The DCIT, Circle-2,, Surat v. M/s. Jay Ambe Corporation, Surat

ITA 3219/AHD/2010 | 2007-2008
Pronouncement Date: 08-07-2011 | Result: Dismissed

Appeal Details

RSA Number 321920514 RSA 2010
Assessee PAN AAEFJ6848D
Bench Ahmedabad
Appeal Number ITA 3219/AHD/2010
Duration Of Justice 7 month(s) 2 day(s)
Appellant The DCIT, Circle-2,, Surat
Respondent M/s. Jay Ambe Corporation, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 08-07-2011
Assessment Year 2007-2008
Appeal Filed On 06-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBL E SHRI A.K.GARODIA A.M.) I.T.A. NO. 3219/AHD./2010 ASSESSMENT YEAR : 2007-2008 DCIT CIRCLE-2 SURAT VS- M/S. JAY AMBE CORPORATION SURAT (PAN : AAEFJ 6848D) (APPELLANT) (RESPO NDENT) APPELLANT BY : SHRI SAMIR TEKRIWAL A SR.D.R. RESPONDENT BY : SHRI HARDIK VORA A.R . O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER DATED 21-09-2010 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II SUR AT DELETING THE ADDITION OF RS.14 38 550/- BEING DISALLOWANCE OF BALCONY PREMIU M PAID TO THE SURAT MUNICIPAL CORPORATION FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION AND CONSTRUCTED COMMERCIAL BUILDING NA MELY INTERNATIONAL TRADE CENTRE AT MAJURAGATE SURAT DURING THE YEAR UNDER CONSIDERATION. FOR THE ASSESSMENT YEAR UNDER APPEAL IT FILED THE RETURN OF INCOME DE CLARING TOTAL INCOME OF RS.1 20 27 500/- ON 29.10.2007. THE AO FRAMED THE A SSESSMENT UNDER SECTION 143(3) WHEREIN HE DISALLOWED RS.14 38 550/- BEING BALCONY PREMIUM PAID TO SURAT MUNICIPAL CORPORATION ON THE GROUND THAT THIS EXPENSE IS OF P ENALTY IN NATURE. 3. ON APPEAL BEFORE THE LD. CIT(A) IT IS CONTENDED THAT BALCONY COVERED PREMIUM IS AN AMOUNT CHARGED BY SURAT MUNICIPAL CO RPORATION FOR GRANTING PERMISSION TO COVER THE BALCONY AREA AND IT IS NOT IN THE NATURE OF ANY PENALTY FOR VIOLATION OF ANY LAW. THIS PAYMENT WAS MADE IN THE NORMAL COURSE OF ASSESSEES BUSINESS OF CONSTRUCTION OF BUILDING WHICH WAS TO B E SOLD AS A BUSINESS OF THE ASSESSEE WITHOUT PAYING THIS AMOUNT THE ASSESSEE COULD NOT HAVE COMPLETED THE BUILDING ITA NO.3219/AHD/2010 2 ACCORDING TO THE PLANS LAWFULLY. BY MAKING THIS PAY MENT THE SALEABLE AREA OF THE ASSESSEE FIRM HAD INCREASED AND THEREFORE THE SAID PREMIUM PAID BY THE ASSESSEE FIRM WAS ALLOWABLE AS A BUSINESS EXPENDITURE AS THE SAM E WAS INCURRED FOR ENHANCING AND PRESERVING THE VALUE OF STOCK IN TRADE. THIS AMOUNT WAS IN THE NATURE OF COMPENSATION AND NOT A PENALTY PAYMENT TO SAVE THE ASSESSEE FROM CRIMINAL LIABILITY OR CRIMINAL PROSECUTION OR TO COMPOUND ANY OFFENCE COMMITTED BY THE ASSESSEE. FOR ALLOWANCE OF THIS EXPENDITURE RELIANCE WAS PLACED ON THE DECISI ON OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT-VS- LOKENATH & CO. (CONSTRUCTION ) REPORTED IN 147 ITR 624 AND THE ITAT AHMEDABAD HAS ALSO EXPRESSED THE SIMILAR VIEW AND ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE BY DELETING THE ADDITION IN THE CASE OF M/S. ENVIRO CONTROL ASSOCIATES (I) PVT. LTD. SURAT VS- ACIT IN COL NO. 210 & 211/AHD/2006 (OUT OF ITA NO.1691 & 1682/AHD/2006. 3.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS TH E LD. CIT(A) DELETED THE AFORESAID ADDITION FOR THE DETAILED REASONS GIVEN I N PARA 3.1 OF THE IMPUGNED ORDER. 3.1. I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELLANT AND ALSO THE CITATIONS IN THE CASE OF CIT VS LOKENATH & CO.