TaxTMI 
TaxTMI 
1991 (10) TMI 97
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....ard and consequently he held that this payment cannot be held as expenses. The Inspecting Asstt. Commissioner (Assessment) disallowed the sum of Rs. 8,625 under his assessment orders dated 17-2-1987. When the matter came up in appeal before the learned CIT (Appeals), the learned Counsel for the assessee produced before her, copy of the letter dated 5-10-1982 which was addressed to the assessee from the APSEB. For a correct appreciation, the contents of the said letter are very essential. A copy of the said letter is furnished at page 11 of the paper compilation filed before me. The said letter is addressed by the Asstt. Divisional Engineer, APSEB, Sangareddy to the assessee. The following is the text of the letter : " On 18-6-1982 at 14.20 hours your service bearing S.C.No. 693 Door No. was inspected by Asstt. Engineer, DPE-I, Hyderabad. It was then noticed that you had (i) Exceeded the sanctioned connected load of 27 HP by connecting 16 HP + 18 KW = HP which constitutes malpractice. The above factors indicate that you are guilty of malpractice. An enquiry will be made into the matter by the Superintending Engineer Operation Rural Hyderabad who will fix the amount of loss sus....
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....ing charges. Please acknowledge receipt. " The question having regard to the facts and circumstances of this case as above is whether it can be said that Rs. 8,625-55 is a penalty paid for any infraction of law. I am of the opinion that as the matter stands now, no competent authority had decided the matter and found the assessee having contravened any provision of law nor such competent authority levied any penalty as such. Payment of Rs. 8,625-55 insisted upon in the notice dated 5-10-1982 was only to keep the service connection live without being disconnected. Without electricity connection it is impossible for the assessee to carry on its manufacturing activity and whatever expenditure that is incurred to keep its business going on is allowable expenditure under section 37 of the Income-tax Act. I am of the view that the ratio of the following decisions relied upon by the learned DR does not apply to the facts of the present case. 1. Haji Aziz & Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350 (SC). In this case the dates were imported from Iraq. Importing dates by steamer is prohibited and hence the Customs authorities confiscated the dates under section 167 of the Cus....
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.... in that regard. In those circumstances, the amount of penalty paid were held as not allowable as business expenditure under section 37 of the Act. However, in this case, no specific provisions of the Indian Electricity Act or the AP Electricity Board Rules were brought to my notice which were said to have been contravened by the assessee. Further, the authority which is empowered to decide the damages suffered by the APSEB did not as yet pass any order. Therefore, the Madhya Pradesh High Court decision also cannot be of any help to the revenue. 3. The learned counsel for the assessee Shri Ajay Gandhi had relied upon the decision of the Delhi Bench of the Tribunal in ITO v. Om Parkash & Co. [1982] 1 ITD 992. In that case, the assessee occupied for its business purposes, a piece of land in Delhi since 1948 without payment of any rent. The Delhi Development Authority which came into being with effect from 1958 demanded damages from the assessee by issuing a show-cause-notice dated 31-12-1974 for the unauthorised occupation of the assessee under the provisions of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. The DDA later made it a condition that unless the da....
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....or sanction of a plan for construction of a building of thirteen storeys. Sanction was accorded in April 1967. While granting sanction, the NDMC laid down that the second floor could cover up only 35 per cent in accordance with its bye-laws. However, the assessee built the second floor covering 50 per cent thereby exceeding the permissible limits under the bye-laws. The building was commenced in July 1967 and construction was completed in July 1969 with only finishing touches remaining. Time for revalidating the plan having expired, the assessee applied for the sanction of the revised plan of the building. It is only 12 storeys in the place of 13 storeys in view of the fact that there was excess construction in the second floor. The revised plan was sanctioned in April 1970 condoning the additional coverage in the second floor and other irregularities on condition that the assessee paid an ad hoc penalty of Rs. 4 lakhs. The question was whether the sum of Rs. 4 lakhs was allowable as a deduction in computing the assessee's business profits. The Delhi High Court confirmed the Tribunal's decision, and held that the sum of Rs. 4 lakhs was permissible deduction in arriving at the profi....