We Have Heard Learned Counsel On Either Side v. Of Income Tax Vs. Indo Asian Switch Gears Pvt. Ltd. ; [1997] 92 Taxmann.086(P&H). The Said Decision Has Been Affirmed By The Hon’ble Supreme Court

OD-9 IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION ORIGINAL SIDE ITAT/1/2024IA NO: GA/1/2024 PRINCIPAL COMMISSIONER OF INCOME TAX 9 KOLKATAVSSUGAM PARK BEFORE :THE HON’BLE THE CHIEF JUSTICE T.S. SIVAGNANAMAndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 19[th] January, 2024. Appearance : Mr. Tilak Mitra, Adv.Mr. Soumen Bhattacharjee, Adv.…for appellant.Mr. Arvind Agarwal, Adv.Mr. F. Ghaffar, Adv.…for respondent. The Court :- This appeal has been filed by the revenue under Section 260Aof the Income Tax Act, 1961 is directed against the order dated 19.07.2023passed by the Income Tax Appellate Tribunal B Bench, Kolkata in ITA No.390/Kol/203 for the assessment year 2018-19. The revenue has raised the following substantial questions of law forconsideration : i) Whether the Ld. Tribunal was committed substantial error in law in notconsidering that penalty imposed by Asansol Durgapur DevelopmentAuthority (ADDA) has arisen out of penal clauses as embedded in the Rulesand Regulations of ADDA, which is a Statutory Body, created in 1980 under Section 11 of West Bengal Town & Country Planning (Planning &Development) Act, 1979 ? ii) Whether the Ld. Tribunal has committed substantial error in law in notconsidering that the phrase ‘prohibited by law’ as mentioned in Explanation1 to section 37(1) of the Income-tax Act has a wider meaning and AsansolDurgapur Development Authority (ADDA), being a Statutory Body, isempowered to enforce it’s Laws and Bye laws on the clients and penaltyarising out of violation of such laws by assessee was not an allowableexpenditure ? We have heard learned Counsel on either side. The short issue which falls for consideration is whether the deductionclaimed by the assessee with regard to the payment which was made in terms ofthe agreement entered into between the assessee and Asansol DurgapurDevelopment Authority for construction of residential township can bedisallowed, as it is in the nature of penalty. The learned Tribunal afterexamining the relevant clauses of the agreement more particularly sub-clauseNo. 9 held that the amount paid by the assessee towards non fulfillment ofcontract and though the expression ‘penalty’ had been used in sub clause 9 ofthe agreement it was found that the payment is not on account of infringementof any provision of law rather it is on account of non fulfillment of contractualobligation. This issue was considered by the Hon’ble Supreme Court in the caseof Prakash Cotton Mills Pvt. Ltd. Vs. Commissioner of Income Tax, 201 ITR 684(SC) and in case of Commissioner of Income Tax Vs. Ahmedeabad CottonManufacturing Co. Ltd. [1994], 205 ITR 163 (SC). The said decisions have beenfollowed by the High Court of Punjab and Haryana in the case of Commissioner of Income Tax Vs. Indo Asian Switch Gears Pvt. Ltd. ; [1997] 92 taxmann.086(P&H). The said decision has been affirmed by the Hon’ble Supreme Court. In the light of the same, the order passed by the Tribunal does not call forany interference. Accordingly, the appeal is dismissed and the substantialquestions of law are answered against the revenue.Thus, the applications are also dismissed. (T.S. SIVAGNANAM) CHIEF JUSTICE (HIRANMAY BHATTACHARYYA, J.) Pkd/GH.