(SUPR A) AND M/S ENVIRO CONTROL ASSOCIATES (I) PVT. LTD.(SUPRA). I HAVE ALSO CONSID ERED THE FACTS OF THE APPELLANT'S CASE AND THE RECEIPTS DTD.01.4.2006 01 .5.2006 01.6.2006 AND 01 7.2006 FOR RS.3 00 000/- EACH AND 01.8.2006 FO R RS. 2 38 550/- I.E. TOTALLING TO RS.14 38 550/- ISSUED BY THE SMC. THE NATURE OF RECEIPT IS ALSO MENTIONED AS 'BALCONY COVERED PREMIUM'. THEREFORE THE RECEIPTS ISSUED BY THE SMC NOWHERE STATES THAT THE ABOVE AMOUNTS HAVE BEEN PAID TOWARDS PENALTY FOR VIOLATION OF LAW. I THEREFORE HOLD THAT THE F INDING GIVEN BY THE ASSESSING OFFICER THAT THE ABOVE AMOUNT HAS BEEN PAID BY WAY OF PENALTY HAS NOT BEEN SUBSTANTIATED BY ANY EVIDENCE BROUGHT ON RECORD. IT IS ALSO SEEN THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF CONSTRUCTIO N ARID SALE OF COMMERCIAL BUILDING AND THE 'BALCONY COVERED PREMIUM' HAS BEEN SHOWN UNDER THE 'COST OF CONSTRUCTION' AND AS 'WORK IN PROGRESS' AT THE END OF THE FINANCIAL YEAR. IN VIEW OF THE SAME I HOLD THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN TREATING THE SAME AS PENALTY FOR VIOLATION OF LAW AND ACCORDING LY DELETE THE ADDITION MADE AND ALLOW THE APPEAL OF THE APPELLANT . 4. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL. 5. AT THE TIME OF HEARING BEFORE US SHRI SAMIR TEK RIWALA SR. D.R. APPEARED ON BEHALF OF THE REVENUE AND RELYING ON THE EXPLANATI ON TO SECTION 37 OF THE I.T. ACT ITA NO.3219/AHD/2010 3 1961 CONTENDED THAT THIS BALCONY COVERED PREMIUM P AID TO SURAT MUNICIPAL CORPORATION IS NOT ALLOWABLE AS COVERING OF BALCONY WAS PROHIBITED BY LAW. 5. ON THE OTHER HAND SHRI HARDIK VORA APPEARING O N BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). T HE COUNSEL OF THE ASSESSEE ALSO PRODUCED A COPY OF THE DECISION DATED 25.09.2009 OF THE ITAT D BENCH AHMEDABAD IN THE CASE OF ACIT VS- SHREE KHODIYAR C ORPORATION IN ITA NO.2162/AHD/2009 WHEREIN ALSO IT WAS HELD THAT SIM ILAR PAYMENT MADE TO SURAT MUNICIPAL CORPORATION WAS NOT IN THE NATURE OF ANY PENALTY FOR VIOLATION OF ANY LAW AND WAS ALLOWABLE AS A DEDUCTION IN COMPUTING THE B USINESS PROFIT. THE COUNSEL OF THE ASSESSEE EXPLAINED THAT IN THIS DECISION THE TRIBU NAL HAS FOLLOWED THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT-VS- LOK ENATH & CO. (CONSTRUCTION) ( SUPRA ) . 6. AFTER HEARING BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE AMOUNT IN QUESTION WAS PAID BY THE ASSESSEE FIRM AS A PREMIUM FEE FOR COVERING THE BAL CONY AND NOT AS A PENALTY. IN THE APPROVED PLAN THE BALCONY WAS TO BE LEFT UNCOVERED . ACCORDING TO THE ASSESSEE DEVIATION FROM THE APPROVAL PLAN WAS ALLOWED ON PAY MENT OF PREMIUM FEE AS PER THE CIRCULAR ISSUED BY THE CORPORATION. IT IS ALSO PERT INENT TO NOTE THAT SIMILAR PAYMENT AHS BEEN ALLOWED BY THE TRIBUNAL IN ITAT D BENCH AHM EDABAD IN THE CASE OF ACIT VS- SHREE KHODIYAR CORPORATION ( SUPRA ) RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE. LOOKING TO THE TOTALITY OF THE FACTS WE ARE OF THE CONSIDERED OPINION THAT THE VIEW TAKEN BY THE LD. CIT(A) IS FAIR AND REASONABLE AND NEEDS NO INTERFERENCE. WE THEREFORE INCLINE TO UPHOLD THE ORDER OF THE LD. C IT(A). 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE CO URT ON 08.07.2011 SD/- SD/- (A.K.GARODIA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08/07/2011 ITA NO.3219/AHD/2010 4 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AH MEDABAD. TALUKDAR/ SR. P.S.