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TMI Blog2014 (12) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 Honourable Commissioner of Income Tax (Appeals) has erred in confirming the above actions of the learned A.O." 2. During the course of assessment proceedings, the Assessing Officer noted that the assessee had made payment of Rs. 34.39 lakhs to the Mumbai Municipal Corporation towards regularization of occupation certificate. The assessee explained before the Assessing Officer that the building completion certificate was issued on 30.03.2000 and on the strength of the same, the assessee proceeded with handing over of possession of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 30.5.2005. The Ld. Authorized Representative has then submitted that the full occupancy was subsequently restored by the Municipal Corporation vide order dated 17.12.2008, therefore, there is no violation of the assessee in obtaining the occupancy certificate which was subsequently restored. In support of his contention he has relied upon a number of decisions including following decisions:- (i) Ahmedabad Cotton Mfg. Co. ltd. & Ors. (1194) 205 ITR 163 (SC) (ii) Lokenath & Co. (Construction) (1984) 147 ITR 624 (Delhi High Court) (iii) Darshan Properties (ITA No. 3098/Mum/2010)(Mumbai ITAT) (iv) Shree Shyam Corporation (ITA No. 553/Ahd/2009) (Ahmedabad ITAT) (v) VRM Share Broking (P) Ltd. (2009) 27 SOT 469 (Mumbai ITAT) (vi) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In the proceedings, as directed by the Hon'ble High Court, the Municpal Corporation has found that there was no objection to develop and grant of occupation certificate for the building in question vide order dated 6.10.2008 as under:- "Office of the Addl. Collector and C.A. U.L.C has issued letter U. No. C/ULC/D-XV/WS- 139/08 dated 16.06.2008 vide page C-171 stating that the State of Maharashtra has repealed the Urban Land Ceiling and Regulation Act 1976 on 29-11-2007. The land under ref. is not under acquisition u/s. 10(3) & 10(5) of ULC Act, 1976, therefore, saving provisions of repealed Act 1999 is not applicable to the land under ref. therefore there office has not objection to develop and grant occupation certificate for the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority under the Act, in examining the claim of an assessee that the payment made by such assessee was a deductible expenditure under section 37 although called penalty is, to see whether the law or scheme under which the amount was paid required such payment to be made, as penalty or as something akin to penalty, that is imposed by way of punishment for breach or infraction of the law or the statutory scheme. If the amount so paid is found to be not a penalty or something akin to penalty due to the fact that the amount paid by the assessee was in exercise of the option conferred upon him under the very law or scheme concerned, then one has to regard such payment as business expenditure of the assessee, allowable under section 37, as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess is an allowable deduction in computing the income. What is money wholly and exclusively laid out for the purpose of trade is a question which has to be determined upon the principles of ordinary commercial trading or on the grounds of commercial expediency. The payment of Rs. 4 lakhs was made in the course of the assessees' business of the construction of the building which was ultimately to be sold as a business of the assessee, inasmuch as without paying this amount the assessee could not have completed the building according to the plans law fully. The payment was vital for the assessees' business which consisted in the construction of the building and its sale flat-wise. The expenditure was for saving of the loss of the alte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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