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TMI Blog2015 (11) TMI 1871X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 29,81,8001-, pertaining to the project named "Oberoi -Woods', by treating it as penal in nature as per Explanation to section 3 7( 1) of the Act and not allowing the 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 Hon'ble Commissioner of Income-tax (Appeals) has erred in confirming the above actions of the learned A.O. b. The Hon'ble Commissioner of Income-tax (Appeals) has further erred in law and facts in rejecting the alternative plea of the appellant that in case the said expenses of Rs. 29,81,800/- are added to the total income, the same should be allowed as a deduction u/s 80IB(10) of the Act, as the said disallowance will result in the increase the profits of the said project, which are eligible for deduction u/s 80rB (10) of the Act. The Hon'ble Commissioner of Income-tax (Appeals) has rejected the plea on the ground that the appellant had not claimed it u/s 80A(5) of the Act. 3. Disallowance of BMC charges of Rs. 53,56,100/-: a. The learned Assessing Officer ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Hon'ble Commissioner of Income-tax (Appeals) has erred in confirming the above actions of the learned A.O. b. The Hon'ble Commissioner of Income-tax (Appeals) has further erred in la and facts in rejecting the alternative plea of the appellant that even if the said expenses of Rs.44,00,000/- are added to the total income, the same should be reduced from the capital work in progress as the same were capitalised in the books of accounts of the appellant and not charged to the profit and loss account. 6. The appellant craves leave to add to, amend, alter and/or delete the above grounds of appeal. 2. As per our opinion there are two basic issues for our consideration i.e. Disallowance made u/s 14A and the second one the disallowance of BMC Charges and Custom charges which were disallowed u/s 37(1) of the I.T.Act. 3. The brief facts of the case are that the assessee filed his return of income on 29.09.2009 declaring total income of Rs. 14,01, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases pertained to penalties levied by the Customs Authorities for the unlawful act of the assessee, however, in the present case the assessee has not committed any unlawful act, therefore, and these cases are not applicable to the assessee. The ld. Sr. counsel for the assessee further invited our attention to the relevant observation in the case of Agra Leatheries wherein the court has said that the Hon'ble Bombay High Court had correctly allowed the expenditure as a business expenditure as well as allowed to be added towards the cost of goods. 7. Further, reliance was also placed on the decision of Hon'ble Punjab & Haryana High Court in the case of CIT vs. Hero Cycles Ltd., 17 BTR 281 and in the case of CIT vs. Industrial Cables (I) Ltd. 212 CTR 513 wherein "penalty" levied for drawing extra loading from the grid, in violation of power rules and regulations was held to be allowable as it was not levied for deliberate violation of law. Attention was also invited to the memorandum to the finance Bill 1998 to show that the purpose of introducing explanation to section 37(1) of the Act was to apply the same in the case of unlawful expenditure such as on account of protectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Rs. . 4.96 Crores has been arrived at after reducing the amount of manpower costs relating to projects amounting to Rs.16.59 Crores, and, hence, the amount of Rs.4.96 Crores is only the administrative manpower cost. The appellant has also claimed depreciation of Rs.2.88 Crores. The appellant failed to produce before me the independent accounts maintained for real estate business and for investments in shares, and, hence, the appellant's accounts are mixed. Therefore, the claim that no expenditure is relatable to earning of exempt income is not correct. In such a situation, the provisions of Sec.14A are squarely applicable. Further, the appellant in its submissions has stated that the indirect expenses relatable to earning of exempt income will be negligible, i.e. not exceeding Rs.10,000/-, since 2/3 man-hours of a Peon and one Executive were used for accounting and other record keeping purposes. Thus, the appellant has' admitted 'that part of the expenditure is attributable to earning of exempt income and thereafter only the amount remains to be quantified. This confirms the satisfaction of AO. As per the decision of the Hon'ble Bombay High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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