- (1.) This appeal has been preferred by the assessee under Section 260A of the Income-tax Act, 1961 (in short, "the Act") against the order dated 14.9.2007, Annexure P. 1 passed by Income Tax Appellate Tribunal, Bench, 'A' Chandigarh (in short, "the Tribunal"), claiming following substantial questions of law:-- "(i) Whether on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the amount of Rs. 3,95,425/- paid to the Municipal Corporation, Ludhiana for legalizing the construction of its building was not an allowable business expenditure under section 37 of the Income-tax Act, 1961? (ii) Whether on the facts and circumstances of the case, the Tribunal without adverting to and reversing the findings recorded by CIT(A) was legally correct in negating the claim of the appellant under section 80G of the Act in respect of donation made by it towards Prime Ministers Relief Fund for Gujarat Earthquake Relief Fund at the call given by Government authorities? (iii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the sum of Rs. 24,89,000/- being the value of goods sent to the Prime Ministers Relief Fund for Gujarat Earthquake relief was eligible for deduction under section 37 of the Income-tax Act, 1961? (iv) Whether on a correct interpretation of the provisions of Section 80-IA of the Income-tax Act, 1961, was the Tribunal legally correct in upholding the order passed by the Assessing Officer whereby the latter had held that the receipt from license income to the tune of Rs. 8,33,885/- and export incentives on DEPB of Rs. 1,08,62,906/- could not be treated to be the profits and gains derived by the assessee from its business for the purposes of computing the relief of deduction under the said provision?" A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The assessee company is a manufacturer and exporter of cotton yarn, woollen and cotton hosiery goods and garments. Return of income declaring total income of Rs. 14,68,78,870/- was filed on 31.10.2001 which was processed under section 143(1) of the Act on 26.3.2002. Notice dated 29.5.2002 under section 143(2) of the Act was served on the assessee on 30.5.2002. In the assessment finalized by the Assessing Officer vide order dated 9.5.2003, Annexure P. 3 under section 143(3) of the Act, the income determined was Rs. 18,95,14,560/-. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income-tax (Appeals) (CIT (A)). Vide order dated 22.2.2005, Annexure P. 2, the CIT(A) partly allowed the appeal. The Revenue filed appeal whereas the assessee filed cross objections before the Tribunal. Vide order dated 14.9.2007, Annexure P. 1, the Tribunal partly allowed both the appeal and the cross objections. Hence the instant appeal by the assessee.
(2.) Addressing arguments on Question No. (i), learned counsel for the assessee relying upon decisions of Delhi, Madras and Rajasthan High Courts in CIT v. Loke Nath & Co., 1984 147 ITR 624, Usha Micro Process Controls Ltd. v. CIT, 2013 37 taxmann.com 324/218 Taxman 68 (Delhi), CIT v. N.M. Parthasarathy, 1995 212 ITR 105 and Jaswant Trading Co. v. CIT, 1995 212 ITR 293 respectively submitted that it is not penalty for infraction of law. Any amount paid to municipality as compensation for condoning deviations from original sanction and accepting revised plan of construction is deductible as business expenditure.
(3.) On the other hand, learned counsel for the revenue supported the impugned order and relied upon judgment of Full Bench of this Court in Jamna Auto Industries v. CIT, 2008 299 ITR 92 and judgment of Karnataka High Court in CIT v. Mamta Enterprises, 2004 266 ITR 356.;