Tribunal denies deduction under Income Tax Act, upholds disallowances for norm violations and penalties.

The Tribunal upheld the disallowance of payments made to Uttaranchal Power Corporation and Sales Tax Department, citing violations of norms and penalties not allowable under section 37(1) of the Income Tax Act. Additionally, the Tribunal rejected the appellant's plea for a proportionate deduction under section 80IC, stating that disallowances related to offenses or prohibited by law cannot be considered for computing profits. Consequently, the appeal was dismissed, affirming the disallowances and denying the requested deduction.

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Issues:
1. Disallowance of payment made to Uttaranchal Power Corporation
2. Disallowance of payment made to Sales Tax Department
3. Rejection of alternative plea of proportionate deduction under section 80IC of the Income Tax Act

Issue 1: Disallowance of payment made to Uttaranchal Power Corporation
The appellant challenged the disallowance of payment made to Uttaranchal Power Corporation, arguing that the penalty paid should not be disallowed. The Assessing Officer found a violation of norms by the appellant, leading to a penalty. The penalty amount was brought to tax as it was not allowable under section 37(1) of the Income Tax Act. The Commissioner (Appeals) confirmed the disallowance. The Tribunal examined the case, considering the penalty as a result of the appellant's offense against the law, not a regular payment. The Tribunal upheld the disallowance, citing the Explanation to section 37(1) of the Act.

Issue 2: Disallowance of payment made to Sales Tax Department
The appellant contested the disallowance of penalty payment made to the Sales Tax Department. The Assessing Officer disallowed the amount based on the Explanation to section 37(1) of the Act. The Commissioner (Appeals) upheld the disallowance after considering the circumstances under which the penalty was levied. The Tribunal reviewed the arguments but affirmed the disallowance, stating that the penalty payment was rightly confirmed.

Issue 3: Rejection of alternative plea of proportionate deduction under section 80IC
The appellant sought a deduction under section 80IC of the Act, claiming that confirmation of disallowances would increase their income, making them eligible for the deduction. The appellant referenced a CBDT Circular to support their claim. However, the Commissioner (Appeals) held that the disallowances, being related to offenses or prohibited by law, cannot be considered for computing profits and, therefore, the deduction under section 80IC was not applicable. The Tribunal agreed with the Commissioner (Appeals) and dismissed the alternative plea.

In conclusion, the Tribunal dismissed the appeal filed by the assessee, upholding the disallowances and rejecting the plea for a proportionate deduction under section 80IC of the Income Tax Act.

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