4,4~O.500/–, for the reason that the amount which was in
the nature of penalty, being penal in nature. Therefore. it
did not qualify for deduction under Section 37 of
Tax In the appeal by the assessee,
commissioner, purporting to follow:.tl’re-.ruli–né_;ot
in the case of CIT V/s. Mamatha re’portecl
ITR 356 (Kat), dismissed the H
4. lV’:::S:tppe~al’*- tol'”theV’ Income tax Appellate
Tribunal also ._havin’g””met_htihe,sarr1e fate, the assessee is in
appeal b_evforel”t~his .courtv_lu1’ioer Section 260A of the Income
;,’:’;F’eL3CAct:’13é§1;… aaaaa
on behalf of the appellant/assessee,
itMr.Dinesh.,”learned counsel would submit. that in the first
Wiristariee, the amount could not be taken as a penalty, as it
w._as..ai1″amount in the nature of regularisatiorl fee even in
a§V/
terms of Bye–Law 6.0 of Bangalore Mahanagara Pahke
Building Bye–Laws, which reads as under:
“‘6.0. Deviations during Construction:
i) Wherever any construction ismin__vio|ati’oii*r:dey’iati~Qn
of the sanctioned pian, the Co.rrimis’siohe*r:
he considers that the vioiati’ons/deyiatieovno it
within 5% of (1) the setidiaok tohbe eproyidedvvéaroujnd
the buiiding, (2) plot o_oy’e*r.age_» (3)’fi’oor_Haer_ea ratio
and (4) heigi:–t.ffoi’ _ and that the
demolition undeVr_i’ohaot_er:i Act is not
teasit}.!e~:\,yeithou’iA_ afteotiingyAstirootorai stability, he may
regu’ia;’r.i_;e.is.’ec’ti :y_ioi’at_ion’sfo_evi_ati’ons after recording
__ deta~i.|.e’d is_e,ason_s for the iisanfiie.
ii) V7-._VioiatiovnfdeeyiatéiéoniZ”as “at 6.0(i) above may be
‘reg__utiia.vriz’edaoiniyiattier sanctioning the modified plan
M ‘ * _record»in_Vg”t’her’eon the violations / deviations and
V it,_t_d.gttte.r the’V|’e”v’y’ot tee prescribed by the Corporation
_ froth time to time.”
it the iearned eounsei submits that the
~ ~.«.fi,”f.authorities3 below have committed an error in law in
tht.,de.rs’t–anding that the payment, was in the nature of a
penalty. T he further submission is that, the ruling of this
Court rendered in the case of Mamatha Enterprises is not
attracted to the present case for the reason that in the ease
of Mamatha Enterprises, on facts it was found
builder / assessee had put up 8″‘ floor of the _
obtaining any approved plan at all. VWhereas”‘inj” .
case the assessee had put up eonstriicltiofi
approved plan from the
compounding fee was paid deviations
within the permissible lithe sanctioned
plan. In the light enahling’ regularising such
deviations””had:’paid?-ipreg1;ilarisat’i’o1’1 fee, applying the said
ruling to the was not called for and
therefore the authori’Vties_ below have committed an error in
law. in ‘-lhfjlciingvi-that riilirig covers this case also.
H hhaize bestowed our .consideration to the
supbmislsions tirade at the Bar and perused the orders of the
atlthority, first and second appellate authority.
8. The appeal is sought for adrnissiori on the
following questions of lawn
i) Whether in law, the Tribunal was
upholding the disaliowance of _pay4riteri:t.i.:’ot it
Fts.4,40,500/- for reguiarizatlAon”ef._the
which were within the permi’s.eai3ire”limits,_cheil,eahgi’it[ii«E71
as penalty and thusip’no.i liable: to 3a_’lvt«o.we.d
U/s.37(t)oi the Act? ll
ii) Whether in law”L.nder– the payment
made for reguvl’aré–2:ati.oril-. the..lcl:e\riation5 in the
plan vviltlhinlh’the;?perritiss”i’b|:erriarg.i§n could be held
to mptli*:pOSe of disaiiowance
.. elspecialiy when the Appellant
had sold the properties in
regularized plan, the profit
_ _ froth v_irhi.r:,h-.hac_.i been offered for taxation?
it AV the otférall examination of the facts and legal
” that the authorities beiow have not
V V’ comr11i«t.t.eclv’any* error in law, warranting a correction by this
?”,i”Co’urti.p in “ei$<ercise of appellate jurisdiction under Section
4l_"2f<3€;l_P£of'lthe Act. We say so, for the reason that the so called
it ':l_4:1"egt1:larisatio1'1 fee in terms of Bye~law 6.0 of the .Bangalore
7
Mahanagara Palike Byelaws is a provision made for
regularising the deviations/violations as enabled U/s.483(b}
of the Karnataka Municipal Corporation Act. 1976 which
reads as under: .
“483. Provisions respecting institution, etc,_,;’_”‘of..’g;i.iiii’
and criminal actions and obtaining Eegai’v_”aVdviiA;:ei”—T’ T
The comméssioner may.-
a)
b] compound any offenceVbaQa.inst this__
bye–laws or regulations wi_1__E_:<V:'i=…v_ri:–:.~i_V3_/ byrales made by
the Government be_.decIa_:red .oornpo't;:ndab|e;"
10. leaves us with no
doubt as to expenditure as it is only an
amount paidlfoyr com-poun’d.~~an offence. The amount paid for
offence….is inevitably a penalty in terms of
and the mere fact that it has been
‘ deseriloed asieoihpounding fee Cannot, in any way, alter the
elaaracteryvof the payment which payment is in the nature of
8
11. As It is in the nature of penaitiy, the law too is
weli settled to hold that it can never be an amount in the
nature of expenditure which can qualify for deduction
U/s/87 of the Income Tax Act and it is for this reas.o:n.,_V we
have to dismiss this appeal. If an answer is __\1?arrajn.ted-V__i1fi.p_
respect of the questions referred aboyfe, we _ar’1s\ife.r the–psarr1e’q
against the assessee and in favour thgerevenu-eV.”‘
12. The appeal is